22 Sep 2016
Patricia and Ben, clients of mine, planned to retire at the age of 65. Recognizing the increasing daily needs of their own parents, Patricia and Ben began to question whether their own retirement funds would be sufficient to cover their eventual personal health care needs. They were surprised to learn that Medicare does not cover personal care. (It does cover a set amount of skilled nursing care following a hospital stay.)
A statistic published by the Center for Medicare and Medicaid Services gave them more cause for concern: 70% of people over the age of 65 will need care services and support at some point in time. Moreover, the national median cost for home care is $45,000 annually, and is even higher in the Westchester area. And these costs are likely to rise as the growing aging population increases the overall demand for services.
So Patricia and Ben contacted me to discuss whether long-term care policies would be appropriate for them. They were clear that they each wanted a policy which covered care in the home. They had also reviewed their financial resources and decided on a premium range that was comfortable for them. Knowing the type of care you want and how much you’re willing to pay in premiums are two important steps in selecting a good plan design. I also recommended they consider plans that provided inflation protection so they could maintain the purchasing power of the benefits.
Planning for the future can be a challenge as we don’t know what our needs will be. A long-term care contract creates a large sum of money from which a set amount of cash is withdrawn to pay a caregiver or provider. A comprehensive plan offers flexibility, covering care in the home, assisted living residences, nursing homes and community services. The insured qualifies for benefits when substantial assistance with at least two activities of daily life, such as bathing and dressing, are needed for 90 days or more. A diagnosis of dementia alone qualifies.
Since each insurance company offers plans with its own distinctive features, it’s important to consider more than one company to find the plan which meets your particular wants and needs.
Most long term care policies are tax-qualified plans, meaning the premiums are deductible on your federal tax return. And the benefits are not taxable. New York State tax filers also benefit from a state tax credit of 20% of the insurance premiums.
All long term care policies and riders are medically underwritten. This means that your health and medical history will be taken into consideration when determining your eligibility and premium rate. Early planning usually results in lower premium costs and an easier underwriting process (when you have less of a medical history). Without long-term care insurance, Patricia and Ben knew they wouldn’t have the financial assets to fund their care if either one of them needed it. The benefits of the plan they selected weren’t entirely what they had hoped for, but they still felt it would be a game changer for them and their family if and when they needed care.