10 Reasons you should consider Long-term care insurance.

10 Reasons you should consider Long-term care insurance.

The risk of Long-term care cost is one of the most underestimated of all retirement concerns. Long-term care insurance will protect what you spent a lifetime building and allow you to enjoy the fruits of your labor without worrying about the risk of Long-term care expenses.

There are 10 reasons you should consider long-term care insurance to provide the protection against this risk.

1. Asset protection
2. Changing family structure
3. Risk of asset transfer
4. Medicare will not cover long-term care
5. Medicaid offers the worst choice possible
6.Chance of long-term care needs is more then 50%
7. Rising cost of long-term care
8. You need to qualify
9. Stay at home
10. The ability to choose

 

To discuss any of these reasons please feel free to call or email us about your particular situation.

10 reasons you should purchase Long-term care insurance
1. Asset protection:
You spent a lifetime building your assets so you can enjoy the fruits of your labors. Long-term care costs are an unexpected liability waiting to devour what took a lifetime to build. The purpose of insurance is protection from the unexpected.

The government provides two types of insurance most people rely on in their retirement years. Social Security and Medicare, social security is income insurance and Medicare is health insurance. Social Security was designed as a way of protecting those who retire and have no other form of income. Medicare provides health insurance if you do not have any outside coverage.

Many people are under a false assumption the government also will pay for long-term care coverage under Medicare or Social Security. The only way the government will pay for long-term care coverage is if you qualify for Medicaid. In order to qualify for Medicaid you must first spend down your assets. In other words you must first become poor. Once this happens you can then qualify for a government program with little choices. And if you are married you spouse is allowed to keep a portion of your assets but with limitations. If your assets were protected against this liability you would not have to face these tough choices.

Think of your assets as your fortress and inside this fortress you and your spouse live to enjoy a lifetime of hard work. Surrounding this castle are four walls that protect this castle from assault. If your assets are not completely protected they are open for attack. Without Long-term care insurance one of the walls is missing.

Health Insurance, Income Insurance, Property Insurance, Long-term care insure. The costs of long-term care are over $50,000 per year and in the next 20 years these costs are expected to triple according to the US General Accounting office this means a 50 year old today can expect to pay more then $300,000 per year at the age of 80. And if you are married the risk to financial health is doubled. Long-term medical expenses could easily deplete what it took a lifetime to build. The average nursing home stay is 2.3 years. One out of five patients over age 65 can expect to stay longer then 4 years. This is a very real risk for anybody with an asset base.

2. Changing family structures TOP
The long-term care plan most people relied on was the children they brought into the world. Demographics and travel have changed this option. Many children upon graduation from college have moved with their jobs to other states and established families of their own. So at the time when parents are in need of their children’s help many are unable to help their parents. Because of vast distances and financial commitments to their lifestyle.

In the past caregivers were traditionally daughters and daughter-in laws who watch over their parents when they were unable to take care of themselves. Today these same people are part of the workforce and are having children later in life. So the time when care is necessary the caregivers are not available for the job. Either as a result of raising children later in life or financial commitments requiring two paychecks in the family.

And finally with the advances in medicine the possibility of living longer increases the need for long-term medical expenses. In less then 200 years the life expectancy has doubled. In early America only 1 in 10 expected to live to 65. Today just fewer than 80% of can expect to live 65. Men can expect to live to 74 and women to age 77. Currently 34,000,000 people or 12% of the population is over age 65 that number is expected to grow to 68 million or 20% of the population by the year 2030.

With these factors the need for long-term care insurance is more important then ever as part of any financial plan for the future.

3. The Risks of Asset transfers TOP
A common solution many people see to solve their problem is transferring assets to family members to shield them from Medicaid provisions. This strategy creates could create several unexpected problems.

Liability
When an asset is transferred, the asset becomes liable to any lawsuits or judgments against the assets new owner. Even if the person were responsible unforeseen events could put your lifelong assets at risk careless mistake or accident. An injury on your property, a car accident, a bad business partner or a careless loan is all potential risks to any asset transfer.

