Is Long Term Care Insurance Really a Good Idea?

Clients are often concerned that long term care insurance is too costly, but it may not be compared to the cost of private paying long term care.

Forbes’ recent article entitled “Is Long-Term Care Insurance Right For You?” says that a big drawback for many is the fact that long term care insurance (“LTCI”) is expensive. However, think about the costs of long term care. For example, the current median annual cost for assisted living is $43,539, and for a private room in a nursing home, it’s more than $92,000.  In many urban areas it is much higher, so utilizing long term care insurance my be best.

Another issue is that there’s no way to accurately determine if in fact you’ll even need long term care. Much of it depends on your own health and family history. However, planning for the possibility is key and unfortunately most clients don’t plan for long term care either with insurance, retirement or in their estate plans.

Remember that Medicare and other types of health insurance don’t cover most of the cost of long term care—what are known as “activities of daily living,” like bathing, dressing, eating, using the bathroom and moving. Medicare will only pay for medically necessary skilled nursing and home care, such as giving shots and changing dressings and not assisted-living costs, like bathing and eating. Supplemental insurance policies generally don’t pay for this type of care.  Those who meet financial guidelines may receive care provided under Medicaid or other benefits such as Veterans benefits.

It is important to shop around as there are no one-size-fits-all long term care insurance policies. Check the policy terms and be sure you understand:

  • The things that are covered, such as skilled nursing, custodial care, assisted living and in home care
  • If Alzheimer’s disease is covered as it’s a leading reason for needing long-term care
  • If there are any limitations on pre-existing conditions
  • The maximum payouts, including if maximum payouts are by day or year
  • If the payments are adjusted for inflation, which depending on the time of purchase might be key
  • The lag time until benefits begin
  • How long benefits will last, including whether there are lifetime caps on the amount paid or time periods paid
  • If there’s a waiver of premium benefit, which suspends premiums when you are collecting long-term care benefits
  • If there’s a non-forfeiture benefit, which offers limited coverage even if you cancel the policy
  • If the current premiums are guaranteed in future years, or if there are limits on future increases
  • How many times rates have increased in the past 10 years
  • If you purchase a group policy through an employer, see if it is portable (if you can take it with you if you change jobs).

Typically, when you are between 55 to 60 is the most cost-effective time to buy LTCI, if you’re in good health. See my prior blog on this point.  https://www.galliganmanning.com/when-should-i-consider-long-term-care-insurance/   The younger you buy, the lower the cost. However, you will be paying premiums longer. Premiums usually increase as you get older and less healthy. There’s a possibility that you’ll be denied coverage, if your health becomes poor. Therefore, while it’s not inexpensive, buying LTCI sooner rather than later may be the best move.

The best thing to do is to consult your financial advisor and your insurance agent on whether a LTCI policy, and which, will work best for you.

Reference: Forbes (April 17, 2020) “Is Long-Term Care Insurance Right For You?”

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What Do We Know about Early-Onset Dementia?

There is an increase in early-onset dementia cases which presents unique issues for families. Consider early testing and long-term care insurance to help.

Rita Benezra Obeiter, 59, is a former pediatrician who was diagnosed several years ago with early-onset dementia, a rare form of the disease. When this occurs in people under age 65, the conditions cause additional and unique issues because they are so unexpected and because most of the potentially helpful programs and services are designed for and targeted to older people.

One issue is that doctors typically don’t look for the disease in younger patients. As a result, it can be months or even years before the right diagnosis is made and proper treatment can start.

WLNY’s recent article entitled “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before” reports that her husband Robert Obeiter left his job two years ago to care for her. She attends an adult day care, and aides help at home at night.

