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Long term care can be an expensive burden for many older people. Few people can afford to pay the often-astronomical costs of long term care out of their own pockets for very long. Nursing home costs average about $160 a day or $58,000 a year. Nationally, costs range from $35,000 to $90,000 (Alaska’s average in 2002 was $448 per day). In some facilities and for some levels of care, costs can exceed $160,000 per year! Home health care services provided just three days a week could cost more than $20,000 a year. Medicare provides only limited nursing home and home health coverage. Medicaid requires an individual to spend almost all of his or her savings and assets before becoming eligible for nursing home coverage.
Private Medigap policies only fill in gaps left by Medicare and does not extend coverage for long term care beyond Medicare limits. Employee group health and major medical plans cover acute illnesses, but provide very limited long term care coverage. Consequently, many people look to private long term care insurance as a way to cover the catastrophic costs of nursing home and other long term care services.
Long term care insurance is different from other types of insurance in that it is designed specifically to pay for some long term care services. Long term care insurance is not a substitute for either Medicare or Medigap insurance. Instead, it covers services neither of these includes. Moreover, availability of these policies is very limited because of restrictions on the age of potential purchasers, health screening and the absence of policies in many geographic areas.
Long term care insurance is a relatively new form of insurance coverage with five or six companies providing the bulk of coverage. Policies vary considerably in cost and benefits. The lack of consistency among policies can make it difficult to compare policies and make an informed choice. A comparison checklist will allow you to evaluate several different policies as you try to decide which policy to purchase. It lists the major elements and provisions of long term care insurance and some guidelines that may be considered as minimum standards when evaluating and comparing policies.
Your financial decision whether to purchase long term care insurance at all and, if so, which specific policy to select, probably will be based on a number of factors: your assessment of your chances of entering a nursing home; what services long term care insurance will cover; other resources, especially family support available to you relating to the provision of long term care; the cost of long term care insurance to you; and policy restrictions, such as waiting periods and pre-existing condition exclusions.
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