Divorce
Another factor to keep in mind when transferring assets is the risk of divorce Many of us assume that events will be like they are today for the rest our lives. Today divorce rates are at 50% any assets will become part of marital property. So if you asset is transferred and divorce occurs 50% of your asset will be transferred to your ex-daughter or son-in-law.
Death
The risk of death is often over looked in asset transfers. The death of your son or daughter can also put your asset out of reach. Your assets could become part of your remarried daughter or son-in-laws estate.
Bad Investments
And finally the potential of bad investments should not be overlooked in the risk of asset transfers. Whoever owns the asset might not take the same care you did in acquiring the asset. One bad stock, bond or real estate investment could wipe away a lifetime of savings.
A better solution to asset transfer is asset protection. This is what a long-term care insurance policy provides.
4. Medicare TOP

Medicare is one of the most misunderstood government programs in identifying what is actually covered for long-term care services. Medicare is a federal program administered by the Center For Medicare and Medicaid. It is available to people at age 65 or those with end stage renal disease.

There are two parts to Medicare. Medicare PART A covers hospitalizations, skilled nursing care, home health care and hospice. There is no charge for Medicare Part A benefits unless you have not had more than 39 quarters of Social Security coverage. If you have had less than 39 quarters you can purchase Medicare Part A.

Medicare PART B covers doctor and medical services, equipment, therapies, lab tests and x-rays. Part B costs $54.00 per month and is an optional benefit.
HMO's
HMO's are required by law to offer the same benefits that Medicare offers. To encourage people to assign their Medicare benefits to an HMO, many HMO's offer additional ancillary benefits like vision and prescription benefits.
Medicare and HMO's are designed to pay for acute medical care needs. They pay for short term, rehabilitative care. Licensed professionals provide this type of care. It is also called skilled care. The types of services a person receives determine skilled care. An example would be physical therapy after a stroke, or IV therapy.
Medicare pays for care in skilled nursing facilities, and for home health care. Medicare does not pay for long-term care. Long-term care is when people need assistance with activities of daily living or supervision due to a cognitive impairment. Medicare was not designed to cover chronic conditions.

Medicare Skilled Nursing Facility Benefits

To be eligible for Medicare benefits in a skilled nursing home facility, the patient must meet the following requirements:

3 day hospital stay (not including the day of discharge)
Care needed must be skilled nursing or skilled rehabilitation services
Medicare must certify skilled Nursing Facility.
Physician must certify the need for this skilled care on a daily basis

If the patient qualifies for all of these criteria, they can qualify for UP TO 100 days of Medicare benefits. Medicare will pay for the first 20 days at 100%. Days 21-100 Medicare will pay for everything except a co-pay of $101.50 per day. If the patient has a Medicare Supplement or an HMO this charge may be covered as well.

The average Medicare stay in 1999 was only 23 days. It is very rare for someone to get the full 100 days of coverage. When skilled care is no longer needed, the care usually becomes custodial care. Medicare does not pay for custodial care in a nursing home.

Medicare Home Care Benefits

Medicare will only pay for care in the home if there are skilled services needed. The care needed can only be part time or intermittent home health care. Medicare will NOT pay for care longer than a regular visit to perform services. As an example, Medicare would not pay for a home care aid to stay for 8 hours or a 24-hour shift. The requirements are as follows:

Medicare defines intermittent care as skilled nursing care that is provided on fewer than seven days each week, or less than eight hours each day (combined) for 21 days or less.

The patient must be homebound. This is defined as a medical condition restricting the ability to leave the house except with assistance- or if it is medically inadvisable to leave the house.

The patient must be under a physician's care and the physician must certify the need for the home health care.

Medicare must certify the home health care agency providing the services.

Unlike Medicare SNF benefits, there are no co-payments for home care services paid under Medicare.

Medicare Supplements

When Medicare was implemented it was determined that there should be balances to the care that people received. This causes people to use Medicare benefits wisely.

There are 10 standard Medicare Supplement policies on the market. They are also known as "Medigap" coverage. These policies pay the co-insurance amounts that Medicare does not pay. For example on days 21-100 that Medicare pays everything except the $101.50 - a Medicare Supplement policy could pay that. (Medicare Supplement plans A and B do not cover this co-payment for skilled nursing facilities)

If Medicare is not paying for care or services, then the Medicare Supplements will not pay either. There are a few exceptions to this.
If you have questions about the Medicare program you can call the Social Security Administration at 800-772-1213. They can answer questions about eligibility.

This is a summary of how Medicare, HMO's, and Medicare Supplements work.

5. Medicaid TOP

When you have lived a long fruitful and productive life why would you want the possibility of you or your spouse ending up in a federal welfare program. Most people who think of Medicaid as an option do not think thru their decision based on facts.

