My Case For Long-Term Care Insurance

Originally published January 2008 by

Todd Washburn, CFP^®

            The holiday season has passed, but the memories are still fresh in our minds.  Along with thoughts of food, gifts, and decorations, there may be images of your family.  How nicely the kids have turned out.  How much Johnny looks like your father.  How Mom and Dad are moving a little slower.  With families spread out more we may see each other less, making gradual changes more noticeable once we get together.

            With that thought, I’d like to discuss some long-term care issues that may affect you, your parents or someone else you love.  It won’t be an exhaustive discussion.  It’s a complex subject that may vary a great deal from person to person.  But I do want to hit some basics and perhaps provide some food for thought.

            Long-term care, for our purposes, is care a person needs on an on-going basis to maintain their lifestyle, independence, health or even life.  The care may come from family, friends, or paid professionals.  It can be as simple as help around the house to as complex as administering and monitoring medications.  But in any case the person is no longer capable of doing everything herself.  This may occur suddenly due to an accident or illness, or gradually as part of aging.  But as you or a family member ages through your 70’s, 80’s and even 90’s, needs are going to arise.

            You probably already know, or sense, that such care can be costly not just in terms of money, but also time and energy.  Someone- you, a family member, or a paid professional- will be needed.  Sure, a family member may provide the care, but there are costs in terms of potential lost wages, additional stress in that person’s life, and time lost with their family.  Professional help, in home or in a residential facility, will cost money.        How much?  I’ll give you a personal example.  My mother is in an assisted living facility in upstate NY.  She suffers from dementia/early alzheimer’s.  Her care costs $4,5000/month- $54,000/year.  It may be more where you or your parents live. 

            So who pays for this?  Well, the options are finite.  You can pay out of pocket (yours, your kids).  You can spend down assets to qualify for Medicaid assistance.  You can use a long-term care insurance policy.  One option some people mistakenly rely on is Medicare.  But it doesn’t pay for long-term care.  There are pros and cons to each option.  For self-pay the upside is you tend to have maximum freedom to do things as you wish.   The downside is that after a few years it can add up to a whole lot of money.  For Medicaid assistance, the upside is the government is paying the bills.  Very valuable if your money runs out.  The downsides- you have to spend down your assets, your options may be limited as to which facilities will take you (my mother’s facility doesn’t accept Medicaid), and it may not pay for the lifestyle you want (i.e. semi-private instead of private room).  For long-term care insurance (LTCi), the upside is that it provides money, may allow more options for facilities, and may mean a better lifestyle.  The downside- potentially years of premium payments with no guarantee any benefit will be received.  But that’s the risk of all insurance isn’t it?

            Let me close with some general thoughts and some additional information.  There are two parties in any LTC situation- the person needing help and the person giving or arranging it.  The more they communicate prior to a crisis, the better for everyone.  That means sharing concerns, desires, and financial information so the care-giver can understand what he/she has to work with.  This is not a time for secrecy.  In purchasing a long-term care policy for yourself, realize you are really doing it for the caregiver.  You’re giving him options.  You’re giving her peace-of-mind that she won’t have to jeopardize her retirement or children’s education to pay for your care.  For those wealthy enough to pay their own way, I might suggest not.  Don’t put your family in the position of spending their inheritance for your care.  They may be perfectly willing to do so, but they’re always going to wonder if someone is second-guessing that they made a decision based on saving money rather than your best interest.  The cost of the policy in this case is minor compared to the comfort it can provide.  And finally, some information.  Along with financial planners such as myself, there are some other key professionals you may want to be aware of.  They are Elder Law Attorneys and Geriatric Care Managers.  They can each be helpful both prior to and during the need for LTC.  I’ve included links below to sites with more information about each.  I encourage you to educate yourself.  And as always, if you have questions please feel free to contact me.

  Take care and welcome to 2008!

Todd

Links:

            National Association of Professional Geriatric Care Managers:  www.caremanager.org