Five LTCI Questions You Should Ask Before You Commit

Last month I read, “Five Questions To Ask A LTCI Specialist Following The Supreme Court’s Obamacare Ruling.”

Personally, I find the title of this article a bit misleading.  The Supreme Court’s decision only affected those people who earned between 100% – 138% of the federal poverty level.  Those people do not even qualify for LTCI in the first place.

Since President Obama suspended all work on Title VIII of the PPACA in December of 2011, Obamacare does not even address Long Term Care.  Paying for Long Term Care is like surviving the Titanic.   “It’s Every Man For Himself.”

Even though I do not find the Supreme Court’s decision relative, I do find the questions in the article appropriate.

LTCI should not be an impulse buy.  Take your time to know what you are getting into.  These are just some of the questions you need to ask before you buy.  You may have to pay premiums for a couple of decades before you will need the insurance.  With such a huge commitment, you should take your time making a decision.  Don’t allow a slick insurance agent to pressure you into buying something today that you will just lapse in a couple of years.

“Based on our health history, what are the chances any of us will ever need long-term care?”

The leading cause for nursing home claims is Alzheimer’s disease.  The leading cause for Home Care claims is cancer.  The latest statistics that I have seen show that 1 in 8 people over the age of 65 will get Alzheimer’s disease.  The statistics also show that 1 in 3 people over the age of 65 will get cancer at some time during retirement.

There is no way to be certain who will get Alzheimer’s or cancer.  Those diseases can strike anyone at any time.  All we can do is play the odds.

Scientist have found a genetic link.  Granted the link is smaller for Alzheimer’s disease than for cancer.  If you have a “blood relative” who has had either Alzheimer’s or cancer, you have a higher probability of needing Long Term Care in the future. 

This does not mean that only people from certain families will need Long Term Care.  It just means that people from those families have a higher chance of contracting Alzheimer’s disease or cancer during retirement.

“In our financial situation, is Medicaid a viable care option?”

Every state is different, however, there are two facts about Medicaid that need to be considered.

  1. Medicaid is the largest source of payment for Long Term Care expenses.
  2. Medicaid has an Asset Test that you must meet before it will pay for your Long Term Care expenses.

People who retire with less than $30,ooo in assets are pretty close to qualifying for Medicaid already.  Unless their kids are willing to pay the premiums, they often are better off using their money for everyday living expenses.

People with more than $350,000 ($700,000 for couples) in cash can probably pay for their own Long Term Care out of their savings.  For them LTCI would be more of a luxury than a necessity.

LTCI meets the needs of a very specific individual.  The person that needs LTCI has $30,000 – $350,000 in savings or has ownership interests in securities or real estate.

Be advised that yesterday I read about a new law in one of the states that I am already licensed.  Starting this month, that state has made 2 drastic changes to their Medicaid program.

  1. The qualification for nursing home help has become tougher.
  2. The state has capped Home Care benefits at $15,000 a year.  The problem is that the average Home Care expense in that state is $37,000 a year.  Residents of that state are on their own to either pay the $22,000 difference out of their own pockets or rely on friends and family to perform those extra care duties.

“What are the pros and cons of relying on savings, life insurance, or reverse mortgages to pay for care?”

There are several pros and cons.  They are too numerous to discuss in one post.

I guess the biggest con behind these strategies is that you run the risk of disinheriting your children.   These assets are not sheltered from Medicaid’s “Estate Recovery.”  If you outlive your savings and need to help from Medicaid to pay your Long Term Care bills, Medicaid will put a lien on the assets in your estate.  When you or your spouse dies, they will demand reimbursement for the money that they paid on your behalf.   Only you can determine if that is an important variable to consider.

“In our case, following the court’s decision, how do federal and state laws affect tax breaks or other LTC-related benefits?”

As I mentioned before, the Supreme Court’s decision has no bearing on Long Term Care.  The one section of the law that congress passed that did address the Long Term Care crises was suspended by the President of the United States.  (Personally, I do not understand how the President has the authority to ignore the instructions of congress but apparently, he can.)

The Court’s decision about Obamacare leaves it up to the individual states to determine if Medicaid will expand to include those who earn enough to be poor but not low enough to be in poverty.  There is no effect on LTCI.

“Given all the facts about us, is LTC insurance the best bet, and what does it cost?”

Each person is unique.  They have unique insurance needs.  If you have $30,000 – $700,000 you cannot afford to dismiss LTCI because you heard a rumor.

The only thing that I can say for certain about costs is that LTCI is going to be less expensive for you if you get it before you retire.  The high premiums that you hear about are for people who wait until they are well into their retirement years.

As you make your financial plans, keep in mind that at some point you will want to retire.  When that happens your income will drop.  Unless you purchase a LTCI plan that will be “paid-up” before you retire, make certain that you get a plan whose premium you will still be able to afford after you retire.

If you do not want to commit to the high premiums of a comprehensive LTCI plan, take the time to read, “How To Plug A Hole In Your Long Term Care Insurance Plans.”  It will give you an idea of an optional strategy.  Just be careful.  Since it is less expensive, it is also less comprehensive.

The Insurance Barn has answered many questions about Long Term Care in Facts You Should Know Before You Buy Long Term Care Insurance.