Long-term care costs continue to climb much faster than the general rate of inflation. Although the primary defense against this astronomical expense has traditionally been long-term care insurance, the cost of this type of coverage has also increased disproportionately, and a growing number of insurers have discontinued their offerings in this area because of the high claims ratio.
Many consumers are actively seeking alternatives to this form of protection to reduce their costs while maintaining a plan to manage this contingency. (For more information, see Types of Long-Term Care. )
On the financial side
Traditional care policies are gradually starting to fall out of favor in the market, partly due to their cost as well as the fact that they were designed to use or lose products. If the policy owner doesn't need managed care, there's no refund for the thousands of dollars of premiums paid to them. These policies are quickly being supplanted by permanent life insurance policies that have accelerated benefit riders associated with them that can be used to specifically pay for critical, chronic or terminal illness or long-term care expenses. These vehicles solve this dilemma for policyholders and also provide other forms of protection and savings.
There are also annuities from commercial insurers that automatically pay out a larger monthly benefit to those who need help. Some contracts simply double or triple the amount the annuitant can access each month in the contract, while others pay an additional tax-free benefit from the insurer. Underwriting for these policies tends to be more forgiving than insurance policies, and the insured also has greater freedom over how the money is spent. If care is not required, the insured may keep and use all money from the contract for other purposes. However, there is usually a relatively high minimum amount for the initial purchase, z. B. $ 50.000, and the fees they pay are usually quite low. Other sources of funding may include a loan from a qualified plan or a deposit in other investments such as stock.
Of course, those who don't have the money to buy these items – or who are medically uninsurable – can opt for the Medicaid spending process. However, this entails many rules, some of which vary from one state to another. The applicant also typically has little choice as to the location and claim of care. (For more information, see: Why health care is so expensive in the U.S? )
Alternatives to conventional care
Those who don't have substantial liquid assets and are uninsurable still have some options.The class act is one of the provisions of Obamacare that allows taxpayers 18 and older to purchase long-term care insurance, even if they already have significant health problems. Both employers and employees must register for this program, and applicants must have worked for at least five years previously to be eligible for assistance.
Home health care is another option many families choose instead of paying for professional care. Of course, families have taken in and cared for elderly relatives since the dawn of civilization, but modern medical science has made this different than in the past. Family members may now need special training to provide more sophisticated care for seniors, and the cost to the caregiver and/or a spouse may be significantly higher than the mere cost associated with providing a room or two for the recipient.
Many caregivers lose a significant amount of money in lost income and salaries to be able to care for them at home. This economic effect should be carefully considered before making this decision. Some compensation may be available through the cash and counseling program offered by Medicaid in about 30 states, which pays family caregivers a limited wage for their services. (For related reading, see: A Quick Guide to Medicaid and Nursing Home Rules. )
The Veterans Administration also offers some forms of care for military veterans. The Aid and Attendance program can pay about $1, 100 to $2, 100 monthly to eligible single and married veterans, their spouses and surviving spouses. The veteran's single or joint income must fall below a certain threshold to qualify.
The Bottom Line
The long-term care market faces an uncertain future. It is impossible for most carriers to offer competitively priced coverage for an event that statistically has at least a 50% probability of occurring. However, there are still options for those who have some financial assets and those who do not. For more information on what you can do to help cover long-term care costs, visit the Medicaid website or contact your financial advisor. (For more information: long-term care considerations)