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With the advancements made in health care and technology today, the world’s population is living longer than ever before. Because of that, there is also an increase in the need for nursing home and other forms of long-term care. But long-term care isn’t just for elderly people, there are many cases when the people needing some form of long-term care may be in their forties, or younger! From this need arises an unfortunate problem. There are those who are in need of care, but are unable to afford it. This is a needless problem that can be easily remedied, as long as you are open to discussing the possibility, and realities surrounding long-term care.

By the year 2050, nearly five percent of our population will be at least 85 years old, whereas, only one percent of the population was that age in 1990.2 This will translate into an increased percentage of
people who will need long-term care, or will already be in either a nursing home or receiving in-home care. As people age, their ability to do little, everyday things diminishes. Most everyone knows people who have hired special care workers to come into their home, or are living in a nursing home simply because they were unable to care for themselves properly anymore.

The odds of your entering a nursing home increase every year. If you knew that you were going to need some form of care, be it inhome or nursing home care, what would you do? Do you know how you would pay for it? If you answered “yes” to the second question, congratulations. At least you have thought about it. But your answers may not be the best suited to your situation. There are a few ways to help protect yourself, as well as your spouse and dependents, from the costs of long-term care. If you answered “no” to the second question, you are not alone. Most people have not considered what they would do. Perhaps they may be unwilling to entertain the thought of needing some sort of plan. Unfortunately, today’s reality dictates that we consider the unpleasant. Simply put, we have to plan in order to make sure that we will be taken care of.

Many of my clients are over the age of 50. Therefore, they have already seen age and frailty in their own parents. One of my client’s mother is in a nursing facility because she suffers from Alzheimer’s Disease. He understands the need for long-term care insurance and has a policy for himself and one for his wife. Many of my other clients understand this. They also recognize that the chances are great for them to enter into a nursing home or need long-term care. However, I also have clients who have never known anyone who was touched by this. They aren’t as open to the possibility of needing any type of care, and are simply unwilling to discuss it.

What I’ve found is that while I can’t push clients into talking about it, I can gently persuade them into thinking about it on their own. Usually, they will decide that they do need to talk to me about it. Those people who choose to face their fears and the unpleasantness that generally accompany thoughts of long-term care are better off. Those who continue to ignore these needs are usually the ones who find themselves flailing their arms instead of flying.

Long-term care consists of different types of care. It doesn’t necessarily translate to nursing home care, although this is the most common form. Individuals needing long-term care may wish to enter a skilled nursing home, or they may want to receive care in their own homes. Skilled nursing facilities generally have a large staff and the equipment necessary to provide most, if not all, services needed at any time by their patients. They also provide rehabilitative services on a daily basis for those who need them. Intermediate-care facilities provide custodial care on a primary basis, but they also have skilled nursing and rehabilitative services. Custodial care facilities are residential places that are designed to provide primary custodial care. However, they aren’t equipped to provide any skilled nursing services. Adult day care, an increasingly popular choice, is offered only on a nonresidential basis. Home health care may provide skilled nursing care, as well as rehabilitative services, from the comfort of the patient’s own home.

Once you’ve made up your mind that long-term care is something you need to consider, the question becomes, “What should I do about it?” Quite simply, take a look at your options. This also involves coming up with some sort of action plan. Typically, the first resource people look to is their family members. A common response I hear when I bring up long-term care is that the client’s family will take care of them. The second response I hear is that they will use Medicare or Medicaid. The least popular response I hear is that the client would like to purchase long-term care insurance.

While all three responses are likely scenarios (varying with each individual), the most positive of the three is to purchase insurance. Through insurance, you are transferring the risk to an insurance company, who, in case you need long-term care, will pay part or all of the cost of your care. In exchange for this coverage, you pay a premium for the insurance. Let’s take a look at each of these three answers and see why they will or won’t be the best general answer.

Family Care

As I said, the most common answer I hear from clients when we talk about long-term care is that their family will take care of them. This is a very admirable sentiment, but it is also very presumptive. The first thing to consider is, while you may want them to take care of you, do they want to take care of you? Don’t just assume that since you think they will take care of you that they will. What you would be asking, even in the short-term, is very time-consuming, financially and emotionally expensive, and intrusive.

For many people, when they refer to their family, they mean their children. Do your children have children? If so, your children would not only be taking care of their own children, but also their parents. Do your children work? How do you expect them to balance the chores of work with the rigors of taking care of you? Chances are, they would be unable to do both, so they would have to quit their jobs. Taking care of someone who needs long-term care is a full-time job in itself; and one that doesn’t pay any money. They would be trading a job that pays them a wage, where they could leave all the job pressures at the office, in exchange for a job where they would be on call 24 hours a day, seven days a week at home. This is a huge tradeoff, especially for someone whose heart isn’t in it. Not to mention the possible added costs of bringing you into their home. If you use a wheelchair, they may have to add a ramp. The list goes on; this is just one example.

