• Should Medicare Add a Long Term Care Benefit?

    One of the biggest misconceptions many have about Medicare is that it will cover their potential long term care needs. While Medicare may provide some coverage for this type of care, there are significant limitations. As a result, most people who need long term care will still be forced to pay for it out of pocket, or through Medicaid or a private long term care insurance policy.

    If Medicare were to add a true long term care benefit, what would it look like and how would it work? A proposal recently published by Health Affairs presents several interesting ideas on how to integrate a long term care benefit into the existing Medicare framework.

    In-home care – The core of the proposal is built around an in-home health care benefit that would be available to anyone with dementia or who cannot perform two of the Activities of Daily Living on their own. There would be a daily benefit limit, similar to private long term care insurance. The focus on in-home health care keeps with the growing trend towards “aging in place”, which allows seniors to continue to live at home as independently as possible even as they need additional supportive services.

    Integration and coordination of care – Beneficiaries would be encouraged to enroll in what the proposal calls an Integrated Care Organization. These ICOs would coordinate care between doctors, long term care providers, and unpaid care givers like loved ones to ensure that patients receive all the medical and support services they need.

    One of the obvious challenges to adding long term care benefits to Medicare is the associated cost to an already strapped system. Aside from a relatively modest monthly premium and a moderate increase in the existing payroll tax that goes to fund Medicare, a significant portion of the cost would be covered by sliding scale co-insurance. The co-insurance would range from 5% for the lowest income beneficiaries to 50% for those with the highest incomes. This would be especially significant for middle income seniors who currently have too much in assets and income to qualify for Medicaid, but cannot comfortably afford the full cost of long term care.

    While it may not be a perfect proposal, it does start a necessary conversation on the real struggles of many seniors to receive the long term supports they need to live their later years with comfort and dignity.

  • Long Term Care Basics You Should Know

    As you likely know from your work in the senior market, longer lifespans mean more and more people will need long term care. But what is it, and how can you prepare and educate your clients to pay for it?

    What is LTC?
    Long term care is the help you need when you are no longer able to complete the Activities of Daily Living on your own. These include eating, bathing, dressing, toileting, transferring from bed to chair, and continence. Generally, if you cannot complete two or more of these without help, you are considered to need long term care. Long term care can be nursing home care, home health care, hospice care, and even home maker services to help you cook and clean.

    What is LTCI?
    Long term care insurance is insurance designed to pay some or all of the costs of long term care. Some policies will reimburse you for covered expenses up to a daily limit, and some policies will pay you a cash amount per day that you’re certified as needing care. You can also pay for long term care through additional benefits added on to whole life policies, or through hybrid products.

    Why have it?
    Skilled nursing facility care can cost close to $100k a year and home health care can cost close to $50k a year, and the cost is rising. Imagine if your clients suddenly had to pay that kind of cost out-of-pocket. Would many of them be able to, or would they be forced to sell off their assets in the hopes of Medi-Cal covering the necessary care?

    Who needs it?
    In short, everyone! Two out of three people will need long term care services at some point in their life, and one in three will need nursing home care. Even just a year or two of that kind of care can ruin a family’s finances. Because premiums are generally based on the age at time of issue, presenting long term care insurance to even your younger clients makes sense, as buying younger can save significant money in premiums over the life of the policy.

    We all hope that we’ll live independent, carefree lives to the end, but the reality is that most of us will need some kind of long term care in our later years. Be prepared to present the options to your clients and help them protect themselves and their families.

  • Know the Cost of Long Term Care

    We know that long term care costs are rising and can have a catastrophic affect on the finances of seniors and their families. Having a dollar amount to put on those costs can help you impress upon your clients the importance of long term care planning.

    Take a look at the national average annual cost.

    Type of Care Annual Cost Annual Cost Increase Over Past Five Years
    Homemaker Services (help with household chores, etc) $44,616 2%
    Home Health Aide $45,760 1%
    Adult Day Care $17,904 3%
    Assisted Living Facility $43,200 2%
    Nursing Home $80,300 semi-private room, $91,250 private 4%

    Unsurprisingly, the average cost in California is noticeably higher.

    Type of Care Annual Cost Annual Cost Increase Over Past Five Years
    Homemaker Services (help with household chores, etc) $51,480 2%
    Home Health Aide $52,624 2%
    Adult Day Care $20,000 0%
    Assisted Living Facility $45,000 1%
    Nursing Home $89,396 semi-private room, $104,025 private room 4%

    And remember, these are national and state averages. In areas in and around San Francisco, for example, home health services average over $60,000 a year and nursing home care runs well over $100,000 a year even for a shared room, reaching as high as $175,000 for a private room.

    It’s also important to note that while single digit percentage increases may not seem like much on the surface, long term care has costs increasing faster than the rate of inflation. These are real, net cost increases, not simply cost of living adjustments.

    You can check out costs in your area with this helpful interactive map from Genworth.