The Three Biggest Long-Term Care Insurance Myths (and why you shouldn’t believe them)
According to the Centers for Medicare and Medicaid, about half of nursing home residents pay for their care out of pocket. A recent survey found a private nursing home room cost a median of $77,745 per year in 2011, up from $60,225 in 2005. Can you afford this?
If more people understood the cost of nursing home care—and the likelihood of needing it—more would buy private long-term care (LTC) insurance. The U.S. Office of Personnel Management released the following sobering statistics:
- 48.6 percent of people 65 and older may spend time in a nursing home
- 71.8 percent of people 65 and older are expected to use some form of home health care
- 40 percent of the people receiving long-term care are between the ages of 18-64
If the need is so high, why do so few buy long-term care insurance…especially among the “near-older,” when premiums are more affordable? A report by America’s Health Insurance Plans (AHIP), a health insurance trade association, studied LTC buying patterns over 15 years, from 1990-2005. The study reveals some commonly held myths about long-term care that prevent people from buying this important coverage.
Myth #1: Nursing home care doesn’t cost that much.
The study found a strong link between understanding the cost of nursing home care and buying long-term care insurance. In fact, 70 percent of non-buyers underestimated the cost of nursing home care in their area, while only 14 percent of the buyers did.
As mentioned earlier, the national median cost for a private room in a nursing home reached $77,745 in 2011, according to a survey by Genworth. Assisted living facilities, which provide less intensive care, cost an average of $2,575 per month, or $30,900 yearly, according to research compiled by several nonprofit senior living organizations, including the Assisted Living Federation of America. Remember, these are averages—if you live in an urban or high-cost area, nursing home costs will likely be higher.
Myth #2: Medicare or Medicaid will pay.
Generally, Medicare doesn’t pay for long-term care. It pays only for medically necessary skilled nursing facility or home health care, rather than the “custodial” or non-skilled care that helps people with the activities of daily living. These activities include dressing, bathing, eating and using the bathroom.
Medicaid is a state and federal government program that pays for certain health services and nursing home care for older people with low incomes and limited assets. In most states, Medicaid also pays for some long-term care services at home and in the community. Who is eligible and what services are covered vary from state to state. Most often, eligibility is based on your income and personal resources. Individuals must generally “spend down” their assets before Medicaid will pay for nursing home care.
Today, most long-term care policies will pay for home health care, as well as a stay in a nursing home or assisted living facility, for those who need help with the activities of daily living.
Myth #3: Long-term care insurance is expensive.
The American Association for Long-Term Care Insurance (AALTCI) says a married individual age 55 who qualifies for preferred health and spousal discounts may pay as little as $709 per year for a basic plan that would provide about $155,000 in current benefits. Plans with features such as inflation guard, longer benefit periods, shorter elimination periods and the like will increase your premiums—but will also pay more in benefits.
The younger you are, the less you’ll pay for long-term care coverage. And since LTC insurers require insureds to be in good health at time of application, your chances of being declined increase the older you get. By buying coverage now you’ll save money and have peace of mind, knowing you’re protecting your assets. For more information, please call us.
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