Analyze finances before choosing long-term care

Though an old man, I am but a young gardener. —Thomas Jefferson

A funeral for one of my favorite aunts took place last Saturday in Lubbock, Texas. I was able to make a quick trip out there for the funeral and return home safe and sound.
My aunt Juanita had Alzheimer’s Disease. She had been in a facility for almost a decade. She did not have long-term care insurance. Thankfully, her one and only son had conducted his life and business affairs in a way that made him able to financially provide quality care for his mother in her declining years. Given all the variations of care I have seen in my profession, I was very grateful for the facilities where “Aunt Dete” resided.
These situations always make me think of the untold thousands of people who do not have the financial resources necessary to provide quality care for a loved one. Most, like my aunt, do not have long-term care insurance. I strongly urge you to investigate this insurance for yourself and your family.
Many of the companies that started out as long term care providers twenty years ago have long-since dropped out of the game. It was so different from life insurance that they couldn’t figure out how to turn a profit. The remaining companies continue to improve and to provide better products – including hybrid policies and life insurance riders.
Today we face care challenges as never before; projected continuing federal deficits, reductions in Medicaid and Medicare spending and rapidly rising health-care costs, in spite of Obama Care. It is clear that finding alternative methods of financing long-term care support is critical.
When shopping for a policy it is crucial to consider carefully your entire financial situation. Failure to do so can result in purchasing too little coverage, which can be worse than purchasing no coverage at all.
Here’s a good example: Harry and Sally are a married couple with minimal assets, who are facing Harry’s nursing home costs of $5,000 each month. Harry has $2,000 in monthly income, as well as a long-term care insurance policy with a monthly benefit of $3,300. Sally has income of $400 per month. At first glance, the couple is better off with the policy, because they have an extra $3,300 per month, without which they could not afford the nursing home. It looks like they could pay for nursing home costs and have $700 per month for Sally’s support.
Unfortunately, Sally’s monthly bills and other expenses exceed that total. Harry is not eligible for Medicaid assistance because his income (including the long-term care insurance benefit) is greater than the nursing home bill. In this example, Harry’s long-term care insurance policy does not provide enough of a benefit to allow Sally to have sufficient income to meet her needs. If Harry’s long-term care insurance policy had provided a $5,000 per month benefit, more of his income would be available for Sally’s monthly expenses. Harry and Sally could have fully financed his long-term care needs and ensured that Sally would have enough money to meet expenses.
If Harry and Sally had recognized this shortfall and decided not to purchase the long-term care insurance, or if they could not afford the increased premiums for the additional monthly benefit, they could have used Medicaid assistance to help pay for Harry’s nursing home costs. Most of Harry’s $2,000 per month of income would be required to pay the nursing home patient share, and Sally could keep her $400 per month. However, because Sally’s income is so low, Medicaid rules would allow her to receive part of Harry’s income in order to support her monthly living expenses. Sally could receive a monthly maintenance needs allowance, which includes money for housing and utilities.
This example demonstrates that everyone needs to thoroughly analyze their entire financial situation, including future income needs, before purchasing long-term care insurance in order to ensure that the policies will adequately cover their future needs. This is particularly important with married couples who may eventually have one spouse in a nursing home and one spouse trying to make ends meet at home.
In addition to meeting with a long term care insurance provider, you should meet with an Elder Law Attorney who has specific, up to the moment, knowledge of the Medicaid landscape, including certain VA benefits.
Remember, there is virtually no situation where it is advisable to wait to purchase long-term care insurance and/or to choose a plan for how you intend to pay for long-term care should the need arise. There are not many options. There’s long-term care insurance, as we’re discussing. Secondly, there’s paying privately until all personal funds are exhausted and then qualifying for Medicaid as long as you meet all other eligibility requirements. Finally, a person can enter a state-approved long-term care facility and, in accordance with the law, can seek Medicaid eligibility prior to the exhaustion of all funds. There are complex legal provisions whereby some Medicaid planning can be done to try and preserve as many of the applicant’s assets as possible for the spouse remaining in the home.
It’s very important to consult with a professional who is familiar with all the nuances of Medicaid laws and procedures. It’s also important to consult with a professional before the purchase of long-term care insurance. You need to compare plans, premium rates and benefits before making a choice.
Thank you for reading. Stay well. See you next week.