Facing an Eldercare Situation with a Loved One?

Facing an Eldercare Situation with a Loved One?

Genworth released its annual Cost of Care Survey and the costs are steep, especially in New Jersey. Median Annual cost of New Jersey Key Costs for Long Term Care:

Home Health Aid                                                   $52,624

Adult Day Care                                                        $23,400

Assisted Living Facility                                        $69,732

Nursing Home Care (Semi Private Room)   $120,450

Nursing Home Care (Private Room)              $129,57

Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities.

There are three levels of long-term care:

  1. Skilled care: Generally round-the-clock care that’s given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.
  2. Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.
  3. Custodial care: Personal care that’s often given by family caregivers, nurses’ aides, or home health workers who provide assistance with what are called “activities of daily living” such as bathing, eating, and dressing.

Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.

Why is it Important to Plan for Long-Term Care?

No one expects to need long-term care, but it’s important to plan for it nonetheless, because the odds of needing long-term care are high:

  • Approximately 70% of people will need long-term care at some point during their lifetimes after reaching age 65*
  • Approximately 8% of people between ages 40 and 50 will have a disability that may require long-term care services*

With the ever-increasing costs of Long Term care it is important to plan ahead and plan early for your loved one’s needs.

Doesn’t Medicare Pay for Long-Term Care?

Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But, Medicare provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. And, although Medicare provides some home health care benefits, it doesn’t cover custodial care, the type of care older individuals most often need.

Medicaid, which is often confused with Medicare, is the joint federal-state program for people with little or no assets that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. To qualify for Medicaid, you must have limited income and assets (generally less than $2,000 in assets), and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.

Here are Some Options:

Buy Long-Term Care Insurance

Like other types of insurance, long-term care insurance protects you against a specific financial risk–in this case, the chance that you have a long-term care need at some point during your life. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and guarantee that you’ll have access to a range of care options. However, because of the high likelihood of needing care, it can be expensive.

These policies kick in once the insured cannot perform two of six activities of daily living (eating, bathing, dressing, toileting, transferring (walking) and continence), or is diagnosed with mental impairment such as dementia.

Before you purchase a policy, make sure you can afford the premiums both now and in the future. While many policies are quoted with fixed level premiums for life, many companies who have issued long-term care policies in the past have been able to increase these premiums for their policy holders retroactively as the insurance companies pay out more than they had originally expected.

The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:

  • Benefit amount: The daily benefit amount is the maximum amount your policy will pay for your care each day, and generally ranges from $50 to $350 or more.
  • Benefit period: The length of time your policy will pay benefits (e.g., 2 years, 4 years, lifetime).
  • Elimination period: The number of days you must pay for your own care before the policy begins paying benefits (e.g., 20 days, 90 days). This can be looked at much like a deductible, where longer elimination periods result in lower premiums.
  • Indemnity versus reimbursement: Reimbursement policies require the individual to submit proof of care, and will only reimburse expenses incurred and approved, while indemnity policies will pay the daily or monthly benefit in full as long as you are eligible to receive benefits. Because of this feature, indemnity policies can be used to pay family members or other informal care providers while reimbursement policies cannot.
  • Types of facilities included: Many policies cover care in a variety of settings including your own home, assisted living facilities, adult day care centers, and nursing homes.
  • Inflation protection: With inflation protection, your benefit will increase by a certain percentage each year. It’s an optional feature available at additional cost, but having it will enable your coverage to keep pace with rising prices.

Life Insurance Riders that Pay for Long-Term Care

Life insurance has many uses, including income replacement, business continuation, and estate preservation. Long-term care insurance provides financial protection against the potentially high cost of long-term care. If you find yourself in need of both types of insurance, a life insurance policy that combines a death benefit with a long-term care benefit may appeal to you.

Some life insurance issuers offer life insurance with a long-term care rider available for an additional charge. If you buy this type of policy, you can pay the premium in a single lump sum or by making periodic payments. In any case, the policy provides you with a death benefit that you can also use to pay for long-term care related expenses, should you incur them. Much like traditional long-term care policies, you can draw on the benefit when you cannot perform two out of the six activities of daily living, or have cognitive impairment.

The amount of death benefit and long-term care allowance is based on your age, gender, and health at the time you buy the policy. The appeal of this combination policy lies in the fact that either you’ll use the policy to pay for long-term care expenses or your beneficiaries will receive the insurance proceeds at your death. In either case, someone will benefit from the premiums you pay.

Deciding whether a combination policy is right for you depends on many factors. Do you need life insurance and long-term care insurance? How much life and long-term care insurance will you need? How long will you need it? Will the long-term care part of a combination policy provide sufficient coverage?

Use Your Annuity to Pay for Long-Term Care Insurance

The cost of long-term care can quickly deplete your savings and affect the quality of life for you and your family. Long-term care insurance allows you to share that cost with an insurance company. But premiums for long-term care insurance can be expensive, and cash or income to cover those premiums may not be readily available. One option is to exchange your annuity contract for a long-term care insurance policy.

Pay for Care Out of Pocket

Paying for a long-term care need out of pocket can be extremely expensive, but can make sense in some situations. For those who will have significant assets throughout their retirement, and can afford to pay what could be hundreds of thousands of dollars in unexpected long-term care related expenses, paying out of pocket is an ideal option. The major advantage to using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care.

The downside however, for those who cannot afford the expense, is their surviving spouse may have little assets left to support themselves with, the options for care once most assets have been spent are extremely limited, and heirs can be left with nothing.

No matter your situation, you should be aware of the potential costs and options available to cover you or your loved ones’ long-term care needs. We can help you evaluate your options and important points to consider as you evaluate your need for long term care insurance. Contact your AEPG Financial Life Planner to schedule a review.

To learn more, read Ray Hawkins’ article : “What You Should Know When Choosing a Continuing Care Retirement Community”

Source:  Genworth 2017 Cost of Care Survey, conducted by CareScout®, June 2017