Welcome to second story in our three-part series on Long-Term Care Service and Support.  Our first installment outlined the government-sponsored programs.  Now we will discuss the new variations of private pay options for you to consider. The last in this series is a great tool for you to calculate your own LTCSS potential costs and research on what consumers are thinking and doing today.

Health care costs a lot of money during retirement, and long-term care can be expensive too. In 2023, a single person aged 65 might need to save about $157,500 to cover health care costs in retirement. A retired couple might need about $315,000. On top of that, long-term care, like living in a nursing home, can cost over $116,000 per year. Most people need long-term care for about 3 years, and 7 out of 10 people will need it at some point. To pay for long-term care, people can use their own savings, insurance, or government help.

Long-Term and Short-Term and Hybrid Plans, Oh My!

If you turn 65 today, you have a 70% chance of needing long-term care (LTC) as you get older. But did you know that Medicare only covers about 10% of long-term care costs? And this is only for skilled care in certain medical situations. As we learn more about the stress of caregiving, people are looking for other ways to pay for and get the care they need. There are different plans to help fill the gaps in Medicare coverage, and these plans fall into three main groups: traditional and hybrid long-term care and short-term home health care.

Traditional Long-Term Care

Traditional Long-Term Care plans help pay for care at home, in nursing homes, assisted living facilities, or adult day care centers. These are for when you have a long-term illness or condition, like Alzheimer’s. These plans give flexible options and even offer inflation protection, so your benefits grow over time.

However, most traditional LTC plans don’t lock in your rates, so your payments could go up if costs rise. Also, if you don’t use all the benefits during your life, the leftover money is not given back. For example, if you have a $100,000 policy but only use $50,000, the remaining $50,000 is lost. Men usually have lower premiums than women. The good news is these plans are tax-friendly since premiums can count as medical expense deductions. You can also use Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs) to pay for them. Just keep in mind that it can be harder to qualify for these plans if you already have health issues.

Hybrid Life

Hybrid Long-Term Care (LTC) plans offer a unique blend of security and flexibility. These plans don’t just cover care at home, in nursing homes, assisted living facilities, or adult day care centers—they also come with a powerful life insurance component. Whether you need LTC services during your lifetime or leave behind a financial legacy for your loved ones, hybrid plans guarantee payment. This means peace of mind, knowing that either you or your beneficiaries will benefit from the policy. Even better, premiums are guaranteed to stay the same while you hold the policy, providing stability and certainty in a world where costs often rise unexpectedly.

Hybrid plans also offer optional inflation protection and often include a guaranteed interest rate of 4%, making them a smart financial choice. Yes, the premiums may be higher than those of traditional LTC plans, but if you can afford them, these policies can serve a dual purpose—ensuring you get the care you need and helping you build an estate for your family. For those who want to secure their future, financially and in terms of care, hybrid plans can be an invaluable asset.

Short-Term Home Health Care

Short-term plans fill an important gap by covering temporary care needs, such as recovery after an accident or a medical procedure. These policies activate immediately, unlike Hybrid and LTC plans, which typically have a 90-day waiting period before benefits kick in. While short-term plans provide less financial support than their long-term counterparts, they are also more affordable and offer a safety net for those who cannot afford or qualify for full LTC coverage.

Short-term plans can also be a useful add-on to traditional or hybrid policies, covering the elimination period before those benefits start. For individuals needing temporary help or who want peace of mind for the first few months after an injury or illness, short-term care can be a lifesaver.

Medicare Open Enrollment Season is Here

With so many options out there, the key is to start planning now. Speak with a trusted insurance advisor or financial planner, and don’t forget to involve family members in these important decisions. The earlier you start thinking about your future care, the better prepared you will be to choose a plan that suits your needs. Take control of your future, fill the gaps in Medicare, and make sure your golden years are just that—golden.