Questions & Answers

What is long term care?

In general, long term care is any care a patient receives for a chronic, long-term illness such as Alzheimer’s disease; a disability such as a broken hip; or the inability to perform Activities of Daily Living (ADLs). Specifically, it may mean home health care, supervised adult day care, respite care, or nursing home care.\

Why has the need for long term care increased?

One reason the demand for long term care has increased is because people are living longer than they ever have before. Also, families are geographically scattered; employment and educational opportunities, among other things, have spread families from coast to coast. Time, travel expenses, and other responsibilities make it nearly impossible to provide the care older family members need. Another reason is that the primary caregivers in most families are women, and today more women work outside the home. And, finally, grown children are unable to care for their aging parents because they, too, are often in need of some degree of assistance.

Why should I worry about costs when Medicare will pay?

Medicare does cover some long term care costs, but coverage is very limited. According to the Health Care Financing Review, 1992, less than 5% of all nursing home costs are paid by Medicare. Payment is made only after 3 days of hospitalization. It pays only for skilled or rehabilitative care that takes place in a “Skilled Nursing Facility” as certified by Medicare. And, Medicare only covers up to 100 days in a nursing home, while the average stay in a nursing home is 2.8 years (Broker World, May, 1990). As you can see, there are many misconceptions concerning the benefits of Medicare.

So, who does pay for long term care?

Medicaid, a jointly funded state and federal program, pays 43% of all nursing home costs nationally (Journal of Accountancy, February, 1993). It is important to note that Medicare supplemental insurance (Medigap) does not pay for long term care costs beyond the services that Medicare covers. Private insurance is growing in importance as more people become aware of the financial risk. The bottom line is that those who need long term care - and their families - often end up impoverished.

What options do I have?

You actually have three options to consider when it comes to funding a long term care stay:

1. You could choose to self insure. However, nursing home costs currently run from about $30,000 to more than $100,000 a year, depending on where you live (Wall Street Journal, November 17, 1995). The biggest fear many people have is that they will outlive their money. Therefore, self funding is generally available only to those who have large estates with high liquidity, and even then, self funding may not be your best investment.
2. A second option is to use Medicaid, or welfare. Medicaid is designed for people who are impoverished. To receive Medicaid assistance, you must meet federal poverty guidelines, or “spend down” your assets, to meet the eligibility requirements. However, when the government takes over, you can lose control of your remaining assets. It is also disturbing to note that you may be unable to use the nursing home of your choice because not all nursing homes accept Medicaid patients.
3. The other option is to pass the risk on to someone else, such as a company that will pay your long term costs for you. This protection is commonly called Long Term Care Insurance. The advantage to this option is that you maintain your independence by being able to choose the type of care you receive because you have the means to pay for it. You control the quality of care you receive, and you preserve your assets. Most people would prefer that their life savings go to their spouse, children, or their favorite charities instead of going to a nursing home. A good long term care plan allows you to pay the nursing home bill with insurance funds and keeps your estate intact for other uses. Many people are finding that long term care policies are just what they need. In fact, the number of long term care policies in effect has risen rapidly to more than 7-million (Kiplinger’s Personal Finance Magazine, March, 2001).