We all hope to live long, healthy, and independent lives. However, the reality is that many of us will need long-term care at some point. This type of care involves assistance with both health and personal needs, which could be necessary for a few months or even several years. Long-term care services are delivered in various settings, ranging from the comfort of your own home to specialized facilities like skilled nursing facilities and assisted living communities.
For individuals diagnosed with Alzheimer’s disease or other forms of dementia, a specialized type of long-term care known as memory care is often required. Like all forms of long-term care, memory care can be financially demanding. While programs like Medicare and Medicaid may offer some assistance, their coverage is often limited. Long-term care insurance presents itself as a valuable financial tool to help manage these costs. Understanding Long Term Care Insurance Once Dementia Diagnosis becomes increasingly important as it can significantly impact the financial and emotional well-being of individuals and their families.
Understanding Long-Term Care Insurance and Memory Care
What is Long-Term Care Insurance?
Long-term care insurance (LTCI) is specifically designed to cover the costs associated with long-term care services. These services are broader than just medical care; they encompass assistance with activities of daily living (ADLs) such as bathing, dressing, eating, and toileting.
It’s a common misconception that long-term care is only for the very elderly. However, the statistics tell a different story. For someone turning 65 today, there’s a significant 70% chance they will need some form of long-term care during their remaining years. Furthermore, approximately 20% of individuals will require this care for a period exceeding five years.[1]
Long-term care insurance generally falls into two main categories:
- Traditional Long-Term Care Insurance: This is a standalone policy specifically created to cover long-term care expenses.
- Hybrid Long-Term Care Insurance: These policies combine long-term care benefits with other financial products, such as permanent life insurance or annuities. Hybrid policies can offer a dual benefit: coverage for long-term care needs and a death benefit or return of premium if long-term care is not needed.
What is Memory Care?
Memory care is a specialized service tailored to meet the unique needs of individuals living with dementia, including Alzheimer’s disease. These services are provided by trained professionals in environments designed to promote safety, independence, and quality of life for residents. Memory care can be delivered in various settings, including nursing homes, assisted living facilities with dedicated memory care units, specialized memory care centers, and even at home.
The services provided in memory care are comprehensive and can include:
- 24/7 supervision and specialized nursing care
- Assistance with personal care activities like eating, bathing, and dressing
- Medication management, particularly for dementia-related symptoms
- Social and recreational activities designed to be engaging and appropriate for cognitive abilities
- Memory-stimulating activities to help maintain cognitive function
- Physical exercise programs to promote physical health and well-being
- Nutritious meals and snacks tailored to dietary needs and preferences
- Mobility assistance to ensure safety and prevent falls
- Access to physical, occupational, and speech therapies as needed
Who is Eligible for Long-Term Care Insurance?
While there isn’t a strict age limit for applying for long-term care insurance, it’s generally advisable to purchase a policy while you are younger and in good health. The majority of long-term care insurance claims are made after the age of 70. Purchasing a policy between the ages of 50 and 65 is often considered a strategic approach, balancing affordability with the likelihood of needing coverage later in life. Buying too early might mean paying premiums for a longer period, while waiting too long could lead to higher premiums or denial of coverage.
However, not everyone who applies for long-term care insurance is approved. Applications can be denied for several reasons, including:
- Pre-existing medical conditions such as cancer or Alzheimer’s disease.
- Use of certain medications, particularly narcotics.
- Current receipt of long-term care services.
Before approval, applicants typically undergo a health screening. This may involve a cognitive assessment, conducted remotely or in person, to evaluate memory and other cognitive functions like learning, decision-making, attention, and reasoning. The purpose of this assessment is to identify any pre-existing cognitive impairment.
It’s critical to understand that if you have already received a diagnosis of Alzheimer’s disease or another form of dementia before applying for long-term care insurance, obtaining coverage can be extremely challenging, and you may likely be denied due to being considered a high-risk applicant. This underscores the importance of considering long term care insurance once dementia diagnosis becomes a concern, although ideally, planning should occur before a diagnosis.
