What is Long-Term Care?
Long-term care refers to services and supports that assist individuals in performing daily activities. These Activities of Daily Living or ADLs are:
Generally, people will need help with ADLs when they acquire chronic illnesses, such as Alzheimer’s, or as a result of injury or disability. LTC allows them to live their lives as normally as possible, or help them function as they recover.
Other supports are also considered long-term care, including:
- Household chores
- Meal preparation
- Grocery shopping
- Caring for pets
- Medication management
Contrary to common misconception, LTC is not just for the elderly, and neither does it mean nursing home care. Around 40% of people who receive long-term care are actually between 18 to 64 years old. Moreover, majority of long-term care is actually provided at home by family members.
Why Do I Need to Plan for Long-Term Care?
In essence, planning for long-term care is necessary because:
- The chances of needing LTC are very high.
- The costs of long-term care services are difficult to afford.
According to the Department of Health and Human Services, 70% of Americans age 65 and above will require LTC services at some point in their lives. It’s very likely that you’ll need assistance later on, as the body becomes more susceptible to illnesses as we age.
Because long-term care is usually needed for an extended period of time, the cost of services is not easy to comfortably afford. In 2014, the average annual cost of a private room in a nursing home is $87,600. Without a plan, many families soon exhaust their life savings to pay for care.
Who Pays for Long-Term Care?
Quick answer: It’s either you or the government.
Long-term care can be funded in different ways. You can opt to rely on government programs or you can choose to pay on your own through self-insurance and other financial products.
Medicaid and Medicare are two government programs that provide financial assistance for the health care needs of Americans.
Medicare covers medically required skilled care following an injury or illness and stay in a nursing home for a maximum of 100 days. Generally, it doesn’t cover custodial care such as assistance in performing the Activities of Daily Living (ADL).
Medicaid, on the other hand, offers a wider coverage for long-term care than Medicare. However, you need to meet the program’s required asset level before you can be eligible for benefits. In some cases, people spend down their assets in order to qualify.
Self-insurance means to personally insure yourself against a financial risk such as long-term care. If you choose to self-insure, you need to set-up a separate account and build a pool of money for out-of-pocket payments for care-related expenses.
Long-Term Care Insurance
Long-term care insurance, as its name suggests, is a policy designed to pay for a person’s care-related expenses. It covers all levels of care needed and it can be custom-fitted according to a person’s needs and budget.
Does Health or Disability Insurance cover Long-Term Care?
Just like Medicare, health insurance has very limited coverage for long-term care. Typically, health insurance will only cover medically required skilled care following an illness, injury, or hospitalization. Coverage usually lasts for a limited period of time.
Health insurance has no coverage for custodial care. So, if you need extensive assistance in performing Activities of Daily Living (ADL) such as eating, dressing, and moving around the home, you will need to shoulder the expenses on your own or through another financial product.
Disability insurance, on the other hand, is a policy designed to provide income replacement should an injury, accident, or disability inhibits you from working. This policy has no coverage for long-term care and it doesn’t provide benefits for individuals who are 65 and older.
NEXT: LTC Statistics