Many people reading this article are dealing with issues and topics relating to in-home care of older persons. And, in economic terms, once an individual has become of a certain age and level of infirmity, long term care insurance is impractical – if it is even available.
For those earlier in the cycle of life events, however, planning for long-term care is a prudent investment, not just to protect your assets, but to assure your personal comfort. Not all long-term care is the same. And, without insurance, your choices may be very limited.
Managing the cost of long-term can be daunting without some advance planning. In the absence of long-term care insurance, people end up relying on some combination of private financing, government benefits and personal savings. Having long-term care insurance will alleviate most if not all of the other cash sources.
Government benefits may be available, but all are means-based. This requires that the recipient must essentially be bankrupt to receive the benefits. Some families attempt to “engineer” bankruptcy by distributing assets. This fraud is carefully monitored and can lead to much more trouble than paying for the long-term care itself. Some call it “Medicare Planning”, but it must start well before (years) there is an actual need.
When to start?
Certainly, you must acquire a long-term care (LTC) policy before there are significant health issues. As with all insurance there is an assessment of risk, and it is priced accordingly. Same with age. The younger you are, the less the policy will cost. You should also be aware that the healthcare market overall impacts the cost of long-term care year-to-year. More like auto insurance than life insurance. The good news is, bottom-line, the cost of an LTC policy is always less expensive than the cost of a skilled nursing facility.
There are many ways to configure an LTC policy and its consequent costs. Some even allow for life-insurance to be bundled so there is a death benefit even if you never use the LTC component. The important point is to talk with someone who you trust to offer you the best advice.
The Cost Question
The cost of LTC depends on the type of medical care it covers and how long it is covered. Where you live is also a factor. Nursing home care ranges from $6,000 to $12,000 per month. But, the challenge for nursing home care is not just the expense, it is the availability. With a growing number of older adults in the U.S. your choices become more limited. If you are dependent on Medicaid, there is no guarantee that there will be a facility near your current living situation – or one in which you will feel comfortable living.
To qualify for Medicaid, almost all resources must be depleted. While state Medicaid programs provide some spousal protection, spousal assets and income will be dramatically limited. Some states are extremely aggressive about recovering assets after a Medicaid patient dies to reimburse costs. Some states even pursue descendants to recover costs. The likelihood of needing long term care for anyone 65 and over is high, so it is important to have a strategy now to pay for your potential care later.
Also, you must plan for the timing of your prospective need. First, you need to qualify to receive long term care insurance benefits. To qualify, you must be unable to accomplish at least two of the activities of daily living (ADLs). These are the routine, self-care tasks in which most people participate on a daily basis without assistance. Basic daily living skills include showering and bathing, dressing, eating, using the toilet and transferring between a bed and chair.
The earlier the better. Health conditions change and age is a constant. Both impact the cost of long-term care insurance. Because not everyone who buys a LTC policy will make a claim the cost of the product is dramatically lower than paying for the cost of quality care. In auto insurance terms. Not everyone will have an accident, but the cost of not being insured when you do can be catastrophic. Plan now.