First you have to understand how Medicaid works and what is required before you can be covered under its program.

Medicaid is a joint federal and state program that pays for medical care for individuals who cannot pay their own medical bills. (In California this program is known as Medi-Cal). To qualify for Medicaid, an individual must have limited income and few assets. Medicaid eligibility rules are complicated, and different states apply different rules. Each state operates its own Medicaid program, consistent with federal law.

Medicaid pays for a majority of our nation's nursing home care costs. Unlike Medicare, Medicaid will pay for both skilled and custodial care. Medicaid pays for physician-approved hospital stays, medical care, prescription drugs, and skilled nursing home care. (There are exceptions in certain states)

The disadvantage to relying on Medicaid is that you will be very limited in your choices of nursing homes, or may be forced to go to a nursing home, since Medicaid usually does NOT pay for home care.

We have summarized the criteria for Medicaid eligibility for your income and assets, whether you are married or single. *We have also provided a chart for you that show you what your state specific criteria is.

Income Limits

The income of a Medicaid nursing-home patient--usually Social Security and pension income--must generally be used to pay the costs of long-term care. The patient may keep a "personal-needs allowance" which averages $30 per month.* (This varies by state)

However, if the Medicaid nursing-home patient is married, the at-home spouse has the right to keep a certain amount of income, which can vary between $1,452 and $2,232.* If the at-home spouse has income that is coming in their name alone they are allowed to keep that income as well and it does not have to go toward their spouse's long-term care costs.

Generally speaking, if the individual has enough income to pay for their own care they will not qualify for Medicaid even if they meet the asset requirements below. If a couple has enough income to provide the at-home spouse with the minimum income requirements and pay for the nursing home spouses long-term care, they will not qualify for Medicaid even if they meet the asset requirements.

Asset Limits

Before a Medicaid applicant can qualify for Medicaid they must "spend down" their assets, such as cash, stocks, and most other items with cash value, until only $2,000 remains, (this varies by state).

If there is an at-home spouse, they may keep assets ranging between $17,856 and $89,280 depending on which state you live in. Any assets above that have to be "spent down". This does not include the house and car and a few other assets. In determining Medicaid eligibility, the couple's assets are evenly divided. The nursing home patient spends their half down to the state's criteria which averages around $2,000, (This varies by state). The only way the at-home spouse can keep the maximum of $89,280 is if half of their assets are equal to or exceed the maximum of $89,280. If this is not the case, the at-home spouse will get to keep 50% of their assets. They are allowed to keep at least the minimum asset allowance (see chart). There are a few states that automatically allow the at-home spouse to keep the maximum of $89,280 if the couple has that much in assets (We have put a * by those states for you on the chart below).

Transferring Your Assets to Qualify for Medicaid

Many people think a solution to qualify for Medicaid is to falsely impoverish themselves by giving their assets away. The 1993 budget bill (OBRA '93) changed the transfer of asset guidelines to qualify for Medicaid's nursing home benefit dramatically. This legislation requires the Medicaid program to "look back" 36 months (30 months for CA) prior to the application for Medicaid's nursing home benefit to see if assets have been transferred (i.e. to children or others) The look-back period is 60 months if assets were transferred to an irrevocable trust. The applicant is ineligible for the number of months equal to the amount of the transfer divided by the state's average cost of nursing home care.

Estate Recovery for Medicaid Benefits

Federal Law requires every state to recover what it spent for the care at the death of the second spouse. State rules and practices for estate recovery vary significantly. Some states are stricter than others. In some states, placing a lien on your home is part of the estate recovery act.

6. Chance of long-term care needs is more then 50% TOP

"What are my chances of needing long-term care?”

It is only human to think that you will never need long-term care. Things like that only happen to other people, right? Most of us would like to believe thats true. Because we think it can't will happen to us, we are often hesitant to plan ahead for future long-term care needs. The truth is that there is a strong possibility that you will need long-term care at some point in your life.

“While the general population perceives the risk of needing long-term care services to be less than 25%, the actual risk for needing long-term care (either home care or nursing home care) is greater than 50%."

LifePlans, Inc. January 2001 as seen in The LTC Planning Guide by Phyllis Shelton 2001

"Who is at risk for long-term care? Is it just older people? "

While there are many older people that need long-term care, it is important not to forget that young people can need long-term care too. It is not too early to plan for your future long-term care needs. Some everyday reasons that young people can need long-term care are: cancer, multiple sclerosis, strokes, Parkinson’s disease, and accidents to name just a few.

