November is Long-Term Care Insurance Awareness Month
Who needs it?
Given that the cost of long-term care can quickly deplete your life’s savings, you should seriously consider adding long-term care insurance to your financial plan. Plus, there’s about a 70% chance you’ll need some type of long-term care after age 65.
Should you ever require it, a home health aide visit costs about $20 an hour, while full-time nursing home care in a private room, the most expensive type of care, now has a median cost of almost $88,000 a year. In some regions of the country, like the Northeast, the cost may be well above that amount.1 While financial considerations cannot be understated, long-term care insurance is also about peace of mind and control. Having it ensures you’ll have access to first-rate care when you need it, and that you won’t have to be dependent on others or be a burden to your children. The odds you’ll need long-term care insurance are greater than you might imagine.
Long-term care services are not just for older people: Anyone who’s has been in an accident or suffers from a debilitating illness may also require round the clock care. In fact, 40% of patients receiving long-term care are under age 65. If you can afford to pay for care without significantly impacting your assets, you may not need long-term care insurance. Conversely, if your assets, not including your home, are less than $80,000 if you’re married, or $30,000 if you’re single, you may not be able to afford the premiums. But If you’re somewhere in between, long-term care insurance should be part of the discussion the next time you sit down with an advisor to review your financial plans.
Types of care
Long-term care insurance pays for a wide range of services and procedures that typically aren’t covered by medical insurance. The types of care fall into three categories: skilled, intermediate and custodial.
If you have a serious illness or injury that you can recover from, you will probably receive skilled care from nurses or professional therapists. Skilled care is provided daily, usually ordered by a physician, and involves a treatment plan. In short, skilled care helps get you better.
This type of care is similar to skilled care, but not provided on a daily basis. For instance, if you injured your leg and need to visit a physical therapist five times a week to help you heal, that would be considered intermediate care.
Unlike skilled and intermediate care, which is used to improve your health, custodial care isn’t intended to heal you. Instead, custodial care includes assistance with daily activities like bathing, eating, dressing, toileting (getting on and off the toilet and other tasks associated with personal hygiene), continence and transferring (getting in and out of bed and chairs). Catheter or colostomy maintenance is also included. Custodial care can range from in-home care provided two or three days a week, to 24-hour nursing home care.
Cost of Care Map
Go to http://www.lifehappens.org/insurance-overview/long-term-care-insurance/cost-of-care-map/ to view a map showing the median annual cost of nursing home care, and the hourly/annual cost of home health care, for all 50 states.
Select which type of care you’re interested in from the drop-down menu and then roll over any state to see the costs
The three primary ways to get long-term care coverage are to buy it on your own with the help of an agent, through your employer, or through an association/membership group. Some benefits also are available from the government, through Medicare and Medicaid.
However, you should be careful about relying on government programs. Medicare covers only short-term skilled nursing home care, and Medicaid will pay for your care only if your assets are very limited.
Some states have Long-Term Care Insurance Partnership Programs that allow you to buy private long-term care insurance and remain eligible for Medicaid benefits if your private insurance runs out. Read on to learn more about the various sources of protection.
Buy It on Your Own
Purchasing it yourself with the help of an agent who specializes in long-term care insurance provides you with a lot of flexibility and options. Your agent can help you shop around for the best policy among multiple insurance companies, and customize a plan to include the combination of features and benefits that works best for your needs and budget.
If you’re in good health, you may qualify for preferred pricing. That’s because the policy will be individually underwritten, meaning the insurance company will base its price on a thorough medical exam and personal health history.
Get It Through Your Employer
A growing number of employers offer group long-term care insurance as a voluntary employee benefit. Typically, an employer will contract with a particular insurance carrier and allow its employees to purchase coverage, often through automatic payroll deductions.
Because employees pay for coverage out of their own pockets, the policies are almost always portable, meaning you can keep them in force if you change jobs. One potential advantage of buying through your employer is that you can sometimes get coverage that would have been more difficult to obtain on the open market. This is especially true of employees who have health problems or a poor family health history.
Why? Because with most group plans, employees are offered the same premium as others in their general age bracket (e.g., 45-54 year olds), regardless of their health status or actual age. So if you’re an older employee or perhaps have some health issues, the one-size-fits-all premium offered through your employer may be lower than what you’d be able to obtain if you tried to get coverage on your own. A downside of buying through work is that you’re limited to the companies and products that your employer makes available to you through your benefits package, and you might be able to find a better price or policy by shopping on your own.
Purchase It Through an Association or Membership Group
Policies offered through alumni groups, trade groups and other organizations are another option that may be available to you. The pros and cons are similar to employer-sponsored coverage. Premiums are often discounted and are based primarily on your age and health. You may, however, be limited in your ability to customize the policy to your specific needs.
Benefits Through the Government
Medicare is the federal government’s program that pays health-care bills for older Americans. When it comes to long-term care, there’s a common misconception that Medicare will pay a good chunk of the cost of long-term care. Not true. Medicare only covers short-term skilled nursing home care that you receive after being hospitalized for at least three days.
For instance, if you get in a car accident, Medicare may cover your care in a rehabilitation facility for a period of up to 100 days. Medicare also pays for some skilled at-home care but only for short-term unstable medical conditions and not for the ongoing assistance that many elderly people need. Medicare will not pay for any custodial care, and 95% of all long-term care is custodial, not skilled. For more information, visit the Medicare website.
Medicaid is the federal government’s program that pays health-care bills for Americans who meet federal poverty guidelines. In addition to covering doctor visits, hospital stays and other standard medical expenses, Medicaid pays for about half of all nursing home costs in the U.S and a smaller, but growing, portion of the nation’s home care costs. But remember, Medicaid will only pay for care if you have very limited assets.
Qualifications vary by state, but generally you may keep only the house in which your spouse or dependent resides, the furniture, a car, a burial plot and funeral funds, and a modest amount of cash. Having Medicaid pay for your care also means you may not have much say in choosing the facility that will provide your care. For more information, visit the Medicaid website.
Partnership Programs and Tax Incentives
To encourage more Americans to take responsibility for their future care needs, the government has developed a variety of incentives to reward those who buy long-term care insurance. Here are some you should know about.
Partnership programs: Long-term care insurance partnership programs are designed to encourage consumers to buy private long-term care insurance, which will help you avoid spending down most of your assets to qualify for Medicaid-sponsored long-term care. Over the long haul, these partnerships between states and private insurance companies save money for both consumers and the government. Programs vary by state, so talk to your agent about how this could apply to you.
Federal tax incentives: If you buy a federally qualified policy (and most policies are), your insurance premiums may be deductible as part of your medical expenses on federal tax returns and benefits are received tax-free.
State tax incentives: A majority of states have a state tax incentive for residents who purchase long-term care insurance.
Make sure to consult with your tax advisor to fully understand which tax benefits may apply to your particular situation.
Find an agent
Contact a representative at Solidarity Health Network today!