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Long-Term Care Insurance: A 21st-Century Necessity?

By Patricia Lawrence, Human Resources Manager

Long-term care insurance is the hottest insurance to hit the benefits market in recent years, and it’s gaining momentum.

Though our lives are more precarious amid a world of terrorist threats, blackouts and snowstorms, people are still living longer. Despite this longevity, many must still cope with costly and ongoing health problems, which has prompted increasing interest in long-term care insurance.

What Is Long-Term Care?

Long-term care is assistance that is provided to people with chronic health conditions, physical disabilities or cognitive impairment. Although long-term care is generally used by the elderly, a young or middle-aged person who has been in an accident or suffered a debilitating illness could also require this type of care. Well-known actor Christopher Reeve, for example, best remembered for his role as Superman, sustained a horse-riding accident in the mid-90s that left him paralyzed from the neck down and dependent on long-term care for the rest of his life.

Long-Term Care Insurance

Long-term care insurance protects an individual against the high financial costs associated with serious accidents, chronic illnesses and disabilities that could last for an extended period of time. Long-term care insurance policies can provide for various types of coverage such as nursing home care, skilled nursing care, personal (custodial) care, respite care, hospice care and assisted living care.

Though some policyholders may initially buy it for peace of mind, others feel that long-term care insurance is a necessity in today’s world.

“Sixty percent of long-term care occurs before age 65,” said George Mandel, a member of the NYSSCPA’s Employee Benefits Committee.

A study by the U.S. Department of Health and Human Services also supports an increasing need for some form of long-term care insurance. The study found that individuals aged 65 and older have at least a 40 percent chance of entering a nursing home. Approximately 10 percent of this group will have to stay in a home for five years or longer.

This sort of care is astronomical. The August 2003 Metropolitan Market Survey of nursing homes and home care costs indicated that the daily average cost for a semi-private room in Manhattan is $333, with a private room running $392 (2004 rate). Because of its high cost, individuals and family members need to consider additional sources to finance long-term care. These could include personal assets, savings, Medicare and Medicaid.

Medicare Misnomer

Medicare provides limited assistance for long-term care. According to Mandel, Medicare only pays for long-term care for skilled nursing services when an individual is hospitalized for the first 20 days. From day 21 through 100, Medicare continues to pay for the skilled nursing services less $109 a day. The individual or family members would then be responsible for the full cost after 100 days.

Before You Buy

The NYSSCPA offers an array of benefits to its members, from auto insurance to life insurance. Long-term care insurance is another benefit that currently is being considered for Society members.

If you are thinking about long-term care insurance, there are many questions you should ask yourself first. What is the maximum amount of coverage that you can afford? How much will the premiums be? How will they be paid? Is it best to pay the premiums on an annual, biannual or quarterly basis? If you pay on an installment basis, what will be the additional interest? How is the policy adjusted for inflation? All these questions should be answered before purchasing a policy.

Finally, remember that the younger in life you buy long-term care insurance, the cheaper and easier it will be to get a policy.

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