Quick…what comes to mind when you think of long-term care insurance (LTCI)? I bet the first words that popped into your mind were “expensive” or “can’t afford it” or “only for rich people.” You’re right. It can be pricey. Many people lump it into the same category as earthquake insurance or an expensive insurance rider on a piece of jewelry or art. However, if you are over 65, the odds of your jewelry being stolen or a catastrophic earthquake occurring in your town (even in California) are far less than the likelihood of needing assistance at some point in your life.
Too many people protect their property and leave their care to chance, opening the door to catastrophic medical bills as well as long-term care expenses which can wipe out a lifetime of savings in a few short years. If you are thinking that Medicare will cover these kinds of expenses, you are wrong.
Here is a glimpse of what Medicare covers:
Medicare Part A:
- Hospital costs after you pay a certain amount, called the “deductible”
- Short stays in a nursing home for certain kinds of illnesses
- Hospice care in the last 6 months of life
Medicare Part B:
- Part of the costs for doctor’s services, outpatient care, and other medical services that Part A does not cover
- Some preventive services, such as flu shots and diabetes screening
Medicare Part D:
- Some medication costs
Medicare and your supplemental insurance plan will only cover certain medical expenses, not the long-term personal care that you or a loved one may need because most of that type of care isn’t medical.
If you are a Solo Ager (someone who does not have a functional, nearby adult child), long-term care planning is especially critical because you may not have anyone available to help you, even for a short-term need. If you are a married Solo Ager or have a live-in partner, you may be able to rely on that person for some of those care needs. Likewise, if you have a sibling nearby you may be able to rely on them for a short period. However, if you are among the millions of baby boomers who are Solo Agers and currently living alone, you have substantial risk in this area.
How much risk? None of us can know for sure whether we will need long-term care. Maybe you never will, but statistically, a 65-year old has a 70% chance of needing personal care and assistance at some point in their life. A hip replacement, a fall, an illness, or an accident can suddenly throw us a curve ball and have us shopping for a short- or long-term care solution at the last minute.
If you have little to no savings and little to no income, you may qualify for one of the government programs that will help defray the cost of your care. Medicaid is the best-known of those programs. Each state administers it separately and you can refer to a state-by-state list to find out what is offered in your area. Other programs offered by select states include Program of All-inclusive Care for the Elderly (PACE), State Health Insurance Assistance Program (SHIP), and the Department of Veterans Affairs (VA).
If you have a net worth of $5 million or more, you can probably self-fund your care at the facility of your choice without fear of running out of cash before your life is finished. No need for insurance; you can self-insure if you wish.
However, for the majority of baby boomers self-funding is out of the question, nor would it be our choice to end up on a public assistance program. That leaves long-term care insurance as one option. The best time to start LTCI is when you are in your 50s, but you can do it at any age. I know one person who started it in her 70s. A licensed LTCI insurance broker will be able to provide you with up-to-date information on your options today.