Updated: Nov 13, 2024

As we age, long-term care becomes an important consideration for maintaining health and independence. Learn how long-term care insurance works with Medicare and how to choose a plan that fits your future healthcare needs.

Long-term care insurance is designed to cover services that assist with daily activities like bathing, dressing, and eating—care that isn’t typically covered by Medicare. While Medicare can help with some short-term needs, such as skilled nursing care or rehabilitation, it does not cover most long-term care expenses. For those who want protection against the high cost of long-term care, private long-term care insurance policies are available. In this article, we’ll explore how long-term care insurance works, what Medicare covers, and how to choose a plan that meets your needs, including real-world examples of popular long-term care insurance plans.

What Is Long-Term Care Insurance?

Long-term care insurance helps pay for the costs associated with long-term care, which includes personal and medical support services for individuals who can no longer perform basic daily activities. These services can be provided in a variety of settings, including:

• At Home: Personal care services provided in your home, such as help with bathing, dressing, and medication management.
• Assisted Living Facilities: Housing and support for individuals who need help with daily activities but do not require full-time nursing care.
• Nursing Homes: 24-hour skilled nursing care for people with serious health conditions or disabilities.
• Adult Day Care Centers: Social and healthcare services provided during the day for individuals who need supervision or assistance.

Long-term care insurance policies cover a portion of these costs, offering financial protection that can reduce the burden on your savings or family. Policies vary based on the benefits they offer, the length of coverage, and how much they pay out for different types of care.

What Does Medicare Cover for Long-Term Care?

Medicare is primarily designed to cover short-term medical care and hospital services, but it offers very limited coverage for long-term care. Here’s a breakdown of what Medicare covers:

• Skilled Nursing Facility (SNF) Care: Medicare Part A covers up to 100 days of skilled nursing care in a facility after a qualifying hospital stay. However, this only applies to people who need skilled nursing services or rehabilitation, not long-term custodial care. The first 20 days are fully covered, while days 21-100 come with a daily co-payment.
• Home Health Care: Medicare may cover some home health care services, but these are typically short-term and must be prescribed by a doctor. Medicare does not cover ongoing personal care or custodial care at home.
• Hospice Care: For individuals with terminal illnesses, Medicare covers hospice care, which includes pain relief and support for both patients and their families, but this is not the same as long-term care.

What Medicare Does Not Cover:

• Custodial Care: This includes assistance with daily activities like bathing, eating, and using the bathroom. Medicare does not cover long-term custodial care in any setting, including at home, assisted living, or nursing homes, unless part of short-term rehabilitation.

Why Consider Long-Term Care Insurance?

Since Medicare doesn’t cover most long-term care services, it’s essential to plan ahead. The average cost of long-term care can be significant, and without insurance, you could face large out-of-pocket expenses. Here are some reasons why long-term care insurance might be right for you:

• Protection for Your Assets: Long-term care can drain your savings quickly, especially if you need care for several years. Insurance can help protect your assets and ensure that you don’t have to rely solely on family members or Medicaid.
• Flexibility of Care Options: Many long-term care insurance policies cover care in a variety of settings, from your home to a nursing facility, giving you more flexibility to choose the type of care that’s best for you.
• Preserving Independence: With insurance, you can afford professional care, which can help you maintain your independence longer by allowing you to remain at home with the support you need.

Types of Long-Term Care Insurance

There are different types of long-term care insurance policies available to meet varying needs. Understanding the options can help you choose the right plan:

1. Traditional Long-Term Care Insurance:
   This is the most common form of long-term care insurance. It works similarly to other insurance policies: you pay premiums, and when you need care, the policy pays out a daily or monthly benefit for covered services.

   • Pros: Typically offers comprehensive coverage for a variety of long-term care settings. Flexible benefit amounts and coverage periods.
   • Cons: Premiums can increase over time, and if you don’t need long-term care, you don’t get any return on the premiums you’ve paid.

2. Hybrid Long-Term Care Insurance:
   These policies combine long-term care insurance with life insurance or an annuity. If you don’t end up using long-term care benefits, the policy will pay out a death benefit to your beneficiaries or provide you with a cash value.

