Is Long-Term Care Insurance Right For You?

The issue of health insurance is hotter than ever before.  One topic of interest is a subset of health insurance called long-term care insurance.  The Minnesota Department of Human Services’ website states that “studies show that 70% of people age 65 and older will need long-term care services at some time.”  Even more striking than the number of people who will need long-term insurance is the cost of long-term insurance.  The U.S. Department of Health and Human Services’ website shows the average costs for long-term care in 2010 were as follows:

  • $6,235 per month for a semi-private room in a nursing home
  • $6,965 per month for a private room in a nursing home
  • $3,293 per month for care in an assisted living facility
  • $21 per hour for a home health aide
  • $19 per hour for homemaker services
  • $67 per day for services in an adult day health care center

Let us suppose that you and your husband or wife have assets totaling approximately $1 million in store for retirement.  One might think this number is large enough to pay for your retirement expenses, as well as long-term care for both of you with a significant portion remaining for inheritances for your children.  Now suppose you both live another 15 years after retirement and deplete your assets by $750,000 during that time.  That means the two of you live off of approximately $50,000 a year, total.  That is $25,000 a year per person.  Depending upon whether or not you have a mortgage or other expenses, that number requires you two to live modestly.  Now calculate the influence of inflation, which increases the cost of living by a compounded rate of 5% per year.  Over these 15 years, therefore, the cost of living will nearly double.

Now let us suppose that you both go into a nursing home for the last 14 months of your lives.  According to GeriPal, a Geriatric and Palliative Care blog, this was the average length of stay for patients in 2010.  You just spent nearly $175,000 in long-term care costs.  Now let us suppose that you spend the last three days of your lives in a hospital in a terminal condition.  The costs have been averaged at $21,000 for a month spent in the hospital at the end of life.  This is $42,000 for both of you.  So you spent a total of $217,000 in long-term care costs, plus the $750,000 you spent over 15 years in retirement.  This leaves your children $33,000 to be divided amongst them.  This number will cover your funeral costs and any debts you left behind, as well as any costs associated with probate.

One option for paying the extremely high costs of long-term care is long-term care insurance.  The State of Minnesota has entered into a partnership to provide long-term care to Minnesota residents, called the Minnesota LTC Partnership.  You may qualify for long-term care insurance through the Partnership if your assets are low enough.  The Department of Human Services’ website states that “currently, people must deplete most of their assets before the state will pay for their long-term care – whether it is in a nursing facility, assisted living or their own home.  In most cases, the maximum amount a person can have in assets (not including home and a car) is $3,000 to qualify for Medical Assistance.  The LTC Partnership policy allows a person to protect assets beyond the $3,000 amount.  Under the LTC Partnership, a person who buys and uses a policy to pay for LTC is able to protect their assets if they later need to apply for Medicaid.”

Not all insurance carriers participate in the Minnesota LTC Partnership.  You can obtain long-term insurance privately.  The cost of long-term insurance varies by insurance carrier.  Keep in mind that the younger and healthier you are, the lower your rate will be.  Long-term care insurance can vary by a few hundred dollars a year.  Talk to a long-term care insurance agent to determine the costs of long-term care for you.  Keep in the mind the numbers referenced above as well as the coverage offered and what services qualify for coverage.  Contact Excelsior Law Firm with any questions.

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