Got Long Term Care Insurance?

Got Long Term Care Insurance? The fourth myth of Long Term Care Insurance is that you already have it. Now don't get me wrong, if you have an actual Long Term Care policy in force, then you have at least some coverage. However, many people mistakenly believe that they have coverage through some other means.

Part of the confusion arises from the distinction (or lack thereof) between skilled care and Long Term Care. Both skilled care and Long Term Care can occur either in a nursing home or at home. However, skilled care such as short-term IVs, physical therapy, speech therapy, and dressing a pressure ulcer are usually covered to some degree by health insurance. On the other hand, Long Term Care such as oxygen therapy for an emphysema patient, catheter maintenance, colostomy drain, and help with the activities of daily living (bathing, dressing, etc.) are usually not covered by health insurance.

The key difference between skilled care and Long Term Care is whether or not the patient is making progress in his or her recovery. Generally speaking, once a treatment becomes necessary to maintain care for a chronic condition, then the patient is receiving Long Term Care and the patient's health insurance will usually stop paying.

Even if the treatment is considered skilled care, there is usually a limit to how long a health plan will pay. For instance, Medicare will currently pay the approved charges for skilled care for 20 days. After that Medicare will continue to pay a portion of the approved charges for skilled care, but the patient will be responsible for a co-pay (currently $133.50 per day) for days 21 -- 100. After 100 days Medicare ceases to provide any coverage for skilled care.

Unfortunately, Medicare is not alone in lacking coverage for Long Term Care. Some of the other plans that provide no coverage for Long Term Care include group and individual health plans, retiree health plans, Medicare Advantage and Medicare Supplement plans, and disability insurance.

What about Medicaid? Medicaid is the usual name for a program jointly administered by the federal and state governments to help the indigent. As far as Long Term Care is concerned, Medicaid has several limitations that may reveal it is not a good option (or not an option at all) for you.

First, you must qualify for Medicaid by having a limited income and below approximately $2,000 in assets. Second, Medicaid will conduct a look back audit (currently 5 years) to ensure that you have not transferred assets to others in order to qualify for Medicaid. Third, if Medicaid finds that you have transferred assets, then it will assess a penalty of time during which it will not pay your Long Term Care costs. There is no cap on these penalty periods. Fourth, assuming you qualify for help from Medicaid your choices for Long Term Care will be limited. For instance, under Medicaid you may not have the option to receive Long Term Care at home, or reside in the nursing home of your choice, or reside in the same facility as your spouse. Fifth, if you receive help from Medicaid for your Long Term Care costs, then upon your decease there is a mandated estate recovery. This means that Medicaid will draw on your estate to reimburse their expenses for your Long Term Care.

Fortunately, you can avoid all of the above limitations and the costs of Long Term Care by insuring against it. If you have already secured a Long Term Care policy, then congratulations! My only advice to you is to make sure you have enough coverage especially if your plan does not include an inflation rider. Keep in mind that a month of Long Term Care that costs $4,500 today will likely run about $12,000 per month in 20 years.

Long Term Care Insurance Is Too Expensive

Long Term Care Insurance is too expensive. The third myth of Long Term Care is that the insurance is not affordable. The truth is that Long Term Care is not affordable.

According to Genworth Financial's Cost of Care Survey published in March of 2006 the following were the national averages for Long Term Care costs:

• $18 per hour (or $180 per 10-hour shift) for home health aide


• $62 per day (or $22,500 per year) for adult day care


• $2,900 per month (or $34,000 per year) for assisted living


• $170 per day (or $62,000 per year) for a semi-private room in a nursing home


• $194 per day (or $70,000 per year) for a private room in a nursing home

A similar picture is painted in Genworth Financial's Cost of Care Survey published in April of 2008. The following are the average Long Term Care costs in South Carolina:

• $17 per hour (or $170 per 10-hour shift) for home health aide


• $2,669 per month (or $32,028 per year) for assisted living


• $149 per day (or $54,385 per year) for a semi-private room in a nursing home


• $158 per day (or $57,670 per year) for a private room in a nursing home

So who is paying these costs? According to Centers for Medicare and Medicaid Services 2004 Statistics published in January of 2006, only 9% is paid by private insurance and 22% is paid out of pocket. Why would someone pay for Long Term Care out of pocket when they could insure against its costs? Some people do not realize that there is Long Term Care Insurance. Others wait until they need the coverage but no longer qualify medically. Some folks mistakenly believe that they already have coverage through Medicare, their health plan, or their disability insurance.

Of course, a few acknowledge the risk and expense and are trying to save or invest to meet their anticipated Long Term Care costs. However, consider that according to American Council of Life Insurance projections published in June of 2003 although the average nursing home cost was $54,998.20 per year in 2003, it will rise to more than $200,000 per year by 2030. Some experts predict that baby boomers should expect to spend between $750,000 & $1,250,000 for 3 to 5 years of Long Term Care 30 years down the road.

The question is even if you could save the money to pay for Long Term Care costs, is that really want you want to do with the assets you have accumulated over a lifetime when you could instead insure against the same risk for pennies on the dollar? This is the reason why many who have the wealth to pay for their own Long Term Care costs purchase Long Term Care Insurance. The wealthy understand that one increases wealth by spending as little of their own money as possible while still avoiding likely or costly risks.

In the end you have to ask yourself, "Can I afford not to invest in Long Term Care Insurance?" Some companies have made it easier, too, by offering discounted rates for those who are married or those willing to pay annually. Additionally, many companies are now offering plans that allow you to select the level of coverage you desire or can afford. Let's face it, even if you can only afford to protect half your assets, then you are still protecting half your assets!