Long-term care (LTC) is one of those realities we’d rather not think about, but the numbers don’t lie—according to the U.S. Department of Health and Human Services, approximately 70% of people turning 65 will need some form of LTC. This could mean anything from an in-home aide assisting with daily tasks to more extensive care in assisted living, memory care or a nursing home.

PLANNING FOR THE FUTURE

Have you considered where you’d like to live and who you want to care for you if your health declines? Basic activities like bathing, medication management, moving from a bed to a chair, using the restroom and eating—known as activities of daily living (ADLs)—are essential to living independently. If you need assistance with these tasks, having a plan in place can make a difference.

The cost of care is another factor. Can you afford to pay out of pocket for the care you prefer? If so, how long will your savings last? People are living longer and the average LTC stay is now eight years. Therefore, factoring LTC into financial planning is crucial.

Costs continue to rise with inflation. In Colorado, a home health aide costs around $78,000 per year. Assisted living averages $68,000 and a private room in a nursing home exceeds $124,000 annually.

WILL HEALTH INSURANCE OR MEDICAID PAY FOR LTC?

Many assume health insurance will cover long-term care, but that’s rarely the case. 

While insurance covers medical expenses such as doctor visits, prescriptions and short-term rehabilitation, it doesn’t pay for an in-home nurse, assisted living, memory care or a nursing home stay.

Medicaid can cover long-term housing, but some communities don’t accept Medicaid or they offer a limited number of Medicaid beds. Additionally, if you have assets when you pass away—such as a home—Medicaid may place a lien on your property to recover costs during probate.  A Certified Medicaid Planner can help you navigate to avoid this recovery by strategic planning.

To prepare, visit LTC facilities in your area. Many offer tours and can add you to a waiting list. Being on the list doesn’t mean you have to move when they call—you can remain on it until you’re ready or if you ever need to move.

WHY CONSIDER LTC INSURANCE?

There’s no better time to plan than while you’re still healthy. Just as you’d designate a health care proxy, share your long-term care preferences with loved ones. 

LTC insurance can provide financial protection and ensure your care aligns with your wishes.

Premiums are generally lower if you buy a policy earlier in life, but even later in life, there are options to fit different budgets. Some insurers offer incentives for purchasing a policy before a certain age or for couples who enroll together. Incentives may include lower premiums, easier acceptance and a death benefit for beneficiaries if the policy is never used. Some older Americans use LTC insurance to act as a tax shelter to protect their assets. Colorado even offers a tax credit on LTC insurance premiums. 

When comparing policies, check if your employer offers group rate plans. Check to see if you can make policy payments out of your Health Savings Plan. Look at costs, customer satisfaction, benefits and portability—especially if you move frequently. Ask about the waiting period before coverage begins (often 90 days) and policy terms, such as duration of coverage (e.g., five years) or payout limits (e.g., $500,000). You can also add inflation riders to ensure benefits increase with rising costs.

A common complaint is that claims are rejected on the first submission. Ask about the company’s claim approval process and how quickly they pay claims. Also, be aware that most policies require proof of need for assistance with at least two ADLs before benefits are activated.

TYPES OF POLICIES

There are two main types of LTC insurance: 

• Traditional LTC insurance. Typically less expensive but offers no redemption value if you don’t use it. Like homeowners’ insurance, you pay premiums but receive no return unless you make a claim. 
• Asset-based LTC policy. More expensive but includes a life insurance component. If you don’t use the policy, it provides a death benefit to your heirs. Some policies also offer a cash-out option, allowing you to recover your premiums.

Planning now can provide peace of mind and financial security. Consult financial planners, health care providers and your accountant to explore the best options for you. Be prepared so if the time comes, you have a place to go where you’ll feel cared for, valued and provided for so you can continue your best journey in life.