What Memory Care Expenses Are Covered by Long-Term Care Insurance?
A comprehensive long-term care insurance policy typically covers a range of expenses related to memory care services, including:
- Room and board in a memory care facility or at home if receiving in-home care.
- Skilled nursing care provided by licensed professionals.
- Assistance with personal care tasks such as grooming, eating, and toileting.
- Specialized memory-focused programs and activities.
- Rehabilitative therapies like physical, speech, and occupational therapy.
Some policies may also extend coverage to ancillary services like laundry and housekeeping.
If you are specifically concerned about the potential need for memory care in the future, it is crucial to select a long-term care insurance policy that explicitly covers Alzheimer’s disease and other dementia-related conditions. While most contemporary long-term care policies offer broad coverage, carefully reviewing the policy’s details, including the “fine print,” is always advisable to ensure dementia care is included.
What You Should Know Before Purchasing Long-Term Care Insurance
When Does Long-Term Care Insurance Coverage Begin?
The activation of your long-term care insurance coverage is determined by the specifics outlined in your policy. To become eligible for benefits, you generally need to meet certain criteria known as benefit triggers. These triggers usually involve demonstrating a cognitive impairment or an inability to perform a certain number of activities of daily living (ADLs) without substantial assistance.
Even after meeting the benefit triggers and being approved for benefits, most policies include an elimination period, also known as a waiting period, before benefit payments commence. This period, typically ranging from 30 to 90 days, requires you to pay for long-term care services out-of-pocket. Once the elimination period is over, the insurance company will begin to reimburse you for covered services.
Coverage Parameters
Most long-term care policies set limits on coverage, either through a daily benefit limit or a fixed daily payment amount once benefits begin. Additionally, the duration of benefit payments is usually limited. While some policies may offer lifetime coverage, it is more common for policies to cover care for a specific period, such as three years. Policies also typically establish a maximum lifetime benefit, representing the total sum the insurer will pay out for your care.
Inflation Protection
Inflation protection is an optional, yet highly valuable, feature that can be added to a long-term care insurance policy. It is designed to help the policy’s benefit amount keep pace with the rising costs of long-term care services over time. Given the escalating costs of healthcare, especially long-term care, inflation protection can be a wise investment to ensure your coverage remains adequate in the future.
Tax Implications
Long-term care insurance can also offer certain tax advantages. Depending on your income and the amount of your premiums, you may be able to deduct a portion or even all of your long-term care insurance premiums as medical expenses, provided they exceed a certain percentage of your adjusted gross income.
Questions to Ask When Navigating Policy Requirements
Choosing a long-term care insurance policy is a significant decision. To make an informed choice, consider asking insurers or agents these crucial questions:
- Is there a maximum daily benefit or are there benefit limits per period (e.g., monthly or annually)?
- Does the policy operate on an expense-incurred basis (reimbursement of actual expenses) or provide a fixed cash allowance?
- Does the policy include inflation protection to ensure benefits grow with the increasing cost of care?
Long-Term Care Insurance Costs
Factors Determining Long-Term Care Insurance Costs
The premium cost of long-term care insurance is influenced by several factors, including your age at the time of purchase, the level of coverage you select, the specific benefits included in the policy, and your health status. If you have pre-existing health conditions, you may face higher premiums or be limited to reduced coverage options. Certain significant health risks could even disqualify you from obtaining long-term care insurance altogether.
Approximate Premium Costs for Different Populations
According to the American Association for Long-Term Care Insurance (AALCI), in 2023, a 55-year-old man could expect to pay approximately $900 per year for a long-term care insurance policy providing $165,000 of coverage. Women, on average, face higher premiums due to their longer life expectancy and thus potentially longer duration of needing care. For the same coverage level in 2023, a 55-year-old woman would pay around $1,500 annually.[2]
Memory Care Costs and Payment Options
How Much Does Memory Care Cost?
Genworth’s Cost of Care Survey provides valuable data on the average expenses associated with various long-term care settings, including those offering memory care. For instance, in Albany, New York, the average annual cost for a semi-private room in a nursing home is currently around $161,239. In contrast, in Baltimore, Maryland, the same type of room averages $129,575 annually.[3] These figures highlight the considerable expense of memory care and the geographic variations in cost.
