Most Mistakenly Think Medicare Will Cover LTC Needs
Have you considered the implications of aging and long-term care? Many of us start thinking about these matters, especially when a parent or another older relative begins to require care or faces aging and chronic health challenges. It is hard not to experience someone needing help with daily living activities or supervision due to memory loss.
Who will provide that care, and how will it be financed in the future? A recent survey titled "2016 Long-Term Care in America," conducted by the Associated Press-NORC Center for Public Affairs Research at the University of Chicago, reveals that 38% of adults aged 40 and over believe Medicare will cover their future long-term health care needs.
People are under this impression even though traditional health insurance and Medicare (health insurance for those 65 and older) do not cover most long-term care (LTC) services and supports. Unfortunately, most families discover this during a crisis with an older family member. Medicare has never been a way to pay for long-term health care.
Traditional health insurance, including Medicare and supplements, only pays for short-term skilled care. Medicare doesn't cover long-term custodial care, which is the type of care most people will require. People require long-term care services due to illnesses, accidents, mobility difficulties, dementia, or frailty due to aging.
The Department of Health and Human Services projects that more than 56% of those turning 65 will need some long-term service before they pass. Most of this care is custodial in nature, so don't expect Medicare and health insurance to pay for it. The responsibility for paying for care—or providing the care—is left to the American family.
Medicaid Pays for Long-Term Care If You Have Limited Income and Assets
According to the Kaiser Commission on Medicaid data, only 2 out of 10 older adults anticipate using Medicaid to finance their LTC needs, even though Medicaid is the largest public payer of long-term care services.
Medicaid is the nation's medical welfare program. To qualify, you must have little or no income and assets. Medicaid is not an answer for long-term care unless you have little savings. The quality of care is also questionable with Medicaid because of the lower reimbursement for services from the government.
American families face an enormous financial burden because of long-term care expenses, and the cost of these services is growing rapidly. Bruce Chernof, M.D., president and CEO of the SCAN Foundation, says long-term care will become an even bigger financial strain in the decades ahead.
Medicare and Social Security were not built to cover Long-Term Care costs, leaving American families unprotected, and as this survey shows, unaware of this fact.
Most People Happy with Their Long-Term Care Insurance
Long-Term Care Insurance, including partnership policies available in most states, is an affordable solution for future long-term care needs.
Many now consider Long-Term Care Insurance part of their comprehensive retirement plan.
The survey shows that most of those with LTC insurance (69%) are very satisfied or somewhat satisfied with a policy's cost. Among those who do not have LTC insurance, just 23% say they have looked into purchasing a plan. This low number is due to several reasons, including the denial that they will ever need care, the erroneous impression that the government will pay for long-term care, and the uninformed belief that Long-Term Care Insurance is very expensive.
LTC Insurance Can Be Very Affordable
The financial burden of long-term care can indeed be substantial. The LTC NEWS Cost of Care Calculator illustrates the current and future cost of long-term care services nationwide. Despite the higher costs of future long-term care, LTC Insurance can be very affordable.
The LTC NEWS Survey of Long-Term Care Insurance Premiums outlines how affordable Long-Term Care Insurance can be, especially if you are younger and healthier. Most people obtain coverage in their 40s or 50s, but affordable options are available for those in their 60s and older, depending on their health.
However, premiums vary dramatically for the same benefits. For example, a 50-year-old couple in good health can see premiums for a plan with a $3,000 monthly benefit, a $108,000 benefit account, and a 90-day elimination period, growing 3% compounded every year range from $184.20 a month to as much as $359.73 a month.
There are several types of LTC Insurance options, including traditional LTC policies and hybrid policies, which combine life insurance or annuities with a qualified rider for long-term care.
Additional Asset Protection Possible
Partnership Long-Term Care Insurance offers a unique benefit known as 'asset disregard,' which provides dollar-for-dollar asset protection. This means that if a policyholder exhausts the funds in their LTC policy, they can legally protect a portion of their estate equivalent to the benefits paid out by the policy.
