Whether or not you should buy long-term care insurance is a question we get a lot.
The answer is: it depends.
This isn’t a simple question to answer because there are so many variables, including:
- Your insurability
- Your age and resulting cost of the long-term care insurance options
- Your overall assets
- Family health history variables
- Whether you were a veteran and when you served
- Other items that can influence the answer
One thing is for sure, you should have a long-term care plan to know your alternatives for your future long-term care needs.
The Long-Term Care Insurance Industry
Modern medicine continues to extend the life expectancy for all of us, but crippling diseases like dementia and others have dramatically increased the costs of long-term care. This means the insurance industry has struggled with providing a profitable long-term care insurance policy, and it continues to adjust to the realities of paying for long-term care.
Many of the early long-term care insurance policies have become extremely expensive for the insurance industry, and many of the early providers no longer provide long-term care insurance. There is no question that the insurance industry continues to recalibrate their rates.
Recalibrated Insurance Rates Mean Fewer Choices and Higher Prices
There was a time when you could buy an unlimited long-term care insurance policy, but you’ll have a difficult time finding such a policy today. Most policies today are limited by a term of years and/or the policy is limited by a dollar amount. Additionally, the specific terms of today’s policies build in an elimination period that doesn’t cover care needs for the first few months or more.
All of these changes are examples of the long-term care insurance industry evolving and adapting their policies to reality. Today, the industry will typically combine long-term care insurance and life insurance into a “hybrid policy” that will provide coverage if somebody dies, or if they need long-term care, but in almost all cases the policy has a limit on the total value.
Unfortunately, the cost of long-term care policies has only gone up, up, up, as the risk of providing this long-term care insurance has gone higher. Many clients have found today’s long-term care insurance policies very expensive.
Other Options to Help You Pay for Long-Term Care
It’s increasingly critical for you to really understand your options and the risks associated with long-term care. There’s no question that long-term care insurance provides a wonderful benefit when you can afford it, but like other business decisions, it’s best to explore all options.
- Self-Pay / Private Pay — paying for your future care needs from your own assets.
- Veterans Benefits — if you qualify, there are VA benefits to help defray the cost of long-term care.
- Medicaid — although you probably don’t want to think about Medicaid as an option, it is important to understand how Medicaid could work in your situation.
Self-Pay / Private Pay is Dependent on Your Assets
At a very high level, Self-Pay / Private Pay is basically segmenting a part of your assets to pay for long-term care needs. Unfortunately, we don’t know how much long-term care we may need in the future, and the cost of long-term care continues to rise.
When you self-pay / private pay for long-term care, you’ll have many more options for care, but you’ll also be paying a higher rate than a Medicaid rate.
In the end, the Self-Pay / Private Pay option is highly dependent on how many assets you have to pay for the expected level of care before your money runs out. This means that it carries a higher risk, but this option is certainly one to consider.
Don’t Overlook Veterans Benefits if You Qualify
Veterans benefits are often overlooked in planning for long-term care needs. Veterans who have served during certain time periods may qualify for a veterans’ benefit known as VA Pension benefits, but more commonly known as VA Aid & Attendance benefits.
These benefits are designed to assist the veteran, or their surviving spouse, with their long-term care needs. When the veteran can qualify for these benefits, they can become very valuable for their care at home or in a facility. These benefits will only pay a specific dollar amount per month (depends on the qualifying amount), and they won’t cover the full cost of skilled nursing facilities.
Medicaid: You Paid for It, So Use it if You Need It
While Medicaid is often considered the option of last resort for long-term care, government statistics show that 70% of people in nursing homes rely on Medicaid to pay for their care.
For diseases with extended care requirements, Medicaid certainly should come into the discussion. It’s important to realize that you’ve paid for Medicaid over your lifetime so why not use it when you need it? Medicaid planning is complex, but also well worth your time when it’s appropriate for your circumstances.
Medicaid planning generally falls into two categories: crisis planning and proactive planning.
- Crisis Medicaid planning is the more common form of Medicaid planning. This planning is geared to protect assets whenever possible, and there are many different ways to assist an individual or a couple when the need arises.
- Proactive Medicaid planning usually is targeted at protecting major assets by asset restructuring with an understanding Medicaid will have a five-year lookback period for all gifts. For instance, if you’re a farmer, or landowner who wants to protect the family property, there are proactive steps we can take to protect these assets. Regardless of how you feel about using Medicaid, it’s very important for you to understand this alternative.
There are no silver bullets or guaranteed solutions to pay for your long-term care, as we just don’t know how much long-term care, if any, you may require. If you would like to speak with us about your long-term care plan, or to develop a long-term care plan for your individual situation, call us at (913) 345-2323. We want you to understand your alternatives, and then gain peace of mind with your decision after you’ve evaluated the best options for your future needs.