Long-term care is a range of services and supports you may need to meet your personal care needs. Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life, sometimes called Activities of Daily Living (ADLs), such as:
Other common long-term care services are assistance with everyday tasks, sometimes called Instrumental Activities of Daily Living (IADLs) including:
70% of people turning age 65 can expect to use some form of long-term care during their lives. There are a number of factors that affect the possibility that you will need care:
The facts may surprise you.
Consumer surveys reveal common misunderstandings about which public programs pay for long-term care services. It is important to clearly understand what is and isn’t covered.
Only pays for long-term care if you require skilled services or rehabilitative care:
In a nursing home for a maximum of 100 days, however, the average Medicare covered stay is much shorter (22 days).
At home if you are also receiving skilled home health or other skilled in-home services. Generally, long-term care services are provided only for a short period of time.
Does not pay for non-skilled assistance with Activities of Daily Living (ADL), which make up the majority of long-term care services
You will have to pay for long-term care services that are not covered by a public or private insurance program
Does pay for the largest share of long-term care services, but to qualify, your income must be below a certain level and you must meet minimum state eligibility requirements. Such requirements are based on the amount of assistance you need with ADL
Other federal programs such as the Older Americans Act and the Department of Veterans Affairs pay for long-term care services, but only for specific populations and in certain circumstances
GOOD TO KNOW: Like public programs, private sources of payment have their own rules, eligibility requirements, copayments, and premiums for the services they cover
Most employer-sponsored or private health insurance, including health insurance plans, covers only the same kinds of limited services as Medicare
If they do cover long-term care, it is typically only for skilled, short-term, medically necessary care
There are an increasing number of private payment options including:
You can use your life insurance policy to help pay for long term care services in several ways:
Combination products: Many consumers are reluctant to buy long-term care insurance because they fear that their investment will be wasted if they do not use it. Some insurance companies have attempted to solve this problem by combining life insurance with long-term care insurance. The idea is that policy benefits will always be paid, in one form or another. These products are relatively new and the features are changing as the product evolves. The amount of the long-term care benefit if often expressed in terms of a percentage of the life insurance benefit.
Accelerated Death Benefits (ADBs): A feature included in some life insurance policies that allow you to receive a tax-free advance on your life insurance death benefit while you are still alive. Sometimes you must pay an extra premium to add this feature to your life insurance policy. Sometimes the insurance company includes it in the policy for little or no cost. There are different types of ADBs each of which serves a different purpose. Depending on the type of policy you have, you may be able to receive a cash advance on your life insurance policy’s death benefit if:
1. You are terminally ill
2. You have a life threatening diagnosis, such as AIDS
3. You require long term care services for an extended period of time.
4. You are confined to a nursing home and are incapable of performing the Activities of Daily Living.
You may choose to enter into an annuity contract with an insurance company to help pay for long-term care services. In exchange for a single payment or a series of payments, the insurance company will send you an annuity, which is a series of regular payments over a specified and defined period of time.
There are two types of annuities:
1) Immediate Annuity: If you have an immediate long-term care annuity, the insurance company will send you a specified monthly income in return for a single premium payment.
This option is available regardless of your current health status. If you do not qualify for long-term care insurance because of age or poor health or if you are already receiving long-term care, you can still purchase an annuity.
The insurance company converts your single premium payment into a guaranteed monthly income stream for a specified period of time or for the rest of your life. How much you receive in income each month depends on the amount of your initial premium, your age, and gender. Since women tend to live longer than men, women generally receive a smaller monthly payment over a longer period of time than do men of the same age.
Key things to consider before purchasing an annuity:
1. The annuity amount you receive may not be enough to pay for your long-term care expenses.
2. Inflation may reduce the value of the monthly income you receive from the annuity.
3. The effect that annuities can have on your taxes is complicated. Consult your tax professional before purchasing one.
2) Deferred LTC Annuity:
These plans are available to people up to age 85. Similar to other annuities, in exchange for a single premium payment, you receive a stream of monthly income for a specified period of time.
The annuity creates two funds: one for long-term care expenses and another separate fund that you can use however you desire.
You can access the long-term care fund immediately, but you must wait until a specified day in the future to access the separate cash portion. The rules of the annuity define how much you can access on a monthly basis from the long-term care fund and how much you can access on an annual basis from the cash fund. To qualify for a deferred long-term care annuity, you must satisfy some health criteria.
Some average costs for long-term care in the United States (in 2015) can be found here: