The statistics are daunting: Today, some 9 million Americans over the age of 65 require some form of long-term care services, including nursing home care. By 2020, that figure will have expanded to 12 million, according to the U.S. Department of Health and Human Services.
Furthermore, the costs of this kind of care can devastate the military retiree who doesn’t plan ahead. According to the Genworth 2012 Cost of Care Survey, the average price of a semi-private room in a nursing home runs to $200 per day. That’s nearly $80,000 per year. Assisted living facilities – which don’t provide the same kind of skilled care as nursing homes do, cost an average of $3,300 per month according to the Genworth study. And although long-term care consumers saw little or no price inflation over the last year, the long term costs of long-term care have been rising at 4 to 5 percent and more each year over the last five years.
How common is the need? Very. According to the U.S. Department of Health and Human Services, you have a 70 percent chance of requiring long-term care services at some point in your life.
It doesn’t take a genius to see that these costs will overwhelm most military pensions. You don’t want everything you worked and sweated for over a 20 to 30 year military career to get routed to a nursing home for years – leaving little or nothing for your spouse other than Social Security and maybe a bit of home equity.
Medicare only provides coverage for nursing home care under very limited circumstances: They may pay for up to 100 days of care, and even then, only after a qualifying admission to a hospital lasting 3 days or longer. Only 20 days will be free under Medicare. After that, you’re going to going to have to pay a coinsurance of $128 per day for nursing home services.
After that, it’s all on you.
Obviously, a $3,300 monthly assisted living bill is going to overwhelm most military pensions, except for very senior officers. And a $200 to $250 per day nursing home bill is going to eat up any military pension. Skilled nursing facilities in some areas can top $80,000 per year.
Don’t Count on the VA
The Veterans Administration is not going to be much help for most of you. The VA does administer a variety of long-term care programs and veterans homes. But they are means-tested, and primarily serve the very poor and indigent veteran.
Long Term Care Insurance
That’s where long-term care insurance comes in. No, it’s not on your standard menu of military benefits. Everyone knows about TRICARE and the pension for 20 or more years of qualifying service. But TRICARE doesn’t cover nursing home expenses or long-term custodial care for veterans or retirees. Neither does disability income insurance or major medical insurance.
Long term care insurance, or LTCI, generally pays a daily benefit, designed to offset the cost of nursing home care. For example, you may buy a policy with a $200 per day benefit, for a period of five year. Most policies these days also provide benefits for a variety of other services along the long-term care spectrum, from in-home care and support to assisted living facilities to nursing homes to hospice care. You can also usually buy a rider, or feature, to ensure your maximum daily benefit keeps up with inflation – a significant factor when it comes to long-term care prices, as over time, they have tended to rise faster than inflation.You’ll qualify for benefits when you (or your spouse, if you buy couples coverage) lose the ability to perform at least two activities of daily living by yourself. These are usually defined as transferring, continence, toileting, dressing, bathing and eating. You can also qualify if you become diagnosed with a severe cognitive impairment, such as dementia or Alzheimer’s disease.
The Federal Long Term Care Program
Not many military are aware of it, but all members of the active component and drilling members of the National Guard and Reserve components of the armed forces qualify for the federal long term care insurance program. This allows you to buy long term care insurance via the federal government, on a simplified underwriting basis. That means that the underwriters only ask you a few basic health questions. For more information, you can download a free e-book at FederalHandbooks.com which includes definitions of what long term care insurance plans cover, tips on choosing a plan for you, and details of the federal long term care program.
Point of interest: The program will cover same-sex partners, unless you are applying as a member of the military.
Note: This isn’t like TRICARE, or SGLI when you first inprocess. You are not automatically approved for long term care insurance just for collecting a government paycheck and breathing. You have to qualify for coverage. You can’t wait until you get diagnosed with multiple sclerosis or have an accident that puts you in a wheelchair to apply and expect to get accepted. In fact, you have to be in pretty good health. It’s important to apply while you are still healthy.Alternatives
In many cases, federal benefits are heavily subsidized by the government. It’s very difficult for most life insurance companies to compete with SGLI, except for very young applicants. That’s not true of the federal long term care insurance program, though. The federal program is currently administered by the John Hancock insurance company. But John Hancock may not be the best fit given your individual and family needs. Other carriers, including New York Life, Mass Mutual, Genworth and Northwestern Mutual have very strong programs with different riders and benefit levels – though you may pay more. In fact, it may behoove you to shop around at several long term care insurance carriers, comparing premiums and benefits, before settling on a policy. If you are in the military and have a same-sex partner, and you want to obtain a policy, you will definitely have to make an end run around the federal long-term care insurance program to insure your partner.
Once you do settle on a policy, though, it’s important to keep it in force. If you miss premiums and let it lapse, you will have to pay much more per month or year when you are older, and you may not qualify at any price, if you develop a health condition.
U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Information, www.longtermcare.gov (as of 2009).