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Here’s the odd thing: people are living a long time; average life expectancy is nearly 80 years in the US. I like that number, but another one truly catches the eye: over 70% of us will require long-term healthcare (LTC) in our old age.  Unfortunately, there is a long-term healthcare crisis in America.

Snapshot

Long-term care (LTC) lasts an average of three years. It can take place at home, the preferred option for people, in a nursing home, private or otherwise, or in treatment facilities of various shades.

A private nursing home room costs around $9,000 per month. No matter where you receive treatment, the price is high, topping $100,000/year. It’s hard to pay without government help or powerful insurance coverage, or my favorite – both.

Taking Action

President Joe Biden. However you rate him – good, bad or mysterious – at least he’s extending a hand. How powerful his arm, or slippery his grip, is up for grabs. Whatever the case, he’s committing $400 billion over ten years to fund long-term healthcare costs. Advocacy groups seem thrilled, unbelieving that instead of just warbling, the government is acting.

Let me spoil the party with a caveat: it’s baby’s first step. That tower of greenbacks will be poured into Medicaid with two key aims: raising the paltry salaries of care workers, and supporting care at home and in community health centers. Nursing homes, an important venue for long-term care, are left out of this funding boost. Spending may reach the stratosphere, but expect it to rise higher

The homecare focus is good, too, because it’s what the people want:  riders that cover homecare in conjunction with  long-term health insurance policies. The government’s picking up our vibrations; baby steps, baby.

The only cause for pause is the program’s cost.  Forty billion dollars per year just nudges the ice flow: most long-term care costs are still unaddressed. No matter what uncles Sammy and Joe might promise, we’re still on our own: we’ll have to insure, go it alone.

Insurance

Insurers now have policies that pay homecare benefits equal to those traditionally offered to cover nursing home costs. In 2019, these products comprised over 96% of the long-term care policies sold and their popularity is easy to see: a home’s very walls are healing. 

Standalone LTC policies cost around $3,000 annually. Customers should buy policies with a cost-of-living adjustment to keep inflation at bay. I recommend a COLA rider for younger people because they face a long road to retirement. It can be expensive, but it’s money well spent. When ruing death and taxes, the ancients forgot crass inflation.

Standalone policies have one weakness: if you pass away before using the benefits, the policy cost is sunk: they offer no death benefit or cash component. Hybrid life policies are an alternative: you can withdraw accelerated benefits to cover LTC costs, generally up to $6,000/month. Total withdrawals reduce the death benefit by that amount.

Insurers have many products to meet the cost of LTC: annuities with long-term-care riders; short-term care insurance, an economical way to provide daily benefits; critical care policies that pay lump sums or regular payouts.

I’m glad the government is moving to ease the long-term healthcare crisis in America. Yet I always trust insurers over politicians: if they fail, they don’t eat. I’m forced to point out, the same goes for you – so get yourself going.