If you haven’t stopped to think about whether you’ll need to be taken care of when you are very old or how you’d pay for it, believe me, you are not alone.
But, if you are a woman, this is a question you cannot afford to avoid.
As Dr. Atul Gawande explains in his book, Being Mortal, “increasingly large numbers of us get to live out a full life span and die of old age.” Because of this, we live for longer periods of time needing help with basic life activities, like bathing, eating, and dressing.
What needs to be emphasized here, though, is that this is much more true for women than men. Women live longer and are more likely to need care at the end of their lives as a result.
Research shows that, over a quarter of ALL WOMEN who turned 65 ten years ago will live into their old age needing a moderate amount of help for more than five years. Help with stuff we do by ourselves now without even thinking; like bathing, preparing meals, eating those meals, and simply getting around our homes and communities.
What’s shocking is that men face this risk about 10 percent of the time. Just consider that difference — about 10 percent compared to about 25 percent. Wow.
If you’ve taken care of your parents or grandparents, you know that this kind of need can be a huge financial drain. It’s very expensive to pay for day-to-day, ongoing help – whether at home (roughly $20/hour) or in an assisted living facility (roughly $40,000/year).
Because of this expense, and because there is often no way to pay for it — a huge burden for providing the actual day-to-day care falls on….the daughter.
Women are much more likely to provide this type of care in one phase of their life and need this type of care in another.
One of the most common questions I get from women who are unexpectedly taking care of their parents is this: “What can I do so that my children don’t go through what I am going through?”
My answer is that there are insurance products out there that specifically cover what we call “long-term care” – these daily needs I’ve been talking about. But the problem is that this insurance falls far short of providing the protection we need at a price we can afford.
It’s not that these products don’t provide a much-needed source of funding. Research shows that people whose parents are covered by long-term care insurance do get significant help.
But, unfortunately, this insurance is not the slam-dunk we need it to be. For one thing premiums are quite high; they can run around two thousand a year if you wait until you are in your fifties to buy it (which most people do). The products are hard to understand and have a lot of limitations on the amount and types of care they cover.
These problems lead many people to believe that they’d be better off just saving for their long-term care needs OR, they believe there’s a government program that will pay.
But, these are HUGE myths. This is magical thinking and we need to abandon it so that we can really grapple with the much greater risk we face as women.
So, let’s start by looking at this risk with open eyes and realistic expectations – let’s grab the scary, heart-pumping possibilities of our old age, pull them out of the dark and examine them together in the cold light of day.
The first step is to stop believing the THREE most damaging and pervasive myths about paying for long-term care.
Myth Number 1: I Can Save Enough.
I am going to say two things that will seem contradictory. One, adequate retirement savings are essential for helping with long-term care costs. Two, retirement savings are not a substitute for insurance. Savings are essential but not adequate. Here’s why.
First, insurance is all about sharing the risk with other people. You make a trade-off that the premiums you pay go into a big pool — never to return to you again — in order to pay for the people who experience the actual event (e.g., house fire, car accident, theft). But, in return, if you are one of those people, you get MUCH MORE money to cover the event than you paid into the pool or than you could have reasonably saved.
That’s how long-term care insurance works too. One recent study showed that you’d have to set aside $1,666 per month from age 60 to 82 to save up to get the same level of protection you’d get from a $188 per month long-term care insurance premium.
Second, if you are among the small group that ends up needing a high level care for more than 5 years, the costs can be truly catastrophic. We are talking hundreds of thousands, if not millions of dollars. There’s no saving for this kind of risk.
Myth Number 2: There’s a Government Program that Pays for This
You look at your pay stub every month and see the taxes you pay for government programs that have to do with getting old: Social Security and Medicare. So, surely these are the programs you can count on when you need long-term care, right?
NO, NO, a thousand times no.
And, as I pointed out in my last blog, Medicare will pay for some home health and skilled nursing facility care, but generally, Medicare is an insurance program for the “medical care” you’ll need when you are old, not for long-term care such as assisted living or help with basic daily care activities.
But, wait, if Medicare doesn’t pay, isn’t there another program for when you run out of money, a welfare program that will take care of you?
Well, yes and no. There is a program, called Medicaid (not to be confused with Medicare), that pays for nursing home care for anyone who is disabled and poor enough. But, it absolutely does not guarantee payment for home care or for assisted living or for adult day care or for any of the services you might actually want from the people and places you might actually want to hire.
So, yes, if you are good with your only guarantee for care being a nursing home — after you’ve exhausted all of your money and your family’s physical and emotional reserves then, sure. You’re covered. But otherwise…..
NO, NO, a thousand times no.
Myth Number 3: Long-Term Care Insurance is Just Like Health Insurance
At this point, you may decide to stop reading, fix yourself a cocktail, and put all this scary stuff out of your mind.
OR, maybe you are now running screaming to the nearest insurance agent to buy long-term care insurance.
If you are considering buying this insurance or just trying to navigate your parent’s policy, understandably, you’re probably thinking of it like health insurance — which we’re used to buying and then, within limits, being able to walk into a doctor’s office and have the visit covered. The insurance pays when you use the service.
Long-term care insurance does not work this way.
Long-term care insurance only pays after the insurance company determines that you have a severe need for long-term care — which is also called a “benefit trigger”. The benefit is “triggered” when you are unable to do two of six of the most basic of daily activities without another person’s help OR have severe cognitive impairment. If you move into assisted living and you don’t meet the benefit trigger, the insurance won’t pay.
Also, the insurance only pays a limited amount per day for a limited period of time – and the insurers will only let you use the money to pay certain providers. So, even if you meet the benefit trigger, you still might not be able to use your insurance in assisted living if you move into a place that doesn’t meet the insurance company’s qualifications.
There’s a lot more I want to tell you about long-term care insurance so stay tuned for the next blog. But, it’s enough for now to just know that what’s available is not like any other insurance you’re used to and it’s not cheap.
And, again, there are no easy answers here. There’s no sure-fire solution to make sure you have the protection you need. But, having the facts will help you make the best decision for you and your parents. That’s all you can do. And, remember…by, definition, then, it is enough.