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(reprinted from Decor
and Style Magazine, May 2003)
 Protecting Your Choices:
the benefits of long-term care insurance
by Candace Bahr
When my grandmother became ill several years ago, it was my mother who took care of her. In her late 60s herself, mom put her own needs and the needs of her family aside to help my grandmother during the last difficult years of her life. When it finally became too much to bear, she made the gut-wrenching decision to admit her mother into a nursing home, where my grandmother eventually passed away at age 96.
It was around this time that my father was diagnosed with Parkinson's disease. He was able to take care of himself, with minor assistance from my mother, until 1998, only two years after her own mother had died. With only a short break in between, my mother went from caring for her elderly parent to taking care of her husband. As time passed, his health became so bad that she finally agreed they would both move into an assisted living facility in early 2000. Within a month, my father had a stroke and became completely unable to communicate or care for himself:
My mother, who is still in good health, was forced to admit him to a nursing home, so he could get the medical care he needs. He still resides there. She spends several hours with my father every day, helping to feed him and to keep his spirits up. The care at the nursing home is the best available (although our whole family agrees it is still lacking), and the annual cost is an astounding $85,000 a year. Although my father had a long-term care insurance policy purchased many years ago, it only covers $25,000 in annual expenses. As a result, the cost of his care is creating a financial drain on my parents' carefully tended portfolio. We did the best planning we could at the time, but we still ended up with disappointing results. That's why I'd like to share both my personal and professional experiences in hopes of helping you prepare for the future. I've learned long-term care is an issue that especially affects women, and must be dealt with head-on.
Factoring Care into Retirement
If you are planning for retirement and you do not take into account your personal care, you are missing a huge component of your financial plan. Two-thirds of informal caregivers are women, a 2000 study conducted by John Hancock Financial and the National Council on Aging reports, and women are more likely to leave their jobs to become a caregiver for a spouse or aging parent. Women also generally require more help themselves in their old age, because they live an average of seven years longer than men.
More than half of all Americans will need some sort of long-term care, either home care or institutional care, at some point in their lives, according to the Health Insurance Association of America. Without proper preparation, covering these costs for yourself or a loved one can undo decades of savings toward your retirement. With medical costs as high as they are, it's easy to burn through your entire nest egg in just a few short years. Fortunately, there are ways to protect yourself and your loved ones financially while still getting the best quality care available.
Contrary to popular belief, Medicare and private insurance are not likely to pick up the tab for long-term care expenses. Medicare only pays for 20 days of nursing home care, and only under limited circumstances. As such, only 8 percent of people meet the necessary requirements. What's more, if yon deplete your assets to the point that you qualify for Medicaid, the coverage will only pay for a nursing home, not home health care or assisted living. Your choice of facilities also may be significantly limited, forcing you or your loved ones to travel hundreds of miles to an approved nursing home.
"There's a great emotional toll in finding appropriate care for a family member who can no longer live independently," says Sheri Strange, a long-term care insurance broker in the North County area, who is considered an expert in the field. "Many Californians who worked and retired with comfortable incomes are forced to consider selling assets to fund private care or to qualify for publicly-funded care through Medi-Cal."
The best defense against such scenarios is to purchase long-term care insurance for yourself and your spouse, and to encourage your parents to do the same. Although the premiums on long-term care coverage can be steep -- the average annual tab is more than $1700 -- the policy could save you hundreds of thousands of dollars in the end. It's far better to factor the cost of long-term care insurance into your budget now, cutting back on small luxuries perhaps, to help ensure your financial security in the years ahead.
Although the terms and conditions vary from one policy to the next, most long-term care plans pay benefits if the insured is unable to perform two or more "activities of daily living," explains Strange, such as bathing, dressing, toileting, transferring, continence and eating. Plans will also cover subscribers who are cognitively impaired -- for example, afflicted with Alzheimer's or Parkinson's disease -- and require supervision. A key aspect of these policies is that they pay when care is delivered in a variety of settings, not just in a nursing home, which means that home-based care and assisted-living facilities are viable options.
When shopping for a long-term care policy, be sure to look at the following:
- Benefit Amount: how much the policy will pay daily
- Deductible & Elimination Period: most policies have a waiting period of 20 to 90 days before benefits become active
- Inflation: a compounded inflation rate of at least live percent per year on future expenses, such as nursing home care, is essential
- Benefit Period: the period of time your coverage will remain in effect once you start to draw benefits, and the maximum amount you can receive
- 10-Year Pre-Pay: this is a key option for business owners, since self-employed people, LLCs, S-corporations and Partnerships may now deduct a portion of premium paid for a qualified long-term care policy, and C-corporations may deduct 100 per cent of the premium
As an incentive for residents to purchase long-term care coverage, the state of California recently created The California Partnership for Long-Term Care, a program of the Department of Health Services, through which the state has partnered with six different long-term care insurance providers. The program is designed to increase the number of middle-income Californians who have quality, long-term care coverage that protects them from impoverishment. "People who buy LTC policies under this program are allowed to protect more of their assets from Medi-Cal spend-down rules than they could otherwise," says Sheri.
Because the issues can be very complex, I encourage you to explore the topic further.
Candace Bahr
is managing partner of Bahr Investment Group in Carlsbad. (Securities and financial planning offered through, Linsco Private Ledger a registered investment advisor member SIPC.) She is a financial consultant with more than twenty years of experience in the San Diego area and is the co-founder of the non-profit Women's Institute for Financial Education (WIFE.org).
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