In observance of Long-Term Care Insurance Awareness Month (November), I want to explore the Pros and Cons of Long Term Care Insurance.
There’s a long-term care crisis in America.
This crisis has been with us for over two decades, but because of the current actual inflation rate of over 17% and rising, the situation has worsened.
So even though the federal government is telling us that the rate of inflation for September 2022 was 8.3%. The actual rate is over 17%, including food and energy costs, which the CPI does not use as part of the index.
Food and Energy dramatically affect the cost of long-term care.
This high inflation is driving up the cost of long-term care, adding to the long-term care Crisis in America.
This hyperinflation is making it even more critical to consider Long-Term Care Insurance if you have not in the past.
Why buy Long-Term Care Insurance?
People buy Long-Term Care for three reasons:
- Family: They don’t want to be a burden to their family.
- Home: Stay in their home and not go to an assisted living or nursing facility
- Assets: Protect hard-earned assets. They do not want to spend their entire net worth on Long-Term Care.
Do you need long-term care insurance? The Pros and Cons of Long-term Care Insurance.
First, what is Long-Term Care?
When most people think of long-term care, they immediately think of a nursing facility. The fact is nursing facilities play a small part, in fact, a tiny part when it comes to long-term care.
Here is the difference.
Long-term care is defined as needing assistance with your activities of daily living or ADLs. These are toileting, bathing, dressing, eating, getting in and out of the bed or chair, and maintaining continence.
Another type of long-term care is the supervision needed for someone with severe memory loss.
Help with activities of daily living can be provided in the home, assisted living, or a nursing home.
Assisted living can be in a residential setting or community (facility); it doesn’t require a nursing facility to provide that level of care.
What causes the need for long-term care?
A longer life span is the main reason for the need for long-term care to increase.
Think you won’t live a long life?
Life expectancy today is nearly 80 years old, and for someone who reaches age 65 male, his life expectancy is 83 and for a female is 86. We are living longer, and with modern medicine, life expectancy will only increase.
Think back to 25 years ago. If you had cancer or a stroke, you died. Today it is the leading cause of long-term care services. The longer you live, the more likely you are to need care.
And 25 years ago, few ever heard of Alzheimer’s. Even today, few of us know the name, Auguste Deter. Meet Auguste Deter:
In 1906 Mrs. Deter was experiencing memory problems, language, disorientation, and hallucinations.
She would accuse her family of taking things from her and was often disorientated.
When Mrs. Deter passed on April 8, 1906, her German physician Alois Alzheimer was permitted to perform an autopsy on Mrs. Deter. That day Mrs. Deter and Dr. Alzheimer made history.
ALZHEIMER’s is pronounced: Allz-Hi-Mers
( I hate it when I hear the name mispronounced, like ALz Timers, notice no “T” or the word “Time” in the name, for those that think it is funny, it’s not!)
The average person who needs long-term care will need care for three to five years.
And keep in mind, on average, people with Alzheimer’s disease live between three and 11 years after diagnosis, but some survive 20 years or more. The degree of impairment at diagnosis can affect life expectancy. Untreated vascular risk factors such as hypertension are associated with a faster rate of progression of Alzheimer’s disease.
When most people think of long-term care, they immediately think of a nursing facility.
Read about: Who should have long term care insurance?
Family caregivers and “Generation X.”
To add to the crisis, Generation Xers are not prepared to provide care for their aging parents. This generation is often called the Sandwich Generation. Because they still have children aged 18 to 25 living in their homes.
Or the Gen Xers are unwilling to step up and be caregivers for their parents.
This is due to several reasons, from demands at work to immediate family demands.
What can you do if you are over 70 and can no longer afford traditional long-term care insurance?
Unfortunately, other than “short-term care insurance,” which provides less than a year of coverage. For most over 75, long-term care insurance is no longer an affordable solution. This is why record numbers are applying for ALTCS today.
You might think about a single premium alternative if you have a nest-egg of $100,000 or more. Underwriting is simplified compared to traditional long-term care insurance. Single premium options may be a viable option if you are over 70. These programs are issued up to age 85.
Many believe that Medicare will pay for Long-Term Care.
Medicare, the primary health care program for retirees, pays only for skilled, medically oriented, or rehabilitative care, not custodial care in any venue. And this must follow a three-midnight stay in the hospital, and Medicare only pays for a maximum of 100 days of care.
Medicaid, a federal and state program for financially needy individuals, will pay for custodial care. However, If your net worth is over the limits will require sophisticated planning to qualify. You will want to consult a Certified Medicaid Planner™.
The VA has a few programs for Veterans.
One such program is the “Veterans Directive Care Program,” and another is the “Veterans Pension.”
The Veterans Directive Care Program provides limited home care benefits average is less than 10 hours a week and is not available in all areas of the country.
Currently, the Veterans Directive Care Program is available in most of Arizona. You must be approved for VA medical benefits to receiving care through this program. Your income must be within limits to qualify for VA Medical benefits.
The other main benefit is the Veterans Pension, previously called VA Aid and Attendance.
Veterans Pension requires that you have qualifying wartime service.
Reservists with only “Active Duty for Training” does not qualify. Usually, they went in for six months and then participated once a month in training.
Arizona Medicaid can be a great alternative to purchasing long-term care insurance. But there are trade-offs; Arizona Medicaid has its own set of pros and cons too.
