Americans are a trusting people. Although we know that our politicians will say anything to get elected to office, we still believe them.
In recent years, our politicians have raised a big stink about how expensive health care is. They have been willing to say anything, including lies, to promote their agendas.
In this lesson, I want to share some facts about a form of health insurance, called Long Term Care insurance (LTCI) that the politicians and press have not told you. Hopefully, after reading this, you will be able to flush some of the political spin about Long Term Care insurance down the drain with the rest of the garbage.
I’LL NEVER NEED IT
We Baby Boomers have always thought we were invincible as long as we just use our heads. Unfortunately, the statistics do not back us up. If there is one thing we can learn from history, it is that everyone eventually grows old and feeble. For every 100 Americans that reach the age of 65, 67 of them will need some form of Long Term Care.
As members of The Greatest Generation experienced the limitations of old age, many of them had to move into a facility of some sort.
Today, the trend is for people to remain in their own home while the age. Those who do often need to make modifications to the home or hire an aide to help them when their family is not available. Only about 15% of people today need to enter a nursing home.
Although know that the odds of needing a nursing home are not what they used to be, it still costs for home modifications or hiring an aide to help you when family is not available. Most Long Term Care plans can be modified to help with just those expenses.
THERE ARE ALTERNATIVE WAYS TO PAY
Not everyone really needs Long Term Care insurance. I will gladly admit that there are alternatives to using Long Term Care insurance to pay for a Home Health Aide, Assisted Living or Skilled Nursing Facility. At the end of the day, those professionals and facilities are businesses. Their goal is no different from you dry-cleaner, mechanic or carpenter. They provide a service in exchange for money. They do not care where the money comes from as long as it is legitimate. Your future Long Term Care needs can be taken care of with any of the following if you elect not to pay Long Term Care insurance premiums.
Family
Approximately 80% of people who need Long Term Care rely on family members. I know that is what my grandmother, father, brother and sister did when they were suffering from Huntington’s Disease. At that time, there were no other options.
No Home Health Aide or Assisted Living nurse is able to provide the level of love that a child or spouse can. They are, however, often better trained in giving Long Term Care. Unless your spouse or child is trained in meeting the specific needs of someone with your limitations, they will never be as efficient in your care as a professional.
Caring for a loved one who is not able to take care of himself is not an easy job. I saw how it can affect people when I was a teenager and watched my mom care for my dad with Huntington’s Disease. It can be very stressful.
If your primary care-giver has a job, she will need to take time off work and lose that income to provide volunteer care for you whenever you need to go to see your doctor or run errands.
If your primary care-giver does not have a job to go to, their entire life is dedicated to looking after your needs and wants. They have little time to pursue their own interests.
Medicaid
The Medicaid system is by far the largest payer of Long Term Care expenses in America today. The problem is that it is not available to everyone.
Medicaid is a joint venture between the federal and state governments. Although some of the money that is in the program is given by the federal government, your state politicians are in charge of administering the program. As a result, there are 50 different Medicaid programs. In order to qualify for Medicaid assistance, you must first qualify for coverage in your state.
There are a few things that are common to the qualifications for Medicaid in all states. Those are the “Tests.” Before Medicaid will help you, you must pass two tests in your state.
First, you must pass the income test. Each state is free to determine how much income you are allowed to have each month. If you get anything above that figure in either your Social Security, Pension, 401k or any other source of income, that money must be used to pay for your Long Term Care expenses before Medicaid will help.
Secondly, Medicaid will calculate the fair amount of your assets. If your assets are already in the form of cash, this will not be a problem. If, however, your assets are in the form of stocks, bonds or real estate, it could present a problem.
Medicaid only allows you and your spouse to have ownership interests in so much. If you have assets that exceed their qualification levels, you must “spend down” those assets on your Long Term Care expenses before Medicaid will offer any help.
Once you are able to qualify for Medicaid, you will be required to exchange some of your freedom of choice for their money. For example, if you must go to a nursing home, your choices will be limited. Many “private pay” nursing homes will not accept patients who pay with Medicaid. You are limited to the options that Medicaid offers you, whether or not they are acceptable to you.
If all you need is to hire a Home Health Aide to help you while your family members are at work, you will only be allowed to choose from Medicaid approved agencies.
Personal Assets
The average American retires with less than $70,000 in savings. They support themselves with their monthly retirement check from Social Security and their pension/401K from their former employer.
If there are no “surprises, ” like car repairs or home repair expenses, during retirement, they should be okay. If, however, they are forced to hire a Home Health Aide or make modifications to their home to accommodate an aging person, their savings can disappear quickly.
MY FAMILY WILL TAKE CARE OF ME
As a teenager, I watched my mother try to take care of my father with Huntington’s Disease. At that time, there was no such thing as Long Term Care insurance. Even if they had wanted financial help from a private insurance company, it was not available.
Mom had not training as a nurse. What was known about Huntington’s Disease during the 1970s pales in comparison to what is known today. (It still is an incurable disease but it is better known then it was.) Mom had to learn for herself how to care for someone with Huntington’s. When dad first got sick, she did not know anything about taking care of a sick husband. It is no surprise that she eventually had a nervous breakdown of her own.
Today, mom is healthy and in her right mind. All that had to happen was for dad to be moved into a nursing home. Soon after she was relieved of care-giving duties, she broke out of her funk and was able to function in society again.
Many Long Term Care insurance plans have three benefits that come in handy if an individual decides to stay home and rely on family members to take care of him.
Home Modification – Many plans offer to pay for modifications to the house to allow someone who is “on claim” to remain in their own home. When dad was confined to a wheel-chair, that particular benefit would have been appreciated when it came time to enlarge the doors and build a ramp on the front porch. Fortunately, I have a brother-in-law who is good with his hands. He was able to do all the carpentry. If it were not for him, mom would have had to hire a professional carpenter. Today, Long Term Care insurance would help pay for the materials and a professional carpenter. In the 1970s, those costs would only be available to my parents from either dad’s disability insurance payment or a charity.
Respite – When dad was at his sickest, I lived in New York, my brother lived in Texas and while both of my sisters lived in Indiana, they were in different cities. All of us would try to help out when we were home for a visit. However, eventually, all of us got to return to are relatively “normal” lives. Mom had to take care of dad 24/7 for years before he got so bad that he had to move into a nursing home. The Respite benefit in a Long Term Care insurance policy provides the money to hire a trained Long Term Care professional to allow a family member to take time off from being a care-giver.
Indemnity (Cash) – This is a benefit that is not available in all Long Term Care policies. If you want it, you need to pay special attention to it and make certain it is included in your policy.
The Indemnity, or Cash, benefit pays a pre-determined amount of money each month directly to the insured. That money can be used in any way that the insured wishes.Recently, I was asked by an individual whose daughter had to take time off from work and son had to fly home once a month, why his Long Term Care insurance policy would not pay his family’s expenses.How do you tell someone, ”the reason there is no money to pay their children is simple explanation but it is too late to do anything.” It just sounds cold and immoral to say something like this. However, it must be said sometime.If this individual had gotten a policy with an Indemnity (Cash) benefit rather than a Reimbursement only policy, he would have the money to help defray his kid’s expenses.
