Statistics indicate that almost half of all senior citizens (people over age 65) will require long-term care. Here are some recent stats from a long-term care study done by Michigan State in 2004:
- Approximately 45 out of 100 people will need LTC
- Average stay is 19 months
- 1 in 3 will spend 3 months or more
- 1 in 4 will spend one year
- 1 in 11 will spend 5 or more years
A survey from the National Family Caregivers Association, released in October 2000, also reported that 54 million Americans are involved in family care giving in some form. Looking at the statistics, and such great risks, doesn't everyone need long-term care insurance? After all, the cost of long-term care insurance can run $5,800 or more monthly in some locations. The truth is, you may or may not need to buy insurance.
In order to accurately determine who needs long-term care, and how much, let's first discuss what long-term care insurance does NOT cover. Long-term care will not cover costs, and attention, necessary to handle personal affairs such as housework, shopping, meal preparation, or answer the phone - although these are necessary activities in a persons life who is living on their own and require a care giver if person is not self-sufficient enough to do these things.
Insurance covers the hands-on or verbal assistance needed to help individuals move from one place to another, to bathe themselves, to dress themselves, to feed themselves, to use a toilet or to have an incontinence problem. Long-term care also entails the physical or verbal assistance necessary to help a non-cognitive person not to be a danger to her or to others. This cognitive deficiency may be a result of stroke, dementia, Alzheimer's or similar conditions. Almost always, the disabled person is under the care of a doctor and almost without exception there is a caregiver. Thus, and this is an important point, single people cannot care for themselves under the definition of long-term care or be paid by insurance. There must be a caregiver. Caregivers are family, friends or licensed health care professionals.
When to buy
It comes down to the various income and asset resources you have available to you. To illustrate this, let's take a look at the varying needs of three general groups:
- Low Resources
- Medium Resources
- High Resources
Low Resources: This group has countable assets that are at or below the spend- down limits imposed by their state Medicaid rules. Additionally, this group typically has monthly income below the average nursing home costs for the state where they live. In many cases, people that fall within this group will qualify for Medicaid without having to spend down their assets. It's best to determine what the Medicaid rules of your state are - especially in consideration of live-at-home spouse support. However, single adults with countable assets of less than $2,000 may not have a need for long-term care insurance.
Medium Resources: This is the group who most often needs the insurance. This group of people has countable assets that exceed the Medicaid limits, but don't make enough money to cover the monthly costs of nursing home care in their area. For this group, having to come up with $5,800 per month over a long-term period could potentially deplete their estate or create an economic hardship for the community spouse.
High Resources: This group has sufficient monthly income to support the community spouse's living needs and to cover the monthly nursing home costs in their area (which vary from location to location). This group may also have enough countable assets to cover and extended nursing home stay. However, many in these people still do, however, obtain insurance because it can help them protect their estate from being reduced by long-term care needs. Most importantly, it can also give them some added assurance by providing a separate source of funds to be used for long-term care needs.
For all of the above groups, it's best to see a qualified financial planner in your area. Depending on the Medicaid rules of your particular state it might be best to have long-term care insurance no matter what your current resources are.
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