A few years ago, my seemingly indestructible 94-year-old mother suffered a series of medical setbacks. As her health problems accumulated, so did the complexity and cost of her care, progressing from her home to an assisted-living facility to a nursing home. It was heartbreaking – and expensive. My wife likened it to “putting another kid through college” – an elite private college, at that.
Medicare, of course, did not cover any of this, except for physician visits and some of her medications. When it was finally over, my wife and I resolved that, should we face a similar situation in our final years, we could not put ourselves or our children through a similar financial ordeal.
, in-home services, and other end-of-life expenses. (Covered services vary by policy; and as always, I have no financial interest in any product or service mentioned here.)
According to the American Association for Long-Term Care Insurance (), the average annual LTCI premium for a 60-year-old couple is $3,490. Not cheap; but there are ways to lower premiums without gutting your coverage.
The best way to keep costs down is to get in early. In general, the younger you are and the better health you are in, the lower your premiums will be. For example – again according to the AALTCI – that “average” annual premium of $3,490 for a hypothetical 60-year-old couple would increase 34%, to $4,675, if they waited until they were 65 to buy the policy. And if their health were to decline in the interim, they might not be able to obtain adequate coverage at all.
You can also lower premiums by decreasing daily benefits, or increasing the “elimination period” – the length of time after you become eligible for benefits that the policy starts paying them; 30-, 60-, and 90-day periods are common. As long as you have sufficient savings to realistically cover costs until the elimination period is over, choosing a longer one can reduce your costs significantly.
Another variable is the maximum length of time the policy will pay out benefits. Ideally, you would want a payout to continue for as long as necessary, but few if any companies are willing to write uncapped policies anymore. Two to five years of benefits is a common time frame. (The “average” premiums quoted above assume a benefit of $150 per day with a 3-year cap and a 90-day elimination period.)
As with any insurance, it is important not to overbuy LTCI. It isn’t necessary to obtain coverage that will pay for 100% of your long-term care costs – just the portion that your projected retirement income (Social Security, pensions, income from savings) may not be sufficient to cover. Buying only the amount of coverage you need will substantially reduce your premium costs over the life of the policy.
If you work for a hospital or a large group, it’s worth checking to see if your employer offers LTCI. Employer-sponsored plans are often offered at discounted group rates, and you can usually keep the policy even if you leave. If you’re a member of any social or religious groups, check their insurance plans as well.
To be sure, there is considerable debate about whether LTCI is worth the cost. Premiums for new policies are rising at a steep clip – 9% annually, according to the AALTCI – and insurers are allowed to raise premiums even after you buy the policy, so you’ll need to factor that possibility into your budget.
But forgoing coverage can be costly too: If you know you will have to cover your own long-term care costs, you won’t be able to spend that money on things you really care about – like your grandkids, or travel, or charitable work. You might even forgo necessary medical care for fear of running out of money.
Everyone must make their own decision. My wife and I decided that a few thousand dollars per year is a fair price to pay for the peace of mind of knowing we will be able to afford proper supportive care, without help from our children or anyone else, regardless of what happens in the years to come.
Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Dermatology News. Write to him at.