Long Term Care Insurance Plans

This research will be informative about the aging American population and the long term care insurance plans that are becoming more accepted and notice to people today. First, this paper will notify about the overview of the long term care industry. Next, the unexpected cost of long term care will be analyzed along with the private long term care insurance market. Last, this paper will be enlightening on the advantages and disadvantages of a long term care policy as well as some simple current insurance quotes from an agent.

When long term care facilities did not exist, the entire burden of caring for the elderly or sick was constantly placed on the family. However, the American family structure is changing and this concept is viewed differently by many, today. This shifting family structure means that an increasing number of elderly persons are relying on long term care facilities to replace the traditional family role. As the baby boom generation approaches retirement they are going to need to take a closer look at long term care options. The number one option that policy makers around America are suggesting for today’s aging population is long term care insurance. The graph below illustrates the projected number of people of the age of seventy and over needing long term care services during their lifetime (Thrivent Financial for Lutherans).

The services of a long term care are needed when a person or family members are no longer able to care for themselves. The care someone needs can range from help with daily activities to actual skilled nursing care. Sixty percent of the people who reach the age of sixty-five most likely will need some type of long-term care services at some point throughout their lives. However, today only nineteen percent of those long term care services are given in nursing homes, the other eighty-one percent is given at home or in a community setting (Thrivent Financial for Lutherans).

Many Americans can not stand the thought of living in a nursing home when they are at the point of needing skilled nursing care.[1] As of this year, 2004, three-fourths of Americans prefer to receive professional healthcare at home rather than have a room at an assisted living facility [2] or nursing home facility[3] (Thrivent Financial for Lutherans). The problem with this mind state is who will care for them? There are a variety of home health services[4] that are offered by various providers, but then again who will pay for these services? Long term care is very costly and that cost will continue to rise as the need for care rises.

The cost of long term care is a major issue when it comes to placing a loved one into a nursing home facility. Between the year of 2003 and 2030 it is projected that the cost of long term care in a nursing home will assume a 5% inflation rate compounded annually. This is a projected cost of $57,500 in the year of 2003 and an increased rate of $214,673 in the year 2030 (Thrivent Financial for Lutherans).

Americans have access to the best health care in the world, if they can pay for it. Long term care is not covered under the Medicare program.[5] Although, Medicaid[6] does pay for long term care, but to receive Medicaid, you must meet federal poverty guidelines for income and assets. Many people must "spend down" a large portion of their assets to become Medicaid eligible. For example, in state of South Dakota a person must spend down their entire savings and checking account balances to $2,000 to even apply for Medicaid assistance.

This past summer,[7] during my internship at the Majestic Bluffs[8] nursing facility in Yankton, South Dakota, I experienced this very issue. An elderly lady was admitted on an emergency basis at the nursing home because of some medical reactions to a recent stroke. When she experienced her stroke, two weeks prior, she was admitted to the hospital and then was discharged from the hospital back to her home. Two weeks later she was admitted to Majestic Bluffs on an emergency admittance. She was told that she would need skilled nursing care for the rest of her life. When it came down to her paying for the services that were being provided for her by the facility, it was a devastating for this little elderly lady to image. The social work told her that she had to “spend down” her $32,000 saving account balance to $2,000 for her to be eligible for Medicaid funding. This lady was so upset she told us numerous times that she just wanted to die so that she didn’t have to waste her life savings on her long term care services. She finally wrote a check in the amount of $30,000 to the Majestic Bluffs facility for the advanced services that she will need. Now this lady will be able to apply for Medicaid once those pre-paid days are over. This is a prime example of the need for ling term care insurance. By investing in long term care insurance persons will be able to protect their assets.

At the present time, the long-term care insurance industry is regulated by each of the states in America individually. There is no set federal regulation. The National Association of Insurance Commissioners[9] has created a long-term care insurance model act that many states have partially adopted. Due to the different regulations that exist across the country, long-term care insurance policies are not standardized. This lack of standardized policies leads to a variety of possible coverage plans for the insured. It also makes comparing policies very difficult. Long term care insurance policies allow individuals to receive care, should the need arise, without depleting the assets that have been accumulated throughout the years (Willging, 14).

Several options exist for financing long-term care. The one that is growing in popularity is long-term care insurance. There are growing numbers of insurance companies that offer long-term care insurance. Long-term care insurance can come in individual and group policies. However, the policies are being provided increasingly on a group basis. The amount of coverage varies, on the type of plan that is purchased. Although, it is standard that long-term care insurance covers skilled care in a skilled nursing facility, as well as intermediate care. As in all major purchases, it is wise to shop around for the policy features that will best suit the allowed budget (Willging, 15).

One of the major, least addressed threats to retirement security is the cost of long term care. Long term care in nursing homes costs, on average, around $150 a day.[10] The average stay for a person in a nursing home is about two and a half years, and on average cost grater than $50,000 per year (Ahlstrom, 1). As stated before these cost will significantly rise within the next twenty five years. As for those elderly who want to stay at home, the nursing services provided in the home can be significantly greater then the nursing home, all depending on the amount of care received and the type of payment made. Despite of the estimated cost of paying for long term care services, very few people in or approaching retirement have private resources or benefits to protect them from long-term care costs. Most people who need long-term care pay for it on their own, or even rely on family members to act as informal caregivers.

About twenty five percent of formal long term care is funded out of the consumer’s pocket. Just about one in four families in this country provide informal care in the home for the elderly family members (Ahlstrom, 2). Medicaid may end up paying for those who exhaust their savings and continue to need medical care, and for those with limited incomes and assets. Medicaid has become a major financer of long term care providers.

