Anthem Answers: Questions about Long-Term Care

Long-Term Care is one of the most frequently overlooked areas of a financial plan. To start a conversation, we have gathered some popular questions to reflect on. General Advice is not personal advice. We recommend contacting your financial professional to follow up on any of these questions and how they affect you and your plan.

What if I have a long-term care event?

A long-term care event could be a wrecking ball to your financial security in retirement. Not to be overly dramatic, but considering the expenses associated with this, it will cost more than just a new membership at the club. The ongoing expense can not only begin to drain your retirement funds quicker; it could also subject the accounts to greater loss in recessionary years experiencing sequence risk.

Right now, costs of long-term care hover around $5,000 per month for In-home care as a national average. Depending on location of care and the averages by state, facility care is $7,000-12,000. Considering inflation, those costs could double in the coming decades. If your current retirement projections could not support an additional service of $5,000 or more, then you may want to ask an advisor for a conversation about long-term care planning.

Another possible result from missing this planning piece is the unintended consequences. Unfortunately, avoiding the topic of needing care and the discussion of “what ifs” will pass on to family. Your spouse, children, or other family members will take on the responsibility and consequences of your chosen plan, or lack thereof. This can impact their emotional, physical, and financial livelihoods in the event you need care.

What are the risks of it happening to me?

While we don’t like to envision or fantasize about dreaded consequences, we do want to be objective and consider statistical facts. You have fire insurance on your house without planning to burn your house down. You probably don’t expect to get into a car accident every time you get in your car. You tie your shoes to protect yourself from tripping over the laces. You likely mitigate risks where possible, and that should be the same when it comes to your life and care.

For a better perspective, I’ve put the research into varying statistics for comparison’s sake.

  • Finding a four-leaf clover – 1 in 10,000
  • Having a house fire – 1 in 3,000 
  • Getting food poisoning- 1 in 6
  • Being audited by the IRS – 1 in 220

And the odds of needing long-term care are between 1 in 2 or 7 in 10, depending on the actuarial numbers from insurance research or the government statistic, respectfully.

Does Medicare cover long-term care?

Medicare is health insurance. It can cover a maximum of 100 days in a facility, but strict limits are in place making it hard to qualify for that short-term coverage. The primary eliminating factor is spending a certain amount of time admitted to a hospital and requirement of rehabilitation following said hospitalization. With the unlikeliness of meeting every requirement necessary for Medicare to step in for those 3 months, it’s a safer decision to plan without it.

What are the options for funding my long-term care plan?

While staying “high level,” there are 3 primary ways to fund the long-term care plan.

The first option is government funding through the Medicaid program. Relying on this program is an option for some individuals. It requires draining one’s assets first and the spouse’s resources in order to qualify. The facilities covered by Medicaid are standard, and limits flexibility for care.

The second is self-pay, or self-insurance, which is funding for long-term care yourself. This could look like selling your home to essentially trade the asset for payments to a long-term care facility. Or dipping into your financial and investment assets to pay out of pocket because there are ample funds available for this. Some may even begin funding a separate account specifically designated toward care. This can be a viable funding solution for those who could add an additional $5,000-$10,000 per month expense without disrupting their lifestyle.

Lastly, we have insurance which has several options within itself. One option is a straight long-term care policy. This policy will cover a level of expenses depending on the policy terms, and in the event you need care, it’s available. Another insurance option is a life insurance policy with a long-term care rider, which allows you to use the life insurance proceeds for long-term care expenses, or giving the full benefit tax-free to beneficiaries should you not need to access those dollars.

Every option is a conversation to talk through with your trusted team: your family, your financial advisor, and any other advocates. Hope is not a reliable strategy, and poor planning could have unintended consequences. Most importantly, having “no plan” is still a plan with consequences.

How Can Anthem Help Me?

We come alongside you for these types of conversations. As part of your full financial plan, this is one of the many points of conversation we ask about. We offer access to Long-Term Care Insurance options as well as education about all of the options. Most importantly, we take your entire picture into consideration for recommendations of what we think fits your situation best. If you are looking for specific advice regarding your financial situation, or the likelihood of needing long-term care, schedule a call with us.

** Past performance may not be representative of future results.  All investments are subject to loss.  Forecasts regarding the market or economy are subject to a wide range of possible outcomes.  The views presented in this market update may prove to be inaccurate for a variety of factors.  These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data.  Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.


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