If Dementia is a generic term for diseases characterized by a decline in memory, language, and other thinking skills required to perform everyday activities, Alzheimer’s is the most common. The National Institute of Health reports that there’s approximately 200,000 Americans in their 40s, 50s, and early 60s with early onset Alzheimer’s.  These numbers have lead to the consideration of Alzheimer’s legislation.  See here.  https://www.galliganmanning.com/elder-law-community-follows-proposed-new-alzheimers-legislation/ 

One conference discussed a rise in early dementia because of the processed foods and fertilizers or the other environmental hazards, and there are definitely some genes more associated with Alzheimer’s—more so with early onset.  There is no clear answer, and most of the treatments help to slow down the progression.

There is some research showing the Mediterranean diet can be protective, as well as doing cognitive exercises like crossword puzzles and Sudoku.

It’s true that no one can predict the future of their health, but there are ways financially that families can prepare for early-onset dementia. It can cost $150,000 a year or more. That’s why you should think about purchasing long term care insurance starting at the age of 40.  You should also have your estate plan reviewed well before memory becomes a significant issue to make sure the plan facilities long-term are planning.

Long-term health insurance can pay for an aide to come into your home, and it can pay for the cost of assisted living. And, remember that health insurance doesn’t cover long-term care, nor does Medicare.  Making sure you have a financial power of attorney prepared by an elder law attorney will provide your family with the flexibility they need to handle your financial needs, bills and so on.

If you are faced with this condition or have a family history of it, consider long-term care insurance early and make sure to review your estaet plan every few years to stay up to date.

Reference: WLNY (Feb. 12, 2020) “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before”

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How Much will Medicaid and Medicare Budget Cuts Save?

Trump’s 2021 fiscal year include major Medicaid and Medicare budget cuts which will have a big impact on those programs if successfully implemented.

President Trump’s proposed fiscal year 2021 budget will include substantial Medicaid and Medicare budget cuts.  The HHS budget notes that taxpayers could save $756 billion in Medicare through 2030 by reducing fraud and waste and relying on lower payments to hospitals through “site-neutral” payment policies. For Medicaid, the Health and Human Services Department’s annual budget proposal presumes that expanded work requirements, tighter beneficiary eligibility screening and capped or “block grant” state funding will all be in effect.  These types of Medicaid and Medicare budget cuts will have a big impact, if successfully implemented.

Also for references, Medicaid and Medicare accomplish different goals, so see here for the differences.  https://www.galliganmanning.com/practice-areas/elder-law/

These approaches show how the White House will change entitlement programs in an election year, if Trump’s budget is approved. His administration would like to see able-bodied adults who enroll in Medicaid to have a work requirement imposed. If this requirement was implemented, it would probably decrease the population of recipients and more of those receiving benefits would be physically unable to work.

“As part of the President’s Health Reform Vision, Medicaid spending will grow at a more sustainable rate by ending the financial bias that currently favors able-bodied working adults over the truly vulnerable,” the HHS budget document said.

The Centers for Medicare & Medicaid Services (CMS) has okayed 11 state work requirement programs and is in the process of looking at nine others. These state work mandates are being challenged in court, but the administration still contends they’ll save Medicaid $8 billion in 2021 alone.

CMS would like to implement Medicare’s “site-neutral” payment policy. This would pay the same lower rate for services whether provided at a doctor’s office or in a hospital outpatient setting. It’s a priority to see it go into effect. However, a federal court scrapped the policy last year, saying it was a programmatic overreach. Nonetheless, the Trump administration again implemented it this year and is facing more lawsuits from the hospital industry. The Trump White House says the site-neutral Medicare payments would save more than $164 billion over 10 years.

The administration also wants to cut Medicare payments for doctors’ residency training programs and hospitals’ uncompensated care. Those moves would save about $52 billion and $88 billion, respectively, over 10 years, the budget document explains.

The administration also estimates that overhauling Medicare payments for care after a patient leaves the hospital would save more than $101 billion over the next 10 years.

We’ll continue to watch these developments as they will have a big impact on Medicare and Medicaid programs.

Reference: Bloomberg Law (Feb. 11, 2020) “Trump Projects Saving Billions From Medicare, Medicaid Policies”

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