It’s a sad reality in senior living that the cost of long term care all too often depletes the entirety of a resident’s lifetime savings. The money they have worked their entire life to save, to set aside for future generations, is gone in a few years.
The average daily cost of a nursing home in the state of Washington is $244 a day, about $7320 a month. The cost of assisted living improves slightly, with average monthly rates of $3,251.
In the cases of early onset diseases, such as Alzheimer’s and dementia, a resident can come in to assisted care very young, and live in that setting for another 10, 15, 20 years. 20 years of care at $7,000 a month for Alzheimer’s care equals 1.68 million dollars. That is a significant amount of money!
Thankfully, there are ways to protect your assets from this quick and drastic spend down. Long Term Care (LTC) Insurance is one of the most common and effective methods.
LTC Insurance is health coverage that pays for senior care such as skilled nursing, home health, assisted living, respite, and hospice care. Each LTC policy is unique, which is why it is so important to fully understand your specific policy.
LTC Policies will have several main components, each one affecting both the cost and usefulness. These are all phrases and terms you should familiarize yourself with.
The policy will begin paying out for care as soon as the “Benefit Triggers” are reached. These triggers are different for every policy, but typically cover activities of daily living (ADL’s). ADL’s are things like bathing, dressing, eating, etc. Once a resident can no longer do one or more of these things on their own they may become eligible to receive LTC Insurance benefits.
Although the resident is now eligible, LTC benefits do not always immediately kick in. The elimination period must first be exhausted. Think of the elimination period like a deductible, except instead of a dollar threshold it is a time threshold. This period ranges from 0-180 days and during this initial period the resident or family will be required to pay for the care out of pocket.
Once the elimination period is over, the question remains, how much will LTC Insurance pay out. Each policy will pay either a daily or monthly maximum benefit. The average daily payout in the state of Washington is $160.
At this point the LTC benefits are flowing freely, but this does not mean it will be an everlasting stream. Most LTC policies will have a maximum benefit amount or period of time. There are some unlimited benefit policies out there still, but it is not typical. The average length of benefit coverage in Washington State is 4.8 years.
LTC Insurance is paid for by premiums, usually monthly payments, but there are lump sum policies that go so far as accepting one large upfront payment to qualify the recipient for future benefits. And while most policies do not require you to pay premiums once the benefits start, there are still some that do. Avoid these policies.
As a general rule, the older you are when you purchase the LTC policy, the more expensive your monthly premiums will be. In addition, the premium amount will take into account your current health condition and the policy payout guidelines. Here’s a breakdown by age group for average monthly premium amounts from 2008: Under 30: $134; 30-39: $245; 40-49: $476; 50-59: $837; 60-64: $1278; 65+: $1928.
These policies can get expensive very quickly which is why it’s important to remember that purchasing a LTC policy is not the right financial move for everyone. There are worksheets available to help you make this decision. Ask your insurance provider for one when you begin talking about LTC Insurance. Statewide Health Insurance Benefits Advisors (SHIBA) can be reached at 1-800-562-6900.
The part that can get frustrating for policy purchasers is the initial health condition assessment. These are done by telephone interview, on-site visits, and/or in consultation with your primary care physician.
I spoke to one Auburn resident who applied for policies for both himself and his wife. His wife was easily approved, however he was rejected based solely on a phone interview. Even after a written letter from his physician the insurance company would not reconsider. Now, many years later, his wife has been diagnosed with Alzheimer’s and he is still fit and extremely active, including mountain biking and skiing, with no health needs even looming. In his words, “Now I’m determined to beat them at their game by not needing it [LTC Insurance].”
There are a few other common pitfalls to watch out for. While many LTC policies do cover assisted living, some do not kick in until skilled nursing care is needed. In addition, even with a skilled nursing stay, some policies do not allow Medicare covered days to count towards the elimination period, meaning you will have Medicare co-insurance to pay during that stay, which can be as long as 100 days.
In addition to the WA Office of the Insurance Commissioner, you can find great resources through the National Association of Insurance Commissioners (www.naic.org), Washington State Health Insurance Assistance Programs (1-800-397-4422), and the Aging & Disability Services Administration (www.aasa.dshs.wa.gov).
