Do You Know the Basics of Long-Term Care?

 Guest Author Raymond Lavine  
 
Long term care may affect you or your loved one. You need to know what it’s all about so you can start taking action based on your circumstance. So here’s a quick overview.What do we mean by long term care? It means you need help performing your activities of daily living (ADLs). Examples are dressing, bathing, toileting, eating and continence for the foreseeable future.Who would provide this help? Long term caregivers do. They’re divided into skilled and custodial caregivers. Custodial caregivers are aides, volunteers, family or friends. Generally heath care plans will pay for care provided by skilled caregivers (medical specialist like doctors, nurses, etc) and custodial services but only if given as part of a skilled care procedure.

Where can LTC be provided? You can receive LTC in your home, at an adult day center, an assisted living facility, a hospice facility or at a nursing home.

What are typical costs for these services? It really depends on where you’re living and what you’re receiving for care. But ballpark annual costs1 may be $25,000 for home health care, $40,000 for assisted living base rate, and $80,000 or more for nursing home costs

Who pays for LTC costs? LTC costs are paid by either you, Medicaid, or from a LTC insurance policy.  Medicaid will pay only if your assets and income are very low. If Long Term Care Insurance is to pay, you’ll have had to purchase the policy and pay the premiums until you qualify for LTC.

What are the Long Term Care insurance benefits?
This depends on your policy. Benefit payments may include payment for various LTC receiving locations (home, assisted living, etc), Daily Benefit Amount (DBA) i.e how much they’ll pay per day in a nursing home, the duration of LTC (number of days of care) they’ll pay, and any inflation adjustments.

How much are LTC insurance premiums?  That depends on your policy choice. Premium costs, though, generally increase the older you are when you purchase the policy. And choosing more, larger or longer lasting benefits will generally increase premium costs too.

Who should not buy LTC insurance? Anyone who can’t maintain paying the premiums until they qualify for LTC shouldn’t purchase it. Premiums for guaranteed renewal insurance may increase with time.

When do you become eligible to receive LTC? It depends on the guidelines for who is paying the benefit costs. Under a tax qualified LTC insurance policy, a licensed health care practitioner must certify you as chronically ill (i.e. you can’t perform some number of activities of daily living for an expected 90 days or you have a severe cognitive impairment.) and that a plan of care is in place for you.
Now you know the basics.

1 MetLife Mature Market Institute, “The MetLife Market Survey of Nursing Home & Home Care Costs,” September 2009. MetLife Mature Market Institute, “The MetLife Survey of Assisted Living Costs,” October 2009.


W hy Should You Invest In Long-Term Care Insurance?

An elderly person needs long term care when he or she can’t handle normal daily activities such as bathing and eating. Someone must step in and help him or her from then on.

Long-term care is expensive.1 The average cost for one year in an assisted-living facility is $37,572 while home health care runs in the $21/hour. The cost of private nursing homes is neraly $80,000 per year. Who can pay for this?

Often people think that government programs – like Medicare and Medicaid – do. But this is not generally the case. Medicare pays for health care for people 65 and over. It doesn’t pay for long term medical service such as assisted living or adult day care.

In fact, Medicare2 pays only the first 100 days of skilled care, such as physical therapy or nursing. But you’re eligible for the care only if you have been in the hospital for at least three days. And the care you receive must relate to the treatment of an illness or injury. Medicare pays 100% for the first 20 days and all but the first $137.50 per day for the next 80 days (for 2010). That’s it.

Medicaid pays for health services for the very poor of any age. Qualifications for Medicaid vary by state. But generally the law says you must first spend down to the poverty level, using up all but about $2,000 of your assets. There may be long waiting lists for facility care. Under Medicaid, nursing home care is essentially the only option. Home care, assisted living facility care, adult daycare, outpatient services, and alternate caregiver services are not usually reimbursed under Medicaid.

So what do people do?

Either you’re poor enough to qualify for Medicaid, rich enough to pay all long term care out of pocket, or somewhere in between.

People with assets of less than $200,000 generally can’t afford long-term-care premiums, and many in this group would qualify for Medicaid.
 
Those having assets to invest of ~ $2 million and up will often consider that they can pay long term care costs out of pocket for several years of long-term care. They may simply forgo long-term-care insurance entirely.

It’s the couples with assets in $200,000 to $2 million range that may have to seriously consider buying long term care insurance. They could see their savings devastated by long-term-care expenses with little hope of passing something on to their kids.

1 MetLife Mature Market Institute, “The MetLife Market Survey of Nursing Home & Home Care Costs,” September 2009.
2
www.medicare.org -for Medicare and Medicaid information


Are You Taking Advantage of Your Long-term Care Tax Benefits?

Congress passed HIPPA1 as an incentive for people to take financial responsibility for their long-term care. It generally provides for deductibility of qualified long-term care expenses, and excludes from taxable income your qualified long-term care benefits.2 Higher deduction limits for LTC premiums are geared to help seniors make payments. Let’s see what this means.

You can add long-term care expenses, paid for both qualified long-term care services and premiums for qualified long-term care insurance products, to your medical expenses deduction on your Schedule A of your IRS form 1040.

Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services that are required by a chronically ill individual and provided through a plan of care prescribed by a licensed health practitioner. That is an IRS mouthful!

Someone is chronically ill (i.e. needing long-term care) when within the last 12 months, a licensed health practitioner has certified him or her as unable to perform at least two of the ADLs (activities of daily living–dressing, eating, toileting, transferring, bathing, and continence) without help for at least 90 days.

Qualified long-term care insurance contracts are those that provide only coverage of long-term care services. They must be guaranteed renewable and must not provide for a cash surrender value that can be paid, assigned, pledged, or borrowed. And lastly, it must not pay for expenses that would be reimbursed under Medicare, except as a secondary payer.

The amounts of these LTC premiums you can include in medical expenses are limited though. But they increase substantially with age. See the table for includible limits on LTC premiums.

Age Limit of LTC premiums includible in medical expense, 2010
40 or under $330
41 to 50 $620
51 to 60 $1,230
61 to 70 $3,290
71 or over $4,110

Your LTC benefits are generally excludable from taxable income as long as they are used for qualified long-term care services (e.g. nursing home, home care, and personal care and maintenance services). Note that your medical deduction is subject to an overall limit of 7.5% of your adjusted gross income.

1 The Health Insurance Portability and Accountability Act (HIPPA) of 1996.
2 IRS Publication 502.


Abourt guest Author Raymond Lavine
Raymond provides Long Term Care Insurance planning to Individuals; Companies, and Business Owners and Professional People. Raymond offers: Empathy; Knowledge; and Experience where it is not about the product, it is about helping you with why people need to know about and Long Term Care Insurance and how it will help peoples lives personally and financially.

 

I grew up in Los Angeles, California. After graduating high school I entered the U.S. Army joining the 82nd Airborne Division i the U.S. and 173rd Airborne Brigade in Vietnam. Raymond, received several combat decorations along with earning a C.I.B. and Jump Wings. After leaving the Army, I attended college and graduate school and have been involved in financial services for 35 years: commercial banking; insurance; mortgage banking; and private and investor banking.
I will work with you at your home, office, or by telephone and on the computer.

You can reach Raymond Lavine at:
By Phone: 253.778.7831 or 888.222.1789
By Email: longtermcareinsuranceguy@gmail.com
Disclosure: Licensed in Washington State and Non-Resident licenses in other states

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