Long Term Care
No one wants to be a burden on those they love. Protect your hard work and legacy for those you care about.
What is Long Term Care?
Long Term Care is a group of health services designed to step in when a person’s health reaches a point where they can no long care for themselves.
Long Term Care insurance is designed to step in to cover these costs. Long Term Care is very expensive and can easily ruin even the most sound financial plans.
Long Term Care Insurance steps in after a person loses 2 out of their 6 activities of daily living or ADLs. These are:
Bathing, Eating, Dressing, Transferring (get out of beds, chairs, walk), Toileting, Continence
Long Term Care is sometimes needed after a major health event such as a heart attack or stroke. More often than not, it is something that slowly develops due to age or chronic illness such as dementia or Alzheimer’s.
Long Term Care Insurance will cover many different services depending on a person’s needs.
Skilled Nursing Care - Having a licensed physician’s supervision and a nurse available 24 hours a day
Intermediate Care - Under physician’s care but less dedicated nursing care is required
Custodial Care - Lower level of medical services needed. Usually includes food prep, food service, bathing, moving patient form bed to chair and vice versa.
Home Health Care - When person is able to care somewhat for themselves, but a daily or weekly nurse visit is required.
Assisted Living Care - Provided by facilities that don’t need the supervision of a full skilled nursing facility
Respite Care - Occasional full-time care for those who need full time care at home, but allows for family members to take a break
Doesn’t Medicare take care of this?
Medicare only pays for the first 100 days of stay at a skilled nursing facility (nursing home.)
Medicare will not generally pay for custodial care either.
If you do not have the resources to pay for the necessary care, medicaid will step in after you have spent down the majority of your financial resources. Countable assets that will need to be used up before Medicaid will step in include but are not limited to:
Cash and Bank Accounts
Vacation or other properties that are not a primary residence
Mutual funds, stocks, bonds, and CDs
In the state of Louisiana, 401k’s, IRAs, 403(b)’s, TSA plans. Including the spouse’s accounts
Cash value life insurance with more than $1,500 in value
Items not included in the asset limit before Medicaid will step in:
Primary home, assuming a spouse still lives there. Also, if the patient can continue to live there while receiving treatment, or is expected to be able to live there. In 2024, the home does need to be no greater than $713,000 in equity.
Pre-paid burial and funeral expenses, life insurance(with less than $1,500 in cash value)
Household furnishings, appliances, personal items such as clothing, engagement/wedding rings
Assets held in an irrevocable trust and asset protections trusts are not counted towards the limit.
Be Aware - There is a 5 year look back for any assets that were gifted or moved to a trust
Trusts must be created well in advance of a qualifying long term care event
The person receiving treatment, can only have $2,000 in countable assets to receive help from Medicaid. If married, the healthy spouse can retain $154,140 in 2024 in the state of LA.
With the extremely high cost of long term care, many will spend down all of their assets in order to cover their medical bills in a short time.
Some items are considered allowable spend downs such as: Medical devices, home modifications, new vehicle or repairs, pay off debts like a mortgage or vehicle, annuity, funeral trusts, personal care agreements utilizing family and friends
What is the difference between Long Term Disability and Long Term Care?
Long term disability insurance:
is typically for those who are injured or ill and are unable to work for a period of time.
covers most occupations and can pay out for many years if you are unable to do your specific job or any job at all.
typically pays about 60% of your normal income while you are medically disabled or until you reach full retirement age.
is usually triggered by a less severe condition than would trigger Long Term Care insurance benefits.
Long Term Care is for those who have lost the ability to care for themselves where as Long Term Disability is for those who cannot perform at their job.
For example, someone who was injured in an accident and hurt their back and can’t perform their job, but can still walk and live without any assistance could likely claim long term disability. They would stay on Disability while they waited to heal from their injury. For someone who hurt their spine and became a quadriplegic, they would more than likely lose the ability to do two activities of daily living and qualify for Long Term Care benefits.
To learn more about Long Term Disability insurance check out our Long Term Disability Info
What are the different types of Long Term Care Insurance?
There’s 3 main types of Long Term Care
Traditional
Life insurance with a LTC Rider
Hybrid
Traditional Long Term Care Insurance:
Works like most insurance, you will pick the amount of coverage, how long it lasts, and how long you must wait before receiving benefits(Also called an elimination period)
Choosing the amount paid each month to help cover the cost of long term care should be considered carefully and with the help of a advisor to balance the monthly cost with the expected costs of care.
Often you will pay for the rest of your life, but it is possible pay for a certain number of years.
It is common for the price, also called monthly premium, to increase with traditional policies as the cost of long term care increases over time.
Life insurance with a Long Term Care rider
Like how it sounds, it provides two protections. Life insurance in the case of death and long term care payments in case of a qualifying event.
Typically the monthly benefit for the long term care rider is 2% of the face value of the policy.
For example, if you were to have $300,000 life insurance policy that would pay out in the event of your death. In the event of a long term care need, it will also pay out $6,000 a month (or 2% of $300,000) until death.
In the event of death during long term care, the remaining balance would be paid to the beneficiaries. Using the same example, if the insured lived 3 years while utilizing the long term care rider ($6,000 x 12 months = $72,000 x 3 years = $216,000 paid out in LTC) the remaining $84,000 ($300,000 - $216,000 = $84,000) will be paid to beneficiaries of the life insurance policy.
If the full $300,000 is paid out for long term care, typically the monthly payments won’t stop, but their won’t be an additional death benefit upon the passing of the insured.
Hybrid Annuity Long Term Care Policies:
These utilize an annuity chassis that requires an upfront payment into a long term care annuity.
The money in the annuity is grown slowly over time, and should the insured pass away without utilizing the long term care funds, they will pass on to beneficiaries.
If long term care is needed, the money will begin to flow from the annuity pool each month.
These are often very helpful to families with assets they want to protect, but may fail the health requirements needed to qualify for Traditional LTC coverage or LTC Life Insurance.
What is the best type of Long Term Care Insurance?
There are a lot of factors to consider when choosing the right type of Long Term Care Insurance and we highly recommend discussing your situation with a professional with a lot of experience with details of the various types of policies.
We recommend giving us a call, sending in your questions, or scheduling a free discussion.
Some great information to have on hand for a discussion are some specifics on your financials
Having the amount of assets you have in savings, investments, and property on hand can help us determine the need.
Some feel they can self insure with the amount of money they have, but after looking at the options find that in the event of long term care, it’s much cheaper to cap their costs utilizing insurance. This leaves much more of their legacy behind for the family and loved ones.
What else should I know about Long Term Care Insurance?
The costs of Long Term Care is very high. In 2023 median annual costs:
Homemaker/home health aide costs = $68,640 / $75,504
Adult day health care = $24,700
Assisted Living Facility = $64,200
Semi-private/Private room in a nursing home = $104,025 / $116,800
The cost of long term care typically goes up in price as the years go on. Building in inflation protection into a long term care insurance policy should be something you consider with your Long Term Care Insurance professional
Consider family history and your personal situation when deciding how much LTC insurance to purchase.
Are you married or single? This could make a difference if someone is there to help cover some of the care in home. It can also help reduce cost if you group both spouses together in one policy due to the shared pool of coverage.
Family history of diseases like dementia, Alzheimer’s and diabetes can be very long illnesses that cause someone to need care for 5-10 years often times. These diseases can wipe out even the most carefully laid financial plans without proper protection.