February 2008 "Long-Term Care Insurance Update"

PLANNING FOR WEALTH & SECURITY
By attorneys Jennifer & Jeff Hawkins

Long-Term Care Insurance Update

Long-term care insurance (hereafter “LTC”) costs are increasing each year at a rate of approximately 5%. With the annual nursing home care costs in Sullivan County running about $50,000, few people can afford to pay for nursing home care for very long. LTC is intended to protect people from the costs of nursing home care. When you need LTC in a nursing home, assisted living, or at home, the insurance company pays the bills instead of you. The insurance resembles life insurance because an insurance customer must qualify for insurance physically. Just as a customer must get a physical for a large life insurance policy, an LTC insurance company may require a physical examination before issuing an LTC policy.

Both LTC insurance and life insurance consider health factors during the underwriting process that may lead to an insurance claim in the future. Life insurance underwriters consider conditions that may lead to a person’s premature death. LTC insurance considers factors that may trigger disability. In some cases, a medical condition may not kill you, but it may cause you to require LTC benefits. Alternatively, a condition may not land you in a nursing home, but you may not live very long with the condition. Waiting to buy the insurance is a bad idea because everyone’s health fails eventually and illness or injury may rob you of insurability.

The Indiana LTC Partnership (hereinafter referred to in this article as the “Partnership”) offers valuable LTC insurance benefits. Medicaid lets a Partnership plan owner keep $1 worth of assets for every $1 of plan benefits paid to the nursing home. An extra Partnership plan benefit, called the “total asset disregard”, provides complete exemption of a person’s assets from the Medicaid eligibility process if the person purchases enough Partnership plan LTC insurance. The Partnership plan law specifies the amount of LTC insurance that a person must purchase to qualify for the total asset disregard benefit. The amount of required insurance increases each year by 5% to keep up with rising LTC costs. Each Partnership plan must increase benefits by 5% each year. Medicaid pays the nursing home bill after the insurance is used up if a Partnership plan customer purchases the required insurance and enters the nursing home even if the person is very wealthy.

Many people don’t want to pay the annual Partnership plan premiums because the Partnership plan is somewhat expensive. However, one month’s worth of nursing home care costs more than the annual premium of most Partnership plan policies. Therefore, most elder law attorneys advise their clients to purchase LTC insurance even if the premiums are expensive if they want to protect their assets from the cost of LTC. Married couples should purchase a plan for each of them.

Some non-Partnership plan policies provide better benefits than Partnership plans. A few LTC insurance companies provide unlimited LTC benefits. An unlimited benefit plan can provide private insurance in a variety of LTC settings including nursing home care, assisted living, and home healthcare situations. A completely unlimited LTC insurance plan will usually cost more than an Indiana Partnership plan. However, many people feel that they would rather be insured by private insurance and have more healthcare planning alternatives than to have a Medicaid-qualified plan that requires a person to apply for Medicaid. Either way, LTC insurance is a great way to protect wealth from LTC costs.

THIS ARTICLE IS NOT LEGAL ADVICE. ALWAYS CONSULT AN ATTORNEY DIRECTLY BEFORE RELYING UPON THIS ARTICLE OR CHANGING AN ESTATE PLAN.