There are some aspects of the future that are pleasant to think about: retirement, free time, grandkids, and so on. And there are some aspects we tend to avoid. Among those conversations that seem to get put off in perpetuity is the one around long term care. Unfortunately, waiting until you need long term care to have that conversation can put you in a precarious spot, both financially and in terms of your care.
What Does Long Term Care Planning Involve?
Long term care is a specific kind of healthcare. In most cases, it applies to individuals who are no longer able to care for themselves. This can happen due to disease, injury, or even aging. When individuals are no longer able to perform the activities of daily living (bathing, dressing, eating, transferring, toileting, and continence) safely, they may require a variety of services.
These services may be performed in the home, in the community, or in specialized residential settings depending on the needs of the patient. Some people may simply need help completing specific tasks. Others may require constant care or supervision. And there is a whole spectrum of needs between those two poles. The costs of these services can be significant and unavoidable.
Options to Pay for Long Term Care Costs
Modern medicine keeps us alive longer, but not necessarily healthy. Long term care costs can be minor or sizable, and a long term care event can be quick or last years. Nobody knows. When considering options to pay long term care costs, these realities need to stay front and center.
An important first step is to estimate what your long term care costs could be. The CareScout Cost of Care online tool is an excellent resource to get started. Put in your location, choose to estimate costs by hourly, daily, monthly, or annually, and you’ll see estimated costs for in-home, assisted living, and nursing home locations.
Self-Funding
Self-funding long term care costs means what it says – you pay for long term care costs on your own. Many families take this route, and it can be a viable way to pay for care. We urge families considering self-funding to build a plan well in advance of when funds might be needed. A plan needs to estimate what costs could be and which funds to use.
Funds come from existing assets – investments, bank accounts, and the like. An important caveat is that the timing of when funds are needed isn’t predictable, and it can lead to unintended consequences. For example, if funds are needed from a tax-advantaged investment account, taxes will be triggered. If those funds are needed during a market downturn, it’s more of a climb to regain the losses.
Building a solid plan in advance is necessary. If a plan is built, then this can all be weathered. Unfortunately, we find that many families do not plan in advance, and their retirement funds haven’t accounted for unexpected costs that can be sizable and last for a while.
Publicly Funded Sources
At the federal level, Medicaid does cover long term care expenses. Medicaid only covers individuals who qualify, and to qualify, most of an individual’s assets must already be spent down. At the state level, Washington State launched its WA Cares Fund, the first state program of its kind, with a lifetime maximum benefit of $36,500. A handful of other states are at various stages of examining their own programs. We urge you to compare the maximum benefit with your estimated cost of care (see the CareScout Cost of Care description above). Unfortunately, you’ll see that, for Washington State, the maximum benefit covers a number of months, which will come up short for many.
Will Your Family Members Be Your Caretakers?
Many families who self-fund will attempt to minimize the costs of long term care by relying on family members to help out with care. There are some important factors to think through when trying to incorporate this into your long term care planning.
Long Term Financial Costs
One of the main reasons families start caregiving themselves is that hiring outside caregivers can get expensive, especially if the hours per day and per week add up. However, what we find many families don’t think about is that informal caregiving takes a significant amount of time and commitment.
On the part of the caregiver, this can mean long hours. As a result, adult caregivers often need to put their careers on hold. This can lead to work-life setbacks, lost wages, and lower bargaining power in future career endeavors.
Emotional Costs
In many cases, families will choose informal caregiving because they want to give something back to their loved ones. They want to show appreciation and support, as well as be a familiar and comforting presence during a difficult time. However, it’s important to consider the emotional impact on caregivers. Caregiving burnout impacts between 40-70% of adult caregivers due to the heavy emotional toll this occupation can take.
When caregiving, your needs are secondary. This can compound the emotional costs of caregiving.
Physical Toll
Caregivers are often on their feet for the vast majority of the day. They are also often responsible for assisting individuals with their own mobility, physically moving them from place to place if necessary. This can be physically demanding. And that can lead to physical strain and both acute and chronic injuries. These physical costs can lead to further emotional and financial stressors.
How Caretaking Stress Takes a Toll
Being a caregiver can be a thankless job, and can add a lot of stress to a person’s life, which can then lead to a decline in his or her own health and wellbeing.
How do you know if caregiving is taking a toll on you? Here are some signs:
- Feeling tired often.
- Weight changes.
- Acting short-tempered or angry frequently.
- Feeling worried or anxious often.
- Feeling overwhelmed or disorganized often.
- Isolating yourself from others—losing interest in social activities or hobbies you used to have.
- Sleeping a lot or being unable to sleep.
- Stomach pain and digestion issues.
- Drinking alcohol excessively.
- Taking drugs, including prescriptions.
For most families, this combination of factors makes informal caregiving untenable. And this makes it more important than ever to find more sustainable long term care solutions.
How Long Term Care Insurance Can Help
Long Term Care Insurance (LTCI) policies will typically activate when a certain number of specific criteria are met.
