Before we take a look at the pros and cons of long-term care insurance, we should explain why it is relevant.
Indeed, it is easy to be confused when you know you will qualify for Medicare as a senior citizen. Long-term care has to be covered, right?
Whether it makes sense or not, the Medicare program simply does not cover the custodial care that nursing homes provide, and it does not pay for in-home care.
Don’t Be Overconfident
It is hard to imagine a time when you will need this level of assistance, but it is also hard to fully grasp what it will be like to experience life as an octogenarian. According to the Social Security Administration, the life expectancy for a 67-year-old woman is 87 years, and it is 85 years for a man.
Over 30 percent of people that are 85 years of age and older have contracted Alzheimer’s disease according to the Alzheimer’s Association. Many people with dementia need nursing home care, and of course, there are people that reside in these facilities for other reasons.
Long-Term Care Insurance
Now we can move on to the subject at hand. There was once a time when more than 100 companies offered long-term care insurance, but that number has radically decreased. Now, there are only about ten companies left standing.
Timing is key when it comes to a long-term care insurance purchase. The younger you are when you obtain the coverage, the lower the premium will be initially. However, companies can and do raise the premiums, so you enter into uncertain territory when you take out the policy.
In addition to your age, other factors that impact the premium include health, gender, marital status, the insurer, and the level of coverage you choose.
To give you a general idea, a policy with a $300 a day benefit for up to two years that is purchased by a 55-year-old Connecticut man will cost about $2400. We should point out the fact that the rates are higher for women because they have longer life expectancies.
One thing about the insurance that gets your attention in the wrong way is the so-called “elimination period.” You pay for the insurance for years, and if you finally have to use it, you do not get immediate coverage.
There is a period of ineligibility when you initially file your claim. It will be somewhere between 30 and 90 days depending on the terms of the policy that you purchase. Since 48 percent of people that need paid care require the assistance for less than one year, this is a pretty big deal.
At the end of the day, long-term care insurance in and of itself is a gamble, and there is another factor to take into consideration.
Medicaid Eligibility
Medicaid will pay for long-term care if you can gain eligibility. Since it is a need-based program, there is a low asset limit, but some things don’t count, including your home.
When it comes to the assets that are countable, you could establish and fund an irrevocable Medicaid trust. If you take this step, you would lose access to the principal, but you could receive distributions of the trust’s earnings until you apply for Medicaid coverage.
Timing is key, because the funding must be completed at least five years before you submit your application. Your eligibility is delayed if you violate this rule, and the duration of the penalty will be tied to the amount of the divestiture compared to the cost of nursing home care.
To give you an idea of the formula that is used, if you fund the trust with enough to pay for a year of nursing home care, your eligibility would be delayed by one year.
We Are Here to Help!
If you would like to develop a nursing home asset protection strategy, we would be more than glad to gain an understanding of your situation and make recommendations. When you decide to move forward, we can establish a plan that will ensure your comfort and preserve your legacy.
You can set the wheels in motion right now if you give us a call at 860-548-1000, and you can fill out our contact form if you would prefer to send us a message.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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