As of 2018, America was home to around 52 million people aged 65 and older. Experts predict that number will rise to 95 million by 2060, thanks to the prolific baby boomer generation (anyone born between 1946 and 1964) and rising life expectancy. Our aging population has had profound impacts on society. One of these is a relatively new need for long-term care, something that Medicare, and indeed most health insurance plans, covers only in limited circumstances. Enter long-term care insurance.
What Is Long-Term Care?
We first need to describe what we mean by long-term care. In general, long-term care refers to assistance performing normal daily activities, not medical care. The Department of Health and Human Services breaks these “activities” into two categories. And to qualify as needing long-term care, you typically need to require assistance with at least two of these activities.
Activities of daily living include:
- Dressing and undressing
- Getting into or out of a bed or chair
- Using the toilet and/or incontinence care
Instrumental activities of daily living include:
- Emergency alert response, especially fire alarms and smoke detectors
- Money management
- Performing chores around the house
- Pet care
- Preparing meals
- Taking medication
- Using the phone or similar communication
You may need assistance with these activities for a finite period, such as after an injury or illness. Or, you may require these services indefinitely.
Who Provides Long-Term Care?
You may think of a nursing home when you hear the words long-term care. In reality, one of the goals of long-term care is allowing the patient to continue living independently (although they can receive these services in a nursing home).
Long-term care providers include:
- In-home care: This is by far the most common type of long-term care and is usually provided by friends or family members. However, paid caregivers may also provide in-home care.
- Assisted living facility: These communities are essentially a hybrid of nursing homes and communal living spaces. The facility may be a large residence that rents individual living quarters or an apartment-like community. Assisted living typically includes staff who administer medications, meal preparation, live-in staff, and communal dining and other socialization opportunities.
- Adult day care: These programs are usually community-based and provide a variety of services from healthcare to socialization. Common hours of operation are 8 AM to 5 PM, and centers are usually closed on the weekend.
- Custodial nursing home: Medicare defines custodial care as “non-skilled personal care,” meaning assistance with the activities of daily living. Custodial nursing homes provide comprehensive care, not simply medical care. This includes the activities of daily living as well as personal and psychological care.
How Much Does Long-Term Care Cost?
The costs for long-term care vary widely depending on the type of care needed. According to Health and Human Services, average costs are:
- $6,844 per month for a semi-private room in a nursing home and $7,698 per month for a private room
- $3,628 per month for assisted living
- $20.50 per hour for a health aide
- $20 per hour for housekeeper services
- $68 per day for adult day care
Prices vary widely depending on the location, facility, and more. Costs typically go up around 4 percent per year, in line with inflation.
Who Pays for Long-Term Care?
Health insurance rarely covers long-term care. Medicare only covers long-term care of a medical nature, such as if you require skilled nursing care after an illness or injury. Medicare never covers the cost of assistance with the activities of daily living.
Enter long-term care insurance. This is a relatively new type of insurance policy that reimburses you for the costs of long-term care. When you buy the policy, you select the terms, such as how much it pays per day, the type of care included (in-home, nursing home, etc.), and the maximum lifetime amount and days. You can even choose optional items like adjustments for inflation.
How Much Does Long-Term Care Insurance Cost?
The cost of long-term care insurance varies depending on the policy and terms you choose. Another factor is how old you are when you buy the policy. The younger you are, the better rate you’re likely to get.
Your medical history also plays a role in determining price. If you currently require long-term care, you may not find an insurance company willing to insure you. The same is true if you have a history of needing long-term care.
All that said, the average rate is around $2,700 per year. That’s for one person. However, if you and your spouse both buy policies, you can usually get a discount (although that still has you paying for two policies).
Other Ways to Pay for Long-Term Care
If you qualify for Medicaid, you may be eligible for long-term care services. Requirements vary by state regarding the level of assistance available. Veterans and their surviving spouses may qualify for Veterans Aid and Attendance. Eligibility requirements for Aid and Attendance include getting a VA pension as well as at least one of the following:
- Requiring assistance with the activities of daily living
- Having to spend the majority of the day in bed due to illness
- Being a nursing home patient due to either physical or mental disability
- Having limited eyesight
If they spend most of their time housebound due to disability, veterans may also qualify for Housebound benefits. However, they cannot qualify for both Housebound benefits and Aid and Attendance at the same time.
Finally, some whole life policies allow you withdraw funds for long-term care. This is a fairly recent change in whole life, though. And these policies are usually more expensive than straight long-term care insurance.
Understanding Your Medicare Benefits
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