For the 20 plus years that I've been working as a financial advisor, preparing for the long term has been my mantra. Max out retirement plans, pay down debt, create an emergency fund, create or update legal documents like wills and medical directives, purchase life and long term care insurance if possible.
The topic of insurance is an integral part of any long term plan. Life insurance is pretty easy to come by for those who work for a company that offers benefits. Life insurance outside of an employers benefits plan is generally affordable and straightforward. Long term care insurance is a different story. Long term care insurance may be the single most important protection that you can have for yourself, your spouse and your loved ones. Unfortunately, long term care insurance can be very expensive and not always easy to acquire.
When talking about long term care, activities of daily living are the focus. Activities of daily living (ADL's) include bathing, dressing and feeding yourself and transferring (moving from the bed to the bathroom, for example). In cases where a chronic illness or an injury cause a loss of ADL's we may need hospitalization, rehab and/or skilled nursing care either at home or in an assisted living facility or nursing home. Many of us might assume that Medicare will be there for us the whole way. Unfortunately that's not the case. Medicare and Medicare Advantage will pay for the cost of skilled nursing care for a limited time IF the care is for the recovery from an illness or injury and IF it is preceded by a hospital stay of at least three days. Here's a real life example that hits way too close to home. My father took a fall three weeks ago. He was hospitalized for five days and subsequently sent to a rehab facility. Once he is discharged from rehab he will move on to nursing care indefinitely. Medicare covers 100% of the hospital and rehab stay up to 20 days. For the next 80 days Medicare pays 80% of the cost. However, once my father is moved to nursing care, Medicare pays exactly $0. Private health insurance also covers $0 for nursing home stays. The cost of my father's care in a nursing home that's part of a retirement community in the Baltimore Maryland area is $432 per day. That's $12,960 per month and $155,520 per year.
According to Senioradvice.com and data published by Medicare.gov, the average cost of a nursing home stay in Maryland is $98,368 per year with costs ranging from $4,950 to $18,840 per month. The national average cost per month for all states is about $6,360. Sobering. As our population ages, the number of people needing long term care is on the rise. On average, 52 percent of people who turn 65 today will develop a severe disability that will require long term care at some point. Women are even more at risk because we tend to live longer than men. 58% of women age 65 and over will need long term care. Long term care costs are not covered by Medicare or any secondary health insurance policies you might have. Only long term care insurance can help protect you and your assets.
When I first started working as a financial advisor back in the 90's (holy cow), over 100 insurance carriers offered long term care insurance. Today, only about a dozen insurers offer this coverage. Low interest rates and the 2007-2009 economic downturn caused most carriers to pull out of the business. Luckily the carriers that do offer long term care insurance are reputable. Genworth, New York Life, Mass Mutual, Northwestern Mutual and Mutual of Omaha are a few of the insurance carriers that still offer long term care insurance.
Long term care insurance can be very expensive, sometimes prohibitively so. It's also not an insurance that everyone needs. If you have significant assets and can afford to pay for a nursing home stay, for example, than long term care insurance is unnecessary. For many of us, a long term care stay costing $155,520 a year (using my father's example) could decimate a retirement nest egg and potentially leave a spouse with financial hardship. In a case like this, long term care insurance may be something to consider. Long term care insurance is a tool we can use to protect your assets and to give you some choices when it comes to the quality of care you receive if that need arises.
I hope this blog doesn't come across as a "sales pitch." That's not my intention at all. For those of us who do not have long term care insurance, I think it's an important part of the conversation when we discuss planning for the future. As I roll through my 50's and approach age 55, the "sweet spot" to purchase long term care insurance, it has been on my mind. My father's recent health issues and his imminent move into nursing care reinforces my own need to get long term care insurance coverage. You might ask why my father doesn't have long term care insurance....we tried. My parents were denied coverage when we tried to get it for them in their 60's. There were healthy with no chronic illnesses however the carriers didn't like arthritic hands. Too much risk.
We have a Zoom meeting coming up in a few days to discuss cyber security. Since it doesn't look like large gatherings will be in our immediate future I wonder if another Zoom meeting to discuss the pros and cons of long term care insurance might be of interest? If this is a topic that's of interest to you, please let us know and we'll put a date on the calendar to meet.
Johanna