Most people think the need for long term care assistance is for people in their 70’s and 80’s. The fact is that 40% of long term care needs are under age 65. The younger the age the lower the premium. Plus at younger ages people are generally in better health in order to qualify. These plans not only help pay for custodial care expenses but also preserve assets that may now or later be needed to pay these expenses but were really planned for retirement income. And especially now when a number of people’s assets have decreased significantly.
Before considering Long Term Care insurance, consider the premium cost (also as a percentage of ones income- if it makes sense to pursue) and then consider the cost of care. Using the April 2008 study by Genworth Financial, the following are sample national average costs for different services:
- Home Maker Service: (non-certified) $18 per hour. Certified is $38 per hour.
- Adult Day Care Facility: $59 per day
- Assisted Living Facility: (private room) $3,000 monthly.
- Nursing Home Facility: (semi-private) $185 per day. Private room, $209 per day. The national average (now) is over $75,000 a year.
These costs do not consider incidental expenses for personal items, drugs, spending money, etc.
In Alaska, a nursing home runs $515 per day ($187,902 per year.) In New York City it’s $398 per day ($145,392 per year). To see what cost’s are in or near your area, go to
your internet search engine and look up Genworth long term care study or Metlife Mature Market. These will give you a lot of information which should be helpful.
No, Medicare isn’t a plan for long term care expenses. Medicaid can provide assistance once the beneficiary spends-down their assets as set by each state. With funding going down and expenses going up, don’t count on the state or the federal government to pick up the tab.
And if the thought of giving (or gifting) away assets in order to qualify for Medicaid is a consideration, be very aware of the strict rules that are in the Deficit Reduction Act of 2005. There could be a rude awakening in the delay of Medicaid benefits if not followed.
Contact legal counsel such as an elder care attorney for assistance in this area.
A few states (and more are joining in) are a part of the Federal Governments supported Long Term Care Insurance Partnership Program. For a person purchasing a LTCi policy in those states, the benefit from the plan can be used first and then still qualify for Medicaid.
See, http://www.ltcfeds.com/help/faq/miscellaneous_partnership.html#1 .
Under certain situations, all or part of Long Term Care insurance premiums may be income tax deductible by individuals as well as businesses. See the following web sight for information.
Premiums will vary by policy benefits: A 90 day waiting period before benefits start will be less costly than a 30 day waiting period. A 3 year plan will be less than a 5 year or life time benefit. Using an inflation rider such as 5%, (compound or simple interest) where the initial daily or monthly benefit increases each year before a benefit is paid out, is more expensive than no inflation rider. Some plans also offer an inflation rider based on the annual CPI (Consumer Price Index) rate which can result in lower premiums
compared to a fixed guaranteed inflation rate option.
How to pay for LTC insurance premiums? A number of options to consider.
- Out of current earned income.
- Withdrawals from investments (principle, interest or both).
- Assistance in part or whole by a relative (children).
- Purchase an annuity with its income used to fund the LTCi policy.
- A plan offered through an employer. Keep in mind that in a number of situations premiums in part or whole may be deductible. Some states also offer a tax credit.
- If both spouses are considering individual policies look at a plan with a Shared Care option or one policy that pays the benefit on more than one life –benefit paid on who ever has the claim first. Many carriers also offer spousal discounts.
In the early days of Long Term Care plans, only nursing homes were covered. Today, numerous options are available and if feasible, a person would rather stay at home to receive care as long as possible. Today’s plans also cover or offer this option.
What triggers benefits in the first place before a Long Term Care insurance policy will pay out. Normally, when you cannot do yourself or require substantial assistance with two out of six ADL’s (Activities of Daily Living) events, e.g., eating, bathing, dressing, toileting, transferring, and maintaining continence. See policy’s definitions to see specific wording on what qualifies benefits to begin. Normally, cognitive (memory) impairments can also trigger benefits.
Also keep in mind the cost of care giving. Possible lost wages and well as personal health issues are factors when taking care of a person. Many times the caregiver will be the spouse or adult children. You may have already experienced this or know someone who has. Here again, Long Term Care insurance can play a big part in care giving expenses and many times pays for respite care for the caregiver.
There are a number of resources on this subject through your state as well as web sights including www.aarp.com and www.longtermcare.gov. Plus many others.
If you or someone you know is considering purchasing a Long Term Care policy now or in the near future, look at all your options- the various policies and benefits available, definition of what triggers the income, the company’s history in marketing these plans (and their financial strength), and the source who you may be buying a policy from. Always request and expect professional advice.
LifeStyle Financial Resources, LLC