I’ve met people who have told me that they have promised their parents that they wouldn’t put them into a nursing home. But that doesn’t mean that the children are then stuck caring for their parents at home. And by stuck, I do mean stuck. Even if the parent doesn’t move into the child’s home, the child is still responsible for making sure that everything is going smoothly.

Let’s consider the example of Bill and Sally Jones. Both Bill and Sally work, earning a combined salary of nearly $150,000 per year. They live a relatively quiet lifestyle, but they do enjoy traveling and taking vacations together. Bill’s mother has been quite ill and has been advised by her doctor that she needs full-time care. Many years ago, Bill, an only child, promised his mother that he would never put her in a nursing home, a promise that Bill intends to keep. Since his mother needs full-time care and is unable to do some things on her own, Bill and Sally decide that she will move in with them.

Bill’s mother doesn’t have a lot of assets, nor does she have any type of long-term care insurance. Bill and Sally sell her home and use the proceeds to help pay for her care. After a couple of months, they decide that Sally should quit her job so that she can take care of Bill’s mother. Their combined income drops from $150,000 per year to $90,000 per year. Taking care of Bill’s mother has become a full-time job for both Sally and Bill. Not only has their income dropped, they are no longer able to do the things they enjoy, like traveling. Since they are Bill’s mother’s primary care givers, there is no one else to take care of her if they decide they want to go somewhere. So, they don’t go.

Obviously, this is a worst-case scenario against the family care option. But, there are other things to consider, as well. Is your family member able to care for you? I don’t mean just financially, but physically. If you were unable to walk, would they be strong enough to lift you into a wheelchair or bathtub? These are very important things to consider. If your family members are unable, or unwilling, to perform physical tasks, then they won’t be able to take care of you.
The third thing to think about is the emotional toll it will take on both you and the people taking care of you. Taking care of a loved one, especially a parent, is a very emotionally tough prospect. For so many years, the parent has taken care of the child and now the child is being called upon to take care of the parent as the parent’s health increasingly deteriorates. For the parent, the stress is equally harsh.

They’ve always been the caregiver, not the one needing care. The role reversal may be too much for either party to handle.
Finally, are your family members knowledgeable enough to take care of you? If you require special treatment, they may not be. You may truly need a professional nurse or caregiver to watch over you and make sure that everything is going the way it should. They will also be trained to notice any warning signs of further deterioration, which your child or other family member may not be.

Medicaid and Medicare

Many people believe both Medicaid and Medicare, forms of government assistance, will be there for them in the case that they need some type of long-term care. The realities of these two programs are startlingly different than what people popularly perceive. First, Medicare and Medicaid are two separate entities. Medicare is a federally run program, while Medicaid is run on the state level and is a form of welfare.

In order to use Medicaid to pay for long-term care costs, you must first be eligible and meet certai- financial requirements. These financial requirements dictate that your income must not be above a certain level, plus there is a limit on the amount of assets you can have, all of which vary by state. If you don’t meet the requirements, then you are ineligible for Medicaid. Therefore, many people do what is commonly referred to as “spend down” their assets in order to qualify. Spending down means liquidating and distributing your assets to the point where you are essentially left with nothing. At that point, you can apply for Medicaid to pay for your care costs.

Generally, although this may vary by state law, those receiving Medicaid benefits are allowed to keep a small portion of their income, a very small portion, which may be as small as $50 per month. If they have more money than that, they are expected to pay, in part, for their own care. While the requirements are strict, the federal definition of “income” is very broad. It says that income is anything you receive in cash or in kind that you can use to meet your needs for food, clothing or shelter. If you are financially destitute, then Medicaid is the only option for you. But if you have sizeable assets, do not consider Medicaid because you will have to divest yourself of everything you have. Is that what you want to do?

It’s important to remember that if you are married and your spouse is still living, the rules will vary.

When Medicaid patients need to enter nursing homes and other care facilities, do you think they are able to choose where they want to go? Not really. Nursing homes and other facilities give preference to private-pay patients and those with long-term care insurance. You may find that if you were to pay for your care with Medicaid, you could wind up in a facility very far away from your family, who would then be unable to visit you very often. This is obviously not the preferred choice.

Medicaid benefits cover a broad spectrum of services. They also, with a few exceptions, don’t require any type of copayment, deductibles, or coinsurance for those who are eligible. They provide comprehensive coverage for acute care, as well as substantial coverage for long-term care. This includes extended, and unlimited, nursing home stays and some home health care services.

