Sustainable Bliss

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Long Term Care Insurance

As we experience the aging of our parents and older friends, it is clear that it is important to think about how we will manage a good quality of life when we cannot do everything ourselves. Some statistics:

  • Average age needing Long Term Health Insurance: 81
  • Average duration of stay over 1 year: 3.5 years
  • San Diego County Average for care: $270/day => $99,000/yr (California Averages)

Kinds of Long Term Care:

  1. custodial care - non-skilled personal care, like help with activities of daily living like bathing, dressing, eating, getting in/out of a bed/chair, using the bathroom (source)
  2. skilled nursing care - Nursing care such as help with medications and caring for wounds, and therapies such as occupational, speech, respiratory, and physical therapy
  3. long-term care - Services that include medical and non-medical (custodial) care for people with a chronic illness or disability.
  4. hospice care - Short-term, supportive care for individuals who are have a life expectancy of six months or less. Focuses on pain management and emotional, physical, and spiritual support for the patient and family. It can be provided at home or in a hospital, nursing home, or hospice facility.

Custodial care is the focus of this post.

Medicare does not include custodial care, and you can only get custodial assistance from your state's Medicaid program if you have less than $2000 in assets, and $600 in income (see below for details).

So if you have assets you want to protect, and sufficient income, long term care insurance often makes sense.

Some considerations when choosing a Long Term Care Insurance plan:

  • individual or group plan
    • group plan may be canceled
  • daily or monthly benefit
    • should cover 70% minimum daily benefit
    • you want monthly for home care
  • payment processing
    • reimbursement, indemnity, cash
  • waiting period before benefits start
    • normally 90 days - you pay out of pocket for this amount of time
  • inflation protection
    • important - want compound; typically 3%
  • facility-only or comprehensive that includes in-home care
    • for in-home, you must have a primary caregiver already
  • waiver of premiums while you receive care
  • benefit limits: period/total amount
    • average duration of stay over 1 year is 3.5 years, <15% more than 4 years

Long Term Care Partnership Policy

** not really viable anymore, as premiums have gone up **

California sample insurance rates

finding an agent: Agent Review * LTC Financial Solutions

FYI, if you fill out Schedule A when doing your annual taxes, you can enter long term care premiums, between $700 (less than 50 yrs old) up to $4,660 (over 70 yrs old).

Medicare / Medicaid

You are eligible for Medicare at age 65.  Medicare only covers medically necessary care and does not cover custodial care. Medicare does cover long-term care in a long-term care hospital or skilled nursing facility up to 100 days, some medical in-home care and hospice care. There are a limited number of facilities that are Medicare-certified. Even on Medicare, you are still responsible for copays.

Medicaid pays more of your bills, but you must be eligible.

Financial Eligibility for Medicaid

Assets whose value is counted in determining financial eligibility for Medicaid (max total of $2000):

  •  Checking and savings accounts
  • Stocks and bonds
  • Certificates of deposit
  • Real property other than your primary residence
  • Additional motor vehicles if you have more than one.
  • Cash surrender value of whole life insurance
  • Jewelry over $100
  • Your home if its equity value is greater than $500,000 ($750,000 in some states) and your spouse or child does not live there

Assets that do not get counted for eligibility:

  • Your primary residence
  • Personal property and household belongings, including all jewelry of spouse
  • One motor vehicle used for transportation
  • Whole Life insurance with a face value under $1,500; all Term Life insurance
  • Burial plots
  • IRA of applicant/beneficiary, if it is being distributed via periodic payments of interest and principal
  • IRA of spouse
  • Annuities if it is being distributed via periodic payments of interest and principal computed to be exhausted at the end of annuitant's life expectancy.
  • $2000 in cash

Income included these sources (max $600/mo to fully qualify) :

  • Regular benefit payments such as Social Security retirement or disability payments
  • Veterans benefits
  • Pensions
  • Salaries
  • Wages
  • Interest from bank accounts and certificates of deposit
  • Dividends from stocks and bonds

Spousal Impoverishment

If one person in a married couple needs long term care, the assets of both of them will be drawn down until all copays, etc are paid. So if one person needs long term care and then passes away, the survivor could be left destitute, as they are responsible for any outstanding bills. There is a Spousal Impoverishment Standard, that states that the spouse can have $119,220 in liquid assets and $2981 in monthly income, except if income is in spouse's name, then they can keep it all.

If you have limited assets and income, and will rely primarily on social security, it might not make sense to pay for long term care insurance, as the medical care

Insurance Policy Sources:

California Partnership for Long-Term Care The ABCs of Long Term Care Insurance California Department of Insurance Suze Orman

Government Program Sources: California Advocates for Nursing Home Reform