Long Term Care Insurance

Federal law makes it easier for everyone to buy and own long term care insurance. That's because it's easier for states to start programs that help reduce the worry, and stress, of paying for long term care.

In this article, we're going to first help explain exactly what is meant by long term care, and the services you can expect under those programs. Next, we'll discuss some of the steps you need to take when choosing a long term care provider. Finally, we will finish up with a discussion of the advantages of these programs, and how this insurance can help you protect your assets.

Long Term Care

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There is a misconception that long term care is only for the elderly, that's simply not true. This type of care includes a variety of services that are administered to individuals with both chronic illnesses as well as disabilities.

Typical long term care services include assistance, or support, with daily activities including getting dressed, taking a bath, or even using the bathroom. These types of services can be used at home, in the community, through assisted living organizations, or in a nursing home.

Choosing a Long Term Care Provider

There is a good chance you might never need long term care, but consider the fact that Medicare estimates nine million Americans over the age of 65 will need long term care in 2007. By 2020, the federal government believes that over 12 million men and women will need this kind of care.

Add to this information published by the US Department of Health and Human Services, which estimates that individuals reaching the age of 65 have a 40% chance of entering a nursing home. For those individuals entering a nursing home, roughly 10% will stay in that home for five or more years. These facts drive home the need to think carefully about how to choose a long term care provider.

Steps to Choosing Long Term Care

As just demonstrated, picking the right long term care provider is an important decision. When making plans for long term care, you need to think about some of your future health care needs, which is not always an easy thing to do. Some of the important questions you need to answer include:

What kind of care might I need in the future?
How might the kind of care I need change over time?
What are my choices when it comes to long term care providers as well as insurance companies?
How much can I afford to pay for my care?

By answering these questions, you should gain insight into the depth and breadth of the care, and insurance coverage, you might need in retirement.

Choosing Long Term Care Insurance

When shopping for long term care insurance, there are four additional factors to consider beyond the health questions just mentioned. These items include:

Protection from Inflation - since most long term care insurance provides for a fixed amount of daily coverage, you might want to consider buying a policy that offers you protection from inflation. Consensus among the experts indicates that the cost of this type of medical care coverage increases at annual rate of 5%.
Amount of Coverage - the cost of providing long term coverage can vary greatly from state to state, so it's important to understand where you might be living when you're age 80 or older. Recent research indicates the national average cost of long term care is nearly $70,000 per year, while in some metropolitan areas it can cost twice this amount.
Length of Coverage - you can usually find insurance that will protect you for anywhere from two years through a lifetime. Most individuals need from three to five years of coverage, and that policy length will save you the 40% premium that a lifetime policy charges.
Insurance Carrier's Financial Health - if you're buying long term care insurance, then you'll want to be sure that your insurance carrier will be around when you need them. To learn more about the financial health of companies, take a look at our article on Bond Ratings. There you'll find information that can help you figure out if your insurance carrier has the financial strength to still be around when you're retired.

Calculating Long Term Care Needs

If you're wondering how much long term care insurance you might need, then our Long Term Care Calculator can help. That free online tool allows you to enter an estimate of your daily long term care costs (in today's dollars), along with the number of years of coverage, existing funds you might have set aside, as well as the projected annual increase to LTC (long term care) costs.

The calculator will help you figure out what your long term care needs might be, as well as any gap you might have in this need. As is the case with all of our online tools, the long term care calculator comes complete with detailed instructions.

Recent Changes to LTC Law

Most long term care expenses are not covered by Medicare, but they are covered by Medicaid and that benefit comes at a cost. That's because Medicaid is a financial needs-based program. To qualify for benefits under that program, you need to pass an asset test, and possibly an income test as well. Passing these tests means most individuals would have to spend nearly all of their savings before they qualify for benefits.

Fortunately, the federal government now allows LTC policyholders that have exhausted their insurance benefits to receive help without using up all of their life savings.

Partnership for Long Term Care

Under the Partnership for Long Term Care program, if you buy a private LTC policy that is approved by your state and those insurance benefits run out, you will qualify for Medicaid and still be able to keep assets equal to the value of the insurance purchased.

For example, let's say you purchased a LTC policy approved by your state that provides you with $250,000 in long term care benefits. Under the Partnership for Long Term Care program you are allowed to retain $250,000 in assets and still qualify for Medicaid. Without such a program you might be required to spend nearly all of your assets before qualifying for Medicaid.

Additional Information on LTC Insurance

As of 2011, 30 states are participating in this program, with more states expected to have such a program up and running in the next several years. To find out if your state participates in this program, you can visit longtermcare.gov and look for information on State Partnership Long-Term Care Insurance Programs. You can also telephone the American Health Care Association at 202-842-4444, and they can help you figure out if a Partnership plan is currently offered in your state.

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