The long-term care dilemma

Planning ahead for long-term care is important because there is a good chance you will need some long-term care services if you live beyond the age of 65. About 70 percent of people over age 65 require some services, and the likelihood of needing care increases as you age.

Planning ahead helps you understand what service options are available in your community, what special conditions may apply for receiving services, for example, age or other eligibility criteria, what services cost, and what payment options – public and private – apply. Having this information helps ensure you will have a range of options when you need long-term care, and makes it more likely that you will have more choice and control over where and how you receive services.

Planning ahead is important because the cost of long-term care services often exceeds what the average person can pay from income and other resources. By planning ahead, you may be able to save your assets and income for uses other than long-term care, including preserving the quality of life for your spouse or other loved ones. With planning, there is a greater likelihood of being able to leave an estate to your heirs, because you are less likely to use up your financial resources paying for care.

Planning ahead also means less emotional and financial stress on you and your family. It can provide a way to involve your family in decisions without depending on them to bear the entire burden alone.

Finally, for many people, one of the most important advantages of planning ahead is to ensure greater independence should you need care. Your choices for receiving care outside of a facility and being able to stay at home or receive services in the community for as long as possible are greater if you have planned ahead.

There are many reasons why people don’t plan ahead for long-term care. These include the natural tendency to avoid thinking about becoming dependent on others for your care, misinformation about the risks of needing care, and lack of knowledge about the cost of care and payment options.

Most people don’t like to think about getting older, developing a disability, becoming less independent, or needing help with personal care. Many people don’t realize that their chance of needing long-term care by the time they turn 65 is as high as 70 percent.

People commonly misunderstand how expensive long-term care is, and how it is paid for. Consumer surveys have shown that many individuals don’t realize that health insurance, Medicare, and/or disability coverage do not pay for most long-term care services. Medicaid pays for some long-term care services, but only if you qualify for the program because you have limited income and financial resources.

Some people find it too difficult to raise these subjects with their loved ones, making it difficult to explore and define their plans. Adult children often feel like they are patronizing their parents if they raise the subject or they are afraid of giving the impression that they might not want to provide care if it is needed. Parents often don’t want to make adult children uncomfortable or to discuss details of their finances with them.

Finally, some people realize it is important to plan, but don’t know how to go about it. The best way to begin is with small and easy steps. Even just talking with your loved ones is a great first-step!

There are a number of possible solutions to the need for long term care for you. Here are some of the most common solutions. To get an estimate of what the cost would be in your area call a Long Term Care specialist to help you with quotes on the plan that is best for you.

1. Self-Insure – This is by far the most expensive way to pay for long term care, out of your pocket. People work their entire lives planning for retirement so they can have the income to live the lifestyle they want. To pay for long term care, you’ll have to spend your income and quickly spend down your assets – your lifestyle will change. Self-insuring is also the way many people spend their life savings only to end up on welfare (Medicaid) if they run out of money.

If you do not have long term care insurance now, you are self-insured, and if your health suddenly changed you may not qualify for insurance and would have to pay yourself.

2. Medicare / Medicare – There are serious limitations when using these as solutions. It is a form of welfare, so you have to be almost destitute to qualify. Medicaid decides where you stay and who takes care of you, thus taking away your independence. You must meet the poverty asset and income requirements and in the end, your estate can be liable for your expenses.

3. Commercial Long-Term Care Insurance – There are a number of reputable companies that offer competitive products for long term care risk. Historically this type of coverage has been considered expensive because people have waited until they were older to protect themselves.

Today, insurance companies are getting better at underwriting the long-term care risk and it is much more affordable that most people think. As with all insurance, you are betting you won’t use it, but the chances are almost certain you’ll need some long-term care. The cost for insurance is pennies on the dollar compared to the cost of care. Usually policies bought in one state are good for coverage in another state in case you move.

4. Asset-based Long Term Care Insurance – This may be a good alternative for people who have a significant asset base and don’t want to pay monthly premiums for something they are not sure they will ever need. It is actually a life insurance policy with an accelerated death benefit that can be used for long term care expenses if you need it. If you are fortunate enough to never use the long term care benefits, your beneficiaries inherit the amount of the policy. And all of it is tax-free. An example would be for age 62, a $100,000 lump sum can provide a monthly LTC benefit of $4,000 up to $250,000 and a death benefit of $150,000.