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Financing ofLong-Term Care
Medicare is the federal program offered to those who are needing
a skilled level of care after a 3 day hospital stay. Skilled care is best
described by the type of care you need due to a hip fracture or stroke -
therapy on a daily basis. Medicare is limited in the number of days it will pay - up to
100. Medicare pays 100% for the first 20 days (after the 3 day hospital
stay and if skilled care is needed), beginning on day 21-100 there is a
copayment required with Medicare. Most Seniors have a Medicare
Supplement policy. Medicare supplements will pay in conjunction with
Medicare. Once Medicare stops paying for care, most supplements will not
continue to pay. If you have exhausted Medicare payments the only other options are
Medicaid and paying out of pocket (private pay). Medicaid is
available for those individuals that are low income or have limited
resources. Medicaid is the state welfare program and has limitations as to
the amount of assets you can own and the amount of income you may receive
each month before you are eligible. The federal government has instituted restrictions on the transferring
of assets out of an estate to qualify for Medicaid. There is a look back
period of 36 months or 60 months if a trust has been established. A law
was passed in 1996 making it a crime to shift assets to become eligible
for Medicaid. In 1996 the average cost for a year in a nursing home averaged between
$36,000 and $50,000. This can be financially devastating. Especially if a
patient stays the average of 3 years or even longer. Some patients have
spent more than $100,000 or even $500,000 on long-term care expenses. Besides paying out of your own pocket you can purchase long-term
care insurance. This insurance must be purchased prior to needing
long-term care. The eligibility for the insurance is based on your current
health. Therefore if you are already ill, you probably will not be
insurable. Most financial planners recommend that LTC insurance be purchased in
your late 50's or early 60's. In this range the cost is quite affordable
and your health is probably still pretty good. The premiums are based on
your age, health, and the type of plan that you purchase. LTC Insurance Benefit Considerations When purchasing LTC Insurance you must make three main decisions: Daily Benefit - the amount of money you will receive from the
insurance company on a daily basis for your care. You usually can select
between $50 and $250 per day. Find out what the current cost of care is in
your area and it will help you make the decision as to what daily benefit
you want. (also see inflation protection below). Benefit Period - the length of time you will receive payments
from the insurance company once you need care. You usually can select a
specific number of years (2,3,4,5,) or lifetime plans are also available.
The average length of stay in a nursing home is 2 1/2 to 3 years. Note: A
three year plan will be less expensive than a lifetime plan. Elimination Period (deductible) - the number of days that you
will be responsible for paying for your care before the insurance begins
to pay. This works like most insurance deductibles except it is stated in
a number of days instead of dollars. Most plans have a variety of options
like 0 days, 20 days, 60 days, or 100 days. Be sure to check if this
deductible is once in a lifetime or if it can repeat. Also, there are three optional decisions that can be added to your
plan.: Inflation Protection - this ties back to your daily benefit and
allows it to grow on an annual basis to help keep your plan in step with
inflation. It is built into your original premium and therefore will
increase your annual premium. You may have choices of 5% simple or 5%
compounded. You do not have to add this to your plan - but it is certainly
recommended if you are younger when you buy your policy. Home Health Care Coverage - some policies will also give you the
option of receiving insurance benefits in your own home. This options will
allow you greater choice as to where your care can be paid for by the
insurance. It may cover community care like Adult Day Care Centers and
Assisted Living Facilities as well as care in the home. This option will
increase your premium. Nonforfeiture - this option provides some form of paid-up
benefit if the policy should lapse. This option increases your base
premium. I hope this will give you some direction when comparing LTC policies.
Always look for a strong and reputable company and also make sure your
agent is knowledgeable about long-term care issues as well. Shop around
and educate yourself and use your best judgment when selecting a plan.
Look for plans that are Tax Qualified.
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