Long Term Care Insurance

Why is LTC insurance the most important part of retirement planning.

The chances of living a long life are real
Who will care for you when you are old?
It’s not your life that will end when you need long term care. It’s someone else’s

Costs of Long-Term Care

Homemaker services $54,000
Home health aide services $55,000
Adult day care health services $19,200
Assisted living facility $51,600
Semi-private room/nursing home $94,000
Private room/nursing home $106,000

In addition to growth in demand, the cost of long term care services has also been increasing. Following are national averages for various types of long-term care.Though actual costs vary considerably by region and by provider, these figures provide some idea of what costs are, and more importantly, the cost trend for various types of care. Note that nursing home costs are rising faster than costs for long-term care services delivered in the home.

According to the Genworth 2021 Cost of Care Survey, the national median costs for long-term care were as follows:

Long Term Care Insurance

Long term care insurance, LTC is any of a wide range of ongoing services and support systems designed to help individuals perform self-care when they are unable to do so themselves. It can be something as simple as one spouse helping another out of bed at home, or it can involve providing round-the-clock medical care to a chronically ill patient in an institutional facility where the individual lives full time. Long-term care can also be anything in between these two extremes. For example, it can include:

Visits by a professional caregiver in an individual’s home a few times a week.
Driving an individual to a community center each day and bringing him or her back home every evening.
Full-time custodial care in an institutional facility that does not offer any medical care.

LTC Challenges

Addressing the need for long term care presents many challenges:

The need can be very costly—potentially, hundreds of thousands of dollars.
The need is unpredictable, both in terms of its timing and in the extent of care that will be required.
The need has the potential to inflict a tremendous burden—financially and emotionally—on family and friends who themselves may not be capable of assuming it.
The need may ultimately result in having to rely on public assistance, which greatly limits one’s options and choices.

Long-term care insurance answers these challenges in a way that few other options do. As with other forms of insurance, long-term care insurance deals effectively with cost, unpredictability and the transfer of risk and financial responsibility. That’s because the event that creates the need also creates the funds to address the need.

Protection Against Spousal Impoverishment

Current Medicaid Rules

Current Medicaid rules allow the community spouse—that is, the spouse who is not applying for Medicaid—to keep a certain amount of the couple’s total countable assets, subject to certain minimum and maximum limits established by federal and state requirements. The amount the community spouse is allowed to retain is known as the community spouse resource allowance, or CSRA. CSRA Limits The minimum CSRA limit is set by the federal government, and all states are required to abide by it.

The minimum limit may change each year to reflect changes in the cost of living. (As a point of reference, the minimum limit was $27,480 in 2022.) Generally speaking, community spouses are allowed to keep countable assets up to the amount of the full minimum limit, and (in most states) up to 50 percent of assets if they exceed the minimum limit, up to the amount of the maximum limit.

The maximum CSRA limit is also set by the federal government, but states are allowed to set a lower maximum limit if they choose. States are not permitted to set a higher maximum limit than the figure established by the federal government. Like the minimum limit, the maximum limit may change each year to reflect changes in the cost of living. (As a point of reference, the federally set maximum limit was $137,400 in 2022.) Some examples will help clarify how these minimum and maximum limits are applied to protect the community spouse from impoverishment while spending down assets to qualify an institutionalized spouse’s nursing home expenses for payment by Medicaid.

Past Rules on Medicaid for LTC

At one time, if an individual applying for Medicaid was married, both the individual and his or her spouse had to be impoverished to qualify for Medicaid even if only one of them needed to be cared for in a nursing home. The healthy spouse was reduced to poverty so that the other spouse could qualify for Medicaid long-term care services. Fortunately, spouses are now protected against such impoverishment.

What you need to know

Drawbacks to Medicaid Assistance

If an individual needs to utilize Medicaid, he or she will run into some problems. These problems will be:

No ability to choose where he or she will receive nursing care;
A loss of financial independence; and
A possible inability to pass on assets to heirs.

When individuals or families have the financial resources to pay for the long-term care on their own, the type of care provided would become a matter of choice and availability. The individual and/or family could decide which facility to go to or if not a nursing facility, the care could be provided in the home.

Unfortunately the options with Medicaid are limited. Medicaid will provide for the individual where there is a bed available. We should realize that nursing homes will fill their beds with customers that are paying the full rate and not the discounted rate paid by Medicaid. It is just good business economics.

Another important point to realize is there has to be a bed available.Since nursing homes fill the beds with “paying” customers, a bed may not be readily available when the need arises for the Medicaid recipient. Lack of availability of a bed will cause a delay in placement of the individual and likely force the family (assuming there is a family) to take care of the individual until a bed is available.

The bed available may be in the same community or it may be in another. The facility may be an “adequate” facility meeting the requirements of Medicaid, but not as nice as a facility if the Medicaid recipient had his or her choice. Medicaid will try to place the recipient as close to his or her home as possible,but bed availability is the key.

Activities of Daily Living Measure the Need for Long-Term Care Assistance

Most long term care involves assisting with basic personal needs rather than providing medical care. The long-term care community measures personal needs by looking at whether an individual requires help with six basic activitiesthat most people do every day without assistance, called activities ofdaily living (ADLs). ADLs are important to understand because they are used to gauge an individual’s level of functioning, which in turn determines whether the individual qualifies for assistance like Medicaid or has triggered long-term care insurance coverage. The six ADLs are generally recognized as:

Bathing. The ability to clean oneself and perform grooming activities like shaving and brushing teeth.
Dressing.The ability to get dressed by oneself withoutstruggling with buttons and zippers.
Eating. The ability to feed oneself.
Transferring. Being able to either walk or move oneself from a bed to a wheelchair and back again.
Toileting. The ability to get on and off the toilet.
Continence. The ability to control one's bladder and bowel functions.

There are other more complicated tasks that are important to living independently butaren't necessarily required on a daily basis. These are called instrumental activities of daily living (IADLs) and include the following:

Using a telephone
Managing medications
Preparing meals
Housekeeping
Managing personal finances
Shopping for groceries or clothes
Accessing transportation

Long-term care providers use ADLs and IADLs as a measure of whether assistance is required and how much assistance is needed. In order to qualify forMedicaidnursing home benefits, the state may do an assessment to verify that an applicant needs assistance with ADLs. Other state assistance programs also may require that an applicant be unable to perform a certain number of ADLs before qualifying. In addition,long-term care insuranceusually uses the inability to perform two or more ADLs as a trigger to begin paying on the policy.

Long Term Care Insurance

Why is LTC insurance the most important part of retirement planning.

Costs of Long-Term Care

Long Term Care Insurance

LTC Challenges

Protection Against Spousal Impoverishment

Current Medicaid Rules

Past Rules on Medicaid for LTC

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What you need to know