Long-term care insurance can be a complex decision

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Long-term care insurance can be a complex decision

The true secret of giving advice is, after you have honestly given it, to be perfectly indifferent whether it is taken or not and never persist in trying to set people right.—Hannah Whithall Smith, American speaker and author (1832-1911)

Some people are convinced that the decision to purchase long term care insurance is a no-brainer. But is it?  Should you buy it?  This is a decision rife with uncertainty and complexity.  .  There’s a chance you will never need long term care, right?  There is that chance, but relying on it is definitely a risk.  Some sales people urge you to put that risk on someone else’s shoulders rather than your own.  Makes sense.  But, on the other hand …

Thinking about long term care insurance reminds me of Fiddler on the Roof, where Tevye tries to deal in his mind with the marriage of his first daughter.  He argues with himself all the way through the song, saying “On the one hand…” and then argues with himself “but on the other hand …” We can all get in that same loop when we think about long term care insurance.  Senior Moments has long been a fan of this insurance, but it should be bought only after careful consideration regarding whether it is the best decision in your individual case.

Have you noticed that the government really wants us to buy it?  There are more and more incentive programs coming down the pike to encourage us to do so, including long term care partnerships that increase the value of the assets that people are allowed to retain when they qualify for Medicaid.  Additionally, there are tax benefits being offered for such purchases.

Consumer Reports magazine has warned that long term care insurance doesn’t make sense for individuals who are too poor or too wealthy. They concluded that the best candidates to purchase the insurance are those persons with assets in a range between $200,000 and $1.5 million.

Many people with low or moderate incomes and relatively modest accumulated wealth will sooner or later rely upon Medicaid to pay for care needed for more than a few months.  At the other end of the spectrum, wealthier consumers who buy long term care insurance to preserve assets to pass on to their heirs should seek the advice of professionals.  It may be difficult to find knowledgeable and disinterested advice, but a great starting point is Maryland’s federally funded Senior Health Insurance Assistance Program (SHIP.) In Prince George’s County, call 301-265-8471.  InAnneArundelCounty, call 410-222-4464.

Once you decide that long term care insurance is the correct choice for you, you still face the daunting task of shopping for the right policy.  You will be required to make a series of judgment calls regarding cost of care and coverage options, among other things.

Questions to answer regarding cost of care include the following:  How likely are you or your spouse to need long term care?  Of course, we do not have the ability to foretell the future, but there is much information around today to aid in your thoughts about this question.  Your likelihood of needing long term care varies with age, health, life expectancy, gender, marital status and family background.

How long will you need long term care?  According to the Administration on Aging, half of all nursing home residents receive care for less than a year.  Three to four years is often said to be the average stay.  However, short-term rehab patient stays are included in those figures to come up with the three to four years.  .

When the time comes, how much will you be asked to pay for long term care?  Prices vary considerably among regions and, of course, according to the venue – nursing home, assisted living or home health care. Once you have reached decisions about the cost and quantity of the long term care you are likely to need, you then have to decide what level of insurance coverage to buy and at what price.  Important variables include the maximum daily benefit, maximum duration and amount for payments, types of care covered, and what triggers the coverage.  Additionally, you’ll want to consider if you want inflation protection and, if so, what type?  What is the deductible going to be (this is called elimination period in the long term care insurance glossary.)  If you purchase an IRS qualified policy, benefits paid to you under the policy will not be taxable as income.

Because the long term care insurance industry continues to evolve, look carefully at the condition and history of any company you are considering, and keep an eye on their financial stability. Political developments may affect policy costs, coverage, and the availability of the Medicaid safety net.   Review policies carefully to see under what conditions a company can cancel coverage or hike premiums.

If you are interested in additional information, the HHS National Clearinghouse for Long Term Care information is at http://www.medicare.gov/LongtermCare.  The booklet “A Shopper’s Guide to Long Term Care Insurance” by the National Association of Insurance Commissioners is posted at various sites on the internet.  Senior Moments is grateful to theNationalConsumerLawCenter for many of the thoughts in today’s column.

Thank you for reading.  Stay well.  See you next week.

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