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Weighing the need for long-term care insurance

The folks who fall between Medicaid coverage and

The folks who fall between Medicaid coverage and self-insurance are the ones who should be considering how to protect against a long-term illness that eats away at their financial health as well. Above, the short form for the new federal Affordable Care Act. Credit: AP

There's no denying it: Most of us are going to need some form of long-term health care during our golden years. And costs of such care are rising.

Genworth Financial recently released its long-term care Cost of Care Survey for 2013, and the results are sobering. The costs of home-care providers, adult day health care facilities, assisted-living facilities and nursing homes have been steadily rising over the past five years.

That being said, the cost increase varies depending on what type of service is necessary. For instance, in 2008 the median annual rate for a private nursing home room was $67,525; in 2013, it's $83,950 (though prices vary widely across the country). This increase reflects a 4.45 percent compound annual growth rate, more than twice the annual rate of inflation during the same time period.

However, the news is a little better if you don't need a facility. The national hourly median rate for a licensed home health aide rose by only 1 percent annually over the past five years, to $19. This slower rate of inflation is attributed to increased competition among agencies and the wider availability of unskilled workers during the recession.

Those are the numbers, but how likely is it that you will need care? According to the U.S. Department of Health and Human Services, about 70 percent of people over age 65 will require some type of long-term care (LTC) services during their lifetime, and more than 40 percent will need care in a nursing home. Of course, your personal health history may increase or decrease your chances of needing long-term care. (One surprising fact: If you live alone, you're more likely to need paid care than if you're married or single and living with a partner. Maybe should incorporate this detail into their sales and marketing materials.)

One of the big misconceptions about long-term care is that services are covered by Medicare. But in reality, Medicare addresses only short-term skilled services or rehabilitative care; it does not cover "custodial care," or assistance with activities of daily living. The only government-provided insurance that does provide long-term care coverage for this is Medicaid, but qualifying for it is a doozy.

If your total net worth is below a certain level (probably around $300,000), it makes sense to rely on Medicaid for future long-term care costs. However, Medicaid is a state-specific benefit, so you should visit the website for more information. On the other end of the spectrum, if you have more than $1.5 million, you can choose to "self-insure," where you tap into your assets to pay for care.

The folks who fall between Medicaid coverage and self-insurance are the ones who should be considering how to protect against a long-term illness that eats away at their financial health as well. These "LTC tweeners" should consider purchasing long-term care insurance.

The biggest problem with long-term care insurance is that it is expensive. It's hard to justify spending thousands of dollars a year on insurance that you may never need. But then again, do you kick yourself for buying auto insurance and not totaling your car?

Another hurdle is that it's been hard to find a highly rated insurance company in the long-term care business these days. Prudential Financial, MetLife and Unum have all decided to exit the individual long-term care insurance business. While these companies have said they will honor all existing contracts, which will be guaranteed renewable, they will no longer write new LTC policies.

Why are these companies leaving what would seem to be a highly profitable business? The answer is clear: Insurance companies are very good at pooling and insuring certain types of risks, like homeowners and drivers, but they are less confident about projecting how many people will need long-term care and how much that care will cost.

Unfortunately, the more insurance companies that exit the LTC business, the fewer options there are for consumers. As you shop for long-term care insurance providers, stick with the highly rated companies that have a proven track record of being in the business and not hiking premiums. Check out the American Association for Long-Term Care Insurance at for more information.

Getting old is hard enough as it is, but protecting yourself and your family from rising long-term care costs can make all the difference in the world.

Jill Schlesinger is editor-at-large for She welcomes emailed comments and questions.

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