Long-Term Care Health Insurance: The Pros & Cons

By Judy Rubin*

Baby boomers are transitioning from the active workforce into active retirement. Most have part-time jobs, hobbies or family to focus on.  There is a lot to divert their attention from un-pleasantries like planning if they reach very old age and need assistance in daily lives. 

Research modeling suggests that more than half of people who are 65 years old today will need some custodial care during their lifetimes. That means some help with the activities of daily living, including eating, bathing, toileting, dressing, transferring and help due to cognitive decline. Every boomer should take a few minutes away from work, the pickleball court or TV’s Downton Abbey reruns to think through what the future may bring and to plan for the time when help is needed, perhaps, lots of it. If planning makes sense, they should start by trying to answer the question: “If I can’t take care of myself, then who will?”  This conversation should involve the whole family but at the minimum anyone who might end up as a caregiver or one needing care. 

Traditional health insurance like Medicare will not cover expenses for custodial care. At the start, most people will enlist the “free” services of a family member or a spouse to help perform daily living tasks. This choice isn’t always available as families are smaller and more geographically spread out than previous generations were. Moreover, finding an available, trusted, family-member caregiver at the time of need may be impossible given the low unemployment rate. Additionally, as the needs escalate, the “free” caregiver may pay dearly in terms of expenses for travel and lost wages for missed work and lost time.  The caregiver’s other family members may be neglected.  And being a caregiver can be back breaking and emotionally-challenging work. For these reasons and more, family relations may be strained to their breaking point.

So how will older folks get their shoes tied or bathrobe on when their joints get stiff and creaky? Furthermore, how will they pay for the home health aide, nursing home or memory-care unit if their loved one can’t do that job?  Those with a big enough pile of money in investments or in the bank may plan to pay for services from their pocket as they are needed. Some people choose an investment plan with the intention that it will grow to be used as a source of funds for care in future years. If you’re interested in an estimate of the cost of long-term care services, look at Genworth’s 15th Annual Cost of Care Survey https://www.genworth.com/aging-and-you/finances/cost-of-care.html.

Here’s a snapshot of what’s realistic. Families with $500,000 in savings could find themselves with none after only a few years. Medicaid is the biggest source of funding for long-term care nationally but in order to qualify, you must spend down your own assets to a mere $2,000.  Exceptions can apply, but they aren’t generous. Also, there’s neither time nor space to address them in this blog. For people who wish to, or need to, protect their assets for other things, long-term care insurance offers an important alternative to spending down assets to pay for care.

Long-term care insurance policies come in many different forms. Because they are regulated by each state’s insurance commissioner, the costs, benefits and terms differ by insurance company and by state.  Here are some of the general basics:

• Buyers should look for an insurance company that is well funded and has a good track record.  Do your due diligence. Will that the company be able to pay when the time comes?
• Purchase a policy that you know you will be able to afford and choose a payment plan that works for you.  Some policies charge the premium periodically each year while others charge installments over several years or all upfront at the beginning.   
• Traditional long-term care policies only cover payment for qualified services and expire when the policy holder dies.  Some newer policies offer death benefits for surviving loved ones if the owner dies before using any or all the benefit dollars.
• It is most common for individuals to get their own policy, but there are policies available in most states that can cover more than one person.  This can be a benefit to married couples, unmarried partners and possibly even for siblings.
• It’s pretty standard for new policies to cover services performed in the home, an assisted-living facility or nursing home as well as care needed due to cognitive decline (like Alzheimer’s or dementia). 
• When comparing policies, look at the options for how and when one qualifies for payments. Do you have to be able to pay for your own care first for a set number of weeks or months before it kicks in? 
• Find out if the policy allows payments for services rendered by family members.  It can be a helpful way to deflect some of the burden. 
• Check to see if your employee benefits include the ability to purchase long-term care insurance that you can keep after you retire.  Compare it with other insurance companies to see if that might be your best option for you.

It is helpful to envision as many scenarios as possible in trying to determine the right policy for you. Due to the complexity of the decision, it is truly important to work with a reputable and knowledgeable person who is licensed to sell long-term care insurance in your state. Everybody’s situation is different, so it is important to consult your financial advisor and/or insurance agent for help selecting the right policy and insurance company for your needs.  Some agents who specialize in this area hold CLTC® certification.  A link to the CLTC website is here. https://www.ltc-cltc.com/. 

Most people think that long-term care insurance premiums seem very steep; they can be. That’s because the cost of care can be enormous, enough to bankrupt many families. The cost of long-term care insurance and how much insurance is needed varies by each person’s circumstance and their health, age, gender and location. Deteriorating health can be a barrier to acquiring long-term care insurance. Like life insurance, the older you are when you apply, the higher the cost of the insurance. But it’s also different from life insurance. Long-term care insurance is more costly for women than men because women have a higher chance of needing care than their male counterparts because they live longer.

For more information see the study The National Association of Health Underwriters’ free Consumers Guide to Long-Term Care by following this link.  https://nahu.org/looking-for-an-agent/helpful-guides/consumer-guide-to-long-term-care

We all know the old joke about “aging stinks but it beats the alternative.”  Aging without a plan and resources may feel worse than the alternative.  November is Long-Term Care Awareness month. Mark your calendar now to have your family conversation about aging before next winter sets in, but better yet, do it long before. 

*Judy Rubin Bio

Judy is a partner at Plaza Advisory Group, and is affiliated with Royal Alliance Associates, Inc.  She has enjoyed working in the financial services industry ever since she graduated with a B.S. in Business Finance from the University of Colorado in Boulder (Go Buffs!), in 1979. Judy began her career as an equity trader working with institutional clients such as pension funds, mutual fund companies, and hedge funds located across the United States. Over time, she recognized her passion for helping families directly and focused her practice on financial planning and private client wealth management.

Today, Judy oversees a team of professionals who deliver customized financial service and advice to a select group of clients in 17 states. Judy’s clients consider her a friend and confidant first and foremost, and these strong relationships allow her to take a “big picture” approach with each client based on their priorities, behaviors, and life events.

With the help of her three millennial children and young team members, Judy is always exploring new financial planning tools, technologies and strategies that may appeal to and excite the next generation of investors to take control of their financial futures. Beyond her own practice, she is also passionate about getting more young females involved in the financial services industry as a career path.

Outside of work, Judy is the past President of the Board for Kids in The Middle, an organization that offers therapeutic services to children and parents dealing with divorce. She is also an active supporter and former board member of The Foundation for Barnes Jewish Hospital and the John Burroughs College Preparatory School.

Judy holds Series 7, 24,31,63,65 licenses, is a Certified Financial Planner® and Certified Divorce Financial Analyst™.

Securities offered through Royal Alliance Associates, Inc., (RAA), member FINRA/SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA.  Additional insurance services may be offered through Plaza Advisory Group, Inc., which is not affiliated with Royal Alliance Associates, Inc.