Is long-term health coverage insurance or a gamble?

Dear Money Maven:  If I’m on a limited income, should I pay for a long-term care policy?  Aren’t the chances of a quick death greater than lingering around for a long time?  Isn’t long-term care insurance a “gamble” that, like that in Las Vegas, “favors the house?”  If I guess my future wrong, will Jewish Family Service or Seacrest Village Retirement Communities help me? —

By Sheryl Rowling

Dear Confused:  Sophie Tucker said, “The secret to longevity is to keep breathing.”  While we might be able to keep breathing, as we age, certain activities might become difficult or impossible.  For most of us, it’s not a good idea to count on Medicaid or Medical to take care of our needs.  Rather, we need to be proactive and plan ahead. 

According to the U.S. Department of Health and Human Services, about 70 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime. On average, women need care for an average of 3.7 years and men require care for an average of 2.2 years.  Additionally, 20 percent of today’s 65-year-olds may need care for more than five years.

In California, the cost of a nursing home averages $6,960 per month while the average cost of an assisted living facility is $3,031 per month.  Additionally, the hourly rate of a home health aide averages $18.  If care is needed 24-hours a day, the monthly cost of home health assistance can be almost $13,000!

Nu?  You think you’re betting against the house by buying long-term care insurance?  Maybe you should think again.

The organizations you mentioned can help, but they don’t take the place of a long-term care policy.  Jewish Family Service’s Older Adult Services provides various programs, including the Older Adult Access Line at (858) 637-3040.  The Access Line Coordinator can help connect you with residential and housing options, meal programs, social programs, counseling and support groups, homemaker and care services, transportation, care management services and more.  (www.jfssd.org)  Seacrest Village, with locations in Poway and Encinitas, is a non-profit development of San Diego Hebrew Homes providing seniors and their families with exceptional quality care in a Jewish environment. (www.seascrestvillage.org)  

It is never too early to consider long-term care coverage.   An accident or long-term disability can happen at any age.  And, don’t think that disability insurance will do the trick.  Disability insurance will cover a person’s bills and existing needs.  However, disability insurance is not going to cover additional expenses associated with long-term care.

Even if you think you have sufficient assets to cover your needs, you should still consider long-term care insurance.  Costs associated with long-term care are increasing rapidly.  You might be able to pay for your needs with your accumulated assets, but do you want to?  Your estate can be greatly diminished due to long-term care expenses, leaving little or nothing to pass to heirs.  

So, listen to the Money Maven, and look into long-term care insurance!  Look for these provisions:

•          The benefit should be at least $200 per day, which approximates current cost.

•          Maintain at least three years of coverage – five years, six years, or lifetime is better.

•          Use a 90-day waiting period, more if you can afford it.

•          Get inflation protection.

•          “Disability” should be defined as liberally as possible; make sure the determination is done by your doctor – not the insurance company.

•          Ensure that the home health care benefits are as generous as those for a live-in facility.

When you’re done with this homework, you’ll have time to think of some other financial questions.  Please don’t hesitate to reach out to me – that’s why I’m here!

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Sheryl L. Rowling, CPA/PFS, and partner of Moss Adams Wealth Advisors LLC, has been providing tax, financial planning and investment advice since 1979.  Sheryl was named one of the nation’s top 250 financial advisers by Worth magazine, received recognition as one of Accounting Today’s 100 Most Influential People, and was named a FIVE STAR Wealth Manager by San Diego Magazine*.  Contact her at sheryl.rowling@sdjewishworld.com
*Third- party rankings and recognition from rating services or publications are no guarantee of future investment success. Working with a highly rated advisor does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client, nor are they representative of any one client’s evaluation or experience with the advisor.