Americans would love nothing more than to live in their own homes in their old age. Can short-term care insurance help them do that? The shots have a good, a bad, and a bad side worthy of a Clint Eastwood movie, and require sleazy analysis to gauge their worth.
On the positive side, “short-term care plans meet the needs of those who want some protection, but are too old, in poor health, or cannot afford long-term care insurance” , said Jesse Slome, director of the American Association for Long Term Care Insurance. The downside is that short-term policies only cover care for a year or less, which limits how much they pay per day or per week.
Although the policies are more affordable than long term care insurance, you also get less for your money. For example, an Illinois acute care policy covering $1,050 of home care per week for up to 52 weeks would cost a 65-year-old woman $63 per month, according to the AALTCI. If that same policy also covers nursing homes, the cost is $125 per month, but nursing homes are considered a separate benefit that only pays up to $200 per day for 365 days after a waiting period of 100 days. By comparison, a long-term care policy would cost that same applicant $175 per month if healthy or $258 per month if ill and pays for about three years of home care or 18 months in a facility, after a similar waiting period.
Short-term care plans have one big upside, though: “People will find it easier to get insurance,” says Slome, adding, “It’s a great planning option for those who just want a Home Care”. The policies accept applicants at a much older age than long-term care insurance, potentially up to age 89, and have simpler medical underwriting. To screen applicants, the apps primarily use yes-or-no health questions, such as “Have you had a heart attack in the past 24 months?” or “Do you currently use a walker?”
For women, unisex pricing is particularly attractive, whereas long-term care insurance policies typically charge women 40% more because their average number of claims is higher, Slome says.
These benefits aren’t enough to convince Skip Skolnik, founder of Skolnik Retirement Solutions in Elyria, Ohio, that policies are worth buying when the median annual cost of a private room in a retirement home is a little more than $100,000 and a home health aide is more than half that amount. “It’s like trying to cover a gaping wound with a bandage,” he says. Someone with financial assets of $200,000 or more “could cover the costs themselves for a few months,” he says. “The real risk is a need that lasts for years.” People with more limited assets generally qualify for Medicaid and don’t need additional private insurance, he adds.
Even Medicare will cover acute care at home and in a facility in certain situations. For example, if you need home care to recover from a specific injury or illness, Medicare will pay for a home health aide for up to 60 days and may even extend that time if care is deemed medically required. Therefore, you may have already covered part of this short-term need.
The ugly one
Acute care policies are not easy to find. A number of states, including California, Florida, Massachusetts and New York, ban policies from their insurance markets in part because the benefits are considered too meager. Even if you live in a state where acute care plans are sold, most insurers don’t want to deal with it. “Acute care isn’t on anyone’s radar,” says Patrick Simasko, an elder law attorney with Simasko Law in Mount Clemens, Michigan.
Only certain insurers — Aetna, Medico and Standard Life, for example — offer short-term care policies, Slome says; his association website can refer you to others. Moreover, he says, “there are very few officers versed in these policies.” Since most people considering acute care have health issues, Slome recommends using an agent who understands this type of insurance and how to buy it.
Someone who can afford and qualify for more generous long-term care coverage would probably be better off getting it instead, but despite their limitations, short-term policies serve a purpose, Slome says. “Most people don’t have anything for this type of coverage. A year is better than nothing.”