New survey illustrates confused state of people about how they will pay for long-term care services

Nov 13 2009

Even as the average annual cost of a home health aide now tops more than $40,000 and private nursing home care is approaching an average cost of $75,000 a year, a new survey by the nonprofit LIFE Foundation finds nine out of 10 Americans do not have a realistic plan to pay for these expenses. Nearly one in four say they will rely on family and friends, while others mistakenly believe their health insurance coverage or government programs such as Medicare will help pay their long-term care costs.

Released to coincide with Long-Term Care Insurance Awareness Month in November, the LIFE survey asked Americans what they would rely on most to help pay for long-term care services if they found themselves in need of assistance with the basic tasks of daily living, such as bathing, eating and dressing. Here's how Americans responded:

"These survey results illustrate that most people are confused about how they will pay for long-term care services, which is a scary thought considering 70 percent of Americans who reach age 65 will need such care at some point in their life," says Deb Newman, CLU, ChFC, LTCP, president of Newman Long Term Care and a LIFE Foundation Board Member. "Health insurance will not cover long-term care services and government programs like Medicare and Medicaid have many limitations. That is why it is critical for Americans to take steps to protect themselves with long-term care insurance. It is the only way to make sure you will have the financial means to afford the kind of care you'll need and prefer."

To help increase awareness of the important role of long-term care insurance, LIFE reviews some of the common misconceptions people have regarding funding sources for long-term care:

• Health Insurance - Typically, health insurance only provides coverage for medical care and does not pay for custodial services for people who can no longer take basic care of themselves.
• Medicare - Medicare is a government-sponsored health insurance program for older Americans. It does not pay for most forms of long-term care; it only covers short-term rehabilitation after you have been hospitalized for at least three days, are homebound under a physician's care or are eligible for Hospice services.
• Medicaid - Medicaid pays for long-term care services, but only for those with very limited assets who fall within their state's determined poverty level.
• Social Security - The monthly benefit for the average retiree stands at $1,153, which is a fraction of what most long-term care services cost.
• Savings - Though the savings rate has begun to improve, the majority of Americans likely do not have an adequate amount of savings to cover the high cost of long-term care services.

"Many factors come into play when considering long-term care insurance, which is why it's critical to work with a qualified insurance professional," says Newman. "Doing so will ensure that you purchase a policy that best fits your needs and budget."

To help people start thinking about long-term care insurance, the LIFE Foundation answers five basic coverage questions:

• How much coverage do you need and for how long? It's important to determine how much the policy will pay for covered services - called the daily or monthly benefit. To determine an adequate amount, start by assessing the average cost for long-term care services in your area by using LIFE's Cost Estimator at: www.lifehappens.org/longtermcarecost.
• How long are you willing to wait for coverage to kick in? The longer you are willing to wait before benefits begin to be paid out, called an elimination period, the more affordable your policy's premiums. Typical elimination periods are 30, 60 or 90 days.
• What types of services are important to you? Most of today's policies will cover any number of care preferences and settings, whether services are provided at home by a health aide, offered in an assisted-living facility or nursing home. Find a policy that will be as flexible as possible so that any type of care will be available to you when you need it.
• How important is it to have a policy that keeps up with inflation? Inflation protection is one of the most critical components of a long-term care insurance plan because it helps your coverage keep pace with the rising cost of care.
• Does your policy qualify for a new state-run Long-term Care Partnership Program? Recently, federal and state governments have begun cooperating on Long-term Care Insurance Partnership Programs. These programs offer asset protection to policyholders with Partnership- qualified long-term care policies. Currently, over half of the states have established or are applying for Partnership programs. For more information, speak with an insurance agent in your area.