Good, bad and ugly of short-term care plans

Americans would like nothing more than to live in their own homes in their old age. Can short-term care insurance help them do it?

The plans have a good, bad and ugly side worthy of a Clint Eastwood movie and require a squinty-eyed analysis to gauge their value.

On the plus side, “short-term care plans fill the need for those who want some protection, but are too old, too unhealthy or cannot afford long-term care insurance,” says Jesse Slome, director of the American Association for Long-Term Care Insurance. The downside is short-term policies only cover care for one year or less, limiting how much they pay out per day or week.

Although the policies are more affordable than long-term care insurance, you also get less for your money. For example, a short-term care policy in Illinois covering $1,050 of home care a week for up to 52 weeks would cost a 65-year-old woman $63 a month, according to AALTCI. If that same policy also covers nursing homes, the cost is $125 per month, but that care is considered a separate benefit that pays only up to $200 per day for 365 days after a 100-day waiting period.

By comparison, a long-term care policy would cost that same applicant $175 a month if she is in good health or $258 a month if she has some health conditions and pay for roughly three years of care at home or 18 months in a facility, after a similar waiting period.

The good. Short-term care plans do have one big benefit: “People will have an easier time getting insured,” Slome says. The policies accept applicants at much older ages than long-term care insurance, potentially up to age 89, and have simpler medical underwriting.

The bad. Those advantages aren’t enough to convince Skip Skolnik, founder of Skolnik Retirement Solutions in Elyria, Ohio, that the policies are worth getting when the median annual cost of a private room in a nursing home is a little over $100,000 and a home health aide is more than half that amount. “It’s like trying to cover a gaping wound with a Band-Aid,” he says.

People with more limited assets typically qualify for Medicaid and don’t need extra private insurance, he adds. Even Medicare will cover short-term care at home and in a facility in some situations. As a result, you may already have a chunk of this shortterm need covered.

The ugly. Short-term care policies aren’t easy to find. A number of states, including California, Florida, Massachusetts and New York, ban the policies from their insurance markets in part because the benefits are considered too skimpy.

Even if you live in a state where shortterm care plans are sold, most insurers don’t want to deal with them. Only some insurers — Aetna, Medico and Standard Life, for example — offer short-term care policies, Slome says; his association’s website (aaltci.org/stc) can refer you to others.

In addition, he says, “there are very few agents versed in these policies.”

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