Separating Long Term Care Insurance
Myths From Realities
By Kenneth Schulman, CLTC

Parents and their adult children can never begin too early to think about their families’ potential needs for care in their “golden” years, and there’s no better time than November to begin that discussion. Why November? November is National Alzheimer’s Month, National Family Caregivers Month, National Hospice Month, and National Home Health Care Month. All of these awareness-building efforts   underscore the growing number of Americans who need or will need long-term care:

  • National Alzheimer’s Month recognizes the progress being made against Alzheimer’s disease and demonstrates understanding and support for the individuals with the disease, as well as their families and friends. The Alzheimer’s Association says 4.5 million Americans have the disease, and up to 16 million are expected to be diagnosed with it by 2050. As Alzheimer’s becomes more prevalent, more people, including spouses and family members, will become caregivers. (Archives of Neurology August 2003).

  • National Hospice Month and National Home Health Care Month  recognize the dedicated professionals and volunteers who provide hospice and home health care, emphasizing the importance of respecting and honoring life in all of its seasons. 

  • National Family Caregivers Month recognizes that approximately 47 million baby boomers in North America are or will be facing the role of caregiver to a parent, relative or elderly friend over the next decade. At the same time, countless thousands of seniors will face the dilemma of caring for a chronically ill spouse. 

As a certified long-term care specialist, husband, father, and member of the Alzheimer’s Association’s South Florida chapter, I’ve experienced the impact the need for long-term care can have on families and caregivers. Each day that I meet with people to help them protect their future, I am reminded of how my wife’s grandparents and extended family were affected by Alzheimer’s. That’s why I’ve decided to focus my career on educating people about their long-term care needs and protecting their future.

During the past 19 years, I’ve found that the majority of people quickly understand the value of retirement planning and are able to calculate their life insurance needs. Yet, the concept of long-term care insurance protection is more challenging, since people can’t predict when the need for long-term care will arise, how long it will be needed, and what the most suitable care will be. By breaking the review process into manageable parts, I’ve found it easier to gain a better understanding of the emotional and objective aspects of the decision process and overcome some of the myths.

It’s An Emotional Decision

Several emotions drive the decision to investigate long-term care planning. Understanding these underlying emotional forces help when it’s time to guide decision-making thought processes. When meeting with clients, the first conversation point is a reality check: a discussion of family members or close friends who have required long-term care. I’ve found that everybody knows somebody close to them or has a close personal friend who has senile dementia, Alzheimer’s or another debilitating ailment. As we all get older and live longer, this occurrence is more commonplace than ever before.

I try to help people realize that long-term care planning and insurance protection is a way for a family to stay focused on the emotional needs of the family member who needs care instead of worrying about a financial burden.

Plans Made Today Will Have a Broad Impact on the Future, Family and Workplace. According to the US Census Bureau (2002), by 2020, the 65 years and older segment is projected to exceed 53 million. This trend indicates an ever-increasing reality that more people will need care than the health care system will be able accommodate.

Well-intentioned families are taking the brunt of the care demands upon themselves – or at least delegating it to one member. In fact, a 2004 “Caregiving in the U.S.” study by the National Alliance for Caregiving and AARP, reported that an estimated 44.4 million American caregivers age 18 and older provide unpaid care to an adult age 18 or older. Almost six in 10 (59 percent) of these caregivers either work or have worked while providing care. And 62 percent have had to make some adjustments to their work life, from reporting late to work to giving up work entirely.

The impact of long-term illnesses and the stresses they place on families is difficult to measure in the workplace, but studies in recent years have also shown that U.S. employers lose significant dollars in productivity each year in tardiness, absenteeism and “presenteeism,” when employees show up for work but are too distracted by the responsibilities and issues of caring for a sick family member to perform well.

Overcoming the Myths

A large part of my role when meeting with families is to help them understand the important role families and long-term care insurance can play in a parent or loved one’s future. For every truth associated with long-term care insurance, there are 10 myths. Here are some of the top myths that should be addressed in long-term care planning:

Most people can pay for their own care
Many people think they can liquidate taxable or tax-deferred assets, including retirement plans or annuities, to pay for long-term care costs. The buzz surrounding reverse mortgages has also given momentum to the concept of paying for care instead of having a policy. As with all financial decisions, you should first consult a trusted financial professional and a tax advisor to determine the tax implications and the recommended sequence for liquidation before doing so.

Long-term care insurance is only for nursing home care  
When most people think of long-term care, they think of nursing homes. However, over 80 percent of persons receiving long-term care are in home- and community-based settings, not in nursing homes, according to “Long-Term Care: An Overview.” (Testimony before Senate Committee on Finance, March 27, 2001, statement of Carol O’Shaughnessy, Specialist in Social Legislation, Congressional Research Service.)

All long-term care insurance is the same
Actually, many policies offer various options, and all policies are not created equally.  When making a direct comparison from one policy to another, keep in mind that five key elements of any policy contribute to price and quality: the financial strength of the company underwriting the policy, the daily benefit, benefit period, deductible, and inflation protection:

  • Financial Strength Ratings:  Be sure to weigh the reputation and financial strength of a company in the decision-making process, so families have a sense of confidence, as high ratings are an indication that the insurance company will be able to pay any future claims against the obligations they have outstanding. 

  • Daily Benefit: Understanding the current cost of care in the area is very important in helping to make a decision as to what daily benefit amount is needed for care, and which policies can help meet that need.

  • Benefit Period: The length of time payments will be received from the insurance company, once care is needed, is difficult to predetermine, so many opt for policies with lifetime or unlimited benefits. Many policies often come with shorter benefit period options as well, which is a good upfront cost-saving measure from an annual premium perspective.

  • Elimination Period or Deductible: The number of days that policy holders will be responsible for paying for their care before the policy coverage kicks in is an another important factor.  The amount of time one can afford to pay for care or to make other arrangements is critical in helping determine the policy elimination period.

  • Inflation Protection: In a May 2003 report, the American Health Care Association estimated the average cost of a nursing home stay at $50,000 per year, or about $137 a day. In Florida, the exact percentage of inflation cannot be calculated due to the unpredictability of how market factors will impact the cost in future years. By adding inflation protection, people can help ensure they have adequate benefits in the future.

The government is there for people who need long-term care
Don’t count on it entirely.  Many think they can rely on Medicare or Medicaid, but don’t realize that Medicare covers only a limited amount of long-term care services, while Medicaid covers some long-term care services – primarily care in a nursing home – for people who have limited income and assets. 

Thinking long-term as caregivers and caregiver supporters, and doing our part to raise awareness, are strong initial steps in eliminating the myths about long-term care. Preparing well in advance to meet our own needs and those of our loved ones should undoubtedly be our first step.


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