Long Term Care Insurance

In-home or nursing home care due to an injury or declining health, particularly over a period of many months or years, can be very expensive, running from $4,000.00 to $6,000.00 per month or more. Long term care insurance can preserve a person’s income and resources from being depleted by the high cost of such care.  Policies come in many varieties.  They can provide a fixed daily or monthly amount or reimbursement for actual expenses incurred.  Premiums vary based upon many factors, including: the age of the applicant when the policy is issued (the premium is lower for younger applicants), health of the applicant, the length of the “elimination period” (the number of days the applicant must pay for care before the policy will pay benefits), the number of months or years the policy will pay benefits (the longer benefits may be paid, the higher the premium), and whether the applicant elects to include inflation riders or options to purchase increased coverage in future years.  As with traditional health insurance, a person can tailor a long term care policy to his or her individual situation and budget.  Besides the benefit of protection against the risk of a major expense, long term care insurance also can help preserve options on where care will be given and by whom, rather than being limited to low cost or options available under government assistance programs.  Long term care insurance may not be beneficial or available if a person has assets valued at less than the cost of one year’s nursing home care, if a person is disabled or has serious health problems, or has limited ability to pay premiums without affecting his or her ability to pay on-going basic expenses. Long term care insurance policies can be purchased from many insurance companies.  A list of companies approved by the Indiana Department of Insurance to sell such policies, along with the telephone numbers of each company, can be found at the Department’s web site:  http://www.in.gov/idoi/2511.htm

In a future post, I will discuss Indiana long term care insurance “partnership” policies that coordinate with Medicaid benefits so as to allow eligibility for Medicaid benefits even though the insured has resources that would otherwise render the insured ineligible.

Planning For Nursing Home Costs

There are a number of methods of providing for in-home care or nursing home care for persons who cannot be properly cared for in their homes, including:

• Payment by you or your family members from personal income or     assets;
• Medicaid assistance for people with low income and limited assets;
• VA nursing home care for honorably discharged veterans;
• Accelerated benefits from your life insurance policy or loans against cash value of policies;
• Income or principal payments from an annuity or trust fund;
• Payments from a reverse mortgage from the equity in your home;
• Long term care insurance coverage.

Not every method may be available to everyone, and some methods may be more or less attractive than others.  Many seniors want to preserve assets in order to pass them on to their spouse and children.  With nursing home care currently costing $50,000.00 or more per year, an extended nursing home stay could substantially diminish or deplete your assets.  If you do not qualify for Medicaid assistance or VA nursing home care, and you want to address the risk of incurring substantial nursing home costs that might result from extended nursing home care, long term care insurance may be an option you may want to consider.  I will discuss common questions and issues concerning long term care insurance and other methods of paying for long term care in future posts.

Personal Care Contracts And Medicaid

Many children provide full or part-time care for their elderly parents—sometimes for years—so that the parents can remain in their home as long as possible. But at some point a child or other caregiver may no longer be able to provide the level of care that is needed, and nursing home care may become necessary. The average cost of nursing home care now approaches $4,000.00 per month. How will a parent pay for nursing home care? Medicare does not cover on-going nursing home care, and Medicaid will pay nursing home costs only after the parent meets financial (and other) eligibility conditions. For an unmarried parent, those financial eligibility conditions currently require that the parent have countable resources totaling not more than $1,500.00. Even though a child may have provided care worth tens of thousands of dollars, in the absence of a personal care contract any money paid to a child in order to reduce countable resources below $1,500.00 will be considered a “gift”—an uncompensated transfer that will render the parent ineligible for Medicaid assistance for a period of time. A personal care contract can provide many benefits, including fairly compensating a family member for valuable care and be part of legitimate long term care planning by helping to spend down resources so that the parent might more easily qualify for Medicaid assistance with nursing home costs. For a personal care contract to be respected for Medicaid purposes, a written contract spelling out the caregiver’s duties and compensation terms should be put in place before services are rendered. Payment may be made by an up-front payment or in installments, but it is essential that compensation not exceed what a parent would have to pay to a non-family caregiver. The key is to create a written contract which provides fair and reasonable compensation to the caregiver, and not an uncompensated transfer. Therefore, in order for the contract not to be treated as a transfer of assets for less than fair market value, the contract should provide for the return of any prepaid monies if the caregiver becomes unable to fulfill the caregiver’s duties under the contract, or if the parent should die before the parent’s life expectancy. This post is just a brief overview of personal care contracts as a part of long term care and Medicaid planning. Because the laws concerning Medicaid are complex and always changing, consult with an attorney who is familiar with Medicaid planning before executing a personal care contract.

Protecting Medicaid Eligibility For A Person In A Nursing Home

Spouses typically create estate plans that leave property to the surviving spouse or a surviving child with no strings attached.  That is reasonable and works fine in most cases.  However, doing so when a spouse or child is in a nursing home, or when it is probable that a spouse or child will require nursing home care, could render the spouse or child ineligible for Medicaid assistance to cover the substantial cost of nursing home care.  In such a situation, a solution is to create a will that contains a “special needs trust” for the spouse or other relative in need of nursing home care, rather than the usual plan of leaving property outright to that spouse or other relative.  The special needs trust, if done properly, would be a “discretionary” trust which authorizes the trustee (which could be a family member) to pay or apply trust funds to care for the person needing nursing home care, but if such person is eligible for Medicaid assistance, to do so in a way that may only supplement, not replace, Medicaid assistance.  Under current Medicaid rules, such a special needs trust may not be contained in a living trust, but must be contained in a will.  By creating a special needs trust in the situation described above, property in the special needs trust can provide funds to supplement the very small monthly cash allowance that Medicaid permits to nursing home residents, but such property will not be counted as a resource that would make the surviving spouse or other relative ineligible for Medicaid assistance, as it probably would if it were given outright to the surviving spouse or other relative under a will or trust.