Considering long-term care (LTC) can seem overwhelming or something that is so far down the road that it isn't important right now. However, having an unexpected long-term care event without protection can be devastating.
However, having an unexpected long-term care event without protection can devastate one’s financial plan in no time. But having the awkward but necessary conversations and a long-term care plan can bring peace of mind. And it gives one confidence, knowing thei rloved ones can focus on loving and caring about them without the burden of caring for them someday.
The following are some considerations that may help when broaching those discussions
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What should care look like?
Everyone has their own view of what their care should look like —what they hope it will be. It’s important that one thinks about what matters most. They should educate themselves about different options, such as in-home care, assisted living or nursing homes. Knowing the available options, one can better communicate their wishes to loved ones as well.
Put it in writing and define it.
This document can help you put your wishes on paper, and can easily be shared with your family members or financial professional as part of a long-term care conversation.
Here are some additional resources that may be helpful in determining preferences related to long-term or extended care needs:
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Getting Affairs in Order
Taking simple steps to gather pertinent documents now can prevent frustrations later, when one’s attention is best used ensuring their loved ones receive the quality care they desire. These preparations should include completing or updating certain documents that help guarantee their wishes. And it’s vital that the necessary people know where these important documents are kept.
Insurance policies and your plan of care
- Employee benefits statement
- Health insurance
- Life insurance
- Long-term care insurance
- Medicare information
- Medical and disability insurance
Investment accounts
- 401(k)
- IRA (Traditional/Roth)
- 529 Plan
Gathering and securely storing these items so that the essential family member or person of contact know show to access them will help tremendously when they are needed.
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Collect your information
This document can be used to start collecting your important information all in one place. Once complete, this is great to share with loved ones or to put with your important papers, while also remembering to update regularly.
Covering the Cost of Care
Long-term care services are both expensive and often misunderstood. Paying for one’s care — or “self-funding” — can be extremely costly, even with private health insurance. Health insurance plans and Medicare may pay for some expenses, but not on a long-term basis.
When planning for long term care, it’s helpful to know the average cost in your state or possibly the state where you’d like to spend your retirement years.
Myths of Long-Term Care
Too often, people stop short of preparing for future needs because they’re confused by the myths surrounding LTC products and services. Many individuals are also under the misconception that other forms of insurance or government-driven plans provide coverage for long-term care needs. Though there may be some areas where expenses are covered, benefits may not be sufficient to cover extended care expenses.
Here are a couple of examples or myths to consider:
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Social Security
Provides retirement income for seniors who have paid into the program, which includes almost everyone that has worked legally in the U.S. However, this program itself only provides for retirement income; whereas some associated programs like Optional State Supplements may provide for some assistance, depending on where qualified recipients live.
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Health Insurance
Covers many individuals during their working years, such as through an employer-sponsored or private program. Most employer-sponsored or private health insurance, including health insurance plans, cover only the same kinds of limited services as Medicare. If long-term care services are covered, coverage may be limited to skilled, short-term, medically necessary care.
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Medicare
Generally for people who are 65 and older or who have a qualifying long-term care need. However, it only pays for long-term care if the person requires skilled services or rehabilitative care within certain parameters. It also does not pay for non-skilled assistance with Activities of Daily Living, which make up many long-term care services.
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Medicaid
For individuals, families and children with limited income and resources. It can cover nursing services, but eligibility requirements vary by state*. Where Medicaid does pay for aspects of long-term care needs, to qualify, an individual must be below a certain income level, and they must meet minimum state eligibility requirements.
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State-Mandated LTC Plans
Are coming up in many states hoping to ease ballooning Medicaid budgets. States are looking to provide more affordable long-term care protection for the middle class, including home health care, and help individuals try to delay or avoid using Medicaid for their long-term care benefits. The WA Cares Fund was the first of these programs, taking effect Jan. 1, 2022, with many other states now discussing the plan.
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Chronic Illness Riders on life insurance policies
Can help pay for expenses when an individual becomes chronically ill and meets certain conditions. They can be added to some permanent life insurance policies that allow an individual to access some of the death benefit while they’re still living. There can be provisions around these policies that limit the amount of the death benefit that can be used for chronic care, so it’s important to understand the nuances of these riders as they relate to use for care needs.
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Both public and private programs have their own eligibility rules, requirements, limitations, copayments, etc. for the services they cover. When discussing options or strategies for addressing extended care needs and associated costs, it’s important that everyone understands what is available to them and the possible gaps they need to address. This document can help when it comes to researching and documenting the information specific to one’s situation.
Dedicated Long-Term Care Protection
There are two types of insurance that provide benefits specifically for use for costs associated with qualified long-term care expenses.
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Traditional long-term care insurance (LTCi)
Long-term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living such as bathing, dressing, or eating. You can select a range of care options and benefits that allow you to get the services you need, where you need them. You pay your premiums each year and if you have a claim, you file the claim. But if you never have a claim, you never collect any benefits from the policy. Insurance companies also may raise the premium on your policy over time.
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Hybrid or asset-based long-term care protection
Combination, "hybrid" or asset-based long-term care policies are gaining attention for good reason. By paying a premium, an individual purchases a life insurance policy or annuity that can be used for qualifying long-term care expenses. Should the policyholder experience a long-term care event, funds from the policy can be used to pay for LTC services, and the insurance company pays for care when those funds run out. And if the policyholder dies without needing LTC, the their beneficiaries receive a death benefit — therefore, the premiums paid into the policy are not "wasted."
The ways that policies pay for long-term care services
When considering purchase of long-term care protection policies, it's also important to understand how they pay benefits to policyholders, their families and service providers. These videos tell you a little more about types of payments and policyholders responsibilitles.
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Reimbursement and Indemnity Considerations
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Indemnity Tax Considerations
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Tax Considerations – Household Employee
Next up: Long-term care considerations
Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.
Not affiliated with or endorsed by the Social Security Administration, the Centers for Medicare & Medicaid Services, or any governmental agency.