Your Future Protected: Considerations for Long-Term and Short-Term Care for Americans 50 and Older

(BPT) - When planning for the future, security and peace of mind are likely top of mind, particularly for Americans age 50 and older. There are many considerations — from income planning for retirement, to considering potential healthcare needs, to getting one’s personal affairs in place. As you and your loved ones prepare for both expected and unforeseen events, you may want to add a long-term and short-term care strategy to your list to ensure your bases are covered for future care you may need as a result of the aging process.

Here are some key considerations for long-term and short-term care coverage to help you determine how to best protect your and your family’s future.

Understanding long-term and short-term care

Long-term care – 70 percent of individuals over the age of 65 will need some type of long-term care services in their lifetime.

Long-term care insurance provides you with coverage for services that can help you meet non-medical care needs (such as bathing, dressing, and transferring) if age, injury, illness, disability or a severe cognitive impairment affect your ability to take care of those needs yourself. Long-term care coverage includes a variety of care options, ranging from home care, assisted living, adult daycare, and nursing home care, depending on the type of assistance needed. Some policies also cover informal care, which is care provided by a friend or family member. Coverage can be tailored to each individual and even a smaller policy provides access to valuable benefits to help address a long-term care need. Long-term care insurance generally covers care for longer periods of time, with common benefit periods ranging between two and seven years.

When thinking about how to receive long-term care, individuals may plan to rely on family, Medicare or Medicaid, self-insuring or purchasing a long-term care insurance policy.

In 2018, nursing home costs averaged more than $91,000 a year nationally, according to a 2018 Cost of Care study from New York Life. Most Americans would quickly deplete their retirement savings if they needed care for an extended period. Even if you can afford to pay for long-term care services out-of-pocket, consider the benefits of sharing the risk and costs by having a strategy in place.

Long-term care coverage options have evolved to meet most any need and cost range. Plans can be personalized to suit your budget and discounts may be available to partners and spouses. You don’t need to cover the entire cost of a long-term care event to reap the benefits of having a policy. Even a small policy can help reduce the financial and emotional burden of a long-term care event and provide access to valuable features and benefits.

Short-term care – Short-term care options provide coverage for up to a maximum of 360 days for five types of care, including home health, adult daycare, assisted living facility care, nursing home care, and hospice care. It does not cover informal care.

Short-term care coverage can be used to help with recovery costs from an illness or injury, or to transition from living independently to receiving assisted care at home or in a facility. It also provides benefits for individuals who suffer from a cognitive impairment, including confusion, poor motor coordination, loss of short-term or long-term memory, identity confusion, or impaired judgment.

This type of coverage:

  • allows you to switch among facilities if your circumstances change and you require more or less care;
  • can help cover the cost of different types of care for up to 360 days; and
  • requires a board-certified physician statement to receive benefits.

Short-term care plans can be customized by benefit duration, benefit amount, and elimination period to meet your specific needs. You can set the number of days covered in your plan and the daily amount of coverage you think you will need to find a premium that works for your budget.

Review the differences between coverage periods for short-term and long-term care

The main differences between short-term and long-term care are coverage duration, waiting period, and benefit amount. Short-term care usually has a shorter benefit period and a smaller benefit amount. Waiting periods for both long-term care and short-term care plans can vary. Most short-term care plans have no waiting period. When it comes to long-term plans, there may be a longer waiting period or none at all depending on the plan.

Short-term care options can complement long-term care options particularly for individuals age 50 and over. Short-term care coverage can also be used as a fallback option if someone is uninsurable for long-term care, as short-term care is generally easier to qualify for based on your health. Long-term and short-term care options can also help cover expenses not paid by Medicare or supplemental insurance coverage.

Assess potential gaps in long-term and short-term care coverage provided by Medicare

Long-term care – Surprising to many, long-term care is not generally covered by health insurance or government programs, but many people do not discover this until they, or a loved one, needs care. The benefits of long-term care options go beyond what your health insurance may cover by reimbursing you for services needed to help you maintain your lifestyle if age, injury, illness, or a severe cognitive impairment makes it challenging for you to take care of yourself. Medicare is designed to assist people during short-term recovery and may cover a maximum of 100 days of services after a hospital stay.

Short-term care Medicare provides benefits for 100 days of skilled nursing care, but you must be hospitalized to be eligible for them. Medicare pays 100 percent for up to 20 days, but you will be responsible for an out-of-pocket copay for days 21 to 100.

Consider timing for making decisions on long-term and short-term care coverage

Because you never know when your need for care will arise, it is recommended that you consider long-term care insurance options when you are younger and healthier and more likely to be insurable, as insurability can change at any time and premiums tend to be lower at younger ages (underwriting is required). It can also help provide you with financial resilience and peace of mind in retirement, knowing you have coverage in place that can help fund long-term care, if needed, without sacrificing other retirement assets. It is important to talk to your loved ones about how you would like to address both short-term and long-term care events.

Getting information from trusted sources is important as you make decisions, and AARP Member Benefits is an online resource for Americans 50 and older with information on benefits for AARP members. It provides information about long-term care options and short-term care options that can be a helpful resource and part of discussions about planning for retirement and your future. AARP members can access information at: https://www.aarp.org/benefits-discounts/healthcare/.