Long-term care looks different from person-to-person. For one patient, long-term care may mean a home health aide coming in for a few hours during the day, For another patient, long-term care may mean living in a nursing home and receiving around-the-clock care. There are a variety of options for paying for long-term care.
Traditional Long-Term Care Insurance
When we say “traditional long-term care insurance,” we are referring to policies that insure against future long-term care expenses, require an annual premium, do not have a cash value or death benefit, and allow the premium to increase over time. These policies usually begin with a strict health underwriting process. In order to qualify for coverage, you need to be in reasonably good health for the company to offer you a policy.
Benefits are triggered under the policy once you meet the policy criteria. For more policies, the first step to triggering coverage is a physician’s assessment that you need assistance with 2 or more Activities of Daily Living (such as bathing or dressing) or you have severe cognitive impairment. Most policies then have an applicable “elimination period” during which you must pay for any care out of pocket. Generally, the elimination period is 30-90 days. Some policies will waive the elimination period for in-home care.
Traditional long-term care insurance policies are “use it or lose it.” If you pay the premiums for years and never need long-term care, then you have lost the money you paid into the policy.
Life Insurance with a Long-Term Care Rider
Even if you already have life insurance or feel you may not need it, this type of life insurance is for the purpose of protecting against future long-term care costs. Meaning that, most of the time, the death benefit is not the primary purpose for purchasing the policy.
The basic concept is that the insurance company will allow the insured to accelerate the death benefit of the policy if the insured is unable to perform two of six daily living activities (eating, dressing, bathing, transferring, toileting, or continence) or if the insured is cognitively impaired.
The most attractive feature of this type of plan is the ability of the insured to use the money to pay for home health care, assisted living, or skilled care. Often the policy will even allow the insured to pick who their caregiver is, even if it’s a family member.
Annuity with a Long-Term Care Rider
An annuity with a long-term care rider starts with an annuity, meaning that the underlying policy has a cash value. If you die, generally this cash value will pass as a death benefit to the beneficiaries that you name on the policy.
The long-term care rider will typically create a pool of funds that you can draw off of for long-term care expenses. Usually, the long-term care benefit pool of funds is larger than your cash value in the policy, but if you draw long-term care benefits, your cash value is usually depleted dollar for dollar. However, if you’ve depleted your cash value, there will still be funds remaining in your long-term care pool to pay for care. There just will not be a benefit paid to any beneficiaries.
Private paying for long-term care means utilizing your current assets to pay for your care. This may mean just paying out of your checking account but it could also mean selling off some jewelry or art to pay for the care. We usually do not recommend making private paying your only plan to pay for long-term care. Even for someone that has a substantial amount of wealth, why would you want to spend a large portion of it when you can preserve those assets and use another option to pay for your long-term care? $770,778 is the projected average cost for 3 years of long-term care 30 years from now.
Sometimes private paying is the initial form of payment for someone intending to use Medicaid benefits to pay for long-term care. This is usually seen as part of a spend-down plan developed by an experienced elder law attorney.
The Veterans’ Health Administration (VHA) provides health care services to eligible veterans. Due to a lack of funding, the VA prioritizes available services to veterans based on the extent of their service-related injuries. The first priority group is veterans with service-connected disabilities rated 50% or more disabling, or veterans that the VA determines are unemployable due to service-related conditions. There are a total of eight priority groups. The further down the list you go, the less likely you are to receive those services, so it is important that if you were planning on using VA benefits to pay for long-term care you know where you fall in the list of priority groups.
For veterans that are able to enroll in the VA health care system, they are eligible for limited Home and Community-Based Services (HCBS) which may include hospice, adult day care, home health aides, homemaker services, and home-based primary care for those with chronic disabling disease. A copayment may be applicable for these services.
The Veterans’ Health Administration also provides nursing home services through three programs:
- Nursing homes are owned and operated by the VA. These homes typically admit those with a 70% or higher service-connected disability rating, those who require care due to a service-connected disability, or those requiring short-term rehabilitative care. These homes may require a copay.
- State veterans’ homes. These are joint ventures between the VA and the states. The states typically set the eligibility criteria for admission, and the veteran usually pays about one-third of the cost.
- VA contract nursing home program. This program is for veterans needing long-term care who may not be eligible for placement in a VA or state veterans home or if there is no VA or state nursing home available. These homes usually require a copay.
Many people mistakenly believe Medicare will take care of all health care needs during retirement, but this is not the case. Medicare does not pay for long-term nursing home care, which leaves Medicaid as the primary government assistance program available.
Medicaid is a needs-based program for people 65 years of age or older, or who are permanently blind or disabled. They must also meet certain income requirements and asset limits for their state. If someone receives Supplemental Security Income (SSI), then they are automatically eligible for Medicaid benefits and do not need to go through the application process.
- A U.S. citizen or show proof of eligible immigration status,
- Live in the state in which they are applying for benefits, and
- Have a social security number (or show proof of having applied for one).
Because of Medicaid’s specific income requirements, it is important to make sure that you actually qualify before applying. Sometimes people wishing to use Medicaid benefits to pay for long-term care must first spend-down their assets to meet Medicaid’s qualification requirements. This is why we recommend working with an experienced elder law attorney to prepare a Medicaid application. A nursing home may offer to help with an application, but they are not obligated to work for your best interests.
We Can Help You Develop a Long-Term Care Plan
Having assisted many clients with long-term care planning, our team at Carolina Family Estate Planning understands that developing a long-term care plan is not just about protecting your own independence and dignity, but also about protecting those you love from the physical, emotional, and financial toll that caring for a loved one can take.
We’ve helped many clients take an interdisciplinary approach to their long-term care planning by exploring both legal and financial options. Usually, a well-rounded long-term care plan will involve a combination of legal, health care, and financial tools to meet your goals and maximize your protection.
For more information, check out our free guide to Alzheimer’s Care, and give our office a call at 919-443-3035 and one of our friendly Client Welcome Specialists will be happy to tell you more about The Alzheimer’s Planning Center and our unique Memory Safeguard Planning, to help you determine the best path forward, and to help you take the next steps toward a more secure future and a better life.