Retirement insights from a Colorado PERA perspective

Issues & Perspectives

Learning about long-term care now can avoid costly missteps later

retirement

It’s estimated that 70 percent of Americans turning age 65 can expect to use some sort of long-term care during their lives.

Long-term care generally means assistance with the activities of daily living (sometimes referred to as “ADL”) that does not require skilled nursing. This care could include everything from simple help with household or yard chores to performing errands, driving to appointments, or help with personal care such as bathing and meal preparation.

Long-term, or ADL, care is generally not the same as skilled care, such as skilled nursing services (help with medications or care for wounds) or physical, occupational, or respiratory therapy. These types of care usually require services from a licensed professional.

However, the costs of long-term care can be significant, particularly if care is needed over a long time period or in a care facility. According to longtermcare.gov, a resource from the U.S. Department of Health and Human Services, in 2010, average costs for long-term care ranged from $21 per hour for a home health aide to $3,293 per month for a room in an assisted-living facility and $6,235 per month for a semi-private room in a nursing home.

Taking steps before care is needed can help make costs more manageable and provide more options, such as remaining in your own home longer.

Medicare and private health insurance plans do not pay for most long-term care services and therefore, the PERACare health plans also do not provide coverage. Medicare only pays for medically necessary care, focusing on acute care such as doctor visits, drugs, and hospital stays. Medicare coverage focuses on short-term services for conditions that are expected to improve, such as physical therapy that can help regain function after a fall or stroke.

There are ways to plan in advance for long-term care needs that include financial, legal, and practical strategies. For example, advance care planning can provide peace of mind that personal wishes – both medical and financial – will be kept even when it’s difficult or impossible to make those decisions for oneself.

Identifying in-home support services and making home modifications, even simple ones, can make it possible to live at home longer and avoid some of the high costs of care in a facility.

A pathfinder at longtermcare.gov provides helpful information customized to different situations, including age and whether or not care is needed now or in the future.

PERA on the Issues posts are written and compiled by the staff of Colorado PERA under the direction of Executive Director Greg Smith and the PERA Board of Trustees. We encourage you to comment with your thoughts and feedback.

Comments

  1. Ann Dunnewald says:

    Genworth LT Care since early 1990’s. They don’t provide Home/ Health when you are 79 or older. Only a facility. This forces me to leave my home. They also gave me wrong info on my local agent. Just got my new quarterly bill from them. This has been very upsetting to my, not to mention the anticipation if having to move to a facility!!!!!