In the case of Medicare, the benefits that apply, coverage of skilled nursing home care and home health care, are limited in the long-term care context. Medicare home health care coverage only applies to either part-time or intermittent care for housebound patients. These patients must be under a physician’s care who must certify the need for the care. Medicare nursing home coverage covers skilled nursing care or skilled rehabilitative care occurring after a medically necessary hospitalization for at least 3 consecutive days, admission to the nursing facility within 30 days after the hospitalization, and only if a physician certifies the need for skilled care. Medicare would then pay for the first 100 days in such a facility, while requiring a copayment for days 21 through 100. They will not, however, cover the cost of care for custodial care.

Medicare is better suited to provide benefits for acute medical conditions, rather than long-term care coverage. Should you need any type of long-term care, you should investigate if you would be eligible for any type of Medicare benefits.

Long-Term Care Insurance

The third option for those thinking about long-term care is to purchase long-term care insurance. Like disability insurance, this insuranceprovides for the insured in the event that they need some form of longterm care, and it comes in a variety of forms. This allows the purchaser to determine better which coverage would best suit his or her needs.

Long-term care insurance will cover a variety of services. These include skilled nursing home care, intermediate nursing home care, custodial nursing home care, other custodial facility care, in-home health care, in-home care, adult day care, respite care, and hospice care. With all these choices, it’s easy for an individual to pick a policy that will be the best suited for his or her anticipated needs. Since most people say that they don’t want to go into a nursing home, purchasing a policy that covers in-home care gives you the flexibility of staying in your home.

This kind of insurance can cover different time periods. Generally, you can choose from two, four, or six years’ worth of coverage, or you can opt to be covered for your entire lifetime. While at face value, lifetime coverage may seem like the most desirable, it is very expensive and most people never use that much coverage. The amount of time you choose constitutes the maximum coverage period. But, if you don’t want to put a time limit on your coverage, you can choose to institute a maximum dollar amount. That sets the amount of money that the insurer will pay in benefits over the lifetime of the insured. Depending on personal preferences, one may be better than the other. However, I have found that the time limit optio- is the best because the cost of coverage continues to increase, thus diminishing the overall effectiveness of the maximum dollar option.

The insurance benefits can be paid in one of two ways. First, the policy may pay the expenses as they are actually incurred. That is, if your long-term care costs are $137.50 per day, your policy would pay $137.50 per day. These are called expense reimbursement policies. The other way benefits are paid is on a per day basis. These policies, called per diem policies, pay a stipulated daily amount. So, if your cost is $137.50 per day, and your policy had a maximum daily benefit of $125, you would have to pay $12.50 per day out of your pocket. This daily benefit will also pay for any in-home care, as long as you elect for that option when purchasing the policy. Again, you have choices regarding the amount of in-home care the policy will pay for. These are generally described as a percentage of the daily maximum for skilled nursing home care. In-home care can have 100 percent of the daily maximum, 75 percent, 50 percent, or some other percentage. The higher the percentage, the higher the premium will be.

Policies will also offer some inflation protection. Since $100 will purchase more today than it will in 10 years, you don’t want to be stuck with a policy that doesn’t account for some type of inflation. Here you have two different choices for your inflation protection. First, you can choose to have no protection. Or, you can choose to have a set percentage added to your daily benefit every year, which is usually set at 5 percent. This is in the hopes that your coverage will then keep pace with the rising costs of nursing home and in-home care costs. Of course, since there is an added benefit, there will be an added premium amount for it. Weigh the pros and cons of purchasing inflation protection because it can add anywhere from 25 to 40 percent onto your premium amount.

While no one wants to use their long-term care insurance, in the event that you do, you will be subject to a waiting period before the benefits begin to kick in. You choose your elimination period, just as you do with disability insurance. It can be as few as 20 days, or you can wait up to 90 days before benefits begin. The longer your elimination period, the less your premium. Most policies allow you to have only one elimination period. Therefore, if you opt for a 90day elimination period and you need care for 100 days, you will receive benefits for 10 days. But, if you need care again, the entire time will be covered and you won’t have to wait the 90 days again. Also, once you begin to use your policy (after the elimination period), your insurance company will waive your premiums. This ensures that you aren’t paying for your policy at the same time you are receiving benefits.

Long-term care policies also offer renewability clauses. A guaranteed renewability clause assures you that you will have continued coverage for your entire life, as long as you continue to pay the premiums. This doesn’t mean that your premiums will remain at the same level, though. The insurer retains the right to raise premiums for your policyholder peer group if the insurer experiences a high level of claims. When investigating policies, beware of those that have an optional renewability clause. This option provides the insurer the ability to renew the contract, not you.

