Facts about Long-term Care (LTC) Planning
Baby boomers started turning 65 in 2011 and the number of senior citizens will increase dramatically during the 2010 to 2030 period. The senior citizen population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million. Between 2000 and 2040 the number of older adults with disabilities will more than double, increasing from about 10 million to 21 million. By 2050, the number of individuals using paid long-term care
services in any setting (e.g., at home, residential care such as assisted living, or skilled nursing facilities) will likely double from the 13 million using services in 2000, to 27 million people. This estimate is influenced by growth in the population of senior citizens in need of care.
People generally think there are four ways to pay for long-term care: Medicare; Medicaid, out of pocket, or private long-term care insurance. Those who are thinking of relying on Medicare or Medicaid to provide long-term care
services need to be well informed about the advantages and limitations of these programs. Medicare may pay up to 100 days of care in a skilled nursing facility per benefit period- 100% for the first 20 days (after a three-day hospital stay, provided skilled care is needed). Then, for days 21-100, Medicare requires a co-payment. Medicaid generally pays for certain health services and nursing home care for those with low incomes and limited resources.
Without private insurance or public program coverage, the high cost of long-term care is unaffordable for most Americans. According to Genworth Financial 2012 Cost of Care Study the average cost of a private room nursing
home stay in 2012 was $82,125 per year in Virginia. The base rate for assisted living facilities averaged $41,775 per year in 2012, and adult day services averaged $55 per day in the Commonwealth. During the same period, hourly home care agency rates averaged $18 for a licensed home health aide.
The market for private Long-Term Care Insurance (LTCI) developed as an alternative to public program coverage (Medicare and Medicaid) or direct payments (self-insure) for services, but LTCI is underutilized. A 65 year old
female has a 2.6% chance of a major house fire, 18% chance of a severe car accident, and/or a 72% chance of needing some kind of long term care in her lifetime. The majority of Americans do not think twice about purchasing auto and home insurance, but only 8 million Americans currently own Long-Term Care Insurance.
Facts about Traditional (Standard) Long-Term Care Insurance (LTCI)
Long-Term Care Insurance (LTCI) helps provide for the cost of long-term care beyond a predetermined period. LTCI covers care generally not covered by health insurance, Medicare, or Medicaid. Individuals who require long-term care are generally not sick in the traditional sense, but instead, have a severe cognitive impairment or are unable to perform at least 2 of the 6 basic activities of daily living (ADLs): eating, bathing, getting dressed, using the
restroom, transferring moving in and out of bed/chair, and continence- controlling ones bowel/bladder.
The American Association for Long-Term Care Insurance, 2012 LTCi Sourcebook, research found that over 8.2 million Americans are protected with long-term care insurance and 337,000 Americans applied and obtained long-term care insurance coverage in 2011. Three out of every four individuals that applied for LTCI in 2011 were between 45 and 65 years old with over half of them applying when they were 55 to 64 years old.
The LTCi Sourcebook also found that over 200,000 individuals received long-term care insurance benefits in 2011 with those claims being paid totaling over 6.6 billion. Â 89.6% of the new claims opened in 2011 were Americans over the age of 70 with 65.5% of them over 80 years old. In home care accounted for 56.5% of the new claims while nursing home care accounted for 31%, and assisted living claims accounted for 19%.
Are Long-Term Care Insurance Premiums Deductible?
In 2013, LTCI premiums are tax-deductible up to a certain amount that is determined by the insured attained age on December 31, 2013 using the following table:
$360: 40 years old or under
$680: 41 to 50 years old
$1,360: 51 to 60 years old
$3,640: 61 to 70 years old
$4,550: 71 years old or older
Current Landscape of the Long-Term Care Insurance Marketplace
As the senior citizen population grows so does the rapidly increasing need for long-term care; even with this increased demand in the marketplace to sell their products the companies that offer traditional LTCI are shrinking.
Since 2010, insurance giants Unum and Met Life have pulled out of the marketplace entirely while Prudential has stopped offering policies to individuals and now they only sell group polices. There are roughly 15 insurance
companies offering standard (traditional) long-term care insurance with the majority of the new policies being written by Genworth, John Hancock, MassMutual, Mutual of Omaha, New York Life, Northwestern Mutual, and