   • Pros: If you don’t use the long-term care benefits, your money isn’t lost, and you still get value from the policy.
   • Cons: Hybrid policies tend to be more expensive than traditional long-term care insurance.

3. Short-Term Care Insurance:
   Provides coverage for up to 360 days, offering a more affordable option for those who want some level of coverage but cannot afford a full long-term care policy.

   • Pros: Lower premiums than traditional long-term care insurance and can help cover shorter stays.
   • Cons: Only covers short-term care needs, and if you require extended care, you may need to cover costs out of pocket.

How to Choose the Best Long-Term Care Insurance Plan

When choosing a long-term care insurance plan, consider the following factors:

1. Assess Your Healthcare Needs and Family History

Consider your overall health and family history of needing long-term care. If you have a history of chronic illnesses or expect to need long-term care due to age or genetics, a more comprehensive policy may be worth the higher premium.

2. Decide on the Type of Coverage

Choose between traditional or hybrid long-term care insurance. If you prefer to have a death benefit or the ability to access some of your premiums if you don’t use long-term care, a hybrid policy may be the better choice.

3. Consider the Elimination Period

The elimination period is the amount of time you must wait after becoming eligible for long-term care benefits before the policy begins paying out. Common elimination periods range from 30 to 90 days. Policies with longer elimination periods usually have lower premiums, but you’ll need to pay for care out of pocket during this time.

4. Check the Daily/Monthly Benefit Limits

Most policies have a daily or monthly benefit limit that they will pay out for your care. Make sure the benefit amount is sufficient to cover the expected cost of care in your area. The average daily cost of nursing home care is over $250, so you’ll want to choose a benefit that aligns with your local costs.

5. Look for Inflation Protection

As the cost of care rises over time, you’ll want your policy to keep up. Some policies offer inflation protection, which increases your benefit amount annually to keep pace with rising long-term care costs. While this adds to your premium, it’s a valuable feature, especially if you don’t expect to need care for many years.

Real-World Examples of Long-Term Care Insurance Plans

Here are a few examples of popular long-term care insurance options and what they offer:

Genworth Traditional Long-Term Care Insurance

• Coverage: Covers care in various settings, including at-home, assisted living, and nursing homes.
• Benefit Limit: $150 – $300 per day.
• Elimination Period: 90 days.
• Inflation Protection: Optional, with choices of 3% or 5% annual increases.
• Cost: Premiums start at around $2,500 annually for a 55-year-old individual.

Best For: People looking for comprehensive coverage with flexible benefit options and inflation protection.

New York Life Hybrid Long-Term Care Insurance

• Coverage: Combines life insurance with long-term care coverage. If you don’t use the long-term care benefits, the policy pays a death benefit to your beneficiaries.
• Benefit Limit: Monthly benefit ranging from $2,500 to $10,000.
• Elimination Period: 90 days.
• Inflation Protection: Available with a 3% or 5% increase option.
• Cost: Higher than traditional policies, with premiums starting at $4,000 annually for a 55-year-old individual.

Best For: People who want long-term care coverage but also want the flexibility of a death benefit if they don’t end up using care.

Mutual of Omaha Short-Term Care Insurance

• Coverage: Provides coverage for up to 360 days of long-term care.
• Benefit Limit: $100 – $200 per day.
• Elimination Period: 0 – 20 days (depending on the plan).
• Inflation Protection: Not available.
• Cost: Lower than traditional long-term care policies, with premiums starting at $1,200 annually.

Best For: People looking for an affordable option to cover short-term care needs.

Conclusion

Long-term care insurance can help protect you from the high costs associated with needing care later in life. Since Medicare doesn’t cover most long-term care expenses, it’s important to consider your options and choose a plan that fits your budget and future needs. Whether you opt for a traditional or hybrid policy, be sure to review the benefit limits, elimination periods, and inflation protection options. By planning ahead, you can ensure that you have the resources to get the care you need while protecting your savings.