Most retirees will need long-term care at some point, most of the care needed is not covered by Medicare, and it cost thousands of dollars each month. It’s a problem, and long-term care insurance provides a solution. Although coverage can be expensive, there are strategies you can use to afford long-term care insurance.
Paying for Long-Term Care
Many seniors are shocked by the cost of long-term care. According to CareScout, the median monthly cost ranges from $2,167 for adult day health care to $10,646 for a private room in a nursing home. If you need a home health aide, that will cost a median amount of $6,483 a month.
This shock is often followed by another rude awakening – Medicare doesn’t cover most long-term care services. According to the Administration for Community Living, Medicare only covers long-term care if you need skilled nursing or rehabilitative services. It does not cover assistance with the Activities of Daily Living – things like eating, bathing, and dressing – that make up the majority of long-term care needs. This isn’t unique to Medicare. Long-term care often isn’t medical is nature, so health insurance doesn’t typically cover it.
Medicaid DOES cover long-term care, but first you need to meet the strict eligibility requirements. If you have resources and income that you’d like to hang on to, this might not be appealing.
Long-term care insurance provides an alternative way to pay for care. However, it can also be expensive.
How Much Is Long-Term Care Insurance?
How much you pay for long-term care insurance will depend on several factors, including your age, health status, gender and coverage amount.
According to the 2024 Long-Term Care Insurance Price Index from the American Association for Long-Term Care Insurance (AALTCI), a single 60 year-old man with a “select” health rating can buy $165,000 in level benefits for $1,200 a year. If he wants benefits that will grow 5% annually, the cost shoots up to $3,820. A single 55-year-old woman with a select health rating would pay more — $1,960 for $165,000 in level benefits and $6,800 for benefits that grow 5% yearly.
If this sounds expensive, keep in mind that long-term care is even more expensive, and most retirees will need it at some point. The good news is that there are strategies you can use to make long-term care more affordable.
Strategy #1: Purchase Coverage Early to Lock in Good Rates
Although you might be tempted to put off buying coverage to save money, this can backfire in a couple of ways. First, you might need coverage sooner than you expected. Second, buying coverage later will be more expensive. The older you are, the more you pay. If you develop health problems, you rates can go up even more.
AALTCI says that a single 55-year-old man with a select health rating can expect to pay $900 for $165,000 in level benefits, while a 65-year-old man with a select health rating can expect to pay $1,700. To secure good coverage at more affordable prices, it make sense to buy long-term care insurance in your 50s.
Strategy #2: Buy Coverage as a Couple
This strategy only works if you’re married, but if both you and your spouse need coverage, it can make financial sense to purchase it together.
A single 60-year-old male with select health would pay $1,200 a year for $165,00 in level benefits, and a woman in the same situation would pay $1,960. That’s a total of $3,160. However, a couple would only pay $2,550 for $165,000 in level benefits.
Strategy #3: Buy a Hybrid Life Insurance Policy
A hybrid life insurance policy is a life insurance policy that also provides long-term care insurance benefits.
A hybrid life insurance policy can be MORE expensive than a long-term care insurance policy, so if you’re trying to save money on premiums, this is not the solution. However, a hybrid policy may make sense if you need both long-term care insurance and life insurance. Some seniors like this option because they don’t have to worry about their long-term insurance going to waste. If they never need long-term care, the policy will pay out to their beneficiaries when they pass away.
Strategy #4: Use an HSA
If you have an HSA, you can use it to pay for your long-term care insurance premiums. This is a smart way to make your money stretch further by using pre-tax dollars. However, to avoid penalties, you need to make sure you’re following IRS rules. The long-term care insurance policy must meet certain requirements to be considered qualified. Additionally, the amount of qualified long-term care premiums is limited based on your age. See IRS Publication 502 for details.
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