Long-Term Care Insurance
Current details regarding funding and availability of medical care in the United States remain unsettled. The reader is referred to the Centers for Medicare & Medicaid Services and The Henry J. Kaiser Family Foundation for recent information.
Because people are living longer, the need for long-term care is likely to increase. Long-term care involves helping people function as well as possible. It includes help with daily activities, such as preparing meals, bathing, and dressing, as well as help with health care. Long-term care may be provided in the home or a long-term care facility, such as a nursing home.
Long-term care is expensive and, as suggested by its name, is usually needed for a long time. Thus, many people need help paying for it. Many people mistakenly think that Medicare covers long-term care. Also, Medicaid, which covers care (including long-term care) for certain people with few financial resources, may not be accepted by some long-term care providers.
A decision to buy long-term care insurance depends on several things:
Need: Is long-term care insurance needed?
People who do not need this insurance include those
People who may need this insurance include those who are neither rich nor poor and who
Costs: Will buying long-term care insurance cause financial hardship?
People should consider whether they can pay the premiums over the long-term, even if their income decreases. They should find out how often and how much premiums increase and how many days have to be paid for out-of-pocket before the insurance pays (the elimination period).
Timing: Is it better to buy long-term care insurance now or later?
The younger people are, the more cheaply they can buy long-term care insurance. On the other hand, the younger people are when they start paying for it, the longer they are likely to pay before needing to use it. However, if people wait too long, they may develop disorders that make long-term care insurance difficult or impossible to obtain.
Coverage: People who have decided to buy long-term care insurance have to decide how many years of coverage they want (the benefit period). The average stay in a nursing home is 2 to 3 years, so most people choose a slightly longer time: 4 to 6 years.
People must also decide what maximum amount is needed to pay for each day of care (the daily benefit). The amount should be close to the average cost of care at local nursing homes.
Policies vary in many important details, so they must be carefully evaluated. For example, people must decide the following:
Whether they want built-in inflation protection
Whether they want a well-defined trigger for the start of benefits—for example, when they can no longer do a basic daily activity, such as bathing or dressing
Whether benefits for home care are comparable with those for nursing home care
Whether the policy has certain tax advantages, such as deduction of premiums from taxable income as medical expenses and exclusion of benefits from taxable income (called tax-qualified plans)