One of the most important goals of your estate plan should be to protect both you and your assets during your lifetime. To do that, you need to consider the very real possibility that you will need long-term care (LTC) at some point in your life. The question is, how will you pay the prohibitive cost of that care? One option is to purchase long-term care insurance. Then the question becomes, is it really worth the cost? To answer these questions, an Oklahoma City Medicaid planning attorney at Parman & Easterday discusses the advantages and disadvantages of long-term care insurance.
Why Is Long-Term Care Planning Important?
Long-term care planning should be part of every estate plan given the probability that you will need care and the high cost of that care. When you enter your retirement years (at age 65) you stand a 70 percent chance of needing long-term care before you die. If you are married, your spouse shares the same odds of needing LTC. Nationwide, the average cost of a year in LTC was over $100,000 for 2019. What makes the cost of LTC so problematic, though, is that neither private insurance policies nor Medicare will cover expenses related to LTC. That leaves paying out of pocket, qualifying for Medicaid, or having long-term care insurance that will pay.
What Does Long-Term Care Insurance Cover?
Your basic health insurance policy will not pay for LTC expenses. You have the option to purchase a separate long-term care insurance policy from an approved insurance company, and a list of approved companies can be found on the Oklahoma Health Care Authority website. Long-term care insurance, as the name implies, is a separate insurance policy that covers costs associated with LTC. Like other types of insurance, an LTC policy can be complicated to understand, and no two policies are exactly the same. Most LTC policies cover some combination of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
What Should I Consider When Purchasing a Long-Term Care Insurance Policy?
Long-term care insurance becomes harder to qualify for and more expensive the older you get. If you decide LTC insurance is your best option, it is important to purchase a policy when you are younger and then stick with it. When considering an LTC policy, consider the following factors:
- The lifetime cost of the policy. If you are paying the premium for 20, 30, or even 40 years before needing the coverage, the cost can add up. Calculate the lifetime costs of paying until age 70, 80, and 90 to give you a rough idea what the lifetime cost of the policy will be and then consider if the benefits offered are worth that cost.
- Mandatory waiting periods. Some policies have a waiting period during which time the policy will not cover expenses.
- Annual or lifetime maximums. An annual maximum benefit will limit your options to those LTC facilities that are within your price range. A lifetime maximum might mean significant out of pocket expenses if your stay is lengthy. When coupled with your discretionary income, is the monthly coverage adequate to pay for your care?
- Exclusions. Most LTC policies, like other types of insurance, include exclusions to which you must pay attention when considering the policy. Does it cover all levels of care or is it limited to nursing home care? And does it provide broad or limited benefits?
- Coverage outside of the U.S. If you are planning to move out of the country when you retire you need a policy that will cover you abroad.
- Automatic termination. Some LTC policies terminate at a specific age or after a specific number of years so look for these provisions before you buy.
Contact an Oklahoma City Medicaid Planning Attorney
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns about long-term care planning, contact an experienced Oklahoma City Medicaid planning attorney at Parman & Easterday by calling 405-843-6100 or 913-385-9400 to schedule your appointment today.
• Mental or nervous disorders or diseases, other than Alzheimer’s disease or other dementia.
• Alcohol or drug addiction.
• Illness or injury caused by an act of war.
• Treatment in a government facility or in a facility for which the government has already paid.
The big one to consider: Coverage limited to a certain level of care, such as that in a nursing home, but not in an assisted living or independent living community.
What many people do not realize is that while Medicare won’t cover LTC expenses, Medicaid might. But the requirements for Medicaid eligibility are difficult to meet if you failed to plan ahead. This is why Medicaid planning is so important.
Medicaid planning uses legal tools and strategies to protect your assets while also setting you up to be eligible for Medicaid to help cover the high cost of LTC.