Long-Term Care Insurance Gets More Expensive
As more Americans reach the age where they need long-term care, and nursing-home costs continue to rise, long-term care insurers are raising their rates dramatically for both new coverage and current policyholders. The result, according to Money magazine, is that many people who need long-term care insurance can’t afford it. Here’s a look at what’s driving rate increases, how to decide on long-term care coverage, and other ways to pay for care.
Why long-term care insurance premiums are going up
Demographics and economics are creating a perfect storm for long-term care insurers. People live longer than ever, often with complex health problems like dementia and diabetes that are expensive to manage, so insurers are paying out much more than they planned. (Money reports that nursing home care can now exceed $90,000 per year.) At the same time, US News & World report notes that fewer people are buying new long-term care insurance policies, so there are fewer new premiums coming in. Insurers can lose money or raise rates for current policyholders.
The choice for policyholders: less coverage or higher rates
As a result, people who already own long-term care policies face a simple but frustrating set of choices, too.
They can pay much higher premiums to maintain the same level of coverage, which can skew their budgets for other things, like household expenses.
They can reduce their long-term care coverage to make the new premiums more affordable, although that raises the question of where the money will come from to cover the larger out-of-pocket portion of their future long-term care costs.
Or they can stop paying for their long-term care policy. For most policyholders, this is the worst option, because it eliminates long-term care coverage and wastes the money already spent on premiums. Dropping your existing coverage and looking for a cheaper new policy won’t work, either. Kiplinger reports that new policies are more costly than ever, even for younger applicants.
Other options for funding long-term care
If you don’t have a long-term care policy already and can’t afford to purchase one, it’s a good idea to understand your other options now in case you need costly long-term care later.
Medicaid can cover long-term care costs as long as your assets and income are below very low limits. Each state sets its own Medicaid eligibility thresholds, and in most cases, your home (if you own one) will be sold after your death to reimburse Medicaid for your expenses.
If you own your home but don’t qualify for Medicaid due to your assets or income, a reverse mortgage can free up equity to pay for long-term care without selling your home–useful if you need long-term care but your spouse still lives in the home. The lender sells the home to settle the loan after you and your spouse have died or moved out.
Selling your home and moving to a long-term care community is the simplest way to pay for care if you don’t qualify for Medicaid and don’t have other family members living in your home. If you need cash before your home sells, a bridge loan can tide you over and fund your care. Bridge loans are paid back from the proceeds of your home sale.
We’ve got more information on long-term care insurance decision-making and senior real estate resources at SeniorAdvisor.com.
Casey Kelly-Barton
Casey Kelly-Barton is an Austin-based freelance writer whose childhood was made awesome by her grandmothers, great-grandmother, great-aunts and -uncles, and their friends.
1 Comment
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I advise everyone to be very careful with the plan you pick for your longterm care insurance. My in-laws have been paying for 25 years on their longterm care, they have paid about $250,000 total in annual payments each. Last year they each had $452,000 in insurance coverage and my mother-in-law decided she wanted to die at home, so we got caretakers but it took so many back and forth correspondence and phone calls to find out they would only cover $250 a day. She ended up using only $16,000 of her $452,000 coverage that she paid $250,000 for before she died. She just lost the rest. My father-in-law has the same identical long term plan and has just gone into a nursing home. The cost is $383 a day, but he is only eligible for $300 a day coverage so it is costing him out of pocket $83 a day or $2573 a month or $30,876 a year out of pocket even with the coverage. And to top it off, he has to pay the nursing home the whole monthly amount out of his own money, and after he proves to the insurance company he paid for the months bill at the nursing home, the long term care will pay the $300 a day or $9300 per month back to him. And they are very slow in paying claims, so we have to keep two months worth of nursing home coverage in my father-in-laws bank account because the long term care company is so slow in reimbursing him. He also pays $6444 a year for his long term care insurance. He is 91 and not in great health so I doubt he will ever get his worth of coverage. So, people, read your contract very, very carefully and ask all kinds of questions or you will be royally ripped like this. They thought they were totally covered and had no worries. ha.
