Understanding Long-Term Care

Last Editorial Review: 1/30/2005

Long-term care insurance helps with nursing home expenses.

WebMD Feature

Reviewed By Michael Smith

When most people think of long-term care for the elderly, they think of nursing homes. But it can involve much more than that. It also means home health care and personal care, and help with chores, all of which can be necessary for older people living at home.

But many people's financial resources are quite limited, and this can keep them from getting the care and services they need when they grow old. That's why many people are turning to long-term care insurance.

A Devastating Expense

Long-term care has become the greatest health-care need of older persons. It's the most common catastrophic health-care expense today.

Every day more than 5,000 people in this country turn 65. More than 2.5 million are 85 or older. And the likelihood of chronic illness or disability increases with age.

The kind of services needed by older persons varies widely. Some need help around the house, with shopping, and with transportation. Some need personal care such as help bathing or dressing. Some need rehabilitative care after a stroke, or intensive long-term skilled nursing care. And some need to be placed in nursing homes.

Some of these seniors are fortunate enough to have family and friends to help. But for many, the cost of receiving needed care and services is a devastating financial hardship.

The Cost of Long-Term Care

The cost of a nursing home is most often $30,000 to $40,000 a year, but can easily exceed $50,000 or even $60,000 depending on its location and how much care is needed. Half of all nursing home expenses are paid directly by seniors and their families. A recent study conducted for the House Aging Committee found that about two-thirds of single older persons, and one-third of couples, were impoverished after only 13 weeks in a nursing home.

Long-term care provided at home is also costly. Home health care provided by licensed professionals can range from around $5,000 a year for home health aides and other supportive services, to more than $10,000 a year for skilled nursing services. Health insurance plans such as Medicare and Medigap will cover these expenses only in certain limited conditions.

Finding a Policy

There are many insurance policies covering long-term care (LTC) available today. Here are some criteria you should look at when considering LTC insurance for your spouse and yourself.

Find out whether your LTC insurance:

  • Provides an adequate minimum benefit of $150 a day while confined in a nursing home.
  • Covers you for custodial and intermediate care as well as skilled care.
  • Requires prior hospitalization in order to receive nursing home benefits.
  • Offers lifetime benefits -- although you may want to reduce your premium cost by buying a policy with a lesser benefit period.
  • Provides home health-care benefits. (But be aware that policies offering this benefit will cost more.)

Some other tips:

  • Insist on a rating of "A" or better from A. M. Best. This rating is an indication of above-average financial strength and operating performance.
  • Look into optional "inflation guard" benefits that increase your total coverage by 5% on each anniversary of your coverage.
  • Compare cost, but insist on quality coverage.

Obviously, the ideal time to purchase LTC insurance would be the day before you need it. But the younger you are when you buy your LTC insurance, the lower your premium will be for the rest of your life -- and generally the better your chance of meeting the company's underwriting requirements.

Reviewed by Michael W. Smith, MD, April 2002.

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