Long-Term
Care Insurance: Planning for Your Future
By David L. Middlemiss
Almost half the population will need long-term care
at some point in their life. An average stay in a nursing home typically
lasts about two and one-half years. Such stays can be very expensive and
quickly deplete your family’s financial resources. It is estimated that
by 2030, when most baby boomers will have retired, nursing-home care
will cost about $190,000 annually.(1)
Who Will Pay? Amid rising medical costs and falling state and federal
funding, the price of a nursing home room has jumped about 8 percent
between April 2002 and August 2003, according to a study conducted by
MetLife Mature Market Institute, a resources center on aging issues
based in Westport, CT. For those paying their own bills, the average
annual expense for a private room in a nursing home was $70,8000 in
2004. (2)
Medicare and Medicare supplemental insurance (Medigap) generally don’t
cover long-term care (LTC). Medicare does pay for some nursing and home
health-care expenses, but the services must be medically necessary and
short term in nature. Medicaid requires you to “spend down” your assets
to a “poverty” level before it will begin paying long-term care costs.
Consequently, most people of moderate means personally pay for long-term
care, either from family assets or with long-term care (LTC) insurance.
LTC policies pay a certain amount for each day you receive care. You
generally can choose the amount you want, from $40 to more than $200 a
day. Most policies also allow you to select from a variety of other
benefits. These benefits might include an inflation rider to help ensure
payments will keep up with care costs, a home health care rider, and a
choice of how long you must reside in a nursing home or the number of
home-care visits you must receive before benefits begin, as well as how
long you want payments to continue.
Tax Breaks Corporations, which sponsor LTC insurance plans, can pay for
policies for their employees and their spouses on a pre-tax basis. The
employee does not report the premium as income. Consult with your tax
advisor as the procedure varies between C-Corporations and
S-Corporations and owners and non-owners.
More than Asset Protection While protection for your assets may be a
powerful reason for buying LTC insurance, it’s not the only reason.
Making LTC insurance an integral part of your overall financial plan
also gives you the opportunity to choose the level of long-term care you
want should the need arise. The wide variety of policy options available
let you select the coverage features you feel will best meet your future
needs. Moreover, people with private-pay insurance, as opposed to
Medicaid, generally have a greater choice of care facilities and a
shorter waiting period to be admitted to the facility of their choice.
To learn how you can add group long-term care
insurance to your employee benefit portfolio by utilizing NYSEC’s
discount LTC program through John Hancock, please contact the
Association office at 1-800-724-1904.
David L. Middlemiss is a registered representative and investment
advisor representative of Lincoln Financial Advisors Corp. offering
insurance through Lincoln affiliates and other fine companies. This
information should not be construed as legal or tax advice. You may want
to consult a tax advisor regarding this information as it relates to
your personal circumstances.
Sources:
1The Boston Herald, March 3, 2005, “Choosing Healthy Options; Long-term
Care is a Wise Investment”
2 2004 MetLife Market Survey of Nursing Home & Home Healthcare Costs
