Because of old age, mental or physical illness, or injury, some people find themselves in need of help with eating, bathing, dressing, toileting or continence, and/or transferring (e.g. getting out of a chair or bed), or assistance due to cognitive impairment. These six things are called Activities of Daily Living sometimes referred to as ADL’s. In general, if you can’t do two or more of these activities, or if you have a cognitive impairment, you are said to need “long term care”.
Long-term care isn’t a very helpful name for this type of situation because it might not last for a long time. Some people who need ADL service may only need it for a few months or less.
Many people think that long-term care is provided exclusively in a nursing home. It can be, but it can also be provided in an adult day care, an assisted living facility, or at home. It also can be offered at a skilled care facility. The distinction between the skilled care facility and the others is important because Medicare and most private health insurance pay only for skilled care — not custodial care.
If you’re under 55, it’s unlikely you’ll need LTC at that time. But, according to research published in the journal Inquiry by Kemper, Komisar and Alecxih, most people who turned 65 in 2005 will, in their lifetime, need some level of long-term care from a few months or less to five years or more. Women are at higher risk than men.
The good news is that people are living healthier longer. In other words, the need for long-term care is, on average, occurring later in life than just 20 years ago. Even so, if you do need LTC service, it can be expensive. For example, in 2005 a MetLife Mature Market Institute survey found a national average daily cost of assisted living facilities of $100, with a range of $55 to $155 across the U.S. Luckily for us, Louisiana’s average costs are in the bottom half of the survey.
In the same MetLife survey, the lowest average monthly base rate for an assisted living facility was $1,500 in the Jackson, Mississippi area and the highest was $4,300 in the Stamford, Connecticut area.
The question now becomes “Do I need LTC insurance, when should I buy it and how much does it cost?”
The answers are different for each individual and each family. For those with very little in assets and those who can afford to pay for care, the need for LTC insurance is probably lower. For those of us in the middle, the need should be examined fully.
As with any insurance product, cost will vary based on health and age. The younger you are, the less likely that you’ll be rejected and lower the premium should be based on your health. The general rule of thumb is to begin looking at LTC insurance in your 50’s. For a select few it might be earlier, for others later.
Costs are based on the benefits and features selected as well as your age. For example, selecting a plan that pays $100 per day vs. one that pays $150 per day will lower your cost. All policies have what’s called an “elimination period” or “waiting period”. This is when you take it upon yourself to pay all of the costs associated with your stay. The longer the waiting period is (i.e. a 180 day waiting period vs. a 90 day waiting period), the lower the premium.
No matter what your situation, this is a conversation that your financial advisor should have with you. Examine your needs, financial situation and health. LTC insurance may be the “bandage” you need to protect your nest egg from cracking.