Many people have a certain idea about LTCI. They think they know what it looks like and what it offers. But it’s important to note that today’s LTCI options have come a long way in offering families customizability and options. For example:
- A Variety of Payout Options: Stand Alone Traditional carriers typically offer lifetime premium payments, but there are a few who offer a 10 pay option, and even less who offer a single pay plan.
- Hybrid plans offer a “best of both worlds approach:” Hybrid plans combine life insurance with a LTCI rider to cover clients no matter what happens. These policies offer a guaranteed payout (LTCI benefits to the policyholder or a death benefit to heirs if they never use their benefits).
- Hybrid plans also offer a wide variety of options: Hybrid plans are available in abundant options, giving clients a significant amount of flexibility and customizability. Plus, Hybrid premiums are guaranteed (they will never increase or change).
Newer, modern LTCI plans allow clients to be more selective and intentional about the insurance they receive and fold into their financial plans.
How Long Term Care Insurance Provides Financial Stability
Long Term Care Insurance (LTCI) is designed to provide peace of mind, ensuring that your financial, emotional, and social resources are protected in the event that you need long term care. There are several important ways in which LTCI does this, including the following.
LTCI Can Protect and Preserve Your Assets
You can never precisely predict when you’re going to need medical care or just how expensive it might be. The thing about medical costs, however, is that they aren’t really avoidable expenses. Whether you need in-home caregiving or a surgical operation, you’ll draw from what financial resources you have to get healthy again. Which means you could see your retirement or legacy funds diminish incredibly quickly.
Unless you have Long Term Care Insurance. Because LTCI will help cover your long term care costs, the drain on your savings or other financial resources will be considerably diminished.
You Have More Control Over Your Care
There are two things that happen when you include Long Term Care Insurance in with your estate planning:
- It signals to your adult children how you want to be cared for. You should have some discussions with your adult children about what long term care might look like for you (in-home assistance vs. a nursing home, for example).
- You’re more likely to get the quality of care you want: Because you will have dedicated resources that will help cover the costs of your long term care, you’ll have more options. This means you’ll be more likely to get the quality of care you desire–and your adult children won’t be forced into an in-home caregiver role that they weren’t expecting.
Long Term Care Insurance Yields Guaranteed Benefits
If you need care for a long period of time, and don’t have a LTCI policy, have you considered which assets you would liquidate first?
There are many asset classes that may increase or decrease in value. When you’re planning your legacy goals, you might be looking for ways to limit this volatility.
As you age, Long Term Care Insurance provides a bedrock and a foundation for your financial plans. That’s because most LTCI plans have predictable premiums and benefits, so you’ll be able to confidently plan into the future.
If you need to use your LTCI, you’ll receive guaranteed benefits. You can’t say the same for something like a 401k or a stock portfolio.
You Can Combine LTCI and Life Insurance
Many Long Term Care Insurance plans offer the ability to merge your plan with life insurance or annuity policy. This is commonly called a Hybrid Life/LTCI or Hybrid Annuity/LTCI plan.
Most people will need long term care at some point in their lives. But not everyone will. If you’re one of the lucky few who go through life without ever needing long term care, a hybrid plan means that your investment will still pay out. This means that no investment goes to waste. And that’s definitely something worth discussion in conjunction with estate planning conversations.
Arranging Caretaking Solutions Becomes Easier
When you or your loved ones have Long Term Care Insurance, you may have more caregiving options available to you when you need them. When the client becomes benefit eligible and meets the policy triggers, coverage for caregiving services is included, such as facility care or home health care. Your family will be better able to afford caregiving services without diminishing your financial resources.
While all policies cover facility and home health care provided by licensed and trained professionals, some plans can include informal caretaking solutions as well. When policyholders purchase a cash indemnity plan, they will simply receive a monthly cash benefit payout once their claim is approved. This can then be used to pay whomever is providing care, whether professional or informal caregivers. That means the policy can pay family members who are providing informal caretaking. This flexibility makes cash indemnity plans an exceptionally popular option for those seeking Long Term Care Insurance.
Common Questions and Objections to Long Term Care Insurance
Over 70% of people over the age of 65 will need long term care at some point. Long Term Care Insurance (LTCI) can help cushion them from a devastating financial blow. For families and financial planners alike, this makes conversations about LTCI absolutely critical to have. Because you never know when you’re going to need it!
But it can be difficult to know what you should talk about and where to start the conversation. It may be helpful to start by examining what pre-existing biases might be and whether they stand up to scrutiny. Consider the following:
- LTCI is too expensive: The expense of a Long Term Care Insurance plan can be somewhat tailored based on what you think you’ll need (and what your client can afford). Plus, LTCI can help your client handle rapidly rising inflation in the healthcare industry.
- LTCI isn’t worth it because people may never use it: In a way, we’re always happy when a client doesn’t use their Long Term Care Insurance. It means they didn’t need long term care! But that’s not the most common outcome. Even if you never make a claim, your policy provides protection and peace of mind.
- LTCI isn’t sophisticated enough for modern consumers: People have come to depend on an ever-diversifying array of financial products that seem absolutely tailored to their needs. Long Term Care Insurance has kept up with these trends: there are a wide variety of LTCI plans and plan types that can be tailored for clients–no matter that client’s lifestyle or needs. It’s all about finding the right plan for the right client.
