How to prepare for long-term care

J. Brendan Ryan is an East Walnut Hills-based insurance agent. Reach him at jbryanclu@aol.com or 513-221-1454.

At the risk of causing my readers factoid fatigue, here is some data about aging and long-term care that should help readers focus on the problem and ideally lead them to addressing it:

• We are living longer.  According to the Kaiser Family Foundation, by the year 2050 there will be four times as many people in their 90s and above as there are today.
• By that time seniors age 65 and older will more than double to 81 million.
• Last year chronic diseases, which are diseases which persist over a long period of time, such as diabetes, emphysema and arthritis, cost us $2.3 trillion.   Ninety-five percent of seniors’ health care costs are attributed to chronic disease.  So, as we live longer, the incidence and cost of chronic disease will rise.

Many of the nation’s seniors need long-term care today. As the legions of middle-aged people become senior citizens in the future, the demands on our care system and the mechanisms for payment for that care system will grow to the breaking point.  Some more data:

• Today 9 million people require long-term care (LTC) outside the home today.  Of those, 40 percent are considered poor or near-poor, which suggests a huge burden on the Medicaid system that will be called upon to care for these people, mostly in nursing homes.
• By the year 2020 that number is expected to grow to 12 million.
•  The likelihood of people over age 65 meeting the criteria for LTC at some point in their lives is 68 percent.
• Tens of millions of non-paid caregivers provide care to the sick or disabled.

It is such a caregiver about whom I worry most.  The rendering of these services can take its toll on the caregiver’s physical health, mental health, personal finances, job performance and opportunity, and familial relationships.  A MetLife study estimated just the monetary loss to the caregiver over time to exceed a half-million dollars.

Eventually, the needs become too demanding or require so much professional care that a nursing home is required.  How can a person prepare for the need for professional LTC?  Some people choose to or are forced to go the Medicaid route for their care.  But for this they have to spend virtually all their assets and thus be impoverished to qualify.  Others who are insurable and can afford it buy insurance:

• A stand-alone LTC policy can be obtained.   This can provide benefits for either paid home-health care or nursing-home care for a selected length of time.  The major shortcoming of this approach is that, if one pays the premium for years and years but never needs to collect a benefit, then all the premium dollars will have been wasted.  It is a use-it-or-lose-it proposition.
• An annuity can be purchased that can have LTC benefit built in.  The covered benefits can be the same as for the stand-alone policy.  If one never collects on the LTC benefit, the cash value of the annuity can be used for retirement income or for a bequest to a beneficiary after death.  This is not use-it-or-lose-it.
• The best choice in my opinion is a life-insurance policy with an LTC benefit attached for a modest added cost.  It too covers the same events as the stand-alone policy.  This policy makes available as much as the full death benefit, not just the cash value, if needed for LTC.  So, someone will get the full benefit: either the insured for LTC needs, the beneficiary as a death benefit or part to each.  This is not use-it-or-lose-it.

The best way to sort through all this is to speak with an experienced agent who comes upon high recommendation from someone you trust.