American Families Will Face Crisis Without Understanding Long-Term Care Risk

Surveys continue to suggest that many Americans do not fully understand the full impact of long-term health care. More people are seeing the consequences of long-term care. COVID-19 places the problem on our TV screens all the time. However, the issue of long-term care is not new, and in recent years more families have experienced the problem firsthand.

The problem is hard to avoid. Most of us have personal experience with family members, neighbors, and others who need help with daily living activities or supervision due to dementia. Today, more people understand that the consequences of longevity are a real concern that affects families and finances personally.

The Associated Press-NORC Center for Public Affairs Research poll says 53% of adults age 40 and above think that it is somewhat likely that they will require ongoing living assistance at some point in their lifetime. Nineteen percent believe it is very or extremely likely they will need long-term care services.

Need for Long-Term Health Care Increases with Age

The risk of needing long-term health care increases with age. Health insurance, including Medicare, will not pay for most of this care, placing families into financial crisis or making family members become caregivers.

Medicaid will pay for long-term health care, but the care recipient must have little or no income and assets to qualify for the benefits. Plus, there has always been a question about the quality of care provided through Medicaid long-term care facilities.  

American Families Unprepared for Costs and Burdens of Aging

The surveys show many American families are unprepared for the realities of aging. Trevor Tompson, who directs the AP-NORC Center, says the need for long-term care will only increase in the years ahead. He notes the large numbers of people who turn age 65 each year.

"With this expanding need comes a demand for ways to maintain high-quality services and to make financing such care manageable for families and governments alike," the AP national survey report notes.

Few people are prepared to pay for the costs of long-term care. The survey says only a third said they were "very or extremely confident" in their ability to pay for ongoing living assistance possibly needed in the future.

Costs for LTC Services Continue to Go Up

It is no wonder that respondents are concerned. Every year the cost of all types of long-term care services increases. The LTC NEWS Cost of Care Calculator says the national average of a nursing home is over $100,000 a year. 

Other long-term health care costs are expensive and continue to rise as demand increases, and providers are attempting to keep up with demand. In addition, labor costs are increasing as well, and these higher costs will strain the finances of American families. 

 Most long-term care is provided at home, and home health care services are also rising rapidly. Over time, more people move into assisted living and memory care facilities as their needs progress. 

The cost of long-term care services varies depending on the type of care and your location. You can learn about the current and future cost of care in your area by using the calculator - Cost of Care Calculator - Choose Your State | LTC News.

Twenty percent of people report that they are not aware that private health insurance, including Medicare, will not pay for most of this type of care. 

Some people are unaware that Long-Term Care Insurance exists and offers benefits for all areas of long-term care, including home care. However, you cannot purchase LTC Insurance when you need care; it is usually purchased in your 50s when premiums are lower, and your health may qualify you for good health discounts. 

Many Family Members Provide Care for Loved Ones

Yet surveys show many Americans are currently providing care for a family member. A 2015 survey reported 40% of the respondents said they were providing long-term care for a family member. With demographics showing large numbers of Americans getting older, their family members will find themselves in the caregiver role unless these Generation X and Late-Boomers take action to limit the burdens on their families. 

Some Americans think they can self-fund future long-term care expenses. What does this actually mean? It means future long-term care expenses will be paid for through your income and assets. This approach places the full responsibility for long-term care on a person's savings and income - or their family members become caregivers. The outcome can be devastating for both the family and the finances. 

"Generally, when someone tells me they will self-fund future long-term care costs, they mean they don't think they will ever need care in the future. The denial of long-term care risk has devastating consequences on their families and their hard-earned savings," said Matt McCann, a leading expert on long-term care planning. 

Can You Self-Fund Long-Term Care?

There are ways to make self-fund easier. Hybrid Long-Term Care Insurance policies can take a single premium and turn it into a substantial amount of long-term care benefits when you need them. However, the policy also has a death benefit, so if you never need care, your family will receive the policy's death proceeds. Experts say you never risk any money, but you have to have enough to fund the single premium.

Partnership Long-Term Care Insurance policies are available in most states. These traditional insurance plans give the policyholder dollar-for-dollar asset protection. If you exhaust your long-term care benefits, you can shelter a portion of your estate equal to the policy's total payout of benefits. 

With traditional Long-Term Care Insurance, you usually pay the premium every year until you need care or pass away. Some plans include a return of premium rider at additional cost.

Remember, Long-Term Care Insurance is medically underwritten, so you must have reasonably good health to obtain coverage. Experts recommend securing coverage in your 40s or 50s when you can take advantage of your good health and much lower premiums. 

Your health, body, and mind decline as you get older. When you prepare for future long-term care, you will not only safeguard income and assets but reduce the stress and anxiety otherwise placed on those you love.