The result is many will be forced to pay privately (out of their retirement savings) for their care.
Unfortunately, the best thought-out retirement plan rarely takes into consideration living a long life or an unexpected fall or stroke.
The Financial Death Spiral
Retirement savings have been allocated to pay for retirement, not for the consequences of living a long life resulting in the need for long-term care.
This results in the need to invade the principal and divert income to pay for care. As a result, one of the seniors’ greatest fears – that of outliving their assets – literally may come true.
I call this the Financial Death Spiral.
The more principal that is reduced to pay for care, the less income is produced from the retirement assets, and there is less income, so you have to take more of the principal to pay for care and on and on and on till your run out of money.
This is why long-term care insurance has become an essential part of a smart retirement plan.
Long-term care insurance allows your retirement portfolio to be used for the purpose for which it was intended, namely retirement. Everyone should know about pros and cons of Long Term Care insurance.
Types of Long-Term Care Insurance
Traditional Long-Term Care insurance:
These are tax-qualified plans for that you can deduct a portion of the premium based on your age, and the benefits are tax-free.
Linked Benefit Life Insurance or Annuities with LTC Extension of Benefits:
This is often called a Hybrid-Long Term Care Insurance plan. They are mainly single premium plans. Though there are a few pay-as-you-go life plans available.
Other less common LTCi products are:
Life Insurance of Annuity with LTC Rider
Life Insurance with a separate premium Chronic Illness Rider
The scope of the article is not intended to delve into the types of long-term care plans. To receive a personalized long-term care quote and compare plans, contact us.
The Pros and Cons of Long-term Care Insurance
The Pros of Long-Term Care Insurance:
1: Peace of Mind
With over 70% of those over 65 needing some sort of long-term care owning long-term care insurance provides added peace of mind.
I help families navigate the often stressful event of the sudden need for long-term care. But it is different when they have long-term care insurance. They are much less stressed out than someone that doesn’t have coverage.
This peace of mind is priceless.
2: Asset Protection
When you have long-term care insurance, you protect the equal amount of assets that the benefits will pay.
If you have a Partnership Program, then you also protect the same amount of assets against Medicaid spending down. Arizona is a Partnership State.
3: Protect your family
Not only do you protect your family financially, but you also protect them emotionally and, in many cases, physically too.
One of the primary payor sources for long-term care is family and friends. Long-term insurance protects your family financially because the stress of how you will pay for needed care has been removed or significantly reduced. One of the primary payor sources for long-term care is family and friends.
Emotionally, your loved ones are protected because they will have reduced stress and peace of mind.
Physically, it is not uncommon to have a family caregiver pass before the person who is in need of care. Caregiving can take a toll on people. Long-term care insurance provides money so that your spouse or loved one does not have to be the primary caregiver.
4: Choice of care options
Long-Term Care Insurance will allow you to choose where you will receive care and by whom.
Most of the nicer long-term care homes and communities require you to private pay for 12 to 36 months before you move on to Arizona Medicaid or ALTCS.
Long-term care insurance will provide funding for this required private pay period that the assisted living provider requires.
Steve Dabbs is a Certified Medicaid Planner with over 35 years’ experience. He has helped many people to get qualified for Medicaid Benefits.
Meeting Medicaid Requirements is a challenging task. A lot of applicants find their applications getting denied for approval due to many errors, so seeking professional help is something you should definitely consider!
Applying for Medicaid Benefits can be a very complicated process but Steve Dabbs can help you to get qualified for Medicaid through his Professional Value-Added Services that will save your Money and Time.
The Cons of Long-Term Care Insurance:
1: The Cost
LongTerm Care Insurance can be expensive and is exasperated as we get older.
But the cost of long-term care today is over $6,000 per month. If you buy between 55 and 65 your premiums for a basic plan will be less than $200 per month.
So you can write a little check now or a massive one later.
2: Qualifying for Coverage
In order to buy long-term care insurance, you need two things Money and Health.
Money to pay the premiums and the health to qualify for coverage.
3: Premiums can increase
Rate increases are a common problem, today, the plans have some limitations on how they can raise rates, but premiums are not guaranteed.
4: You may never need it!
What if you never need long-term care? You are the 30% that are lucky enough never to need care.
This 30% are those that die, and the rest are just blessed with good health.
A life insurance-based long-term care plan might be the right plan for you.
I think that you can see that the Pros outweigh the Cons.
Now you understand about all pros and cons of long term care insurance.
If you do not own long-term care, it may be time to explore the types of plans and find one that fits you best.
Steve Dabbs holds the CLTC® designation “Certification in Long-Term Care Insurance” he will meet with you in person or virtually to find the right plan for your situation.
Call Steve Dabbs to ask your queries.
Steve Dabbs is a Certified Medicaid Planner™, a VA Accredited Claims, accredited by the Dept. of Veterans Affairs, and an Accredited Investment Fiduciary®. He helps people to apply and qualify for ALTCS Arizona Long-Term Care and VA Aid and Attendance Benefits.
Applying for ALTCS or VA Aid and Attendance benefits can be complicated, but Steve Dabbs can save your Time and Money by reducing delays and claims denials.
He is a Fiduciary, so as a Fiduciary, he must do what is in the best interest of his Clients.