Fact and Fiction about Long Term Care (and why it never hurts to have a plan)William N Stant

1. Too many of us cling to irrational ideas about needing long-term care for ourselves. Facts, however, can turn irrational hopes and assumptions into rational plans and reasonable expectations, especially if you use them to put together a reasonable plan for handling long term care costs. For example, here is a key fact to start with: Most of us will need long-term care in some form before the end of our lives. Here’s another fact: Unfortunately, far too many of us will neglect to plan for the inevitability of long-term care expenses. If you are reading this, you are taking the key first step. Among men in the US today, the statistical likelihood of needing long term care sometime before you die is 46.7%. Among women the likelihood is 57.5%. The duration of an extended LTC event can vary. For example, among men the duration averages around 2.2 years. For women duration averages about 3.7 years. These are abstract statistics to be sure. But they are derived from the hard facts of unprepared living among all of us in the here-and-now.
2. Many of us have real-life LTC stories derived from the hard facts of unprepared living. If you’ve heard someone’s story, or you’ve lived through one yourself, you may have found yourself asking how things might be different if there had been a plan in place. Having a plan does not guarantee pain-free aging. But putting together a plan requires us to ask hard questions. One of the most important questions is, for whom do we go to the trouble and expense of putting together a plan? Who stands to gain, or at least not lose, by our adequately funding, far enough in advance, an LTC plan? The answer frequently lies with the caregivers.
3. Who cares? Family members, ranging from teenagers and young adult children caring for grandparents to adult children raising kids of their own while caring for their parents, make up networks that provide informal long-term care. Spouses, life partners, friends and neighbors provide long-term care. They stay home from school, skip classes or whole semesters in college, miss work, forego opportunities for advancement, lose sleep and sacrifice their own health to provide informal long-term care. However loving and selfless they are in taking up this responsibility, they can be spared this burden if a careful plan for meeting inevitable LTC expenses is drawn up and funded far enough in advance.
4. A Kaiser Family Foundation study published in November of 2023 reported that fewer than half (43%) of US adults surveyed said they had had a serious discussion with a loved one about who would care for them if they needed help with daily activities or how such care would be paid for (39%). Forty-three percent lacked confidence they would have the resources to pay for care they might need as they age. Less than half of all adults aged 65 or older reported saving any money for future LTC expenses.
5. Who pays? The Kaiser study cited above found confusion about how long-term care is paid for in the United States. While Medicaid is the main source of payment for LTC, 45% of adults 65 and older indicated they expected that Medicare would pay for their own or a loved one’s nursing home bill if they had an extended care event. But Medicare does not cover LTC. It only covers rehabilitative care.
6. Long Term Care is not rehabilitative care: Usually people think of healthcare as something that will rehabilitate you. It helps you recover from an illness or an injury. Most healthcare is rehabilitative. But long-term care (LTC) is not rehabilitative care. It is custodial care. Custodial care is not healthcare in the usual sense. It is intended to provide care necessitated by a physical or mental impairment whose duration is understood to be indefinite.
7. Long Term Care is not just for old people. What is “old,” after all? A sizeable minority, 16.9%, of nursing home residents are under age 65. Nursing home residents make up only 2.3% of the elderly population (65 or older) in the U.S.
8. Long Term Care is not only provided in nursing homes. In fact, most LTC is provided at home by family caregivers or home-health aides. It can also be provided in community settings such as senior centers. If you need LTC, where you receive it will likely be determined by your specific situation.
9. Medicare does not cover LTC. Medicare covers up to 100 days in a rehab center and these are often located on the same campus, or in the same building, as a nursing home. But this is not LTC. But co-location causes confusion.
10. Medicaid will help with LTC costs. But it is a needs-based program administered by states that require you to qualify by applying for it. The qualification process involves spending-down your assets in a process that may undermine your standard of living. Avoiding the dreaded “Medicaid spend-down” is a good reason to plan for managing the cost of LTC.

Using Insurance to Plan for Long Term Care

An insurance policy offering LTC coverage will pay benefits to help with the LTC expenses when benefits are triggered. Details regarding benefit triggers can differ among policies. Benefits are generally triggered in one or both of two scenarios:

Scenario 1 – Activities of Daily Living (ADLs):

Benefits are triggered when a qualified medical professional has documented in writing that you are expected to need, for a period of 90 days or more, stand-by assistance with two out of 6 ADLs. ADLs are:

1. Dressing, as in getting out of your pajamas and into the clothes you will wear when awake.
2. Bathing, as in taking a shower or a bath.
3. Toileting, as in using the bathroom to eliminate bodily waste.
4. Continence, as in being able to control your bladder or bowel.
5. Transferring, as in getting out of a chair and into bed.
6. Eating, as in feeding yourself using dining utensils.

Scenario 2 – Cognitive Impairment: Benefits are triggered when a qualified medical professional has documented in writing that you need stand-by assistance, monitoring, or supervision due to a cognitive impairment such as Alzheimer’s.

When Will the Check Come?

Once benefits are triggered there is usually a waiting period, also known as an elimination period, during which you meet your LTC expenses on your own for a period of time specified in the insurance contract. If it is well planned well in advance, it is possible for this period to pass with a minimum of financial distress. There are plenty of other sources of stress to cope with when you or a loved one are living through an extended long term care event. This is one of those situations where a good plan built around the right amount of the right kind of insurance coverage can make all the difference in the world.

With LTC insurance coverage the period of time that passes between triggering benefits and the payment of claims (i.e., receiving a check) is known as the “elimination period.” A typical elimination period is 90 days. With a 90-day elimination period you would expect to receive a check after 120 days. Why the extra 30 days? You wait an extra 30 days because claims are typically paid in arrears. The nursing home, meanwhile, expects you to pay in advance.

The underlying financial planning question is: How much of the anticipated cost of LTC can you afford to self-insure? In 2024 in Indiana, for example, the median cost of a month in a nursing home in a private room is $8,916. Are your household income and financial resources sufficient to cover the first 120 days (4 months) of nursing home costs ($35,664) at this level? After claims start getting paid, can you afford to pay half of the full amount each month? How much would it cost to insure the other half? These are important financial planning questions.

The financial impact of LTC expenses and how to handle them involve financial planning questions. Check back here for more discussion on this topic, including the variety of insurance solutions available.

Bill Stant