Do You Still Need Long Term Care Insurance if You’re Single?
Nearly half of the United States adult population is single. It’s important that your Long Term Care Insurance match the realities of your support system, your financial health, and your lifestyle. These factors can all have a direct impact on your long term financial and physical wellness.
What’s Unique About Long Term Care Insurance for Single Seniors?
For single seniors, there are some critical ways that you should make sure your Long Term Care Insurance (LTCI) policy is tailored for your needs. This includes paying special attention to the following:
- Your personal support system: If you’re married and need long term care, your partner is usually the first one to get involved in the process. Your spouse may even be the one to file the claim. But if you’re single, that will not be the case. It’s important to understand the hierarchy that usually occurs. If you’re unpartnered, your children may be the first to get involved. If you have no children, this task may fall to a relative or trusted friend. The point is that many people will need help navigating this system when they require long term care. It’s important to know who will be getting involved on your behalf.
- Your professional advisory team: When you are partnered, you have a default support system. If you’re a single senior, however, you may not. This is important to take note of because many of those who need to access long term care will also require a support system. For unpartnered individuals, it’s a good idea to start growing this advisory team–and it will look different for everyone. Your advisory team could include an attorney, an accountant, a geriatric care manager or home healthcare company, or even friends and neighbors. The bigger and wider your support system, the more options you’ll often have.
- Communication: Married couples will often have some amount of default understanding regarding long term care and LTCI (and how it impacts their finances). That’s not the case with most other support groups. So it’s absolutely critical that you talk to your support group and close friends about what your LTCI policy looks like and what your wishes are for long term care.
- Income: Many partnered couples will have two incomes–which may drop down to one in the case of a long term care event. However, that’s not the case for single seniors. In the event that you cannot work because you need long term care, you will not have access to a partner’s continued regular income. This is something you’ll have to keep in mind when selecting a policy that meets your needs.
Some Policy Decisions to Consider
In terms of specific recommendations, unpartnered individuals may want to consider a cash indemnity policy. With this type of policy, the beneficiary (ie: the single senior) gets a cash payout without having to submit an invoice–though you will still need to submit claim forms. As with many other LTCI policies, in order to qualify for a cash indemnity policy activation, you need to meet 2 out of the 6 ADLs or be diagnosed with a severe cognitive impairment, such as Alzheimer’s or dementia.
Once that occurs, the cash paid out is usually the maximum benefit for the month. For example, if you need $5,000 of service but have $10,000 of benefits, the full $10,000 will be paid out. You can then use that for anything else you may need (for example, paying family members, providing for non-licensed caregivers, or taking care of other long term care needs). This makes things easier and provides you with a certain amount of flexibility. That means that your support team can take better care of you with less hassle and fewer hoops to jump through.
Resources
What should be clear is that long term care (and preparing for long term care) is a big job. And it can take an incredible toll to try to do it all on your own. Having these discussions and making these decisions on your own can be exceptionally challenging. But you don’t have to do it on your own. There are many resources that can help you and your family navigate the complex world of long term care and Long Term Care Insurance.
Geriatric Care Managers
Sometimes called Aging Life Care Specialists, Geriatric Care Managers can act as your individual guide to getting the care you or your loved one needs, including long term care. Geriatric Care Managers have the ability to perform assessments and coordinate care. This can include tasks such as identifying services, creating care plans, and even acting as a liaison with care providers.
Insurance generally doesn’t cover the cost of Geriatric Care Managers. Individuals and families should check with their health insurance plans and their LTCI policies to understand what’s covered and what you may be expected to pay for out of pocket. For many, Geriatric Care Managers are worth the expense, as they can help guide you through the long term care experience in a way that works for your needs and your financial realities. For Geriatric Care Managers we recommend in Illinois and nationally, go to our website here.
Elder Law Attorneys
When most people think about elder law, their minds first go to estate planning and will writing. But many seniors often have needs that extend beyond these areas, especially when it comes to long term care.
An Elder Law Attorney can help you navigate complex aspects of the legal system that apply to seniors, covering everything from securing Medicaid and other health benefit programs to power of attorney directives and planning for the future (especially in terms of planning for incapacity or vulnerability). Elder Law Attorneys can help you protect your future, your assets, and your health care wishes.
Local resources
There are many local and not-for-profit resources scattered throughout communities. Seeking out these resources can help families successfully navigate these conversations and decisions.
You Don’t Have to Navigate This Challenge Alone
Every situation will be different. And this guide can provide a useful starting point for having these conversations and making decisions about long term care. However, it may be worth it to talk to an expert. The experts at Gordon Associates, for example, have helped countless clients find effective, useful plans that fit their goals, their lifestyle, and their means.
To discuss your care options, contact us today to talk about your options!
To help determine if long-term care (LTC) insurance is right for you, we are offering a FREE informational guide. This is a comprehensive booklet that will answer many of your questions about tax breaks and incentives for LTCI for federal and state taxes.
To help determine if long-term care (LTC) insurance is right for you, we are offering a FREE informational guide. This is a comprehensive booklet that will answer many of your questions about LTC and assist you with your health care planning.