What You Need to Know about Long-Term-Care Insurance
The extreme cost of skilled care is leading to many more people looking into additional benefits to help cover those costs. The average cost of a semi-private room in a skilled nursing facility was $94,900 per year, in 2021.[1] Assisted living, home health aides, and in home care can cost between $50,000 and $60,000 per year as well.[2] No matter what type of care you end up needing, it will likely require some level of financial planning.
If private paying does not sound like the desirable choice, there are a few different options to help cover the exorbitant cost of care. Two federal programs, Medicare and Medicaid, try to provide some relief. However, Medicare only covers up to 100 days, but rarely that many. Also, for Medicare to pay, it must be for short-term care, or for care provided at home or in a nursing facility that is connected to physical rehabilitation, like after a surgery or other qualifying hospital stay. It is not a solution to help pay for long-term-care stays.
Medicaid, is a federal health insurance program that could provide a little more financial support. It’s a program that pays for a portion of at-home or nursing home care, but to qualify you must have limited financial assets and income. Despite it being a federal program, each state decides how to administer that program, so rules vary widely across the country for who may qualify. Using the proper estate planning tools, including an irrevocable trust, you may qualify for Medicaid even if you have accumulated many assets during your lifetime.
With Medicaid planning, you should start early. There is a five-year lookback in all states except for California, so planning needs to be contemplated and in place for at least that long. Of course, you can still do planning in a crisis, but you likely will not be able to protect as much of your hard-earned assets.
Even with these potential federal funds available for care, often times there is still a large bill for the person receiving the care. One way to supplement your income to cover these costs, is through long-term-care (“LTC”) insurance. LTC insurance is a private option for individuals or couples. This – like other types of insurance – requires payment of a premium monthly or annually. Although it is another monthly expense, it could get you a tax break if you itemize your deductions at the end of the year.
When shopping for a LTC insurance policy, you can choose the rate of the policy; whether it pays monthly or daily to the facility; how long the “elimination period” is (or amount of time you must be in a facility before the policy kicks in, kind of like a deductible); and the duration of payments, typically offered in months or years.
One downside is that LTC policies are quite expensive; insurance companies see the same average nursing home rates that we do and price their plans accordingly. The more coverage you buy, the more expensive the premiums. Plus, LTC insurance companies are picky about to whom they extend coverage. Just like other types of insurance, it is better to get a policy while you are younger and healthier. Single individuals and women also tend to pay more for LTC insurance plans than men and married individuals.
No matter what route you take, pre-planning for your end-of-life-care will allow you to have the most flexibility and options in the time of your health crisis. If you are considering purchasing a long-term-care insurance plan, talk with your estate planning attorney to see what they advise, based on the other rules and programs in your state. Long-term-care insurance may be an option to supplement the high costs of skilled nursing home care for some. Talk with your estate planning attorney to discuss the pros and cons specific to your situation.
[1] Genworth. Cost of Care survey 2021. Genworth.com. June 2022. https://www.genworth.com/aging-and-you/finances/cost-of-care.html
[2] Id.