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7 Things to Understand About Long-Term Care
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BY ANN MARSH
FEB 26, 2015
3:55pm ET


Payouts from insurance companies for U.S. long-term care coverage hit $7.85 billion last year, an increase of 5% over the prior year, according to a new report by the American Association for Long Term Care.

But some professionals worry that many planners are falling short when it comes to advising on LTC coverage. Both Jesse Slome, the association's director, and insurance agent and expert Romeo Raabe, who bills himself as "the long-term care guy" of Green Bay, Wisc., offer up a few facts, forecasts and trends they think advisors should pay attention to.

1. Payouts are likely to rise.

"The nation's long-term care insurers expect to pay $15 billion annually a decade from now, in 2023," says Jesse Slome, the association's director -- "and more than twice that amount, or $34 billion, in 2032, when today's 60-year-olds reach their 80s."

That would be a roughly fourfold increase in covered expenditures over less than two decades, Slome points out.

2. Where the money goes might surprise you.

The bulk of the payouts made by insurers go to cover care that enabled people to stay in their own residences or in assisted living communities, and not for skilled nursing homes, Slome says: "Consider long-term care insurance as nursing home avoidance protection."

Costs & Benefits: Nursing Homes vs. Home Care
3. People will live longer than they think -- and will need help.

"People underestimate life expectancy," Slome says. "Few adults in their 50s or 60s are prepared for the financial consequences of their longevity." Almost 70% of people turning 65 will need some long-term care in their lives, according to the U.S. Department of Health and Human Services.

4. But clients may need less care than they think.

The biggest issue that keeps more people from buying needed coverage is their belief that they need to pay more for them than they really do, say both Slome and Raabe.

Many clients won't think of buying a policy if they can't afford more than three years of coverage, when that time span might do the trick, says Raabe, who counsels advisors on insurance planning. But "for a lot people, three years of care may be sufficient."

5. Partial coverage might be enough.

Raabe says he sometimes helps clients figure out how to use partial coverage effectively.

He cites a relatively modest example of $5,000 in monthly care costs, and suggests that a client might be able to allocate $2,500 a month -- say, $1,500 from investments and $1,000 from other income -- toward that care, leaving only $2,500 a month to cover with an insurance plan. That smaller payout might be more manageable, he says. "There might be only a $3,800 or $4,000 premium a year for that," Raabe says. "There's no reason for them to buy $5,000 worth of coverage, [if] they don't need so much."

6. Have the conversation with your family

Conversations about losing loved ones either now or in the future are difficult, but actress Angela Bassett said "they can be had" as long as they have compassion.

Indeed, the "Olympus Has Fallen" star spoke to ABC News for an initiative close to her heart called Let's Talk Now, created by Genworth. The idea is not to be afraid to have the conversation now with loved ones about long-term care and planning.

Bassett, 56, had to deal with different long-term care situations involving both her mother, Betty Jane, who died last year, and mother-in-law, who was diagnosed with ALS and is now living with her family.

"I know the importance of it," she said of having the discussion with your kids or other loved ones. "It's absolutely something we are each going to deal with, our parents as well as ourselves, one day."

Bassett, who has two children with her husband, actor Courtney B. Vance, said the important thing when discussing such issues is only bringing up what people can handle for their ages.

"We have their grandmother living with us, they get to see that up close and it's just another part of life," she said. "It's unfortunate, but what we need to do is put a plan in place. ... So that she can continue to live in comfort to the best of her ability and to what her desires would be. It's something I wasn't able to do with my mother but, fortunately, I had the resources to care for her."

The "American Horror Story" star said that while caring for her mother and mother-in-law, she discovered that nursing homes and assisted-living facilities can be upward of $100,000 a year.

"Start the conversation early before you're in a desperate situation," she said. "The truth is my mother wanted to go to assisted living. My mother-in-law, she did not want to do that. These are your loved ones, this will eventually be you in this situation. You have to think about this."

As for Bassett herself, the general consensus in Hollywood is that she simply does not age. She cites staying away from processed foods and sugars and just learning more about what serves her body as she grows and learns over the years.

"More and more water," she said. "And exercise is good for you. A positive mental outlook is good for you, having a spiritual base and being grateful is good for you. Having a purpose in life, that's good for you."

7. Jim Boyer, Sr. Benefits Advisor helps you plan:

Raabe argues that long-term care coverage is still not playing a sufficient role in planners' work with their clients.

"Advisors need to remember that they can create a huge nest egg for a client only to have it go away in a couple of years because of a health problem," Raabe says. "Advisors need to ask clients if are going to mind a bill of $100,000 or $200,000 a year for a nursing home."