Most of us spend our careers focused on our clients and patients today, while building our practices with an eye on the future toward retirement tomorrow. But, as we plan for retirement, we may tend to overlook the “crack in the nest egg”—our own need for long-term care.

Americans are living longer now than ever before. That’s not to say that all of these extra years are better; there are just more of them. As we live longer, the chance that we’ll need some sort of assistance grows by the year. Indeed, up to 70% of senior citizens will require long-term care services at some point in their lives.1

But what are those services? And who will pay for them?

Most Americans simply don’t think about it. Only about one-third of people surveyed believe that they will need long-term care in the future.2 The fact is that, according to the U.S. Department of Health and Human Services, more than two-thirds of all Americans will require some form of long-term care. About 9 million Americans over the age of 65 will need long-term care services this year. By 2020, that number will increase to 12 million.1

 Facts and Statistics on Long-Term Care
• About 70% percent of individuals over age 65 will require at least some type of long-term care services during their lifetime. More than 40% will need care in a nursing home for some period of time.1

• While about one-third of 65-year-olds may never need long-term care services, 20% of them will need care for more than five years. Women need care for longer (on average 3.7 years) than do men (on average 2.2 years).1

• In 2004, there were more than 44 million caregivers age 18 or older in the United States—about 21% of the adult population—providing care for an adult family member or friend. Approximately 60% of caregivers are women. Thirteen percent of caregivers caring for older adults are themselves age 65 or over. The typical caregiver is a 46-year-old woman, married and employed, who is caring for her widowed mother who does not live with her.1

• A 2006 study of caregivers found that they average 21 hours a week giving care. Half of them have intensive caregiving responsibilities, performing at least one activity of daily living, such as bathing or feeding, for their care recipients. Twenty-six percent perform three or more of these activities. Eighty percent of caregivers perform such activities as fixing meals, doing housework, and providing transportation to medical appointments.1

• Long-term care is expensive. One year of care in a nursing home costs more than $68,000 for a semi-private room, based on the 2008 national average. One year of care at home, with periodic personal care help from a home health aide (the average is about three times a week), costs almost $18,000 a year.1

• More than eight in 10 (85%) of Americans surveyed understand that long-term care could be the result of a variety of causes, such as Alzheimer’s disease, an accident, or a chronic or disabling condition.2

• Only one-third (34%) of Americans surveyed realize that health insurance, disability insurance or Medicare will not pay for expenses associated with long-term care. Similarly, a large number of caregivers (76%) are unaware which insurance or programs pay for long-term care.2

• Only 18% of Americans surveyed know that long-term care insurance rates are primarily based on age. But, almost nine in 10 (87%) are aware that a comprehensive long-term care insurance policy covers care at home, in an assisted living facility, and in a nursing home.2

What Is Long-Term Care?
What exactly is long-term care? This is non-skilled personal care assistance that is usually custodial in nature. The goal of long-term care services is to help individuals maximize their independence and ability to function at a time when they are unable to be fully independent.

While there is a diagnosis involved in these cases, there is no positive prognosis. Instead, “long-term care” is when the patient is in need of assistance with two or more activities of daily living, or ADLs. These activities include bathing, dressing, eating, toileting, caring for incontinence, and transferring (from bed to chair, for example). The only time when these are not quantified for long-term care is when the patient has some form of cognitive impairment or dementia.

Types of Assistance
When thinking about long-term care, most people first think of nursing homes. Actually, this is the last level of care that we should be thinking about. Most people would agree that we would all like to stay in our own homes as long as possible. Care in the home falls under the category of home health care. Indeed, most long-term care is provided in the home.

When this becomes impractical for part of the waking hours, adult day care would be the next option. If this proves impractical but a nursing home is more than is necessary and some level of independence is desired for at least one partner, then assisted living is the next option.

Finally, full-time residence in a nursing home is the last option when no other is available.

Paying for Care
Many people believe that Medicare will pay for long-term care. The fact is, however, that it almost never pays for custodial care. To qualify for any nursing home care under Medicare, the patient has to spend at least three days in the hospital, and then be transferred to the nursing home with a diagnosis and a positive prognosis.

Medicare usually stops paying when the patient is either stabilized, moved home, or exhausts the maximum of 100 days of nursing home care.

Some people qualify for Medicaid, but Medicaid has strict limits on the financial situation of the recipient, such as income, total assets and equity in a home. Also, Medicaid patients are limited to the facilities that are available to them.

To be clear, there are those who will be able to pay for long-term care from current assets and income. They are, in essence, self-insuring in the amount of $5,000 to $6,500 per month in today’s dollars. In 10 years, that could be $9,000 to $12,000 every month. Not everyone can add this level of expense to the family and not have it negatively impact others. For those who can absorb this level of expense without worrying about outliving their retirement assets, purchasing long-term care insurance may not be necessary.

Not many of us will be able to afford that, though. That’s why it’s important to plan now. Planning includes both how to pay for long-term care (such as purchasing a long-term care insurance policy) and finding out what long-term care services are available and where to obtain them.

Plan Design
There are some decisions to make regarding how to put together a long-term care insurance plan, with several basic items and a couple of options:

• Daily or monthly benefit—the amount the policy will pay.
• Elimination period—how long you can pay for care before the policy starts to pay.
• Benefit period—how long one would want the plan to pay benefits.
• Inflation protection—how fast, if at all, you would want the benefits to grow over time.

Long-term care policies tend to have few optional benefits. Many offer spouses the ability to share benefits, which allows the two to share in each other’s benefits. One other option is to waive the Elimination Period in the case of care being provided at home.

The Cost of Waiting
When should someone consider buying long-term care coverage? The obvious answer is before it is needed. Consider the fact that the younger one starts a long-term care policy, the lower the premiums will be and the less the total premiums to age 80 will be. For example, a 45-year-old person will have a total premium outlay for the next 35 years that is greater than a 55-year-old person would have over the following 25 years.

Also, many plans have the ability to be paid up at age 65, which might be affordable if started at age 45, yet would be nearly prohibitive if started at age 55. For example, one leading carrier charges $2,295 annually for an adequate plan at age 45, but at age 55, comparable coverage would cost $4,299—or over $27,000 more to age 80. However, if someone wanted to shorten the premium-paying period and have a plan that was totally paid for by normal retirement age, the 45-year-old could have the same coverage for a premium of $4,223 and be done paying premiums at age 65.

Also, there may be tax advantages for buying long-term care coverage, either individually or as an employee benefit plan. Check with your tax professional for advice that would apply to your particular situation.

Where to Begin
When considering long-term care insurance, look for a long-term care specialist, preferably a broker offering more than one or two companies. Consider the broker’s training, educational credentials and commitment to help you solve your long-term care needs.

Here’s a tip: Does the insurance broker talk first about a plan or a product? If he or she is interested in a plan, you’re dealing with a professional. If the person focuses first on a product and price, consider getting another opinion.

The sooner you begin, the sooner you can avoid a potential “crack in your nest egg” and preserve the assets you have taken a career to accumulate for your retirement.

For more information, contact the authors or your local insurance broker. Dr. Gay is a practice management consultant in Denver. He can be reached at Mr. Soule is independent insurance broker in Denver. He can be reached at

1. National Clearinghouse for Long-Term Care Information. U.S. Department of Health and Human Services. Available at: Long_Term_Care/Basics/Basics.aspx (accessed October 20, 2009).
2. MetLife Mature Market Institute. MetLife Long Term Care IQ Survey: Removing Myths, Reinforcing Realities. September 2009. Available at: (accessed October 20, 2009).