The odds that you'll need long-term care are likely greater than you imagine. Seventy percent of all Americans age 65 and older will likely need some form of long-term care (LTC), according to a study in the journal Inquiry. That includes nursing home care as well as assistance with activities of daily living (ADLs): toileting, bathing, dressing, eating, transferring out of bed and incontinence care.
Last week, the Department of Health and Human Services announced that it was dropping the CLASS Act, which would have set up a public LTC insurance program, from the Affordable Care Act.
Though the Obama administration has pledged to keep working on a public option for long-term care, it has not offered any concrete solutions, making it much more likely citizens will have to turn to the open market as they look for coverage.
On average, people need care for three years, but 20 percent of today's older adults will need care for five years or more, according to the HHS' National Clearinghouse for Long-Term Care Information. More than 40 percent will need care in a nursing home. And considering the average annual cost of nursing home care is $75,000 a year , this level of care can quickly eat through your savings.
"Long-term care expenses are one of the greater economic risks that older Americans face," says Richard Johnson, director of the Program on Retirement Policy at the Urban Institute. "Nursing homes are incredibly expensive, and if you don't have insurance you're going to have to pay out of pocket, as Medicaid doesn't kick in until you basically spend all of your money on long-term care."
Here are 10 misconceptions about LTC insurance to consider when deciding whether to make this investment:
1. Medicare will pay for care
Medicare only covers LTC for short periods of time, such as rehabilitation after an injury or illness. It does not cover assistance with ADLs that many older adults need to maintain their independence. Medicaid will cover nursing home care only if your income is below a certain level and after you've depleted almost all your savings.
2. Insurance only covers nursing home care
When LTC insurance was first introduced in the 1980s, it was meant to cover only nursing home care. Not anymore. Today most policies are joint policies, meaning they cover both in-home assistance and nursing home care. "You can think of it this way: Long-term care insurance might keep me out of a nursing home," Johnson says.