Because You Asked: Do I Really Need Long Term Care Insurance? (Part 1)

In a word, YES.  And the other truth that goes along with it is that very few people are willing to take an honest look at this need.  Why is it such a difficult issue for us to face?  There are many reasons that I have heard, but here are a few of them:

  • “I probably won’t need it, and if I don’t use it, I will have just lost that money”
  • “Long term care insurance is expensive, and there are other things that I would rather spend money on in retirement”
  • “My health insurance will cover it”
  • “My spouse/kids will take care of me”

There is a tremendous amount of information available to combat each of these rationales, and yet I have come to believe that it is generally not truly a matter of a lack of factual information, although that plays some part.  I believe that it is more a case of a combination of denial or avoidance, because most of us simply do not want to face our own mortality and eventual physical and possible mental decline that goes hand in hand with aging.  But let us begin with a few facts anyway.

What are the chances that I will need long-term care services and supports?

According to the ASPE Research Brief from the HHS Office of Disability, Aging and Long-Term Care Policy: “The prospect of becoming disabled and needing long-term services and supports (LTSS) is perhaps the most significant risk facing older Americans.” Here is a link that specifically indicates: https://aspe.hhs.gov/system/files/pdf/261036/LifetimeRisk.pdf

  • 70% of adults who survive to age 65 will develop severe LTSS needs before they die.
  • 54% of people who survive to age 85 receive some type of paid LTSS and 34% will receive long-term nursing home care.
  • For women: 75% of 65-year old women will develop severe LTSS needs before they die, and women are 2/3 more likely than men to receive nursing home care over their lifetime.

The “Use it or lose it” concern is an interesting one for this reason: ALL property and casualty insurance works on this same principle, and yet we would never consider NOT carrying homeowners and auto insurance policies. Compare the potential need for long-term care with the overall chances of a fire in the home, which is generally 0.3%, or 1/3 of 1%.    We are simply sharing the risks of an unplanned event with the insurance company, rather than bearing the total risk ourselves.

What about the costs of long-term care insurance?

Yes, traditional long-term care insurance can seem fairly expensive, particularly if you wait until you are over age 60 when you may have developed a chronic health issue or have a family history of such.  For this reason, we have come to believe that the “sweet spot” for purchasing long-term care insurance is between the ages of 50 – 60.  But compare the costs of long-term care insurance with the potential out-of-pocket costs for needed long-term care from another HHS report: https://aspe.hhs.gov/system/files/pdf/261776/OoPAfford.pdf

  • Only 22% of older adults could fully cover paid home care, 30% could fully cover assisted living, and 5 % could fully cover nursing home care with their incomes.
  • About half of adults ages 65 and over without enough income to cover these costs would deplete their remaining financial assets by funding no more than one year in assisted living or 19 months of paid home care. The only option then left to them would be Medicaid.

Won’t my Medicare pay for long-term care? 

Generally, NO it will not.  Medicare pays for medically necessary services, such as doctors’ visits, hospitalization, physical therapy, rehab and medications.  Medicare does NOT pay for Assisted Living, Nursing Home or many aspects of Home Care, aside from those who qualify for some Home Health visits.

Many individuals confuse Medicaid and Medicare. Medicaid is for those who are financially indigent. Medicaid offers some limited services for those who qualify for home assistance, but it will not pay for Assisted Living; it will pay for nursing home room and board care.  But here is the important question for me and my loved ones:  Do I want or would I want a family member to spend the last of their life in a Medicaid Nursing Home?  The answer for me, is “Not if I can help it!” 

But my spouse or children will take care of me! 

There are a number of oft-quoted statistics that indicate that upwards of 25% or more of caregivers will die before the person who is receiving the care, especially when dealing with dementia and Alzheimer’s disease.  The physical toll alone can be tremendous, not to mention the emotional stress and tendency to overlook the caregiver’s own needs, including their own medical needs.

If an adult is caring for an aging parent, they are often also juggling work/career and their own family and or children’s needs while trying to provide care.  Most families no longer have the luxury of providing unlimited home care to an aging parent or relative.

Conclusion for Part 1

In the second paragraph of this discussion, I noted that my personal perception is that the unwillingness to address the possibility of future long-term care needs was more a result of denial or avoidance, rather than a lack of knowledge.  In this particular missive, I have nevertheless attempted to address some of the knowledge-based deficits that may exist.

In part two next week, I will discuss more about various options for covering the potential costs of long-term care.  As to addressing the denial/avoidance aspect?  I only know to keep having the conversation, and encourage as many people as I can to take a hard, honest look at their own situations, whether it be potential care needs for yourself, or for a family member, such as parent or grandparent.

As Certified Financial Planner ® practitioners, we do not make “guarantees” as it relates to investments or finances.  But I will “guarantee” and leave you with this thought:  the longer we live, the greater our potential needs for physical assistance and care; the older we get, the more our bodies decline, and the greater our chances for mental decline as well.  We can fight it, and do our best to prevent it, but it will happen.

 

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