Long Term Care Insurance
by Pamela Q. Weaver
Everywhere you turn these days, there is discussion
of Long Term Care Insurance. Our clients often ask us: “What
is it?” and “Do I really need it?” As we accountants
like to answer: “It depends.”
Long Term Care is assistance a person needs to manage, rather
than cure a condition for an extended period of time. Most health
insurance plans and Medicare have limited coverage for long term
needs and only cover services that are deemed to be medically
necessary. Their primary purpose is to cover physician’s
fees, hospital care, brief stays in a skilled nursing facility
and limited skilled home healthcare.
People with long physical illnesses, disabilities, or cognitive
impairments often need services that are not medically necessary,
such as help with activities of daily living, home healthcare,
respite care, adult day care, care in a nursing home or assisted
living facility and care management services. Since these services
are not generally covered by health insurance and Medicare, we
urge our clients to think about how they would pay for these services,
should they become necessary.
Currently, in Connecticut, nursing home costs can run $78,000
or more per year. Essentially, a person has three options for
paying for their care:
• Private Pay
• Long Term Care Insurance
• Medicaid
For those people with sufficient assets, paying for nursing home
care is not a financial concern. However, an extended stay by
one or both spouses can easily approach $1 million or more. For
those concerned with the preservation of assets for subsequent
generations, Long Term Care Insurance can be an important part
of their estate planning.
Long Term Care Insurance essentially picks up where Medicare and
private health insurance leave off. Since plans vary, it is important
to work with a trusted advisor to determine which plan is best
for an individual's situation.
Many policies have a specific pay-out limit, usually enough to
cover a daily rate for 2 to 3 years. Once the policy limit is
reached, the coverage ends and he/she must either pay for remaining
care on his/her own or possibly apply for Medicaid. The thought
behind this coverage is to cover the typical 2 to 3 year stay,
and/or to provide coverage during the “look back”
period for Medicaid.
Other policies provide for unlimited coverage, regardless of how
long your care lasts. These policies are of course, more expensive.
The State of Connecticut offers a program called the Connecticut
Partnership for Long Term Care. Policies sold under the Partnership
carry a special endorsement from the State for meeting additional
insurance standards. Partnership policies provide a minimum daily
benefit, automatic increases to the daily benefit for inflation,
cover a wide array of home and community-based services in addition
to nursing home care, provide home care case management services
and have an option to reduce the amount of the lifetime benefit,
if the policy is in danger of lapsing.
The Partnership policies allow the policy holder to protect assets
equal to what the policy has paid in benefits if he/she needs
to apply for the Connecticut Medicaid Program. Consequently, the
policy holder only needs to purchase an amount of insurance equal
to the amount of assets he/she wishes to protect. In addition,
Partnership policyholders receive a 5% discount on nursing facility
rates in Connecticut.
Medicaid, as opposed to Medicare, is a state run program that
pays for nearly half of all nursing home care, in addition to
some home and community-based services. However, there are severe
limits on the amounts of income and assets a person may keep and
maintain eligibility for Medicaid. Medicaid is really a program
of last resort when all other resources and insurance have been
exhausted. We urge clients who believe they may need to rely on
Medicaid in the future to meet with a trusted advisor to ensure
they understand the eligibility criteria and its ramifications.
It is not unusual for a person to privately pay in the early period
of a patient’s care and then apply for Medicaid as funds
are depleted. Further, for those with limited resources, the costs
of paying the premiums of Long Term Care Insurance often do not
outweigh the benefits.
For those who choose to purchase Long Term Care insurance, “timing
is everything.” An applicant’s age and health determine
the availability and cost of the policy. It is sometimes beneficial
to apply for coverage in the 49 - 60 year age range, where premiums
are lower, and before the onset of disqualifying illnesses such
as Alzheimer’s disease or Parkinson’s disease. Policies
are available privately or through many organizations. Additional
information may be obtained through the Connecticut Partnership
for Long-Term Care at www.ctpartnership.org.
Note that for income tax purposes, premiums for Long Term Care
Insurance are generally treated the same as health insurance premiums,
except they are subject to limitations depending upon the policyholder’s
age. The allowable amount should be added to your health insurance
premiums when calculating deductible medical expenses and the
self-employed health insurance deduction.
Long Term Care Insurance may just be the peace of mind you need
to protect some of your assets and income, pay for your own care
via insurance reimbursement and maintain your financial independence.
For more information, call Pam at (860) 678-7100 x307.
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