Long-term care planning should be part of most comprehensive estate plans because we all stand a good chance of needing long-term care (LTC) at some point. The reason LTC planning is essential is the high cost of that care and the need to contemplate how you will pay for it if you need it. The Grand Forks elder law lawyers at German Law help you figure out if long-term care insurance is worth the cost, or if planning for Medicaid eligibility is a better option.
The Cost of Long-Term Care
When you reach retirement age (at age 65) you will already stand at least a 50 percent chance of eventually needing some type of long-term care. Each year thereafter those odds increase. Nationwide the average cost of a year in LTC was around $90,000 for 2018. Residents of North Dakota, however, paid some of the highest LTC costs in the nation that same year with the average cost of a year of LTC care running $140,000. The cost of long-term care could deplete your retirement nest egg in short order if you are forced to pay out of pocket – and there is a very good chance you will have to do just that if you failed to plan ahead because Medicare will not cover expenses related to LTC. If you retain private health insurance, the odds are very high that it will also exclude expenses related to LTC. Unless you can comfortably pay out of pocket for LTC, that leaves purchasing an LTC insurance policy or ensuring that you are eligible for Medicaid as the only viable options for covering LTC expenses.
What Is Long-Term Care Insurance?
As the name implies, long-term care insurance is a stand-alone insurance policy that specifically covers costs associated with LTC. Like other types of insurance, an LTC policy can be complicated to understand, and no two policies are exactly the same. Also like other types of insurance policies, an LTC insurance policy will be subject to exclusions and limitations which you need to be aware of before deciding to purchase the policy. When considering an LTC insurance policy you need to be very clear on what benefits the policy offers. For example, an LTC insurance policy may cover any, or all, of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
Along with the benefits the policy offers, there are a number of additional characteristics of an LTC insurance policy that should be taken into consideration when you are contemplating purchasing the policy, such as:
- Waiting period. Many LTC policies have a waiting period during which time the policy will not cover expenses, meaning you will be responsible for covering those expenses out of pocket. The waiting period length varies, but it is not uncommon to have to wait up to six months before an LTC policy will start paying out benefits.
- Maximum benefits. Be sure you understand if the policy has a yearly, per occurrence, or lifetime maximum benefit because you will be responsible for any expenses that exceed those maximums.
- Coverage away from home. Will the policy cover you outside of the U.S.? If not, are you planning to remain in the U.S. when you retire? Many retirees move out of the country which could make your policy worthless.
- Automatic termination. Some LTC policies terminate at a specific age or after a specific number of years, once again leaving you responsible for the cost of LTC.
- The lifetime cost of the policy. Premiums increase the older you are when you take out a policy, making it wise to take out the policy when you are young and healthy; however, those lower premiums can add up to a small fortune if you have to pay them for 20 or 30 years before using the policy.
Is Medicaid Planning a Better Option?
Relying on an LTC insurance policy is one way to plan for the high cost of LTC; however, Medicaid planning might be a better option. What many people do not realize is that while Medicare won’t cover LTC expenses, Medicaid will. If you believe there is even the possibility that you will need to rely on Medicaid in the future, including a Medicaid planning component in your estate plan is imperative to ensure that your assets are protected and that you are eligible for Medicaid when the time comes that you need long-term care.
Contact Grand Forks Elder Law Lawyers
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about long-term care planning and/or Medicaid planning, contact a North Dakota Medicaid planning attorney at German Law by calling 701-738-0060 to schedule an appointment.