General Discussion

The possibility of needing long term care due to an illness or physical disability is something most people would rather not think about. But as we age, the likelihood that we will need some type of assistance is very real.

Long-term care is different from the rest of your health care, and itís not typically covered under health insurance policies, HMO plans, Medicare or Medicare supplemental policies. Health care plans are designed to provide coverage when you receive care from a doctor or treatment in a hospital. Some may also cover nursing home care or home care - but typically, only on a short term or limited basis.

Long-term care includes personal care, such as help with bathing, eating or dressing that you require over a lengthy period. Thatís why it can be very expensive. Long-term care can range from simple assistance with activities in your own home or a residential care facility or it can mean highly skilled care in a nursing facility. The possibility of needing long-term care due to an illness or physical disability is something most people would rather not think about. But as we get older, and because we are living longer, the likelihood that we will need some kind of assistance is very real. Long-term care coverage will help you live your life with dignity and with independence.

Examination of the Risks/Costs

  1. Longevity : Longevity continues to increase and it cannot be underestimated. It is impossible to determine exactly how long you will live and if and how long you may need assistance.
  2. Average LTC Stay : Currently the average stay in an assisted living or nursing facility is approximately 2.5 years. However this number should be used with caution. Averages are just that. If you had one person stay in a nursing home for one month to recover from an injury and another stay for five years the average stay is 2.5 years. Since some beds are used for short term patients the average stay may be underestimated.
  3. Home Care : Home care is an important part of any long term care plan. Home care refers to care provided in your own home. Many prefer to stay in their own home as long as possible. Typically home care covers home health care, adult day care, personal care, home maker services, hospice and respite care.
  4. Costs: Long-term care can be very expensive. Nursing home costs in California average $190 a day in 2006 (or $69,350 per year). Of those who enter nursing homes, 55% will have a total lifetime use of at least one year, 24% will stay between one and five years, and 21% will have a total lifetime use of five years or more, (National Center for Policy Analysis, A Long-Term Solution to Medicaid Problems. November 17, 1995). This means that more than half the people who go into a nursing home will spend between $69,350 and $346,750 (in year 2006 dollars) and one person out of every five will spend even more, perhaps much more, than that. And you shouldnít forget that before most people enter a nursing home, they would have already struggled for years with the cost of long-term care in their own homes. The possibility of needing long-term care is something most of us would rather not think about. Yet, "More than 40% of those who turn 65 will spend some time in a nursing home..." (National Center for Policy Analysis, A Long-Term Solution to Medicaid Problems. November 17, 1995).
  5. Care Management: The CA Partnership Long Term Care insurance policies require a Care Management Provider Agency, approved by the State Department of Health Care Services and independent from the insurer, to provide care coordination for Partnership policyholders.
  6. Using a collaborative process, the care manager works with the policyholder, his or her family, and physician to complete a comprehensive assessment to determine the clientís needs and resources and develop a detailed Plan of Care individualized to meet those needs.

    • Plan of Care : In developing the Plan of Care, the care coordinator will consider the unique needs of the client and recommend alternatives for how those needs can best be met. It is likely that without the help of a care coordinator, a policyholder or family would have no idea of where to find someone to provide the necessary care. Partnership regulations require the care coordinator to consider how the policy benefits can help meet the policyholderís needs, and how the needs might also be met through other sources, perhaps through community services, or the clientís health coverage, etc. These other sourcescan help reduce the out-of-pocket expenses to the policyholder as well as help the policy benefits last as long as possible. The identification of other sources of care can be especially important for a person who has a policy designed to pay benefits for only one or two years. Furthermore, since the Partnership requires the care coordinator to live in and be familiar with the community in which the policyholder resides, he or she will have a good understanding of where the quality providers are.
    • Care Implementation and Monitoring: In addition to completing a comprehensive assessment and Plan of Care, the care coordinator can also contact the caregivers and arrange for them to be in the home to provide care at the required times, negotiate rates of payment, and monitor the quality of the services provided if desired by the policyholder.

  7. Benefit Amount. While the range of costs can be determined today the amount of benefit you require can be affected by several variables. One factor to consider is how much of the cost you would like to pay yourselves. In other words if you are confined to a assisted living facility or nursing home could you, or would you, use some of your income from social security, pension or the portfolio to pay for some of the costs. You may also be able to reduce expenses from your annual budget and thus use those assets to pay for some of the costs. The following is an example:

Cost of Care


Reduction in food


Reduction in Auto


Reduction in Entertainment


Reduction in Miscl


At risk amount

$ 71,000/year

All of these factors should be discussed to arrive at the amount of benefit that you would like to cover with insurance.

Long Term Care Solutions

There are several options or ways to tackle the risk of a long term care expense. The following is quick description of each method.

  1. Self Insure: We should always examine whether we can afford to pay for a long term care stay using the income from sources such as social security and pensions combined with investment portfolio income or capital depletion. The advantage of self insurance is obvious. If no care is required you have not spent money on insurance and thus more assets are available for your heirs.
  2. Long Term Care Insurance: Long term care insurance is what most individuals will obtain to reduce the risk of long term care costs. By obtaining the insurance we exchange the risk of an expensive long term care stay to an insurance company for the payment of premiums. Long term care insurance has improved greatly and in general the benefits are normally payable when you unable to perform 2 out of 8 ADLís (Activities of Daily Living). There are several options that you can add to policy but in general the most important is inflation protection which can be either simple or compounded. It is important to note that most policies today cover all levels of long term care including Adult Day Care, Respite Care, Assisted Living, or Skilled Nursing.
  3. Hybrid Products: Currently there are two types of hybrid products on the market. The most popular is a long term care policy tied to a life insurance policy. The other is a fixed annuity tied to a long term care policy. Typically some of these hybrid products are used for individuals that may not qualify for long term care insurance or if the cost is prohibitive.
  4. Progressive Care Communities: Today progressive care communities are becoming more popular as they have assisted living and some have skilled care located on site. Each of these communities arranges the costs somewhat differently. Most progressive care communities charge the resident a flat monthly fee that does not change significantly if long term care or assisted living care is required. However they can change with inflation. In many cases long term care insurance can be used to cover some of the cost once assistance is required.

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