Preparing for Long-Term Care

April 27, 2020 8:22 AM , Updated May 8, 2020 7:28 PM
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Words 'long-term care insurance' written on a piece of paper sitting on a desk next to a stethoscope

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Health insurance and health care spending are popular topics of conversation among Americans. Most households are eager to maintain the quality of coverage they enjoy well into their retirement years. But preparing for long-term care requires consideration and thoughtful preparation.

A long-term care (LTC) policy can help protect your nest egg while also giving you more choices about YOUR FUTURE. 

What is Long-Term Care?

Long-term care is the need for specialized care outside the parameters covered by ordinary health insurance. While sometimes it just means a longer hospital stay, long-term care encompasses a wide array of scenarios that may arise.

For example, a Long-term care Facility (LTCF) is a health care establishment with a more specialized focus. Residency at an LTCF may be necessary for patients who are rehabilitating from a severe injury, fighting a chronic illness, or otherwise in need of care that an ordinary hospital may not provide.

Consider Your Options

Often, family and friends provide long-term care for a season. However, this can be a burden on loved ones over time, and the need for assistance tends to increase with age.

Choosing to purchase long-term care insurance can be a way of protecting your loved ones while also making sure you’ll receive the level of care you require.

Many “self-insure” by default, simply because they haven’t made other arrangements. Those who self-insure may depend on their personal savings and investments to fund any needs.

Another approach is to consider purchasing LTC insurance, which can cover all levels of assistance from custodial care to in-home helpers. Federal employees have the option to carry LTC insurance into retirement through the Federal Long-Term Care Insurance Program (FLTCIP). This is an option worth exploring, though the cost of FLTCIP can be high.

Extended Care, Extended Coverage

In addition to LTC care, the scope of long-term care coverage can include home care and other specialized services such as visits with health care professionals, emergency alert devices, transportation, housekeeping, meals, and more.

It’s essential to determine whether the insurance you receive through your employer (or the coverage you’ve purchased) is designed to cover long-term care. In most cases, Medicare does not provide long-term care, as it falls outside their definition of “medical care.”

The good news is that there are ways to prepare for the event that you or your loved ones require LTC. These include purchasing a specific insurance policy and establishing a Health Savings Account (HSA).

An Approach For Every Person

Whether you are just beginning your retirement strategy or are nearing retirement, it’s vital to incorporate health care into the equation.

You may want to consider obtaining a particular insurance policy that specifically covers you in the event that you need extra care. Pre-existing conditions may disqualify you from purchasing such coverage, so it’s wise to think about it early.

It’s not necessarily a fun topic, but the advantages are clear: an LTC policy can help protect your nest egg, while also giving you more choices about where and how you receive the care you may need in the future.

Crucial Questions To Consider

What is the daily, weekly, and/or monthly benefit amount?

Policies often pay benefits by the day, week, or month. You may want to evaluate what long-term care facilities in your area are charging before committing to a policy. Long-term care costs vary on a state-by-state basis.

What is the maximum benefit amount?

Many policies limit the total benefit they’ll pay over the life of the contract. Some state the limit in years; others, in total dollar amount. This is an important question to consider.

What types of facilities are covered?

Long-term care policies can cover an array of options, including:

  • Nursing home care
  • Home health care
  • Respite care
  • Hospice care
  • Assisted living facilities
  • Other community facilities

Many LTC policies cover some combination of these. Be sure to look into what facilities are available to you when you’re considering a policy.

What is the elimination period?

Benefits don’t necessarily start upon entering long-term care. Most have an elimination period, a kind of “blackout date” period during which the insured is responsible for the cost of care. In many policies, elimination periods can range from zero to 100 days after nursing home entry or disability.

Does the policy offer inflation protection?

Adding inflation protection to a policy may increase its cost, but it could be important if long-term care services could potentially increase in price over time.

© 2020 Brandon Christy. All rights reserved. This article may not be reproduced without express written consent from Brandon Christy.

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About the Author

Brandon Christy, CPA, PFS, is the founder and president of Retirement Benefits Institute, Inc. He is an established leader in contracted federal retirement benefits education, and his company has trained over 10,000 federal employees to help them gain clarity and confidence in retirement.

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