Financial Planning Information
Long-Term Care (LTC) Insurance
Long term care insurance provides money so you can afford to stay in your home, adult day care or nursing home without using up your investments.
LONG TERM CARE INSURANCE IS EXPENSIVE AND SHOULD BE PURCHASED IF YOU NEED OR WANT IT AND IF YOU CAN AFFORD IT. YOU SHOULD ONLY PURCHASE IT AFTER A QUALIFIED PROFESSIONAL HAS THOROUGHLY ANALYZED YOUR NEEDS AND COMPARED NUMEROUS COMPANIES PLANS TO MEET YOUR NEEDS, AT THE LEAST COST.
Who needs Long term care?
People with at least $200,000 in investments and/or people with at least $100,000 in income per year, should consider purchasing long term care insurance to protect their current and future income and/or assets.
People can need long term care at any age because they can be hospitalized and be released if their condition has stabilized. If they still need medical care and/or rehabilitation they probably will be sent to a nursing home. Also, there may be a period after the nursing home where they could be restricted at home because they are still not healthy enough to go back to work or live independently.
Long term care expenses vary greatly by state.
In New York State, the current upstate 2009 costs are $15-$20 an hour for unskilled home care and $23 an hour for Home Health Care Aide.
That equates to $33,580 per year for 4 hours a day of home care (breakfast, lunch and dinner times) or $67,160 per year for 8 hours a day. The average nursing home cost in 2009 is $111,325 per year in upstate New York, and more in the New York City metropolitan area. These costs are per person and could quickly bankrupt most people's assets. Also, Long term care costs have been going up by 5.5% per year for the last 15 years, so we anticipate the cost to be as follows:
|2009 average upstate New York State LTC facility cost per person||$111,325|
|Estimated cost 10 years from now increasing at 5.5% per year||$190,159|
|Estimated cost 20 years from now increasing at 5.5% per year||$324,819|
|Estimated cost 30 years from now increasing at 5.5% per year||$554,838|
According to a study from the Senate Committee on Aging, "at least 40% of our senior citizens will need an average of 2.5 years of long term care". 1 in 5 will require care for longer than 5 years. (California Dept. of Aging - 1994)
The earlier age you purchase long term care insurance the cheaper it will be for the rest of your life. The reason is the insurance company invests your premiums until you file for claims and this investment return is added to your premiums to pay for your care. In addition, you must qualify for long-term care insurance with good health, so the earlier you purchase the policy the higher probability the premium will be less expensive.
As we get older, there's an increased chance we will need assistance to remain independent. (Source: US Census Bureau 2003 male and female)
|Five to 15 years old||94%||6%|
|16 to 20 years old||93%||7%|
|21 to 64 years old||88%||12%|
|65 to 74 years old||70%||30%|
|75 years old plus||49%||51%|
Sources of money to pay for long-term care expenses
Individuals can pay for long-term care with the following resources:
- Savings and investments
- Long term care insurance
- Medicare and Medicaid
Medicare and Medicaid have strong restrictions which make them unsuitable for paying for long-term care expenses unless you have less than $100,000 in assets, plus your home.
Medicare will pay for up to 100 days of care if you do all of the following: you must have been in the hospital for at least three complete days, have it deemed medically necessary by a Dr. to be transferred to a nursing home on the fourth day or later, and have your medical condition keep improving. If any of these caveats are not met Medicare can stop payment immediately.
Medicaid will only pay if you have spent down all of your assets to these minimum amounts:
|If you want Home Care you have to spend your assets down to:||2009 *|
|One Person Household||$13,800|
|Two Person Household ||$20,100|
If you are willing to put the ill person in a Nursing Home, with the Spouse remaining at Home:
The Community Spouse, at home, can keep up to $109,560 (2009 allotment) in investments, plus the home, personal belongings, their car and a Burial Fund of $1,500 for the ill person.*
*The Medicaid Resource Allocation is the amount of money and assets Medicaid will make you spend down to before you qualify for Medicaid Income. Assets include all non-excluded income and resources of an individual and his/her spouse, as defined in the SSI program. Included also are income or resources to which they are entitled but do not receive due to their own action, such as disclaimer of an inheritance.
In addition, Medicaid will attach some or all of the income from the ill person. For more information, consult a trained professional and by clicking on the internet links listed under "Consumer Resources" on the left side of this web page . Personal Financial Consulting Inc. and/or its financial planners have the Certified Long-Term Care (CLTC) designation(s) certifying they are qualified to analyze and recommend appropriate long-term care solutions. Click on "supporting organizations tab" at the top of the page for more information.
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