Last week I was asked whether an individual should purchase an insurance policy covering long -term care, so let’s address this issue.
What is long-term care insurance?
Long-term care (LTC) insurance is a special private health plan that insures for long-term care as Medicaid is the public assistance program for this care. Individuals whose incomes and resources are high enough that they would never meet the qualifications for Medicare often opt for LTC insurance. However, Medicaid and LTC insurance are not necessarily mutually exclusive options.
LTC insurance doesn’t disqualify individual for medicaid
Holding an LTC insurance policy does not, in and of itself, disqualify the individual for Medicaid. As a third-party resource or TPR, LTC insurance pays for long term care before Medicaid is applied for or reimburses the Medicaid program for services paid by Medicaid but covered under the LTC policy.
Even the Cleavers must decide
Let’s assume that Ward and June Cleaver, now in their fifties, are confronted with the issue after Wally has married, given them their first grandchild and Theodore (the Beaver) has graduated from college and taken his first job (though he still lives at home).
Ward wants to investigate purchasing an LTC policy because he’s heard that nursing home costs are skyrocketing and he doesn’t want the boys to worry about financing his and June’s final days. He tells June he wants a policy that will cover all the costs of a nursing home so they don’t have to pay a penny out of savings.
Ward and June arrange to meet with Eddie Haskell, now an insurance agent who is anxious to sell them a policy. They gather in the living room and June brings in coffee and cupcakes.
Eddie, as usual, oozing flattery, compliments the Cleavers on seeking LTC insurance while they are still so young and healthy. Eddie pulls out his portfolio of available policies and brags he can offer a variety of LTC plans with a wide range of options. Some of the plans pay for nursing home care only. Others will pay for assisted living and in-home services as well. The Cleavers are a bit skeptical, knowing Eddie, but in this case, he is telling it square.
Halfway through the first cup of coffee, the Cleavers learn the policy they can afford pays a per diem amount, with no guarantee that this amount will be sufficient to cover all the long-term care facility charges.
Ward is disappointed and asks, “Then what’s the best you can do for us, Eddie?”
Eddie says that the rule of thumb is that they should purchase the amount of LTC insurance that will cover the excess of the monthly cost of nursing home care over the Cleavers’ monthly income.
“Let’s put it this way,” Haskell says. “If your monthly income is $2,000 a month and the average cost of nursing home care is $4,500, you need to buy enough insurance to pay $2,500 a month to cover all the cost.”
Ward considers this and asks, “Why not purchase insurance for the full $4,500?”
Eddie answers, “Well, you could….”
And, Eddie, being Eddie, is tempted to stop there. His better nature kicks in, however, and he adds, “But it’s not really a good choice because it’s so expensive.”
Ward is impressed with Eddie’s knowledge, but to be sure Eddie is giving the straight scoop, he says he would like to check out the policies and the company’s ratings with the Texas Department of Insurance before he and June make a decision. Eddie, who had been hoping for an immediate sale, reluctantly agrees that is not a bad idea. The Cleavers tell Eddie they’ll get in touch when they have completed their research.
Texas Long-Term Care Partnership Program
Medicaid places a limit of $2,000 on the countable assets that an applicant may have to qualify for Medicaid benefits. Texas has a program that is a joint effort between insurance companies and the state to encourage people to purchase LTC insurance.
However, an LTC policy purchased under this Long-Term Care Partnership provides a feature called Medicaid Asset Protection, which allows an applicant for Medicaid to keep a dollar’s worth of assets for every dollar the policy pays out in benefits. In other words, an applicant for Medicaid who holds a LTC policy that will pay out $200,000 in benefits, and who has savings of $200,000 may keep that $200,000 in assets and still qualify for Medicaid after the insurance benefits are exhausted. Additionally, Medicaid will not be able to go after that $200,000 in the estate of the Medicaid recipient for recovery of Medicaid benefits paid out.
Timing of purchase is crucial
LTC insurance can be a solution to financing long-term care, but few seniors are covered. Most people convince themselves that they will never need the care. Others wait until their health has declined and, therefore, do not qualify for the policies or premiums are cost-prohibitive.
Many mistakenly believe that Medicare covers LTC costs when it pays a small amount for a short period of time. It is crucial not to wait too late to consider the decision of LTC insurance. Age and health factors are of primary consideration.
Before making a decision to purchase LTC insurance, consult knowledgeable agents who represent multiple companies and can give comparisons of the benefits of each. Check out the experience, ratings and reputations of these agents. Ultimately, the decision is an individual one based on affordability and whether benefits justify the cost.
For more information online go to these websites: www.tdi.texas.gov, click on “Insurance and HMOs” and then click on “Long Term Care”; www.ownyourfuturetexas.org and www.longtermcare.gov.
I am indebted to Kathy Dorsey, CLTC of Long Term Care Solutions, www.kathydorseyltc.com, in preparing this column.
Sandra W. Reed is an attorney with Katten & Benson, an elder law firm based in Fort Worth. She lives in Somervell County.