Long-Term Care

The rules of money have changed, and the need for long term care insurance has changed along with it. Many people have not dealt with this subject simply because until very recently, it was not very necessary.

In ancient Greece, for example, the life expectancy at birth was 20. When the Declaration of Independence was signed, life expectancy was still around 23 years of age. Even as recently as the 1900s, most Americans died around age 47. Today there are over 35 million people over the age of 65, and the figures continue to grow.

Many clients consider the idea of long-term care to be daunting, but in most cases it is a significant risk management component of a sound financial plan.

Long-term care is an approach designed to give you choices about care when and if needed. It is also a way of ensuring that your family is not forced to become the primary caregiver and is an important way to preserve your assets.

LONG-TERM CARE: DEFINED

LTC is the daily care required if you have a serious long term care illness or disability. Long-term care policies generally cover expenses for skilled, intermediate, and custodial care, whether these services are provided at your own home, an adult day care center, an assisted-living facility, a group home for specific conditions such as Alzheimer’s, or a nursing home.

WHAT ARE YOUR CHANCES OF NEEDING LONG TERM CARE?

  • 60% of people over 65 years of age will require long term care at some point in their lives. As people age, the probability they will need long term care also increases.
  • People between the ages of 18-64 make up 40% of the people needing long-term care.
  • Although there are about 3.2 million people in nursing homes, there are another 22.4 million people who receive care at home, in adult day care facilities and in the growing assisted-care living setting.

A survey by AARP and the National Alliance for Caregivers indicates that almost 25% of the American households are currently providing informal, unpaid care for an older friend or relative.

WHAT IS THE COST OF HOME CARE?

Most people prefer to receive care at home for the longest possible time. Proper LTC insurance coverage can delay or even eliminate the need for nursing home care by providing for a dedicated professional at home.

WHAT IS THE COST OF NURSING HOME CARE?

Depending on the facility and the area of the country, an average nursing home stay can cost as much as $160,000 or more per year. It is expected that in the next ten years the average financial risk of long term care will be $188,260, and in 20 years it will reach $300,864. Without long term care insurance, most families would be impoverished within one year.

WILL MEDICARE AND MY HEALTH INSURANCE PROVIDE FULL BENEFITS?

No. Medicare and other health insurance programs are intended to cover hospital and physician costs, not long-term care expenses.

Many of those who pay for nursing home care, quickly deplete their entire savings and end up applying for Medicaid, the government program for the financially impoverished.

Those who have not accumulated significant assets for retirement are most at risk.

ARE THERE ANY TAX ADVANTAGES TO PURCHASING LONG TERM CARE INSURANCE?

Yes. The federal government passed the Health Insurance Probability and Accountability Act of 1996, which provides tax incentives to people who purchase tax-qualified long term care insurance plans. These incentives, subject to limitations, include LTC insurance benefits received by a claimant will be tax free to the recipient. Ask your CPA for more information on this topic.


** The per-diem limitation for periodic payments is $300.
** Source: IRS Revenue Procedure 2007-66 (2010 limits); Section 213(d)(10)
** This limitation is calculated separately for each spouse, so a 53 year old and a 63 year old couple have a $1,270 and $3,390 deductions respectively; which can total $4,660
**Any benefits paid under this policy are non-taxable.
Sources:
(1] The Washington Post, April, 1996
[1] Employees Benefit Research Institute Issue Brief, July, 1995
[1] Brookings Institute, The Caregivers, 1995
[1] USA Today, March 18,1997
5Who pays for Nursing Homes? Consumer Reports, September, 1995
6Business & Health Magazine, January, 1997
7 Consumer Price Index, Statistical abstracts of the United States, 1996
8 Business & Health Magazine, January, 19979 Division of Health and Long Term Care, NYS Department of Social Services.