Facing Your Future
by Timothy Haas
As we face our largest elder population ever, Americans are recognizing the importance of planning for long-term care. State Medicaid programs have stringent eligibility rules requiring patients to use up almost all of their assets before being covered, and care choices can be limited. Private long-term care (LTC) insurance can help, but the options can be confusing.
"Long-term care" describes a wide range of ongoing health-related services that are not hospital-based. Home care may mean as little as an aide coming by a few times a week to help you bathe and tidy up, or as much as round-the-clock nursing. Adult day care and respite care give family caregivers a break while giving loved ones a chance to see friends and take part in activities. Assisted-living facilities let residents live independently while providing on-site backup. And, of course, nursing homes admit those who need continual attention.
Comprehensive LTC plans cover every level of care. The benefits kick in when you begin to need assistance with at least two-a few plans say three-of six "activities of daily living." These are bathing, dressing, using the toilet, transferring (moving from bed to a chair, for example), eating, and continence.
Do You Need It?
"Long-term care insurance is part of an overall planning
process," says Cheryl DeMaio, a second vice president at
TIAA-CREF. "Take care of disability insurance, life
insurance, and retirement savings first, then possibly college
savings for your children or grandchildren. After that, it may be
time to think about long-term care."
DeMaio says that their average LTC policy buyer is 64, but some unmarried people are buying in their mid-40s, as are empty-nesters in their 50s. Initiating coverage when you're younger—and more easily insurable—is definitely more affordable.
In its handbook Planning for Long-Term Care, the United Seniors Health Council suggests that you may need LTC insurance if you:
- Own assets of at least $75,000 (excluding your home and car)
- Have (or expect) annual retirement income of at least $25,000 to $35,000
- Can pay premiums without affecting your lifestyle
- Can absorb possible premium increases without financial difficulty.
If an LTC plan seems to make sense for you, call a few facilities and home health agencies in your area to get an idea of current rates. An industry rule of thumb is to buy coverage for 80 percent of the anticipated cost and expect to pay out-of-pocket for the other 20 percent. If you have substantial assets or a high retirement income, you could save on premiums by purchasing less coverage and paying more out-of-pocket.
By selecting compound inflation coverage, which generally ups your allowable benefits by 5 percent each year, you may be able to purchase a lower benefit level (though with an increased premium). If your plan doesn't offer this, consider buying a higher benefit amount initially.
Should you buy "lifetime" benefits? With the average nursing home stay at two and a half years, some experts recommend buying four to six years of coverage. However, others, such as David Guttchen, director of Connecticut's Partnership for Long-Term Care, point out that nursing home residents often have had a few years of home care first. Without lifetime protection, many end up dipping into assets they never expected to touch.
Before You Sign on the Dotted Line
Make sure to read the fine print. If it's not in writing,
it's not covered. Here's what your policy should offer:
- Coverage of all pre-existing conditions without a waiting period
- A continuum of care (such as home health care, adult day care, assisted-living, and nursing home)
- No prior hospitalization requirement to start receiving benefits
- Premiums waived while you're receiving benefits
- A policy that is guaranteed renewable as long as you pay the premiums
- One deductible for the life of the policy
- Coverage that can be upgraded or downgraded if you can't afford the premiums
- The option to cancel within the first 30 days and receive a full refund
Where To Get It
Several major insurance/financial planning services, like John
Hancock, UnumProvident, TIAA-CREF, and MetLife (AARP's LTC
underwriter) sell LTC insurance.
But educators have an even wider choice. NEA and AFT members can join organization-based plans. A few state pension systems, such as CalPERS, offer group plans, as do some state retired teachers associations and even some specialized teachers associations, such as the American Association of Physics Teachers. And most university faculty have access to employer-sponsored group plans.
Though group plans sometimes provide fewer coverage options, they tend to be a good value. After you've done your own research, talk with a few insurance agents who specialize in LTC.
Long Term Care Resources
AARP on LTC: www.aarp.org/confacts/health/privltc.html
Health Insurance Association of America guide to LTC insurance: membership.hiaa.org/pdfs/2002LTCGuide.pdf
To buy Planning for Long-Term Care ($19.00), call 800-373-4906.
For nationwide cost comparisons, go to www.metlife.com. Near top of page, click on "Business to Business." On drop-down menu, click on "Mature Market Institute." Scroll down to "Survey on Nursing Home and Home Care Costs 2002" and "Survey of Assisted Living Costs 2002."
