Getting older is an expensive proposition. With each decade, the risk of living with a chronic disease, some form of dementia, or other disabling condition, increases. Chances are that most of us will need some kind of assistance with daily care in the future, and many will need to pay privately for that help because their assets exceed the threshold for subsidized care.
Those expenses can add up quickly. According to the Massachusetts Executive Office of Health and Human Services, the average private pay cost of a nursing home in the Commonwealth was $354 per day in July 2016. Forbes pegs the hourly rate of an agency home health aide at $20 per hour; in Central Massachusetts, the average hourly rate is closer to $24.
For women, the cumulative costs are typical higher, simply because women tend to live longer than men in a supported care setting. According to the Forbes article, men will need 18 months of paid care, on average; women, three years.
Understand the Tradeoffs
For those without family members or friends who can be their at-home caregivers, Long Term Care (LTC) insurance presents one way to help cover future expenses. But LTC policies can be a pricey investment. Premiums increase as you age; chronic pre-existing medical conditions can rule out coverage options. Basic policies may not even cover the full daily cost of a nursing home.
So, how do you know whether to buy a LTC policy, when to buy it, and what to look for? The answer depends in part on how much risk you want to take, what you expect will be your future assets, and what you can anticipate about your own health based on family history.
Don’t count on Medicare: those benefits cover only acute hospital stays and limited rehabilitation care. In Massachusetts, MassHealth pays for nursing home expenses, but only after other funds are exhausted. The extent to which the federal and state governments continue to subsidize health care expenses through Medicare and Medicaid is the focus of heated debate nationwide, with no clear answer in sight.
Know Before You Buy
If you suspect that the odds of chronic, debilitating illness are against you, and if there is a high likelihood you’ll need help with basic activities of daily living (dressing, bathing, eating), then a LTC policy might be the right investment. Here are some basic tips:
- Buy before you get sick. While there’s no way to know the future, you will have a better chance of getting an affordable LTC policy if you buy while you’re still in good health. Balance this against the number of years you will need to pay premiums before you might need the benefits. On average, it pays to investigate this form of insurance and buy a policy during your 50’s or early 60’s.
- Look for a policy with the shortest elimination period. Typically, LTC policies have some kind of a waiting period before benefits can be claimed. A 90-day elimination period is common. Be sure to understand the time frame for which you will still have to pay full price for care until the policy kicks in. Some policies offer a “no elimination” period for home care benefits, which can be very helpful for families
- Buy inflation protection. The cost of long-term care will continue to rise. Since you’ll probably be purchasing a policy several decades in advance, you want to be certain that you’re covered for future, not current costs.
- Look for portable, flexible coverage. Your benefits should follow you wherever you live, both at home and in a long-term care setting, as well as geographically. Ideally, you want a policy that also gives you flexibility to hire the care that you prefer, and not be bound to a home healthcare agency.
- Name a third party contact. For your own protection, identify a family member or trusted friend who can be notified in case of failure to pay a premium or policy cancellation. If memory becomes an issue, you want to be sure of back-up to maintain coverage.
- Work with a reputable agent. LTC insurance policies are complicated. You need someone you can trust to help you sort out all the options, including the relative advantages and disadvantages of group versus individual policies. You also want someone who will find you a policy with a company that has an excellent track record with customer service.
- Include LTC insurance as part of your estate plan. Be sure to consult with your financial adviser to develop an affordable plan this is right for you. You want to be certain that you can still afford LTC policy premiums even after you stop working. Some policies enable you to change coverage and benefits as your circumstances change.
President of Deborah Fins Associates, PC, since 1995, Deborah Liss Fins is a licensed independent clinical social worker and certified Aging Life Care™ manager. Drawing on more than 30 years of professional experience in aging life care management, DFA offers comprehensive assessments and planning, guidance in selecting appropriate care, help identifying resources for financial support and professional consulting. Please contact us to set up a complimentary initial telephone consultation.
For more on coping with aging, follow us on Twitter: @DeborahFinsALCM.
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