The most pressing matter that elder law attorneys address is the long-term care cost challenge. According to the government run website LongTermCare.gov, seven out of every 10 people that are turning 65 on any given day will eventually need help with their activities of daily living.
More than one third of these individuals will reside in nursing homes at some point in their lives. The median annual charge for a private room in a Rochester area nursing home was just under $162,000 in 2020, and many people require multiple years of long-term care.
Medicare Won’t Help
If you pay into the program sufficiently when you are working, you will qualify for Medicare when you reach the age of 65 under currently existing laws. This program will provide a solid health insurance underpinning, but there are some out-of-pocket costs.
These expenses are manageable for most people that budgeted for retirement, but there is one enormous gap that is hard to address comfortably. Medicare does not pay for the custodial care that nursing homes provide, and it does not cover professional in-home care.
Long-Term Care Insurance
Now that we have set the stage appropriately, we can look at the long-term care insurance equation.
Back in the 1990s, there were over 100 different companies that offered this type of insurance. However, the vast majority of these insurers fled because of cost uncertainties and low interest rates. Now, there are less than a dozen companies that sell these policies.
Clearly, this is going to be a subject that is probably not going to find its way onto your radar until you are getting up there in years. The older you are when you obtain the coverage, the higher the premium will be, so this is a problematic reality.
Genworth Financial is a company that is in the marketplace, and they have a tool on their website that you can use to find cost estimates.
A 55-year-old man that is looking for coverage with a $300 a day maximum benefit would pay an estimated annual premium of $2391. For a woman, the number is $3105, because women have longer life expectancies.
The estimated annual premium for this level of coverage for a woman that is 70 years old is $7435 and change.
If you are insured and you need to file a claim, you would have to wait out a so-called “elimination period.” This is a length of time when you have to pay out of pocket before the insurance starts to cover your claim. It will typically be 30, 60, or 90 days depending on the policy details.
Another negative is the fact that the premium that you are quoted when you first take out the policy is subject to change, and this puts you in a vulnerable position.
In the final analysis, there is no absolute answer to the question of whether you should carry this type of insurance. There are certainly a lot of negatives, and you have no way of predicting the future, so it would not be unfair to say that a long-term care insurance purchase is a gamble.
The situation doesn’t boil down to long-term care insurance or nothing. Medicaid will pay for custodial care, but you can’t qualify if you have significant assets in your own name.
In an effort to develop a financial profile that will lead to eligibility, you could convey assets into a Medicaid trust. With this type of trust, you can retain full control of your assets, and even retain the economic enjoyment of your assets, but your assets will not be counted against you for Medicaid eligibility purposes. The rules for creating such a trust to acquire Medicaid eligibility are complex and change frequently. Accordingly, you should only create such a trust with the assistance of a qualified elder law attorney.
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We are here to help if you would like to develop a plan for aging that culminates in the appropriate passing of your legacy. You can schedule a consultation if you call us at (585) 546-1734, and can fill out our contact form if you would prefer to send us a message.