Did you know, seniors can only get in home nursing care through Medicare if they are hospitalized for 3 or more days?
Medicare doesn't provide Homemaker services, custodial or personal care, and only provides 21 days of service. Plus, the only way to go to a nursing home is to be on Medicaid.
Relying on Medicare might not be the best option. Luckily there are products out there that help protect our nest egg, no matter what our health looks like.
The yearly cost of private nursing home care has gone up from $60,000 in 2004 to over $100,000 in 2019. In-Home health care services are significantly cheaper, but can still run nearly $5,000 per month.
As stated earlier, Medicare’s Home Health services and Nursing Facility services are severely limited. Unless a patient is recovering actively from an illness or injury, neither option is available for seniors. Relying on relatives or children for care can be dangerous, and very few people are able to afford a nursing home or in-home care for long. According to the Medicare website, “Medicaid Nursing Facility services are available only when other payment options are unavailable and the individual is eligible for the Medicaid program.”
This means that the only option for many seniors is to pay for care themselves until their assets dry-up and they qualify for Medicaid.
With such little room for error, Medicare hasn’t made it easy for seniors to protect themselves. So what options are out there for those that can’t perform their ADLs (Activities of Daily Living)? According to multiple sources, 7 out of 10 people will need some sort of custodial or long-term care in their lifetime. Long-Term Care Insurance Plans seem like a good place to start when searching for a way to protect against this huge expense. LTC Policies are specifically designed to pay for expenses surrounding Nursing Facilities, In-Home care and assisted living. Unlike Medicaid, LTC policies can provide full at-home care coverage for those who would like to stay in their own homes.
With any insurance plan, the size of the payout determines the premium cost. Since nursing home and custodial care costs are so high, so are LTC insurance premiums. For a 55 year old couple, one year of premiums can cost over $3,000. As we age, this price increases, making it less and less appealing to those on a fixed income. Additionally, retirees tend to wait until their 60s before considering LTC insurance. By this time, many applicants have pre-existing conditions that disqualify them, or make premiums prohibitively expensive.
Luckily, there are alternative options.
People with money usually want to hold onto it. When we get older, we want to pass it on to our kids. That’s probably why LTC insurance is becoming so unpopular. Much of the time, this insurance goes to waste due to an inability to pay premiums, or a rapid decline in health rendering custodial care unnecessary. For those who want the benefits of LTC insurance, without the risk of wasting premium dollars, certain life insurance and annuity contracts have riders that can provide a similar, if not better solution.
As I’m sure we all know, Annuities are just like Life Insurance contracts with the added benefit of being an investment as well. Both Life Insurance and Annuities can have Long-Term Care Riders attached to them. These riders provide a living benefit to life-insurance owners by paying for monthly long-term care expenses. While the details can vary, most provide payment as a percentage of the contract’s death benefit, often paying out between 1-4% per month.
The major benefit of these riders is that they are only utilized if long term care is needed. While premiums may be increased slightly by the rider, the costs are greatly reduced from a standalone LTC policy. Additionally, if care is only utilized for a short time, the remaining death benefit is still paid to the beneficiary. It’s really the best of both worlds. While this is a great alternative to standalone LTC policies, it can still be prohibitively expensive for many people on Medicare.
One solution retirees have found for the problem of long term care, is short term care insurance policies.
Short term care insurance is just like long term care, but lasts only 1 year. While the premiums can be 10x less expensive, the average long term care claim lasts 22 months, leaving a 10 month gap for the average senior. While this is not an ideal solution, certain policies allow for workarounds. For example, United National Life’s In-home short term care policy uses days of care rather than calendar days to determine their benefit period. This means that your 365 days of care can be spread out over multiple years.
Another alternative to LTC policies are Critical Care or Critical Illness policies. These contracts generally cover those who suffer from cancer, stroke or heart attack, and can provide monthly payments similar to other custodial care policies. While the benefits are similar and the price is reduced, the likelihood of payment is much lower due to the specific nature of their coverage.
Getting your long term care needs handled can be a liberating feeling. The ability to have family around without being a burden, the ability to stay in your own home instead of going to a nursing facility, even the ability to pass down an inheritance are all benefits of planning for this expense.
As always, we suggest getting a holistic view of your retirement and insurance plan before making any purchasing decision. With the proper education and planning, we can ensure that everyone retires with dignity and comfort.