As the adult child of an aging parent, you no doubt do your very best to respect your parent’s life choices and not to intrude with unwanted advice. But, there’s one area where you should weigh in (albeit gently and respectfully) – your loved one’s long-term care financial planning.
One of the consequences of our increased longevity is the fact that more of us will likely need some type of care over the long term. This can be devastatingly expensive to families who aren’t prepared financially. Too often, the financial burdens of mom or dad’s long-term care end up being shouldered by their children and even grandchildren if they are old enough. This can cause untold family stress.
Many people mistakenly assume that they can turn to government programs for help with long-term care expenses, when in fact Medicare pays only for skilled or rehabilitative care, not assisted living or independent living. Medicaid is a federal/state health insurance program designed for low-income individuals. To qualify, your loved one must meet strict income and asset limits, which often entails ‘spending down’ to reach the low-income threshold, and then moving into a nursing home. Remember: Medicaid and Medicare will NOT cover the cost of assisted living or independent living communities.
One option worthy of investigation is private long-term care insurance (LTCI). These policies cover costs of care not covered by private health insurance or government programs. Yearly policy premiums are significantly higher than other types of insurance. Most LTCI policies have variables that determine premium costs and benefits, including:
· Daily benefit amount - the maximum dollar amount the policy must pay for your care on any given day. This can vary widely, but today, most policies typically pay $150 per day.
· Benefit period – the maximum amount of time the policy holder receives benefits. This can range from a few years to unlimited lifetime coverage.
· Elimination period – how long the policy holder must pay out-of-pocket for long-term care before the long-term care insurance policy kicks in.
· Home care benefits – a feature of some policies allowing the holder to receive in-home care.
· Inflation protection – a common option of long-term care insurance designed to protect against the rising healthcare costs.
· Policy types – comprehensive, facility-only and home care-only are the three types of policies currently offered.
· Benefit payment – how the policy pays benefits to the policy holder; most reimburse for expenses, up to a pre-determined amount.
Those who choose a long-term care insurance policy typically do so because they want to be prepared so their families don’t bear the financial burden of care. Yet not everyone is a good fit for these policies. Most experts recommend against it for those with very low incomes or assets (who can access Medicaid funding sources) and for those with higher incomes and assets (who can self-insure or draw on finances to pay for assisted or independent living communities). Further, there is vigorous debate about whether these policies are too costly and largely unnecessary.
Before purchasing any long-term care insurance policy, take the time to educate yourself; ask careful questions of anyone offering to sell you a policy; don’t buy based on scare tactics or base emotional appeals; and get impartial advice from a trusted financial advisor. While LTCI may or may not be right for your loved one, we can’t stress enough the need to have that conversation about long-term care finances so no one is caught unprepared. What type of financial planning has your family done?
Do you think a long-term care insurance policy would work for your loved one?
If you think a long-term care insurance policy might be an option for you or your families, make sure you learn the details yourself. Ask for a qualified provider.
