Long-term care insurance refers to insurance that pays for the expenses incurred by individuals who cannot take care of themselves due to old age, illness or disability and need to be treated at home or in a nursing home by a dedicated person. Long-term care insurance belongs to the category of health insurance, and the subject matter is the individual's physical health status. Usually the care period is long, which may be half a year, a year, several years or even more than ten years. The meaning of care is to maintain the individual's physical function as long as possible rather than to cure it as the main purpose. Long-term care insurance can be used as a financial compensation for care costs. Long-term care insurance mainly pays for the daily care costs of the elderly, or the daily care costs caused by illness or disability. It is generally divided into family care and institutional care.
How to choose the right long-term care insurance in the United States
In the United States, long-term care insurance (Long Term Care, LTC) is mainly suitable for the following groups of people:
People who are worried about future care costs
Family history: If there are patients with chronic diseases such as Alzheimer's disease and Parkinson's disease in your family, your risk of developing these diseases will also increase.
Poor health: If you have long-term health problems, you may need long-term care in the future. LTC insurance can prepare you financially in advance.
People who plan to protect their assets
Want to avoid depleting their savings: Long-term care costs are high, especially when living in a nursing facility or receiving long-term home care. LTC can help you save a lot of money.
Want to avoid relying on family: Some people don't want to burden their family with finances and care when they are old. LTC can provide financial support and professional care services.
People who lack family care support
Single or no close relatives: If you don't have family members around to help, you will need professional long-term care services in the future. LTC can provide financial assistance without family support.
Older spouse or relatives: If your spouse or relatives are older and may also need care, they may find it difficult to provide support in the future and you will need external care.
People approaching retirement age
Most people start to consider purchasing long-term care insurance around the age of 50, because premiums will increase with age. Long-term care insurance is a means of protection for those who want to maintain their quality of life after retirement.
People who want flexible care options
People who want home care, nursing facilities, or other flexible care services in the future: Long-term care insurance usually covers a variety of care types, including home care, nursing homes, and assisted living facilities, which can meet different types of care needs.
Who needs long-term care?
According to the latest research report of the American Cancer Society in 2016, nearly 1.6 million people in the United States are diagnosed with cancer each year, and 64% of them survive for at least 5 years. Nearly 1.2 million people have heart disease each year, and 60% of them survive. Currently, 22 million people in the United States have heart disease, stroke, and cancer.
The high survival rate should be a happy thing, but many families are also worried about it. The high cost of care and medicine makes it difficult for many families to maintain or even file for bankruptcy. Many people will ask, don’t we have medical insurance? Ironically, 78% of those who file for bankruptcy due to large medical expenses are those who originally have medical insurance. According to a survey by the American Cancer Society, more than 67% of medical expenses are actually indirect expenses (such as nursing fees), which are not included in medical insurance and patients need to pay out of their own pockets.
According to statistics, the chance of a house catching fire is 1/1200, the chance of a car accident is 1/240, the chance of hospitalization for surgery is 1/15, the chance of needing long-term care at the age of 65 is 2/5 (40%), and the chance of needing long-term care at the age of 75 is 3/5 (60%). With the increasing prevalence of aging in the United States and various diseases, many elderly people or patients are facing a very practical problem-they need to go to a nursing center or hire someone to take care of themselves at home.
What is the cost of long-term care?
If you can't take care of yourself, there are basically four places to go:
- Live in a private nursing home
- Assisted Living Center
- Adult Daycare
- Hire someone to take care of you at home
- Nursing home: Currently, there are 1.8 million people living in private nursing homes, another 1 million living in assisted living communities, and 7.6 million living at home and receiving door-to-door services. No matter which way you go, you will have to spend money. Living in a private nursing home is the most expensive, generally costing 80,000 to 100,000 a year, and it is hard to find a place.
- Assisted Living Center 50,000 to 60,000.
- Adult Daycare costs 20,000 to 30,000 a year.
- Hire someone to come to your home to do 4 hours a day, charging 2,000 to 3,000 a month. If you do 8 hours a day, the monthly fee will rise to 7,000 to 8,000. This is just today's fee standard. In the past 10 years, the cost of long-term care has increased by an average of 6-8% per year, which is much higher than the inflation rate. If it continues to rise, it will double in 10 years. This is just the cost for one person. If both husband and wife need long-term care, the cost will double. This huge cost is impossible for the middle class to afford by themselves.
How to pay for long-term care expenses?