Alternative Ways to Pay for Memory Care
While long-term care insurance is a significant resource, it’s also important to be aware of other potential payment options for memory care, especially if long term care insurance once dementia diagnosis is not an option. These alternatives include personal savings and investments, government programs like Medicaid (for those who qualify based on income and assets), and potentially Veterans benefits for eligible veterans. Family support and reverse mortgages could also be considered in certain situations.
How Much Long-Term Care Insurance Will You Need?
The duration of long-term care varies significantly from person to person. Research indicates that women, on average, require care for a longer period (3.7 years) compared to men (2.2 years).[1]
When determining the appropriate amount of long-term care insurance, consider the cost of care in your specific geographic area and anticipated future cost increases. For example, Genworth’s Cost of Care Survey projects that the average annual cost of assisted living in Chicago, Illinois, currently around $83,950, is expected to rise to $112,822 by 2031.
Other crucial factors to consider when deciding on the level of long-term care insurance coverage include:
- Your age and current health status
- Your personal and family health history, particularly concerning conditions like dementia
- Your overall financial situation, including income, savings, and assets
- The availability and willingness of family members to provide care
How to Choose the Best Long-Term Care Insurance for You
Making a well-informed decision when purchasing long-term care insurance is crucial. Here are some helpful tips:
- Thoroughly review each policy: Carefully examine the coverage details, policy terms, and any exclusions. Remember that long-term care policies can vary significantly.
- Compare different policy types: Evaluate traditional and hybrid policies, considering their respective costs, benefits, and limitations to determine which best suits your needs.
- Verify insurance carrier credentials: Ensure that the insurance companies you are considering are licensed in your state by checking with your state’s insurance department. Additionally, assess their financial stability using rating agencies like A.M. Best.
- Avoid over-insuring: Assess your financial resources. If you have substantial income, savings, or strong family support, you might not need the highest levels of long-term care insurance coverage.
- Avoid under-insuring: Conversely, ensure that your policy provides adequate coverage. If your policy doesn’t cover all potential long-term care expenses, you will need to rely on your personal funds.
- Ensure affordability: Confirm that you can comfortably manage the monthly premium payments, and be aware that premiums may increase over time.
Frequently Asked Questions
How do I find out if I’m eligible for long-term care insurance?
Eligibility for long-term care insurance is based on factors such as your age, current health, and the specific underwriting guidelines of each insurer. The best way to determine your eligibility is to consult with a licensed insurance agent or a certified financial advisor who specializes in long-term care insurance.
Can my health insurance policy cover memory care?
Generally, no. Traditional health insurance policies are designed to cover medical expenses related to illness or injury but typically do not cover long-term care services, including memory care, which is considered custodial care.
Can my life insurance policy cover memory care?
Yes, in some cases. Hybrid life insurance policies that include a long-term care rider or benefit can be used to cover memory care expenses. These policies allow you to access a portion of the death benefit while you are still living to pay for long-term care needs. If you do not use the long-term care benefit, the full death benefit is paid to your beneficiaries upon your passing.
Bottom Line
Planning for the future is essential, and while no one can predict the future with certainty, considering the possibility of needing long-term memory care is a prudent step. Long-term care insurance can provide significant financial security and peace of mind should you or a loved one require memory care services. Navigating the complexities of long-term care insurance requires careful consideration and research. Seek advice from qualified professionals to make informed decisions that align with your individual needs and financial situation.
Sources
- U.S. Administration for Community Living. How Much Care Will You Need? Found on the internet at https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
- American Association for Long-Term Care Insurance. 2023 Long-Term Care Insurance Price Index Released. March 6, 2023. Found on the internet at https://www.aaltci.org/news/long-term-care-insurance-association-news/2023-long-term-care-insurance-price-index-released
- Genworth. Cost of Care Survey. Found on the internet at https://www.genworth.com/aging-and-you/finances/cost-of-care.html