You also want to make sure that you understand the insurance company’s policy of preexisting conditions. While many contracts don’t have any language in them regarding preexisting conditions, others do. These clauses allow the insurer to not pay benefits for any physical or mental problems you had at the time you purchased the policy. Some policies have permanent preexisting clauses, while others will only keep them in force for 6 to 12 months.

When Do Benefits Begin?

These days, long-term care policies have several definitions of when the insured person can begin receiving benefits. These are usually referred to as triggering events or definitions of disability. Many policies then follow a triple-trigger policy, which allows the person to be covered as long as they meet one of the following three conditions:

1. The insured is unable to perform a specified number, usually two or three, of daily living activities. These activities come from a list and include walking, getting in and out of bed, eating, dressing, using the bathroom, and bathing. Some policies allow for certain cognitive abilities like short-term memory to be included in the list of daily activities, but many don’t..

2. The insured has a cognitive impairment, which typically means the deterioration or loss of the individual’s intellectual capacity. This will be measured by clinical evidence and standardized tests. Parkinson’s Disease and Alzheimer’s Disease are examples.

3. A physician certifies that the insured needs long-term care as a medical necessity. This condition can be very liberally applied since the individual’s own doctor is usually the certifying physician.

The use of all three conditions is the most beneficial to the person purchasing long-term care insurance, but most insurance companies only use the first two benefit triggers

Who needs long-term care insurance?

Not everyone needs long-term care insurance. However, for the majority of people, it’s advisable. There are certain things to consider when deciding if long-term care insurance is for you.

- Is there a history of debilitating illness in your family? If you have many family members who have had some form of cancer, heart disease, or any other type of prolonged illness, the chances that you will also suffer from that are higher than if most of your family members were healthy. This will also increase your chances of needing long-term care.

- Are you male or female?

Unfortunately, it’s a fact of life that more women need longterm care than men because women have longer life expectancies than men do, which increases their need for care.

- Can you afford the premiums?

This is a very important factor because long-term care insurance isn’t cheap. Plus, with all the different types of add-ons you can choose from, your premium may be more than you can feasibly afford.

- Are you healthy?

If you wait until you have a disease such as Alzheimer’s, you become uninsurable and you will have to pay for any longterm care out of your pocket. Purchasing long-term care while you are healthy ensures that the coverage is there when you need it.

What Kind of Coverage Do You Need?

When choosing the type of coverage for your policy, do some research beforehand, so that you know how much local nursing homes are charging, either on a daily or annual basis. Or, if you don’t want to stay in the area where you are currently living, check out the nursing homes closer to where you would like to be. It’s important that you choose a daily benefit that is in line with, or close to, where you would like to go. Choosing too much coverage will only increase your cost, but choosing too little coverage may not allow you to go to the facility you would normally choose.

You should also pick a policy that allows for more than one type of coverage. By being able to choose from different levels of care, and having that care covered, you will eliminate the possible headaches and heartaches that go along with long-term care. Besides, what good would your policy be if it only covered skilled nursing home care and you only needed intermediate care?

Cognitive Disorders

Most insurance policies will cover nursing home stays for people who suffer from a cognitive impairment. This is defined as the deterioration or loss in intellectual capacity and is measured by clinical evidence and standardized tests that reliably measure the impairment of short-term and long-term memory; orientation as to person, place and time; and deductive or abstract reasoning. An example of a cognitive disorder is Alzheimer’s Disease.

However, there are times when a person needs long-term care due to a cognitive impairment that wouldn’t be covered. Some insurance policies specifically say that they won’t cover any care given if the cause isn’t clinically named, while other policies will cover that type of care. For example, let’s assume that Mary and Jim Client have been married for 50 years. Mary becomes ill and passes away. Jim begins deteriorating very quickly and his doctor determines that he would be better off if he lived in a nursing home or had some type of full-time home care. However, there is no specific name for what Jim is suffering from. It’s not Alzheimer’s or Parkinson’s disease. Because there is no name for what Jim is suffering from (although some would chalk it up to a broken heart), most long-term care policies wouldn’t cover Jim’s expenses.

But there are some policies that do cover these types of impairments. The preceding example is just that: an example. There are many other types of afflictions (those which don’t have medical names) that could occur causing you to need some sort of long-term care. Your insurance coverage would then be obsolete because yourcare wouldn’t be covered. These are known as “nonorganic” cognitive disorders because they don’t have medical names. Organic cognitive disorders have been given names such as Alzheimer’s and dementia. Make sure that the policy you decide to purchase does cover these types of situations. Although you may think that the chances of your needing this option are small, and you may pay a higher premium because you have this coverage, it’s better to know that you have it and not need it, then to need it and not have it. You may find that you have to read your policy’s fine print very carefully to determine whether nonorganic disorders are covered, but in the end it will be worth it.