Medicaid finances nearly half of all skilled nursing home care. It also pays for a limited home and community based care benefits. Thirty-five percent, of Medicaid benefits expenditures in 2002 were related to long term care. While states pay for roughly forty percent of Medicaid, long-term care now represents a significant, growing and probably weak portion of their budgets. Medicare, the other major public insurer, has very limited long term care benefits. Because, of the recent addition of the American drug benefit, Medicare is unlikely to expand its long term care coverage in the near future (Ahlstrom, 2).

Private long term care insurance is a small but growing market. This source of coverage is for nursing home and home-based care costs. Long term care insurance protects policyholders from much of the catastrophic[11] costs of long term care services. The private insurance provides policyholders with more care options than Medicaid, and also reduces the dependence on Medicaid. Still, as of 2001, there were only 5.8 million policies in force (Ahlstrom, 2). There is a lack of awareness to the American population on the risks of needing long term care. To promote the purchase of long term care insurance, Congress has enacted several proposals such as:

· A limited tax deduction for premiums similar to the deduction for medical insurance premiums purchased by individuals

· A consumer education campaign on long term care and Medicare through the Centers for Medicare and Medicaid Services[12]

· The impact of these activities may increase over time, but the number of people purchasing long term care insurance remains small.

Long-term care insurance provides policy holders with a sense of security. Policy holders know that their future long-term care needs are provided for and that their savings will not be wiped out. Long-term care insurance also removes the potential burden that could be placed on family members of the individual in need of long-term care, but could not afford it.

Although long term care insurance can provide elderly with a sense of security it may not be a wise investment for all. Long term care insurance is expensive. Many people who wish to provide for themselves cannot afford the long term care insurance premiums and meet their current expenses. If people find that the premiums are difficult to pay now, how will they pay them in the future when the premiums rise and income levels do not. Long term care insurance is also not for the persons who have a limited income and very few assets. It would be smarter that a person would just “spend down” their assets in under 12 months, so they would qualify for Medicaid. An individual must examine his or her needs to determine if long-term care insurance is the right option for them. There is no time like the present to make this determination. The younger in age that a person is, the better chance for eligibility and lower premiums they will receive in respect to long term care insurance (Ahlstrom,3).

Although, some people believe that the ideal time to buy long term care insurance is the age of fifty, really it makes sense at any mid-life age. When purchasing this insurance early, you pay less per year, but you pay it for a longer time. Even when long term care insurance is purchased at the age of seventy the premiums are about $4,000 a year (depending on the type of coverage), it's not that expensive if you consider the alternative. That same $4,000 would cover only one month in a skilled-nursing facility. Even a person in their eighties paying up to $12,000 a year for insurance makes sense. That is a lot of money, but that's only three months in a skilled-nursing facility (Sander, Personal Interview).

People need to keep in mind that there are many advantages to having long term care insurance, but there are also disadvantages. Long term care insurance is an option to help finance extended care. The need for it can be determined by calculating how many present-day premiums protect against future out of pocket costs. This insurance covers mid to long term care rather than short-term care. It also covers what Medicare and many private health plans do not. Long term care insurance is expensive but it may be a good value if your particular situation warrants extended coverage.

In Comparison with a twenty year age increase, the premiums increase tremendously.

As the American population ages in the next few decades, many predict that long-term care insurance will continue to grow in importance. Long term care can be required by individuals of any age group, but the elderly are most likely to need long term care in the near future. As life expectancy increases, and as the "baby boom" generation moves into its elder years, long-term care is expected to be needed by larger portions of the population. This is why the importance of long term care is being addressed by insurance agencies more every day. Although, this insurance coverage has some very noticeable disadvantages it also has many advantages. Each and every day long term care is becoming a bigger part of the health care industry’s future.

Do ask a trusted friend to join you when an agent visits to you about the insurance

Do ask a lawyer or friend to review the policy to make sure that you have not missed anything

Don’t write checks payable to the agent, make checks payable to insurance company

Don’t buy unless you will be able to make the annual or monthly payments in the future. Remember that the rates will increase as inflation increases.

Fisher, Carroll. “Long Term Care Insurance Senior Health Insurance Counseling Program.” Oklahoma Insurance Department. 2003-2004.

Sander, Todd. Personal Interview. Thrivent Financial for Lutherans. October 2004.

Cleverley, William. and Cameron, Andrew. Essentials of Health Care Finance. Joes and Bartlett Publishers, Inc. 2003.

Stone, Robyn. and Wiener, Joshua. “Who Will Care for Us? Addressing the Long Term Care Workforce Crisis.” US Department of Health and Human Services. 2001. 1-40.

Willging, Paul. “Let’s Stop Ignoring LTC Insurance.” Nursing Homes Long Term Care Management. 52.11 (2003): 14-16

[1] Daily nursing and rehabilitative care, ordered by a doctor, that can be performed only by, or under the supervision of, skilled medical personnel.

[2] A facility that is licensed by the appropriate authority in the state where it is located and that charges a fee to provide inpatient care for persons who are not in need of hospital or nursing home care, but who are in need of assistance with Activities of Daily Living or are cognitively impaired.

[3] A licensed facility that provides room and board and a planned, continuous medical treatment program, including 24-hour-per-day skilled nursing, personal and custodial care.

[4] Health care services provided by a licensed home health agency in the patient's home

[5] A federal health insurance program designed to provide health care for the elderly and the disabled. People who qualify for Social Security benefits are automatically eligible for Medicare.

[6] A joint federal and state program that helps with medical costs for some people with low incomes and limited resources. Medicaid programs vary from state to state, but most health care costs are covered if you qualify for both Medicare and Medicaid.

[7] Summer of 2004

[8] Sister James Nursing Home

[9] A national organization of state insurance commissioners who work to promote uniformity of state regulations and legislation related to insurance.

[10] Or $4,500 a month

[11] Tragic event

[12] CMS