What Are Your Long Term Care Insurance Payment Options?

DSCN8270_1_72 - Landscaping At Long Term Acute...
DSCN8270_1_72 – Landscaping At Long Term Acute Care Facility Where My Wife is Staying (Photo credit: bterrycompton)


There is a heath care crisis heading for America.  Unfortunately, the politicians we have had for the past 4 years have chosen to ignore it.


As Baby Boomers start to retire, there will be a strain on the health care economy caused by Long Term Care expenses.  Neither private major medical insurance nor Medicare will help with those bills.  The only option you will have, if you do not make other plans, is to spend your assets until you can qualify for Medicaid.


While that strategy may be satisfactory to a single adult, it is not acceptable to many married folk.  The result of that strategy is to deprive the healthy spouse of most of the money that they helped you save during your working years.




The last time that the federal government attempted to help with the Long Term Care crisis was in 2005 with the Deficit Reduction Act of 05.  It gave states the authority to develop Partnership Plans.  Those plans allow citizens to purchase only enough Long Term Care insurance to shelter their assets from Medicaid’s Asset Test and Estate Recovery actions.


That means that if you have a Partnership Plan and run out of insurance, the only hurdle you will have to over-come to have Medicaid help you with your Long Term expenses is your state’s Medicaid Income Test.


Some will say that the Patient’s Protection and Affordable Care Act, a.k.a. Obamacare, has provisions that address Long Term Care.  Technically, they would be correct.


Title VIII of the PPACA does express congress’ instructions to the Secretary of Health and Human Services to develop a plan using Long Term Care insurance to help with the coming crisis.


Unfortunately, all work on C.L.A.S.S. was suspended by Barack Obama in December of 2011 after his Secretary of Health and Human Services reported to congress that the plan was, in her opinion, “unfeasible” and HHS was ready to give up on it.




In recent years several Life Insurance companies have developed Long Term Care Insurance riders.   If you have a need for Life insurance, this may be an option.  They allow you to use your policy’s benefit amount as either a death benefit or for Long Term Care expenses.


Right now, these riders are only available on permanent types of Life insurance or annuities.  That may change in the future but I have not seen anything that would lead me to think that a LTCI rider will be available for Term Life insurance in the near future.


If you elect to use this option, keep in mind that it has some limitations.


  1. These plans do not necessarily provide coverage for both risks unless you do some planning ahead.  Your premium buys a pool of money.  You can use that pool for either Long Term Care expenses or death expenses.  In many cases, that is just fine.  However, don’t try to combine estate planning needs with Long Term Care needs.  Your heirs will find that your estate planning precautions come up short of what is required.
  2. To date, none of these “Hybrid” plans are approved for Partnership status.  That means that if you run out of money in your Life Insurance policy, you will have to “spend down” your assets on Long Term Care expenses until you can qualify for your state’s Medicaid assistance.  Your spouse would be exposed to the same limitations on your life’s savings that you were trying to avoid.  Your children would have to wait in line for their inheritance subject to Medicaid’s Estate Recovery.


LTCI Strategy


The days of the top-heavy LTCI policies are over.  Several insurance companies have stopped writing LTCI completely.  Many of those that remain have stopped writing policies with an unlimited benefit.


The good news is that LTCI is no longer as expensive as it used to be.  Many people who purchase plans in their 50s find that the premiums for a base plan are about what they were spending on Life insurance in the first place.


Jessie Slome, executive director of the American Association for Long Term Care insurance, is credited with promoting the following strategy for married couples.


“Currently three to four of years of coverage is being favored, as it’s far more affordable,” he says, and couples (who buy 70 percent of the policies) can then take advantage of shared care riders. That means the couple buys, say, three years of coverage each, but .one spouse could potentially tap the couple’s full six-year pool of benefits. This type of rider usually adds 15 percent to 20 percent to the cost of the policy, Slome adds.” 


There are other strategies that you can use when doing your Long Term Care planning.  In this post I only offer two of them.  Between you and your insurance professional, you can customize LTCI so that it meets your needs at a price that is relatively comfortable.  You do not have to subject your spouse to Medicaid’s allowance or your children to Medicaid’s Estate Recovery unless that is how you wish to be remembered.