There are three main ways to pay for long-term care expenses:
- Medicaid (public medical assistance)
- Use your own money
- Long-term care insurance claims
Some people may ask if there is Medicare (public medical insurance)?
Medicare is the government's payment of acute medical care expenses for the elderly and disabled in the United States over 65 years old, such as medical treatment, hospitalization, surgery, drugs and other medical professional care, but does not include daily life care, such as eating, dressing, bathing, toileting, etc.
Specifically, the patient must have been hospitalized for at least 3 days and be admitted to a Medicare-certified long-term care center within 30 days to enjoy its care benefits. Medicare provides up to 100 days of professional nursing services. The first 20 days are covered by Medicare, but the cost from 21 to 100 days must be borne by the patient, with a maximum deductible of $161 per day (2016 standard). If the patient still needs care after 100 days, he or she will have to pay the full amount out of pocket.
The U.S. government's low-income medical assistance program (Medicaid) can provide long-term care benefits for some elderly people, but the conditions are very harsh, and ordinary middle-class families are excluded. Therefore, if a patient or elderly person needs long-term care, they have to be fully responsible for the high cost of care.
Medicaid does not work, the second way is to pay for long-term care out of your own pocket, using savings, investments or retirement money to pay for long-term care. How much this will cost is difficult to estimate, depending on when you start to need long-term care and what kind of care you need. Do you have to live in a private nursing home, or just hire an hourly worker to come to your home, how long it will take, and the rate of increase in long-term care costs in the future, etc.
Conservatively, you have to prepare hundreds of thousands of cash or liquid assets, which is a heavy burden for the middle class. After retirement, you don't work, have no new source of income, and rely entirely on social security, 401K, IRA, and personal savings and investments to maintain your retirement life. Frankly speaking, it will be difficult for most middle-class people to prepare hundreds of thousands of cash for long-term care. Unless you have accumulated millions of assets, you must consider the third way, that is, to buy long-term care insurance, and the insurance company will pay for your long-term care expenses when needed.
What is long-term care insurance?
In fact, many American families have already regarded long-term care insurance as their reliance in their later years. Traditional long-term care insurance is a kind of consumer insurance. If it is not used, it is a waste of money. It is expensive and not cost-effective, so generally no one will choose it.
In recent years, some insurance companies have launched several new products. These insurances are not single long-term care insurance, but all-in-one insurance products. This policy combines long-term care insurance with life insurance as a rider. You buy a 1 million yuan insurance policy from an insurance company. If you pass away, the insurance company will pay your family 1 million yuan. If you cannot take care of yourself, the insurance company will pay you the nursing insurance benefits on a monthly basis. If you pass away before you have used up the benefits, the unused benefits will be paid to your beneficiary as a death claim. This insurance is guaranteed, and you can choose how many years to pay off (paid-up), and you will benefit from it for life. Moreover, if you do not use or use up the benefits during your lifetime, you can pay for your family, which is its advantage over traditional long-term care insurance.
Claims
The claim amount of life insurance depends on the death certificate, while long-term care insurance requires a doctor's certificate stating which functions you have been impaired and you cannot take care of yourself, such as dressing, eating, going to the toilet, urinating, and other daily activities. If you cannot complete specific items independently for more than a certain number of days, you can apply for claims from the insurance company.
It is important to know that there are two ways to claim for long-term care insurance, which are:
- Reimbursement
- Indemnity
Reimbursement means you take the invoice to the insurance company for reimbursement, or the insurance company pays the money to the private nursing home where you live according to the amount of the bill. However, for life insurance that provides this kind of pre-living benefits or long-term care rider claims, the insurance company directly pays you a sum of money, and you decide how to use the money.
Generally speaking, traditional long-term care insurance mostly adopts reimbursement, and you take the receipt to the insurance company for reimbursement every month. However, according to regulations, the monthly claim amount received by the insured cannot exceed 10,000 US dollars, and it must be certified by a formal licensed nursing home institution. This is a restriction for Chinese friends who want to hire a nurse or relatives and friends to take care of them.
Now, a life insurance with a qualified long-term care rider can directly send a check every month after meeting the claim requirements, and the insured can freely use the money without being subject to various restrictions of long-term care insurance. In fact, long-term care insurance is not only for the elderly, but also for people of any age who have physical disabilities and need care. According to statistics, 40% of people aged 18-64 have used long-term care, and 48% of people over 65 may need long-term care from professional nursing centers in the future.
