What you should know about long-term care

More than 50 percent of the population living in the United States is expected to need some form of long-term care, either home or institutional care, at some point in their lives.¹ Although you may have spent years carefully working and planning for retirement, have you ever considered what might happen if you or your spouse required long-term care?

There are many misunderstandings about long-term-care insurance. Many people believe Medicare/Medicaid coverage will provide for long-term care. Medicare offers limited help. Per benefit period, it pays for 20 days in a skilled nursing facility and part of the cost for the next 80 days, but only after a hospital stay of three days or more. Medicare also pays nothing for simple long-term, custodial care.² Medicaid’s rules vary by state. Medicaid’s nursing-home and home-care coverage is generally limited to people with low incomes and few assets.

Long-term-care policies are more inclusive than they used to be. Most routinely cover “functional” infirmities (such as needing substantial help to dress), physical impairment (such as a stroke) and severe cognitive impairment (such as Alzheimer’s disease).

The key features of long-term-care insurance include daily benefit amount, benefit period, elimination period and home-care coverage. The daily benefit amount is the maximum benefit you will receive for any one day of care. The benefit period provides benefits for a fixed number of years. If you want to reduce your risk, a lifetime benefit period may be appropriate. The elimination period, which acts as a deductible, should be selected based on the amount of time you are willing to pay for long-term-care expenses out of pocket before benefits begin. Common choices are 20 to 100 days. Finally, with more than 90 percent of seniors responding that they have no intention of leaving the comfort of their homes or communities to enter a nursing home,³ you should consider a policy that offers complete home-care coverage.

With a little foresight, you can help protect your savings, retirement nest egg and family wealth against the potential risk of long-term-care expenses so that you can enjoy the retirement you’ve planned. You may be able to purchase a long-term-care insurance policy with an annual premium for less than the cost of one month’s care.⁴

Sources: ¹ The Wall Street Journal, October 22, 2001. ² CBS Marketwatch.com, Nov. 20, 2000. ³ U.S. News & World Report, May 21, 2001. ⁴ CBS Marketwatch.com, Nov. 20, 2000.

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