Long-term care (LTC) is a significant and growing issue for the United States. According to the AARP, as of 2015, 41 million people were providing unpaid care for family members, and the Alzheimer’s Association® reports that 16 million people in the US are providing unpaid care for someone with Alzheimer’s or other dementia as of 2020. Perhaps most startling, roughly 70% of people turning 65 will need some form of long-term care services in their lifetimes, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) reports.

Understanding the prevalence of care, how needs are met, and ways to pay for LTC is not easy – there are many factors involved and options to considerations.  In this article, we’ll answer some of the most common questions related to LTC.

1. How do we define long term care?

The modern definition isn’t so much about service, rather it covers a wide range of assistance and support, generally provided over an extended period of time.  LTC support is designed to meet medical, personal and social needs of those who cannot fully support themselves.

It’s important to note that the primary goal of care is not to cure an illness, but to allow an individual to attain and maintain an optimal level of functioning.

The non-medical component of LTC deals more with “custodial care”, which is aimed at assisting people with ordinary activities referred to as “Activities of Daily Living” (ADL’s).  These daily tasks include bathing, eating, dressing, toileting,  maintaining continence, and transferring (getting out of bed or chair).  The inability to do two or more ADL’s is a key trigger for benefit eligibility with both Medicaid and private long term care insurance.  Cognitive impairment is also a trigger for LTC benefits.

2. How prevalent is long term care?

The statistics around needing and utilizing long term care services are striking, and will likely become more so as our populate ages and lifespans increase. In addition to the statistics noted above, ASPE noted that 24% of people turning 65 will require LTC for more than two years with 67.9% of that number being women.

Some risk factors for needing long term care include:

• Age – generally, as we age, our risk increases. Age is biggest risk factor leading to long term care.
• Marital status – Widowed, divorced, and single adults have the highest risks of long-term care admission, according to the National Center for Biotechnology Information
• Gender – 9% of people in long-term facilities are women, according to the National Center for Health Statistics 
• Lifestyle – poor diet and exercise habits can lead to greater risk
• Health and family history can also have an impact

3. What are the types of care and their costs?

There are three most common types of care:

Home Based Care. This is care given in the home, and often broken down into two categories:

• Homemaker Services = housekeeping, cooking, running errands, and similar activities. Nationally, median annual rate charged by noncertified, but licensed home-care agency is $53,772*.
• Home Health Aide Services = assistance with ADL’s, not medical care. Nationally, median annual rate charged by noncertified but licensed home-care provider is $54,912*.

Community Based Care. This is adult day health care, providing therapeutic, social and other support services in a community based setting.  Annual cost nationally is $19,236*.

Facility Based Care. This refers to living in a care facility full time such as an assisted living facility (national median annual rate for private one-bedroom unit is $51,600 excluding one-time entrance fees or other special costs), or a nursing home (national median annual rate for single-occupant private room is $105,852, semi-private room is $93,072.)*

*Figures provided by 2020 Genworth Cost of Care Survey.

4. How do we pay for long-term care?

Medicare – many people believe that Medicare pays for LTC, but this is not the case.  Medicare pays for hospitalizations and treatments, largely related to acute situations.  Once the patient no longer needs a bed in an acute care facility, Medicare benefits stop.  Medicare will pay for medically necessary skilled nursing facility care for short periods; however, there are strict criteria that must be met to qualify for Medicare coverage:

• The individual must have had a prior hospital stay as an admitted patient for at least 3 full days
• The individual must be admitted to the skilled care facility within 30 days of discharge from the hospital
• A doctor must certify that skilled care is required
• The services must be provided by a Medicare-certified facility
• If the above qualifications are met, Medicare will pay for costs incurred in the facility, including assistance with ADL

Medicaid – Government funded insurance.  This is only available to certain low-income individuals and families who fit into particular eligibility groups.  Must meet both financial and functional eligibility criteria.  Financial requirements are that individuals demonstrate minimal income and assets.  Functional eligibility requires an impairment that limits ability to perform ADL’s.  Even if individual does qualify for Medicaid, conditions may not be ideal.  Most assisted living facilities do not accept Medicaid patients.  Most nursing homes do accept Medicaid but limit how many Medicaid patients they will accept.  In some states, patients must take the first bed that opens up, no matter where it is located.

Long Term Care Insurance – Private insurance that typically provides for help in home with personal activities including ADL’s, homemaker assistance services, such as cleaning and bill paying, visiting nurses, community programs, such as adult day care, assisted living services, typically including meals, health monitoring, and help with daily activities and skilled nursing care

LTC insurance can help protect individuals, families, and their assets against potentially catastrophic LTC costs.  However, it isn’t appropriate for everyone.  For those on fixed incomes, or are having trouble covering basic living expenses, as well as people who only have modest assets, long term care insurance probably doesn’t make sense.  Similarly, if one can comfortably self- fund the cost of extended care, they may not need LTC insurance.

Many features to LTC policies, and broad range of customization options.  Buyers can choose from:

• Care settings and services offered (nursing home only, home health care only, or combination)
• Daily or monthly benefit amount the policy will pay for
• How long to pay out of pocket before benefits begin (“elimination period”)
• Duration of benefit payments (i.e. 1 year, 2 years, etc.)
• Inflation protection

Premiums for long term care policies are not guaranteed, and tend to increase over the life of the policy.  In addition, premiums increase dramatically by age of issue – the older one is, the higher the premium will be.  Typical purchase of long term care insurance is between ages 55 and 60.

Self-Funding – This refers to paying for long term care costs out of pocket with personal or family money, savings, pension benefits, stocks, or other investments.  Self-funding may require planning well in advance in order to save a sufficient amount to cover the costs of long term care.

Summary

What we’ve covered is only a high level summary of the key areas related to long term care. It is important to think about and plan for long term care.  The likelihood of needing care, and the tremendous costs associated with long term care are too great to ignore.  Working with your comprehensive financial advisor to plan for long term care can help you to understand:

• How would an extended long term care event impact your financial well-being?
• What is the best way for you to protect yourself and your family in the event you need long term care?
• Are you a candidate for long term care insurance, or self-funding, or a combination of the two?
• What questions should you be asking parents or loved ones who may need long term care?

Your financial advisor can help in answering these important questions, plan appropriately for this risk, and provide peace of mind in knowing you are protecting yourself and those you love.

Sources:

https://www.aarp.org/ppi/info-2015/valuing-the-invaluable-2015-update.html?cmp=RDRCT-VALUN_JUN23_015

https://www.alz.org/alzheimers-dementia/facts-figures

https://aspe.hhs.gov/pdf-report/what-lifetime-risk-needing-and-receiving-long-term-services-and-supports

https://health.usnews.com/health-news/best-nursing-homes/articles/nursing-home-facts-and-statistics

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4903036/

https://www.genworth.com/aging-and-you/finances/cost-of-care.html

https://www.medicare.gov/coverage/long-term-care

https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/

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