Plan Ahead Now With
Long-Term Care Insurance
Getting old is a depressing prospect for many Americans,
particularly those who are destined to need extended nursing home care. It's OK if you're
rich, and can afford $40,000 a year or more for the average nursing home stay. And
there's a safety net if you're poor: Medicaid will pay long-term care costs if you have
for the big group in the middle, people who have worked to save some money for
their retirement or to give their children, the options are grim. It doesn't take long
to wipe out a nest egg for round-the-clock care. And to take advantage of Medicaid,
middle-class Americans must impoverish themselves by spending down to a small savings
account. If they're lucky, they might be able to keep the house.
The sorry state of long-term care is the dirty
little secret of the U.S. health care system, otherwise touted by its supporters as
the best in the world. But the system virtually ignores the fact that many families
can't take care of their elderly at home, and expensive care (skilled,
Intermediate, custodial, in home or facility) is the only option. The Medicaid
system, never designed to take on the burden of America's frail elderly, isn't up to
In the 1980s, the insurance industry took a look at
this scenario and saw a big, fat opportunity: Why not sell insurance that covers
The idea seems sensible: Buy the insurance when you're
young to ensure you won't wipe out the family's finances when you're old. Unfortunately,
those early policies weren't especially well designed for consumers, and many
people who bought them got little in return. In recent years however, regulators and
insurers have made big changes to long-term care insurance policies that now make
them a much better deal.
Still, this form of insurance isnt for everybody. And its an
extremely complex decision to make, in part because youre gambling on the future. Will you need nursing care 20 years from now? (Of course, life
insurance is also gamble, but the premiums are much cheaper.)
So how do you figure out whether this is a good way to
insure your future?
For one thing, don't usually consider it unless you're
at least 60 years old, counsels Bonnie Burns, education director for the California HICAP
Association, a group of consumer counselors for the elderly.
You'll also want to assess your own risk of ending up
in a nursing home, or needing care and for how long. Women are more likely to need nursing
care because they live longer than men. Based on the numbers, Consumer Reports calculates
that the average person would want enough insurance to cover at least a four-year
stay; 10 percent or more of the people will stay longer than that.
The next question is ask yourself is whether you have
assets to protect. There's no point in buying insurance if you have a moderate income or
have little in savings, because you'll have nothing to lose and can simply turn to
Medicaid for help in the event you'll need custodial care. Insurance is also probably
unnecessary if you can afford to take about $160,000 or more and set it aside to cover a
projected four-year stay in a nursing home.
United Seniors Health Cooperative recommends insurance
only if you have total assets of at least $75,000. You'll want to take a look at how much
your state (or the state you'll retire in) allows you and your spouse to hold onto and
still use Medicaid as you assess your need for coverage.
If you decide to pursue insurance, calculate how much
of a premium you can afford to get adequate coverage.
Another important consideration is what types of
benefits are covered by the policy. Burns recommends policies that will kick in early in a
disability, and will cover home care, to help you get better before you end up in the
nursing home. "You want a policy that pays for things that will assist you to stay in
your home," she says.
Be sure to check
how an insurer will decide whether you are disabled enough to get benefits. In the
long-term care world there are so-called activities of daily living (ADLs),
such as eating or bathing without help. You want a policy that recognizes as many of them
as possible, but requires only a couple of them to be impaired before paying out.
You'll also hear a lot about whether a policy is
"tax-qualified." This refers to whether you can take the premiums off on your
taxes, along with other medical costs on the deduction page known as Schedule A. Of
course, you can only deduct medical costs once they go above 7.5 percent of your income,
so this may not be relevant for many people.
When you're ready to start shopping to long-term care
insurance, check whether your employer offers a group plan. You can also try an insurance
broker who represents a number of different insurers, or better yet one that specializes
in senior coverage. Be sure to compare the policies carefully. It's a good idea to seek
out expert help when making this decision. Just be sure that whatever source you use is
familiar with the laws and regulations in your state, because there are significant
differences in the Medicaid systems and long-term care insurance rules among states.
Here are some good sources for help:
Reports has an in-depth, detailed look at long-term care insurance that includes
comparisons of policies from a number of different insurers. Keep in mind, though,
that the policies profiled may not be available in your state, and they may be the most
generous policies offered by those companies. Check your library for back copies of Consumer Reports.
Online access requires a subscription.|
|Your local HICAP, or Health Insurance
Counseling and Assistance Program. Check your local phone book or senior center for the
one near you. You also can try the directory at Medicare Web site.|
|The United Seniors Health Cooperative. It
offers a comprehensive, updated guide called "Long-Term Care Planning," which
helps you compare features of different insurance plans. The 100-page book costs $18 and
is available by writing to USHC at 409 Third St. S.W., 2nd floor, Washington, D.C. 20024.|
|The book, "Beat the Nursing Home
Trap, A Consumer's Guide to Choosing and Financing Long-Term Care," by Joseph
Matthews, published by Nolo Press in Berkeley, Calif.|
Long Term Care