• What is long-term care?
• Why should you consider long-term care insurance?
• Who pays for long-term care?
• How much does long-term care cost?

1. What is long-term care?

Long-term care involves a wide variety of services for people with a prolonged illness, disability or cognitive disorder (such as Alzheimer’s disease). Long-term care is not one service, but many different services aimed at providing people with the help they need when a prolonged illness or disability keeps them from being able to care for themselves. It can range from help with day-to-day activities in the home (custodial care such as dressing, preparing meals, bathing, etc. ) to more sophisticated services such as skilled nursing care in your home or a nursing facility. Persons with physical illnesses or disabilities often need hands-on-assistance with activities of daily living. Persons with cognitive impairments generally need supervision, protection or verbal reminders to accomplish everyday activities. Skilled care and personal care remain the most common terms used to describe long-term care and the level of care a person may need.

Skilled care is generally needed for medical conditions that require care by skilled medical personnel, such as registered nurses or professional therapists. This care is usually provided 24 hours a day, is ordered by a physician, and involves a treatment plan. Skilled care is generally provided in a nursing home, but may also be provided in other settings such as the patient’s home with help from visiting nurses or therapists.

Personal care (also known as custodial care) helps a person perform activities of daily living, which include assistance with bathing, eating, dressing, using the toilet, continence and transferring. It is less intensive or complicated than skilled care and can be provided in many settings, including nursing homes, adult day care centers or at home.

2. Why should you consider long-term care insurance?

If you’re like most consumers, you’ve set aside money for a rainy day. But you probably haven’t protected your savings against the expense of an extended illness or disability. You should take action now, because the likelihood of needing such long term care is significant and the cost is high. A study reported by the New England Journal of Medicine in 1992 anticipates that 43% of people over age 65 will enter nursing facilities during their lifetime. More than half of the people in a nursing facility stay more than one year. Currently, the cost of a year in a nursing home averages about $38,000.¹ In addition to nursing facilities, many people will need long term care services in their home, or community services in adult day care centers. It has estimated that 80% of all people age 65 will need either nursing facility services or home or community services during their lifetime.

Long term care insurance is the most efficient means of protecting your assets from this threat. When you purchase a long term care insurance policy, you not only help safeguard your assets from the cost of long term care, but you increase your independence and control over future needs.

¹ American Health Care Association study, 1993

3. Who pays for long-term care?

Nationally, one third of all nursing home expenses are paid out-of-pocket by individuals and their families, and about half are paid by state Medicaid programs.¹ Medicare, Medicare Supplement Plans, Medicare HMO’s and traditional health insurance plans are designed to pay for hospital and doctor costs, not to pay for long term care services. In fact, Medicare pays only about 10% of all long term care costs (including only 5% of all nursing facility expenses).

A study performed by the Health Care Financing Administration, which administers Medicare, showed that the majority of nursing facility costs were paid with the personal assets of the individual receiving the care, or by Medicaid if the individual had no personal assets. To receive Medicaid assistance, you must meet federal poverty guidelines for income and assets on health care. When you have spent down your assets, you then will be eligible for Medicaid. Thus, many people begin paying for nursing home care out of their own pockets and are forced to spend down their financial resources until they become eligible for Medicaid.

¹ American Health Care Association study, 1993

4. How much does long-term care cost?

If you don’t have insurance, long-term care can be expensive, depending upon the amount and type of care needed and the setting in which it is provided. Currently, the cost of a year in a nursing home averages about $38,000.¹ This cost is only an average and varies widely across the country. If you receive skilled nursing care in your home and are visited by a nurse three times a week for two hours per visit for the entire year, the bill would come to about $12,300.¹ If you receive personal care in your home from a home health aide three times a week for a year, with each visit lasting two hours, the bill would amount to about $8,400.¹

¹ American Health Care Association study, 1993

Information quoted directly from:

• A Shopper’s Guide to Long-Term Care Insurance , National Association of Insurance Commissioners.
• Long Term Care Companion Consumer Guide, Transamerica Occidental Life.