Solutions to the Problem of Funding Long-Term Care
May 25, 2020
An aging population, medical advances that extend life expectancy and soaring costs for long-term care are the principal drivers of a problem too many Americans don’t consider until it’s too late: paying for care that standard health insurance doesn’t cover.
Consider:
- Multiple studies show that 70% of Americans over the age of 65 will need long-term care (LTC) in their lifetime.
- As of February 2020, LTC, which is not covered by traditional Health Insurance, cost an average of $6,844 per month for a semi-private room in a nursing facility and $7,698 per month ($92,798 per year) for a private room. Given post-COVID inflation, those figures, from LongTermCare.gov, are certain to be higher today.
- Medicare is restricted in scope and duration.
- Medicaid can provide limited assistance with LTC, but only for individuals who are eligible and, even then, only if their income and measurable assets are below a specified level.
Yet a survey released in July of 2022 found that only one quarter of adults between the ages of 40 and 64 with annual household income between $75,000 and $150,000 have or are even considering funding reserved for long-term care. Forbes reported on the survey in a piece titled “Most Americans Are Unprepared For Long-Term Care Costs, New Research Shows.”
That’s a headline as apt as it is ominous.
“Everyone should be having conversations with loved ones about wishes and needs,” Tom Beauregard, the CEO of the home healthcare service that co-sponsored the survey, told Forbes. “And from these conversations they should then be either earmarking a significant portion personal savings for long-term care needs or they should be enrolling in lower-cost policies to cover at a minimum one year of long-term care needs.”
LTC Learning Opportunity
Funding long-term care is the subject of the next event in Alera Group’s Engage series of employee benefits-focused webinars: What’s Coming Next With Long-Term Care Coverage? During the June 15 webinar, we’ll discuss:
- Long-term care options and costs;
- Financing solutions, including Long-Term Care Insurance (LTCi) and linked benefits, such as long-term care riders on Life Insurance and annuity policies;
- Why offering long-term care coverage as a voluntary, or specialty, benefit is a smart choice for employers;
- Legislation states are enacting or considering to create their own publicly or privately financed Long-Term Care Insurance programs.
Joining me on our panel of Alera Group experts on long-term care coverage will be Regional Compliance Consultant Bob Bentley; Shane Johnson, Senior Partner at Perspective Financial Group; and Tina Santelli, our Vice President of Voluntary Benefits and Enrollment Solutions.
Employers who offer or are considering LTCi as a benefit will want to learn the latest about this evolving coverage. Individuals, especially those approaching or past age 50, should be interested as well. As those studies about long-term care show, most of us are going to need it.
Awareness and Affordability
Why do so few Americans have or plan to purchase some form of long-term care coverage? Many don’t realize how expensive long-term care can be. Others aren’t aware of the restrictions on Health Insurance, Medicare and Medicaid. Some aren’t aware that Long-Term Care Insurance even exists.
But for even the best-informed, the matter simply comes down to price, and Long-Term Care Insurance is one of the more expensive personal lines of coverage. According to data from the American Association for Long-Term Care Insurance, average annual rates in 2020 were $1,700 for a 55-year-old man and $2,675 for a woman of the same age (with differing actuarial tables accounting for the variation in premium).
That said, here’s something else to consider: Typically, Long-Term Care Insurance activates when an insured is no longer capable of independently performing two activities of daily living (ADLs). Most Long-Term Care Insurance carriers recognize six ADLs:
- Bathing
- Continence
- Dressing
- Eating
- Transferring (e.g., moving from chair to bed)
- Toileting.
When you think about the type of facility or in-home service you’d prefer to provide you with such assistance once necessary, or when you realize the burden on family members called on to assist in those daily activities, the cost of LTCi may seem more reasonable.
It is a lot for an individual or couple to consider, and it requires an informed decision. For employers, offering coverage of long-term care – as either a paid or voluntary benefit — shouldn’t be nearly as difficult. Most employees surely would appreciate it.
We’ll discuss it further on June 15. I hope you’ll join us.
About the Author
Karin Landry
Managing Partner
Spring Consulting Group, An Alera Group Company
Karin Landry has more than 25 years’ experience in the insurance, healthcare, risk financing, retirement and benefits industries, and holds eight insurance patents in her name. In the 18 years since she co-founded Spring Consulting Group, she has helped employers of all sizes and across a myriad of industries. She holds the following the professional designations of ACI, CEBS, CLTC and GBA, and is a licensed broker in most states. She received a B.S.B.A from Babson College and pursued graduate studies in finance at Northeastern University.
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