How To Plug A Hole In Your Long Term Care Insurance Plans

PET scan of a human brain with Alzheimer's disease
Image via Wikipedia

A couple of weeks ago I retook the certification training for Partnership Long Term Care insurance, aka LTCI.

Partnership LTCI is an arrangement between your state’s Medicaid system and your state’s insurance laws.  It allows you to shelter some of your assets from the financial requirements of Medicaid.

While I was completing my research I noticed a hole in Long Term Care insurance that is not commonly discussed or addressed.


The problem with LTCI is that it can be quite expensive.  You can pay premiums for several years before benefits begin.  It is absolutely no different from Medicare.

You have probably been paying Medicare taxes for years.  Those taxes entitle you to participate in the largest health insurance program on the planet when you are disabled for at least 24 months, develop end stage renal failure or turn age 65.

Since you have been paying Medicare premiums since you started working, the premiums have been relatively low.  That is not the normal case for Long Term Care insurance.  Most people wait until later in life before they realize their need for LTCI.

It is not unusual for people to wait until they are in their late 50s or early 60s to obtain LTCI.  Since they wait so long, the premiums are greater than those they paid for Medicare.  Instead of stretching those premiums out over 45 years, they have to pay their premiums in 20 years.

In order to hold the premium down as much as possible, many people elect a 90 day or longer elimination period.  That is a potential problem.  The insured agrees to pay all long-term care expenses for the first 90 days.

Medicare says that they will pay for the first 100 days of medically necessary Long Term Care.  The problem is in the words “medically necessary.”

Most LTCI policies will pay for skilled and unskilled care.  Medicare will only pay for things that require skilled care.  Although Medicare says it will cover up to 100 days of nursing home care after a hospitalization, the average claim they will pay is only 25 days.

If a person suffers a stroke, it is likely they will need to be hospitalized.  While they are in the hospital Medicare will cover most of their medical bills.  With the right Medigap plan paying what Medicare does not pay, they will not have to pay anything out-of-pocket.

Medicare may even pay for skilled nursing care after they leave the hospital.  Unfortunately, neither Medicare nor Medigap will pay for you to hire non-skilled help with Activities of Daily Living.

For that type of coverage, you will need Long Term Care insurance.  If your policy has a 90 day elimination period to hold the premium down, you will need to pay for your Long Term Care assistance out of your own pocket until the 90 days are up.


There is a solution to the problem if you do not feel inclined to spend your savings to hire a home health care aide.  This option is not the ideal but it is the best that is currently available.

The leading cause of Long Term Care in the nation is stroke.  It is followed by Alzheimer’s disease.

In recent years a new insurance product has become popular in the United States.  Critical Illness insurance pays a lump sum of cash when one of the critical illnesses has been diagnosed.  Almost all plans are going to pay in the event of stroke or Alzheimer’s disease.  They also generally pay in the event of a heart attack, cancer or a dozen other medical conditions.

Since they pay a lump sum of cash upon a diagnosis of one of the critical illnesses directly to the insured, the money can be used to pay for a home health care aide during the elimination period.

Often the premium for a Critical Illness policy is going to be less than the premium for a LTCI policy with a smaller elimination period.

If this option is something you wish to pursue, there are a couple of warnings I want to share.

  1. Critical Illness insurance is not comprehensive insurance.  It would have paid a benefit when my mother suffered a stroke.  It would not, however, have paid a benefit when my father was diagnosed with Huntington’s disease.
  2. Critical Illness benefits often changes at 65.  Read the fine print in your policy.  With many insurance companies, if you want to use this strategy, you must obtain your Critical Illness insurance before your 65th birthday.  Although there is no expiration age of the insurance, it must be issued prior to age 65.

Tim Barnes, CLU is dually licensed both as an insurance agent and Insurance Counselor in Texas.  He acts only as an insurance agent in other states.  You can read his bio and see his credentials on About The Insurance Barn.

If you do not already have an insurance agent that you trust, we would like to apply for the job.  Use the contact form to your right to communicate with us.


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