According to a recent report, sixty per cent of people who reach the age of 65 will need long-term care at some point in their lives.  Making provisions for such costs should therefore be an important element of planning for one’s advanced years.

Medicare only pays for nursing home care subject to certain restrictions, and for a maximum 100 days.  Even then the patient is required to contribute a proportion of costs for most of that period.  Medicare Supplemental Insurance is not designed to cover long-term care costs.  Medicaid does cover nursing home costs, but for those people who do not qualify, the prospect of large medical bills for extended nursing home stays looms large. 

There are many strategies to address this problem.  These range from working past the usual retirement age, investing in annuities, or simply saving money expressly for that purpose.  Another option is to purchase an insurance policy which will meet the costs of an individual’s long term care.

People purchase these policies for a number of reasons: they may not wish to “spend down” assets on healthcare costs until they qualify for Medicaid; they may wish not to be a burden on their families, or to be forced to rely on the government.  There are also benefits to family caregivers: relieved of the burden of full-time care, they will be more likely to remain in the workforce, and may suffer less stress.  Furthermore, in the current political climate it is unclear what will remain of either Medicare or Medicaid after a few more years of aggressive spending cuts, both at state and federal level.  This uncertainty may be another good reason why people might opt to buy long term care insurance.

However, these insurance policies are not cheap.  The precise amount of premium will depend on a variety of factors, such as your personal health history, age, and the level of coverage you choose.  John Conrad of State Farm Insurance in Jefferson City says that the age of the applicant has a particular bearing on price, with premiums increasing exponentially as the applicant gets older.  Although circumstances differ, the optimum age to begin a policy is usually in the mid-fifties.  In any event, given the expense of the premiums, you should only consider insurance if you can afford to pay them without sacrificing other essential expenditure items.

The precise terms of long-term care insurance policies vary greatly, and so it’s a good idea to shop around and consider a number of different policies.  They are complex contracts, and should be treated with caution.  Here are a few things to consider:

·        What are the triggers which will allow you to claim under the policy?  Not all custodial care may be eligible.  Usually policies are triggered when a person is unable to perform a specified number of Activities of Daily Living (bathing, dressing, eating, etc.).  Cognitive impairment is also commonly used as a trigger.

·        Check the amount of coverage.  There may well be both a weekly or monthly benefit limit and also an overall maximum benefit limit.  These figures obviously need to be considered in conjunction with the costs of providing health care in your community.

·        What types of care are covered? 

·        Are there restrictions as to where must services be provided? 

·        Is the policy is renewable for life?

·        Is the policy tax-qualified?  If so, any benefits received will not be deemed to be part of your taxable income, which is obviously a great advantage.

·        Consider buying inflation protection.  This will increase your premium, but it gives the comfort of extra protection in the event of spiraling healthcare costs

·        Is the insurer an established company who is financially stable?

The National Association of Insurance Commissioners produces a free brochure entitled “A Shopper’s Guide to Long-term Care Insurance”, and this is an excellent resource for more detailed analysis of what you should look out for.  Contact them at (816) 842 3600.

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