Long-Term Care Planning For the Elderly

Are you wondering how to go about long-term care planning? Or are you looking to take the first steps toward long-term care planning? Either way, this guide will help you with the process of long-term care planning and put you on the right path towards helping your elderly loved ones through their golden years in as much comfort and safety as possible.

Definition of Long-term Care

Long-term care planning is a plan you create to meet your needs if you end up needing long-term care. Typically, long-term care refers to health and personal care given by someone other than a family member for an extended period of time. It's also called custodial care or adult day services. Long-term care can be provided in different settings, such as at home or in a nursing home or assisted living facility.

Why buy long-term care insurance?

Long-term care is an expensive proposition. The average annual cost for a single person in a nursing home is more than $90,000, and that number increases with each additional person you want to add. While Medicare covers most medical expenses if you require skilled long-term care services, it does not cover other forms of long-term care such as physical therapy or routine home maintenance.

It’s best to buy long-term care insurance well before you need it since coverage can be denied based on your health at the time of application. If your loved one has Alzheimer’s disease or another progressive degenerative disorder, he may not be eligible for coverage after five years from his initial diagnosis.

How popular is long-term care insurance?

Long-term care insurance covers both medical and non-medical services and costs an average of $2,000 per year for a 65-year old couple, according to Genworth Financial's 2017 Cost of Care Survey. That cost is expected to rise steadily, as is demand for long-term care insurance; 85% of survey respondents said they were concerned about becoming unable to pay for their own or a family member's long-term care. With such high costs and increasingly popular policies, it's not surprising that 70% of respondents indicated they had changed their long-term care planning strategy because of information they learned from their insurer. If you're considering adding long-term care insurance to your list of retirement planning strategies, read on!

Long-term Care Settings and Services

Long-term care settings range from independent living facilities to assisted living facilities, nursing homes, and hospice care centers. Most people will eventually need some sort of long-term care during their lifetimes, whether it’s for a year or two or for twenty years. Because you’ll be paying for your own long-term care in most cases (either directly out of pocket or through insurance), you want to make sure that your money goes as far as possible.

Heterogeneity in Long-term Care Recipients

Long-term care recipients tend to be very different. They have different illnesses and physical and mental health needs that vary greatly from person to person. If you’re one of these recipients, then there are a few things you need to know when creating your long-term care plan. One is that people with cognitive impairment typically require more comprehensive care plans than others, as they cannot always communicate their needs or advocate for themselves in all aspects of daily life.

Heterogeneity in Long-term Care Settings and Services

A Socioeconomic, Demographic, and Geographic Look: As an aging society, it’s important that we understand who is receiving long-term care and where. The following map outlines a number of factors that play into a person’s decision about where to receive long-term care: socioeconomic factors (such as education level), geographic factors (such as urban versus rural setting), and demographic characteristics (such as gender). All of these factors, individually or in combination with one another, can have a major impact on whether people receive care at home or in an institutional setting.

Assessing the Cost of Care

One of the first steps to long-term care planning is determining how much it will cost to provide your parents with care. There are several different factors that go into these calculations: what type of living arrangement they want, where they want to live, and whether they need 24/7 care or just part-time help, among others. With all these variables in mind, there are a number of online calculators that can give you an idea of how much it will cost to provide your parents with care.

How long-term care insurance works

Long-term care insurance is meant to cover services that Medicare doesn’t. This can include assistance with activities of daily living (ADLs), such as dressing, bathing, and cooking; and it may also include custodial care in a nursing home. To qualify for these benefits, you must be at least 65 years old and have paid premiums into your policy for five to seven years. The average annual premium for an individual with a $150 daily benefit is around $4,000. The more coverage you buy, though—the less expensive it becomes on a monthly basis.

Long-term care activities of daily living are

eating, toileting, bathing, dressing, and continence. These daily living activities are often referred to as ADLs. Long-term care refers to home care, residential facilities, and other health care services that people need when they cannot function well enough on their own due to injury or age-related conditions like Alzheimer’s disease or dementia. The assistance needed may range from help with personal hygiene for a short time to full nursing care for many years.

Rate Or Cost of long-term care insurance

When determining your long-term care insurance costs, you should consider both your age and health when selecting a plan. Cost varies from state to state, but on average it is expected to cost over $200 per month for an individual and around $600 for a couple in their 70s and 80s. The cost of long-term care is higher than traditional health insurance because it does not cover routine doctor’s visits, prescription drug costs, or medical emergencies. However, seniors that require help with normal daily activities, such as bathing or eating independently are more likely to qualify for long-term care benefits than those who require hospitalization.

Tax advantages of buying long-term care insurance

Seniors who have long-term care insurance may be able to tap their savings or assets without paying taxes. As with all life insurance, you can take tax deductions for premiums you pay for long-term care coverage. Keep in mind that, depending on your plan, policies purchased after age 40 qualify for a tax deduction only if they’re purchased with taxable dollars; if you use pre-tax dollars from an employer-sponsored benefit, that amount doesn’t count as a medical expense and isn’t deductible.

2021 federal tax deductible limits for long-term care insurance

Age at the end of the year Maximum deductible premium

40 or under $450

41 to 50 $850

51 to 60 $1,690

61 to 70 $4,520

71 and over $5,640

Source: IRS Revenue Procedure 2020-45.

How to buy long-term care insurance?

When it comes to long-term care planning, there are two types of policyholders: those who have a policy and those who will buy one in the future. According to recent statistics, 55% of Americans age 65 or older need some form of long-term care—but only 38% own a policy. That number is declining as well; it was 47% in 2009.

Understanding state ‘partnership’ plans

With most states now offering long-term care insurance plans, many people are being offered or forced to take advantage of these programs. While it’s important to understand what partnership plans are and how they work, you should be cautious before signing up for one. No matter which plans you choose, you could still end up paying tens of thousands out of pocket if you need more care than what is covered by your state’s program.

Additionally, some private long-term care policies provide better benefits than partnership plans do. Make sure to do thorough research before picking a policy; since so many elderly people require specialized assistance with day-to-day tasks, it’s especially important that your loved ones have proper coverage for medical and home assistance costs in their later years.