  2. Mary says:

    We are strong believers in LTC insurance in today’s world. With that said we have good and bad experiences with the LTC offered in association with our PERA membership. We share the lessons we’ve learned with many:
    1) Buy as soon as you can in adulthood since age influences cost.
    2) Buy it because the per month cost of EVERY LEVEL of assistance ( in-home, facility and skilled nursing care) are astronomical. The expense can easily bankrupt an average family. This is especially true since the length of time it is needed is not known on the front end but nonetheless it can be required for years and years.
    3) Without the help from LTC insurance coverage, a stable, happy family of average income can be slammed into severe turmoil that can last years while caring for a loved one.
    4) Buy from a well rated insurance provider.
    Lessons Learned :
    Initially we were very, very happy to get long term care policies through our PERA membership in the late 90’s/early 2000’s from Penn Treaty /American Standard Insurance Company. And, we were thrilled to know it came with an 5 % annual cost of living/ services raise in the annual coverage total, we qualified and bought riders for life-time policy for in-home or assisted living and skilled-nursing care. The premium did not go up and payment stopped once we started to use the benefits. It also had terms allowing regeneration of the value (pot of money) if you used benefits for a condition that improved to the point of no longer needing payment for covered benefit services, (i.e., recovery after serious car accident requiring physical therapy to help regain function). None of the benefits were reliant on age qualifiers it was only based on need for assistance with Activities of Daily Living. SOUND TO GOOD TO BE TRUE ??? IT WAS !!!
    American Standard Penn Treaty went bankrupt and all of it’s benefits ~ after many years of premium payments ~ was gone. The Fed courts noted the average age of their insured clients was 79 years old! They had No coverage from a company they relied on. We found some There was solace in that it took several years in Receivership (during which customers had to pay) to resolve so there was some coverage in that period. However, eventually it all stopped. The only thing left was to opt in or out of continuing to pay premiums and be covered by a Colorado indemnity fund.
    We learned all states require insurance companies to pay into an indemnity fund just in case a company goes bankrupt. BUT guess what ? There is a cap on how much each client’s expenditures. There is no options to pay more for lifetime coverage. Colorado’s lifetime cap (at the time & I believe it’s still the same?) for each client is $350,000 for assistance with ADL. That cap cannot be regenerated if you draw on it for a condition that improves. As for the premium ~ it goes up with time / age and premiums do not stop if we use the policy.
    We do not find ourselves happy any more. Later we were told that at the time it was offered through PERA membership, it was a B rated insurance company. When it went bankrupt we could have left the coverage and lost all the money paid on premiums and elect to go find another policy. We decided to keep it, though. By the time bankruptcy came I was in my late 50’s & my husband in his 60’s so we were now facing reality of how much your age determines LTC Insurance’s premium price, what coverage you get and even if you are accepted as a client. By early 2000’s PERA no longer had a relationship for LTC insurance through American Standard Penn Treaty but went with a different company. Now I believe they no longer have a company for members at all and we have to find it on our own. The last dagger was to learn that American Standard Penn Treaty has reorganized and remains able to sell insurance in its new form !
    So after all this, how can we be strong supporters for LTC insurance? Well we had also (as a PERA member benefit) purchased LTC insurance for my mother who at the time was in her mid 60’s. As life should have it, she developed Alzheimer’s. Now a widow and living by herself she was in need of help with every day activities. This was about to teach us even more lessons about LTC insurance.
    First, we tried bringing help in at $25 per hr in 2010. Second lessons came when only a couple years later, she needed 24 hr care in an assisted-living facility which for our family meant she had to move out of the family home. This did not make for an easy transition for her. Please note the article reports a ‘room’ in assisted living is $3,293 a month. My mother went from a family home to a small 1 bedroom apartment back in 2011 for $5,100.00 a month! Turmoil? Yes, it & stress had already developed for her and us but would have been so much worse without her LTC paying bills. For example, we learned a vast majority of families have to sell the family-home BEFORE even being able to enter & pay for assisted-living. LTC can begin to pay for assistance immediately, making a big difference in quality of life and security for the individual and their family when tough decisions have to made.
    Less than 5 years after entering assisted-living, the bill our mom would have been paying was $5,800 a month. However because the LTC had a 5% annual cost of living raise, her funds did not run out faster than the increase in cost of services. Without LTC insurance paying the bills, bankruptcy would have been likely even though she had a retirement income & IRA’s as well as profit from a house sale. It was a lesson for our family to realize without LTC coverage our mom would have been FORCED to burn through her assets and go onto Medicaid & into one of their facilities which are often rated subpar.
    Unfortunately, since age is such a strong influence at the time of purchasing LTC insurance, she did not have LIFE -TIME coverage. By the time she needed a secure ALZ. facility she had maxed out her insurance coverage and was forced to use her private funds going forward. Good news was the LTC had enabled her to preserve her resources. By the time she entered skilled-nursing facility she paid a $7,800 per month bill which certainly would not have been possible had we not had at least 5-6 years of the bills being paid by her LTC insurance. As it was, she nearly burned threw all of her private funds after losing an 11 + year battle fighting ALZ.
    Our families experience and education from those experiences are not rare nor are they unique. ALC insurance is very important given the huge impact of assistance costs, whenever there is a need for help with everyday living activities. The need for assistance not only arises in senior years but it can be needed after any type of trauma interrupts family lives. Without it, personal assets and personal choices are often erased. My mother was fortunate to use her LTC coverage in-full before bankruptcy swept benefits away. The future only calls for better benefits given skyrocketing costs. Where it leaves people like my husband & me after a company’s bankruptcy wipes out a great policy which was a cornerstone to a long-range financial plan, is an experience that no one should go through. In the end, we have very anemic coverage, despite having paid thousands over the years with even more being paid into our future, that predictably will not keep pace with fast rising medical and long-term care costs.

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