Long-Term Care Insurance

Transcription

1 600 HIGHWAY 169 S. SUITE 885 MINNEAPOLIS, MN PHONE: (763) The cost of healthcare is a concern to many Americans. Many believe that the single largest threat to the financial future of Americans is the cost of healthcare. Once an American enters retirement, the cost of medical care begins to become a larger part of the budget. For most Americans, they will not face a more devastating financial crisis than the need to pay for a nursing home. One in three seniors will enter a nursing home at one point in their lives under current statistics. 1 This percentage is likely to increase greatly before the year By the year 2040, the number of seniors without children or anyone else to care for them will increase by 50%. 3 There are three ways that Americans can pay for nursing home care: long-term care insurance, out of pocket, and Medicaid/Veteran s Administration benefits. In Minnesota, the Medicaid program is called Medical Assistance. This report will cover the pros and the cons of each of the three options. After reading, you will have a better idea of what strategy might work best for you. According to the latest survey by Genworth, the cost of a private room in the Twin Cities at a nursing home is an average of $8,500 a month. 4 A semi-private room doesn t fare much better at $7,750 a month. 5 This cost can be devastating to the retirement incomes and assets of Minnesotans. Often, only one person enters a nursing home while their spouse lives in the community for as long as their health continues to be good. The largest burden is often on this spouse that remains behind. Could you live on $8,500 less per month? What you can t cover in your social security, pension or other income must be paid for by using your assets unless you have planned. Fortunately, for almost all Minnesotans, one of the three options covered in this report will work. You do not have to lose everything when you enter the nursing home. Long-Term Care Insurance Long-term care insurance has been offered on the market for a long time. This type of coverage involves a yearly premium and if you ever need long-term care then it us/industry expertise/cost of care.html 5 Page 1 of 5

2 will reimburse you for the cost. This means that the policy will pay out whatever you are charged up to the policy limit on the policy. It is not uncommon for these policies to cost $6,000 or more a year. You also must go through medical underwriting just like for life insurance. If you have arthritis or other health problems that will make you likely to use the benefits then they could either cost more or you could be denied all together. It is important to explore this option while you are younger in order to pay an affordable price and make sure that you will qualify. These types of policies are still offered, but only a few insurers sell them. Most insurance carriers have moved on to either an annuity with a long-term care rider or a life insurance product with the same. The main differences between these types of policies and traditional long-term care are the amount of benefits and that the benefit is not reimbursement. The benefit is lower in total for lifetime benefits. A traditional long-term care policy can provide a million dollars or more of potential coverage. This is because they are intended to cover care from catastrophic injuries that could make you unable to care for yourself while you are younger. Normally, you first become eligible for these policies when you are 35. A life insurance policy might provide $300,000 of long-term care coverage by a rider. This rider can enhance your death benefit also. However, if you use the long-term care coverage then the amount used is deducted from your death benefit when you die. However, there is an upside. These policies do not pay based upon reimbursement. If the policy will pay $14,000 per month then you will get this amount regardless of the cost of the nursing home. If the nursing home cost is $8,500 a month then you will still get $14,000. Traditional long-term care policies also have another advantage. Some of these policies are a part of the Long-Term Care Partnership. This program was created by the Deficit Reduction Act of If you purchase a policy that qualifies for this program, then for every dollar that the policy gives you in benefits, Medicaid will allow you keep one dollar of your own money if you need to go on the program. This means that if your policy spends $1 million on your care and then your coverage runs out, you can have Medicaid pay for the rest even if you are worth $1 million. That is a very attractive benefit. A long-term care policy makes sense for any American that makes over $30,000 a year, has more than $75,000 of net worth, you can afford the premiums, and can afford the premiums if they go up 20 to 30 percent. 6 Many Americans have health problems 6 United Seniors Health Cooperative Page 2 of 5

3 that make them ineligible for these policies. Some American families can also not afford the premiums. These families will need to rely on one of the other two options. Out of Pocket This option is the least attractive of the three. Under this option, you spend your savings and income on the nursing home. A spouse left outside of the home will have to get by without a significant portion of their previous income. If the money runs out, then state benefits might take care of the spouse inside of the home, but the one that remains in the community often faces poverty. Your children will also likely lose their legacy. Some Americans take out a reverse mortgage and use this money to pay for care. However, this means that the family home will not be able to be given as a legacy for your children. The moment that the home is unoccupied for a month, the loan becomes due. Few families are in a position to pay the mortgage back. This normally means the home is lost. Medicaid The final option is the state-run Medicaid program. This option is not as devastating as you might think. The way that most couples approach Medicaid is often devastating however. This is because they approach it without a plan. In order to be eligible for Medicaid, the person entering the nursing home must only have $3,000 in assets and can keep only $97 a month of their income. Most assets of their spouse are also at risk. The spouse that remains can keep $120,900 of assets and a total of $2031 a month of the couple s income. 7 The rest of the couple s income must be given over as a Medicaid co-pay. So, if a couple has $3,000 a month in income before applying for Medicaid, they will only be able to keep $2128 a month once on the program. This can have a devastating affect on the couple s finances and future. $120,900 in assets will not last for the life of most American seniors. That amount will run out quickly. This doesn t have to be the case though. With planning these assets can still be used over the life of the couple even if Medicaid is needed. These devastating consequences are often only a reality if there is no planning. The best time to plan is 5 years before you might need Medicaid. However, even if you are in need of Medicaid tomorrow, a qualified elder law attorney can save most of your assets. The following assets are generally at risk when Medicaid is needed: 7 Each of these numbers change yearly with inflation. They are also changed whenever the legislature changes the law. Page 3 of 5

4 Income of both spouses IRA funds, 401k funds, investment accounts Annuities Life Insurance cash values Value of a vehicle beyond the first Home equity above $560, Jewelry and collectibles Guns A car beyond the first Boats and recreational toys Medicaid has some advantages however. The nursing home can only charge the Medicaid rate rather than the extremely high private pay rate. This rate varies depending upon the facility and the level of services needed by the resident. However, this can be as low as $4,500 per month. Imagine the savings! Through the use of special trusts and financial products, a skilled elder law attorney can guide you to where you are eligible for Medicaid benefits without getting rid of your money. This will allow your spouse to continue maintaining the same standard of living once you are inside of the nursing home. Also, it will provide for a chance that your children will inherit. Most nursing home stays are only for about 2.8 years. After that, most seniors who enter a nursing home have passed away. Rather than losing all of your money before you even enter the home, these strategies can allow you to keep your money and even repay the state every penny when you die. If you are on Medicaid, your co-pay pays down the $4,500 and Medicaid only pays the difference after the co-pay. If you did not lose all of your assets before entering the nursing home then there might be a good chance that you still have more than Medicaid paid when you die. The rest will go to your heirs. War veterans might also be eligible for VA benefits. These programs have strict eligibility requirements. Seek out a VA benefits or elder law attorney to determine your benefit eligibility. These programs are also possible without losing your nest egg. Even if you don t plan, then someone must take care of you. Someone must apply for your nursing home care and benefits. You should have at a minimum: a will, an Advanced Healthcare Directive, and a Durable Power of Attorney with enhanced powers for Medicaid. Without these, your family might have to declare you incompetent and involve the state in every detail of your care. Page 4 of 5

5 If you want to explore your options, then please contact me at the phone number on the first page of this report. I will sit down with you for free and explore your options to help you determine what is right for you and your loved one. You don t have to lose everything to the nursing home. Save your money and plan. Schedule your consultation today. Page 5 of 5