What Is Long-Term Care?

Among the unsettling things to contemplate is a time in life when you may need help with even the most basic tasks. According to the U.S. Department of Health and Human Services , more than half of adults turning 65 will develop a disability severe enough to require long-term care. The average lifetime cost of that care is $138,000.

Long-term care is a range of services helping people with what are called basic activities of daily living:

• Eating
• Bathing
• Dressing
• Using the toilet
• Continence care
• Transferring to or from a bed or chair

Long-term home care may also include help with housework, grocery shopping, meal preparation, medications, money management, and other tasks. Friends, relatives, or a home health aide may provide these services at home. Alternatively, personal long-term care can be provided in the community through adult day care, assisted living, or a skilled nursing facility. 

You may need long-term care if you have a disability, chronic condition, or cognitive impairment such as dementia. Women are more likely than men to need nursing care and to need it longer: 3.7 years versus 2.2 years, according to the Administration on Aging (because women live longer on average than men and have higher rates of long-term health problems ).

Average annual long-term care costs vary by region but are generally very high. They can range from $17,900 for adult day care to $45,800 for assisted living and $91,300 for skilled nursing care, according to a Bipartisan Policy Center report from 2017. Because health insurance and Medicare do not cover long-term care, more than half of those who need it pay out of pocket.

What Is Long-Term Care (LTC) Insurance?

Long-term care insurance provides nursing home care, home health care, and personal or adult day care for people age 65 or older, or those with a chronic or disabling condition requiring constant supervision. LTC insurance offers more flexibility and choices than many public assistance programs, such as Medicaid.

In 2020, for example, the average annual cost of a private room in a skilled nursing facility or nursing home was $105,850, according to Genworth's long-term care report. A home health aide then cost an average of $54,912 annually (reference 1).

In the United States, Medicaid supports low-income individuals or those without savings. Eligibility requirements differ by state (ref. 2).

Tips for Retiring Without Long-Term Care Insurance

Long-term care insurance generally covers all or part of assisted living and home care. Medicaid rarely does. Comprehensive home care coverage is an LTC insurance option. It covers a visiting or live-in caregiver, companion, housekeeper, therapist, or private nurse up to seven days a week, 24 hours a day, up to the policy's maximum benefit (ref. 3).

Most long-term care policies cover only a specified dollar amount for each day in a nursing facility or each home care visit. Read the fine print carefully and compare benefits to determine which policy best meets your needs.

Some Points to Consider

• Many experts suggest buying long-term care insurance between ages 45 and 55 as part of an overall retirement plan to protect assets from the high costs and burdens of extended healthcare. Buying earlier is also less expensive. In 2020, the average annual premium for a couple both age 55 was $3,050, according to the American Association for Long-Term Care Insurance (refs. 4 and 5).
• Long-term care premiums may be tax-deductible if the policy is tax-qualified and the policyholder itemizes tax deductions, among other factors. Businesses paying LTC premiums for an employee can generally deduct them as business expenses (ref. 6).
• Although premiums may be lower when you buy younger, you will pay for coverage many years before you are likely to need it. Weigh your options carefully.
• Because this product is expensive, several alternative ways to pay for healthcare needs later in lifehave emerged. They include critical illness insurance and annuities with long-term care riders. Consider what makes the most sense for your family, especially if you are a couple with a significant age or health difference that could affect your future.
• If you do not have a financial advisor, this may be a reason to hire one specializing in eldercare issues to work through these questions with you. 

If you already recognize that you will face a time when long-term care is needed, it makes sense to do everything possible to shape your future rather than leave it to family members during a health emergency.

Sources and References

1. Genworth. “ Cost of Care Trends & Insights, 2020 .” Accessed September 13, 2021.
2. Administration for Community Living, ACL.gov. " Financial Requirements—Assets ." Accessed September 13, 2021.
3. Haven Life. “ What Is Long-Term Care Insurance, What Does It Cover, and Is It Right for You? Accessed September 13, 2021.
4. American Association for Long-Term Care Insurance. “ 2020 Long-Term Care Insurance Price Index Released for Age 55 .” Accessed September 13, 2021. 
5. American Association for Long-Term Care Insurance. “ 2021 Long-Term Care Insurance Price Index—for Age 55 .” Accessed September 13, 2021.
6. American Association for Long-Term Care Insurance. “ Long-Term Care Insurance Tax Deductibility Rules—LTC Tax Rules .” Accessed September 13, 2021.