Long-Term Care Insurance | What Options Do You Have?
Once you turn 65, there’s a 70% chance that you’re going to need some kind of long-term care and supports for your remaining years. Medicare, Medicaid, and most private health and disability income insurances often do not pay for extended care expenses (unless you meet certain qualifications). How will you pay for what is not covered by a government benefit?
That’s where long-term care insurance comes in. Buying long-term care insurance is one way to prepare. Long-term care refers to a host of services that aren’t covered by regular health insurance. This includes assistance with routine daily activities, like bathing, dressing, or getting in and out of bed. It can cover:
In-home care.
Assisted living and nursing home care.
Adult daycare.
Home modifications—like wheelchair ramps, grab bars, and railings.
Assistance with day-to-day activities (think getting dressed, bathing, eating, and more).
Why You Should Consider Long-Term Care Insurance
People buy long-term care insurance for two reasons:
To protect savings. Long-term care costs can deplete a retirement nest egg quickly. Long-term care is quite expensive. If you’re required to pay out of pocket, it can drain your savings very quickly. Here are the average monthly costs for assisted living and skilled nursing facilities in Pennsylvania (2020).
To give you more choices for care. The more money you can spend, the better the quality of care you can get. If you have to rely on Medicaid, your choices will be limited to the nursing homes that accept payments from the government program (not all nursing homes accept Medicaid). Medicaid doesn’t pay for assisted living in many states.
How Long-Term Care Insurance Works
Under most long-term care policies, you’re eligible for benefits when you can’t do at least two out of six “activities of daily living,” called ADLs, on your own or you suffer from dementia or other cognitive impairment.
The activities of daily living are:
Bathing.
Caring for incontinence.
Dressing.
Eating.
Toileting (getting on or off the toilet).
Transferring (getting in or out of a bed or a chair).
When you need care and want to make a claim, the insurance company will review medical documents from your doctor and may send a nurse to do an evaluation. Before approving a claim, the insurer must approve your plan of care.
Under most policies, you’ll have to pay for long-term care services out of pocket for a certain amount of time, such as 30, 60, or 90 days, before the insurer starts reimbursing you for any care. This is called the “elimination period.”
The policy starts paying out after you’re eligible for benefits and usually after you receive paid care for that period. Most policies pay up to a daily limit for care until you reach the lifetime maximum.
As you make a long-range financial plan, the potential cost of long-term care is one of the important things you’ll want to consider. To begin your plan with one of our eldercare attorneys, reach out here.
Continue Reading Below to Determine Your Medicare Eligibility for 2021
Residency and Citizenship – the applicant must be a Pennsylvania resident and a U.S. citizen or have proper immigration status.
Age/Disability – the applicant must be age 60 or older, or blind, or disabled. The applicant must meet certain medical requirements consistent with the level of care requested. Persons must need care for thirty (30) consecutive days. In Pennsylvania, before admittance to a nursing home, there is a Pre-Admission Screening and Resident Review (PASRR). PASRR screening determines whether or not an applicant meets the nursing home level of care and also whether a specific facility can meet their needs.
Income Limitations – If single, the applicant’s monthly income (wages, Social Security benefits, pensions, veteran’s benefits, annuities, SSI payments, IRAs, etc.) must be no higher than 300% of the Federal Benefit Level ($2,382) to become eligible for Medicaid. Income that is not considered countable includes a personal needs allowance of $45.00/month per individual.
Asset Limitations (Exempt vs. Available) – Medicaid divides assets into two categories: Exempt and Available. Exempt assets are specifically designated under the rules, and ownership of an exempt asset by the applicant will not result in a denial of benefits. If an asset is not listed as exempt then it needs to be liquidated and applied toward the costs of nursing home care before the applicant can receive Medicaid benefits. The state has a look-back period of 5 years with a penalty for people who sell assets below fair market price, transfer assets to others, or give money and property away. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is listed as exempt.
Exempt Assets in 2021 for an applicant in Pennsylvania include:
$2,000 or less in cash/non-exempt assets if single. Pennsylvania adds a $6,000 disregard to the asset limit if a Medicaid recipient’s monthly income is below $2,199. If the assets exceed the limit on the first of the month the applicant is ineligible for the entire month.
For persons who have a monthly income above $2,382, but are medically needy (MNO-MA) with medical expenses that exceed their income, the asset limitation is set at $2,400.
One home is exempt (equity limit $603,000) if planning to return, a spouse, a child under 21, or a disabled person resides in it. Whenever an institutionalized person sells a previously exempted residence, the money from the sale becomes a countable asset. The recipient may then lose eligibility for Medicaid until he/she has spent down the money and their countable resources are once again less than the maximum.
One automobile, no equity amount specified.
Irrevocable burial trust, no amount specified.
Non-saleable property, household furnishings, furniture, clothing, jewelry, and other personal effects are not counted.
Value of life insurance if face value has no cash value.
Non-resident property essential to self-support (i.e. rental property) if monthly revenue is below income limitations.
Spousal Rules for 2021:
Amount of assets the community spouse may retain: The community spouse can keep non-exempt resources owned by one or both spouses with a maximum of $130,380. If the community spouse’s assets do not equal the minimum of $26,076, the community spouse is able to retain assets from the institutionalized spouse until the minimum is reached.
Community spouse impoverishment protection: The community spouse can keep part of the institutionalized spouse’s income if the community spouse has a monthly income of less than $2,155. The maximum amount of income that can be retained is $3,259.50 varying by case, depending on unique living expenses. If applicable, up to $609.00 in home maintenance and a $570 utility allowance including heat are not figured into the total.