According to the survey, 36% of respondents feel very or extremely confident that they will have the necessary resources to cover long-term care costs. Meanwhile, another 36% are somewhat confident, while 24% are not too confident or not confident at all about their ability to finance long-term health care.
Genworth Financial, a leading insurance company, does an annual research study on the cost of LTC services and the public perception of those costs. The 2016 study showed most Americans underestimate the cost of long-term care at-home care by nearly 50%.
Valerie VanBooven, RN BSN, Editor-in-Chief of HomeCareDaily.com, says the study also determined that women are more likely to underestimate the cost of in-home care, even though they comprise 80% of the care providers or family members who find the right level of care and support for a loved one.
If people underestimate the cost of long-term home care, they are more likely to be unprepared for it in the event that they or someone else in their family requires significant long-term care in the future.
Other points the AP/ NORC survey showed:
- 77% of respondents would prefer to receive care in their own homes.
- 67% indicate they would want their loved ones to receive LTC services in a home setting.
- One-third of the respondents have not made any plans to pay for their LTC services.
Just under half (46%) of survey participants anticipate that it is at least somewhat likely that an aging family member or close friend will need ongoing living assistance in the next five years. Those who have long-term care experience and are younger than 65 are more likely to anticipate that their loved one will need assistance.
Of those who say their loved one will need ongoing living assistance, 1 in 3 say they will be at least partially responsible for providing that care. Half say that someone else will be responsible for delivering that care.
Family Caregivers are Untrained and Unprepared
However, these prospective caregivers are not confident they are prepared to provide this care. Just 30% of those who will be responsible say they feel very or extremely prepared to provide this ongoing care to their aging family member or friend, 47% say they are somewhat prepared, and 20% say they are not very or not at all prepared.
Most family caregivers are untrained and unprepared for a job that is physically and emotionally demanding. Plus, they must juggle their career, family, and other responsibilities with their job.
Meanwhile, those with Long-Term Care Insurance receive benefits from those plans, which help them receive quality care, including in-home care. Long-term care Insurance companies paid over $14.1 billion in claim benefits in 2023, according to Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), a national consumer advocacy group.
Americans are living longer and often the result is a need for long-term care. The individuals who own LTC Insurance policies benefit from the protection as do their families and loved ones.
Without an LTC Insurance policy to pay the cost, Slome acknowledges the caregiving responsibility often falls on elderly spouses or adult children of aging parents.
LTC Insurance provides choice and control while protecting your retirement plans and lifestyle. It allows loved ones to care about you rather than being forced to care for you.
Prepare Before You Retire
As more families understand that the government is not the solution for their future long-term health care, they seek options to address the costs and burdens of declining health and aging.
The cost of long-term care is expected to grow in the decades ahead. The LTC NEWS Cost of Care Calculator shows how expensive long-term care services are today and how they will increase, based on major metro areas in each state.
In-home care, adult day care centers, assisted living, and memory care are less expensive than a nursing home, but they are all financially draining on a family's budget. Most long-term care is delivered outside a nursing home. These costs vary depending on where you live.
Long-Term Care Insurance is an affordable way to address the consequences of getting older and needing help with everyday living activities or supervision due to dementia.
When you own a policy, you own a solution that gives you access to quality care options, including care in your home. Not only do you secure quality care for yourself, but you also get to safeguard your income and savings and give loved ones the time to be family instead of being caregivers.
Most people obtain coverage in their 40s or 50s, but affordable options are available for those in their 60s and older, depending on health. Be sure to seek the help of an experienced Long-Term Care Insurance specialist who will navigate the many options from all the top companies.
Remember, every company has its own underwriting criteria and pricing, so a specialist will match you with the company that provides you with the most benefits at the lowest cost.
Don't delay; your health can change anytime, and you must have reasonably good health to obtain coverage.