Long-Term Care: Costs, Insurance and Reform

February 4, 2020

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By Jeff Brandt, MSW ’20, and the J. Benjamin Miller Masters Research Fellow in Aging; Recipient of the 2020 Distinguished Student Award for Social Work Leaders in Healthcare

American consumers tend to hold some misconceptions when it comes to long-term care.

Think Medicare will cover the cost of a nursing home? Think again. Each year, thousands of families stumble into the unwelcome discovery that long-term care (LTC) is generally an out-of-pocket expense. It’s not uncommon for LTC consumers to deplete their bank accounts paying for care before Uncle Sam finally picks up the tab under Medicaid.

Think you won’t need LTC? Odds are good that if you live long enough, you’ll need it. The Missouri Department of Insurance estimates that 70% of older adults will require some form of LTC at some point.

Want to know what it’ll cost? Brace yourself, because LTC isn’t cheap. Genworth.com reports that for St. Louis area residents, 365 days in a semi-private nursing home room will cost more than $63,000, while a year in assisted living costs $42,000, and a home health aide working 44 hours per week will cost more than $51,000. And lest you think you could stretch your savings a little farther with a move out-of-state, compared to much of the country, St. Louisans are getting a bargain. The national average for nursing home cost tops $89,000 for a semi-private room or $100,000 for a private room.

Fortunately, Long-Term Care Insurance can help.

Long-Term Care Insurance (LTCI) is a private insurance policy consumers can purchase to help pay for LTC services. Depending on the policy, LTCI can contribute toward the cost of home health aides, nursing homes, assisted living, skilled nursing, or adult day care. The price depends on the consumer’s age at the time of purchasing the policy, the dollar amount of daily coverage and total coverage, and the duration of coverage.

Yet LTCI can be a hard sell for families on a budget. As of 2015, only 10% of Americans had some type of private insurance for LTC. LongTermCare.gov calculates that the average policy cost $2,207 per year in 2007. The “average” policy covered 4.8 years of benefits for a daily benefit amount of $160. Hypothetically, a 60-year-old locked into the 2007 price who pays into the policy for 20 years before moving to a nursing home in 2027 will have invested $44,140 in LTCI.

While $44k amounts to less than the cost of a year in a nursing home, it’s still a pretty penny, especially given the rising costs of health care, housing, and consumer goods—and this doesn’t take into account the possibility that policy premiums may increase over time. As with any insurance, there’s the chance you won’t end up using it, or the risk that insurers will find a loophole to deny coverage. Consumers shopping for LTCI coverage are advised to ask insurance companies for their history of premium increases, to clarify what exactly their policy will cover, and to confirm the elimination period, i.e. the amount of time you must pay out of pocket before insurance kicks in.

There’s no easy solution for LTC consumers. Whether you pay expensive insurance premiums now or expensive LTC room rates later, you’re in for some sticker shock.

So what should you do? Other than speaking with a financial advisor who can review your specific situation, you can help by talking about LTC in your community. Speak to your local, state and national representatives, and tell them we need LTC coverage under Medicare. Despite the fact that it affects all of us, the outrageous out-of-pocket cost of LTC is barely discussed on the national stage. LTC should not remain a mere afterthought in the national conversation about healthcare reform.

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