Long Term Care Articles

What You Need to Know About Long Term Care

Medi-Cal (Medicaid) Only Pays For The Indigent
--And Don't Count On Medicare

Medi-Cal (welfare) only pays for the indigent, and won't help middle-class health care consumers, who will quickly go through retirement savings if they should end up needing nursing care in their 60s or 70s. Don't look to Medicare to pay for it, either. Only if a Medicare enrollee spends at least three days in a hospital and then goes to a nursing home for the same condition that put him or her in the hospital will it cover the care. In these cases, Medicare will pay for 100% of the costs for the first 20 days (with a co-payment after that or until you stop improving). Medicare won't pay for any care given at home or an assisted-living facility.
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Long-Term-Care Insurance Protects Retirement Assets

Without it, a person could go through his savings and retirement nest egg pretty quickly. Self-insuring requires assets that generate at least $100,000 to $150,000 a year in funds available specifically for long-term-care costs.
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Buy It Sooner, Rather Than Later

Today, the average age of a long-term-care insurance buyer is 55. Fifteen years ago, the average age of the buyer was 69. The younger you are when you apply for a policy, the more likely it is you will be approved--57% of those who apply for long-term-care insurance at age 70 or older are declined by insurers, while only 11% of those who apply between the ages of 50 and 59 are turned down. The time to start thinking about long-term-care insurance is when you turn 50.
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Choose Your Benefit Period Wisely

Most policies have benefit periods that range from two to 10 years and offer a lifetime benefit option designed to cover diseases like Alzheimer's or Parkinson's, in which case you might be in a facility for many years. The average claim lasts two-and-a-half to three years. However, 20% of the people who file a claim will need long term care for more than five years. It is important to know you won't outlive your benefit.
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Getting Paid For Using It

When you buy a long-term-care policy, you will choose the daily or monthly benefit and the benefit term or benefit multiplier. Daily benefits range from $100 to $400, but the higher the daily benefit, the more you will pay in premiums. Keep in mind that the average nursing home in the U.S. costs $75,000 a year, while a full-time home health aid costs $34,000 a year on average.
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Plan For Inflation

If the daily benefit is $200 and you opt for the 5% inflation protection, the benefit in 15 years will be $400 and the daily benefit in 30 years will be $800. No one should go without the proper inflation protection based on your age. You are buying a product for the future, and prices will go up. So you need to have a benefit that will cover future increases.
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Get A Comprehensive Plan That Is Flexible

A comprehensive policy pays for care at a facility but also offers the option of receiving care in your own home or community. You want your care to be paid for regardless of the setting you are in. Less expensive plans, called "facility-only," cover only care given in a nursing home or assisted-living facility. Be sure to ask about the elimination period, which is how long you must wait after buying the policy before a benefit can be paid. Survivorship benefit waives the premium for the surviving spouse if one dies. Most policies have a home care waiver and a survivorship rider available.
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Paying For It

Consider getting a "10 pay" or pay to 65 option. It costs more in the short term, but may be less expensive over the long run. This option requires premiums be paid for 10 years, after which you will have a paid-up policy which protects you from rate increases that might occur down the road (although you are exposed to rate increases during the 10-year payment period). This premium is typically three times the cost of an annual pay policy, depending on your age. Most policies have a "waiver of premium" clause, which means that when you are in a facility and receiving claims, you won't have to pay a premium (but if you are receiving care at home, you may pay premiums). Some companies will charge a small extra premium if you want the home health care waiver of premium. Every carrier offers a spousal discount (that also applies to any two people who live together). Some insurers offer "shared benefits" policies for couples, which means the pool of money will be available to either party.
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Uncle Sam Will Reward You For Buying It

There are some tax incentives for those who buy long-term-care insurance. No taxes are owed on benefits paid out, and there are 35 states that offer a tax credit to long-term-care policyholders. In New York, tax filers are eligible for a tax credit equal to 20% of their annual premium. Alabama residents may deduct the value of all premiums for qualified long-term-care insurance policies paid in a given tax year, while Wisconsin residents are able to deduct 100% of the annual cost of a long-term-care insurance policy (spouses are also eligible), minus the federal gross-income deduction for long-term-care insurance. If you are self-employed and between the ages of 51 and 60, you can get a federal tax deduction of as much as $1,150; as much as $3,080 if you are 61 to 70, or $3,850 if 71 or older, and this has increased every year. There are also tax incentives for corporations to pay for long term care insurance.
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Start When You Are Healthy (Today)

You can't just buy this insurance because you want to, you first must qualify. You qualify by applying for underwriting approval. A review of your medical records determines if you are insurable. If you don't qualify then you will have to rely on your savings, family, or state aid with Medi-Cal (welfare). Find out - don't assume you are uninsurable because you have health issues. And don't fall into the trap that "I'm OK today so I don't need it." With that logic you don't need your health insurance either or car insurance, since you haven't had a car accident yet. You can't wait until you need it to buy it. Don't assume you will be insurable tomorrow, health changes suddenly.

© Kiplinger's Financial