Over a 40-year career in the field of geriatrics assisting seniors, their children and eldercare professionals, perhaps the single most-asked question is, “Will Medicare pay for this?” Sadly, I have repeatedly been the bearer of bad tidings. In 90% of cases, the answer is no. My question then is, “Do you or your loved one have long-term care insurance?” More often than not (at least in the first half of my career), the answer is, “No, I didn’t think I would need it.”

According to the AARP (American Association of Retired Persons), 70% of people turning 65 today can expect to use some form of long-term care during their lives. 90% of those who receive long term-care assistance will live at home or in a community setting.

Of course, it is impossible to predict who will need long-term care, for how long, and how much it will cost, but the AARP provides data on the average costs of the most popular long-term care services.

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While there are disparities in these costs across the country — such as the cost of living and minimum wage — the information below gives you a general idea of cost comparisons per year.

Average Annual Costs for Long-Term Care Settings

Nursing home care in a private facility: $104,000.

Private pay home care: $50,000 (for 40 hours of care a week)

Assisted living community: $57,000 (for a one-bedroom)

The evolution of long-term care insurance

In the 1980s, long-term care insurers made an almost-fatal flaw in marketing this new type of policy as protection against nursing home costs. Since it’s human nature to deny or postpone the possibility that one will ever wind up in a nursing home, potential policyholders wanted nothing to do with them. These early policies didn’t offer coverage for home care or for those with dementia.

Insurers dramatically revised their marketing strategy in the 1990s, positioning coverage as a way to protect one’s assets and wealth. That approach clicked with those who saw themselves as having wealth and means in their senior years, sending the sale of policies skyrocketing.

How much it costs depends on what you select

Today, there are many pros and cons of having long-term care insurance, with one of the major cons being that they can be prohibitively expensive depending on the options you choose, including:

  • The type of coverage preferred, such as group or employee offered, partnership policies, life insurance either/or policies, daily, monthly or lifetime caps
  • The elimination period * (Also called the “waiting” or “qualifying” period, it refers to the length of time between when a need begins and benefit payments are made by an insurer.)
  • The age at which the policy is purchased
  • The daily, monthly, or even lifetime cap on a policy
  • The number of “activities of daily living tasks” needed by the recipient
  • An individual versus a couple policy

The AARP quotes that the average policyholder pays $2700 a year, but with so many variables, it’s almost impossible to make comparisons. There are alternatives to long-term care insurance, but most of them involve paying privately for services. But for those of you who don’t have the means to pay out of pocket, it’s critical to have a sit down with an insurance carrier to get a realistic quote.

Some things to pay special attention to

Some insurance carriers will give a discount to a spouse under a certain age at the time of purchase. For example, buying this insurance at age 65 is significantly higher than at 64 and higher still than if purchased at 55 or 60. In other words, the earlier the age, the lesser the premium. Yet, I have known people who have been able to get a policy at age 75, but boy, did they pay a high price for it! Also, be aware than certain medical conditions such as ALS, diabetes in some cases, and some mental illnesses are ineligible for coverage.

The elimination period is one that often catches people off guard when they need to activate a claim.

Policies offer a reduced annual rate if the holder chooses an elimination period of 30, 60, 90, or 200 days. This means that the claimant must pay out of pocket for the elimination period of the days chosen. The longer the elimination period, the lower the premium, but consider this: If you have a 90-day (or 3-month) elimination period and your nursing home or assisted living facility costs $10,000 a month, you will be responsible for the first $30,000 out of pocket before the insurer pays.

Helping you navigate long-term care decisions

Unlocking some of the nuances, meeting the criteria for eligibility, and activating a long-term care insurance policy can be intimidating, confusing, and daunting, but the good news is that many insurance companies are pleased to offer complimentary consultation and advice. I would strongly suggest that you select an agent that does not represent just one long-term care insurance company, but offers an array of policy choices.

BAYADA is here for you, too! We have an entire department of long-term care insurance specialists dedicated to helping you get the most out of your policy, including reviewing a current policy, determining eligibility for reimbursement, and automating weekly billing for home care services. Contact us today to learn more.