When Caring Isn't Enough - American Academy of Actuaries, January 1999 Percent of Working-Age Adults Needing LTC

"I don't see myself in a nursing home. I’d rather shoot myself or jump off of a bridge!"

The majority of people have a hard time admitting that they could need long-term care because they associate long-term care with nursing homes. None of us can see ourselves being in nursing homes. The truth is, we live our lives promising our parents that we will never put them in a nursing home. A nursing home is not a place we would like to receive care.

The good news is that a nursing home is probably the last place you will have to go. There are so many more options, many that were not available before today. It is now possible to stay at home or live in an assisted living facility, rather than go to a nursing home. Most people are more realistic about seeing themselves needing long-term care in their home.

"82% of long-term care takes place in the home, adult day care centers, and assisted living facilities. 18% of long-term care takes place in nursing homes".

Agency for Health Care Research and Quality Sept. 2000 as seen in The Long-Term Care Planning Guide, Phyllis Shelton, 2001

7. Rising cost of Long-term care insurance TOP

Long-term care is not limited to older people many younger people find themselves in need of Long-term care as a result of illness, car or sporting accidents.

Christopher Reeve was 43 years old when he fell from his horse and was paralyzed from the neck down.

  • 40% of the people who need long-term care are between the ages of 18-64.

The cost of long-term care can vary based on location and type of care needed. The cost of care is higher in urban areas like New York City then in rural areas such as Athens, Ohio. The cost of a nursing home in Ohio is about $150/day or close to $5000/month. In more populous areas the figures are almost double. Home Health care is about $110/day for an 8-hour shift or about $40,000/year. Adult day care provides custodial health care for those unable to be left alone when the primary care giver is at work or away. Adult day care costs about $65 a day or about $17,000/year. Assisted living is independent living with help on standby if needed. Assisted living averages about $75/day or $27,000/year.

The cost of long-term care is expected to double over the next decade as demand for services increase. There are four reasons for the increase in demand for long-term care services.

1. Medical advances: With advances in medical technology many of us will be living longer then ever expected. The mapping of the Human Gnome is a map of the 100,000 genes that make up the human body. With the completion of the GNOME cures to many illness are now possible. In fact many scientist feel we are on the verge of conquering cancer, Parkinson’s and other debilitating disease. This kind of breakthrough will allow people to live much older then ever before. Increasing demand on long-term care resources.

2. America is getting older: Cures and advances in medical technology lead to longer life expectancy. Today there are 34 million people over age 65 making up 12% of the population. By the year 2030 the number is expected to grow to 76 million or 20% of the population. This will also increase the demand and cost of long-term care costs.

3. Changes in the family: First both parents work to support the household making the one income family scarce. Traditionally the spouse of the child would take of the parent when the time was needed. This is no longer the case. Secondly, children are now getting jobs in other states and establishing families hundreds of miles from their parents. And finally many children are having a child later in life so much of their energy is focused on their own children rather then parents when the time is needed. The change in family structures is also another strain on the long-term care resources.

8. You need to qualify TOP


The option of long-term care insurance is not unlimited. Usally when its really wanted its too late to receive. Because only those who are not in need of the insurance can qualify. Once a need arises as a result of a medical report or a doctors concern it might be too late.

Even if you have an illness that does not mean you will not qualify but in order to fully understand you current situation we would need to get more details on your health and what type of medications you are now taking.

9. Stay at home TOP

The thought of being placed in a nursing home to many is unacceptable so the subject is ignored. Ignoring the risk can be the worst mistake made. Nursing homes should be the last resort not the first resort. People with bad planning end up looking to nursing homes as first resort.

Two main reasons nursing homes become first resort are:

1. Caregiver burnout: If your spouse is your caregiver and the burden becomes unbearable there is no other options then to spend down assets and when those are exhausted a nursing home is the only option.

2. Lack of Help: The inability of spouses to care for each other happens with the aging process. The physical strength and energy in youth can dissipate with age. So the options become very limited with no one physically being able to bath, toilet, dress and move someone they spent a living with.

10. The ability to choose TOP
While you are healthy and insurable you have the option to choose the company to protect your lifetime of work. Once you become ill and your insurability is in question your ability to choose is severely limited.

Last Updated (Tuesday, 03 March 2009 12:03)

 
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