November is long-term care awareness month. That’s probably as exciting for you as this year’s Croatian backgammon championship. So why on earth should you care?
First, you should care because of Mira (not her real name). Mira is 48, divorced, and has two young sons. She recently started the financial planning process with me, but before we had finished she was diagnosed with ALS. You may be familiar with ALS, which is sometimes called Lou Gehrig’s disease: it’s a degenerative disease which affects the nerves of a person’s brain and spinal cord. It results in the progressive loss of motor control, meaning that people with ALS can lose the ability to speak, eat, move and even breathe.
We were too late to get long-term care insurance coverage for Mira, and now she would not qualify at any price. The good news is that Mira has a lot of support from friends and family, and she has some resources available through her employment at a school. But her story underscores how important it is to take care of this issue NOW, not next year or after you turn 50 or when you get that raise. Some products do have a minimum age of 40, but others have no minimum at all.
The second reason you should care is that you’re likely to be affected: if you make it to age 65, you have a 70% chance of needing some kind of long-term care services. And 40% of the people who are currently receiving long-term care services are UNDER age 65 (both statistics are from www.lifehappens.org).
What ARE long-term care services? This is the kind of help you need if you have a chronic illness or some other kind of injury or disability that has a long recovery period…or that you can’t recover from at all. So imagine the fallout from a stroke, cancer, Alzheimer’s, or even a serious car crash. You could be left needing care for months or even years, whether it’s just help doing the grocery shopping or round-the-clock nursing services.
But doesn’t Social Security Disability, my company’s long-term disability policy, Medicare, or health insurance pay for this kind of care? The short answer is no. You may be “lucky” enough to qualify for Social Security Disability payments, but even if you qualify for the maximum you would receive just $2,861 per month in 2019 (Source: www.ssa.gov). Keep in mind that your long-term illness means you probably can’t work, so how far will that $2,861 go every month? That may not even cover your mortgage.
Your long-term disability policy will pay if you’re hurt of sick for more than 90 days, but this coverage ends when you retire (or reach some maximum age like 65). And it only reimburses you for part of your wages; in all likelihood it won’t be enough. Health insurance will pay for your doctors, but if you need help with errands or cleaning, or if you need assisted living or nursing home care, it will not. Medicare will cover some long-term care services, but only after you’ve been in the hospital for three days, and then only for a short period of time (up to 100 days).
And long-term care services are very expensive. A nursing home will cost you over $100k per year in Washington and California, just to give you an idea. Just getting help at home will cost you more than $50k a year in Washington and California (Source: www.lifehappens.org). You can see how even a few months of long-term care can consume a lot of assets, but imagine having Alzheimer’s for six years or ALS for five years. Not many people can afford that level of care for an extended period of time.
So what do I do? Aren’t long-term care policies really expensive? And I heard that they don’t pay out, anyway, and they hardly cover anything. Why bother?
The cost of a policy depends on your health and age, but it’s true that it’s not cheap. It will probably run you in the thousands of dollars each year, depending on how long you want to spread out your payments. These days, there are flexible ways to pay for long-term care, and a wide variety of options for coverage.
It is also true that there were some issues with the coverage in certain old, traditional long-term care policies. It may have also been more difficult to qualify for benefits. So much has changed since then, but the fear and uncertainty are still out there. You may even have heard horror stories from your own friends or family members. But nowadays, qualifying for benefits can be as simple as having a doctor’s note.
Please don’t let the misinformation and fears stop you from finding out what you need and how you might pay for it. Just get informed!