Be Prepared For Long Term Care

Brandon Miller is a Financial Advisor with American Express Financial Advisors based in San Francisco, California and can be reached at brandon.j.miller@aexp.com    One of his specialties is comprehensive financial planning for gay and lesbian individuals and couples.

Brandon Miller has a website that can be found at http://gayfinancialadvisors.com/California.htm

Thanks to healthier lifestyles and medical advances, Americans are living longer than they used to.  The average male is expected to live until he is 76 years old, compared to 30 years ago when the average male life expectancy was 70.  The average female is expected to live until she is 80, compared to a 75-year life expectancy 30 years ago.  However, even though we are living longer, most Americans are not adequately prepared for the costs of long-term care. 

Many people mistakenly believe that Medicare will cover their long-term care costs.  However, Medicare, the federal health insurance program, was truly designed to help pay for short-term care.  While it does provide coverage in the early stages of care, it does not pay for any long-term care.  Currently, Medicare pays all expenses up to 20 days.  After 20 days, it covers expenses up to $95 per day.  After 100 days, Medicare doesn’t pay for any expenses.  For more information about what you can expect from Medicare coverage, go to www.medicare.gov.

Once you face the reality that Medicare was not set up to help pay the costs of long-term care, you also must realize that long-term care is expensive, and it can very quickly deplete savings and jeopardize your family’s financial stability.  For example, the average cost of nursing home care is estimated at more than $57,000 per year. (These costs are projected to reach $190,000 a year by 2030.)  The current cost of in-home assistance averages $18 per hour, or $37,000 per year for 40 hours a week of help.

Consider Long-Term Care Insurance      

Long-term care insurance is a good option for protecting your assets if your health deteriorates and you need assistance. Although long-term care insurance has been around for longer than 20 years, purchasing this type of insurance can be confusing. Before you purchase a long-term care insurance policy, here are a few things to consider:

q       Age:  A variety of factors determine the cost of your insurance policy, but the biggest factor is the age at which you purchase the plan.  The earlier you purchase, the less expensive your premiums.  However, purchasing long-term care insurance too early may not save you money in the long run because you will be paying for the premiums longer.  In general, it is recommended that you purchase long-term care insurance in your late fifties to early sixties. 

q       Levels:  There are three basic levels of care you may need.  Skilled care involves licensed medical professionals at nursing homes.  Intermediate care consists of limited licensed care with custodial assisted living. Finally, custodial care assists with daily activities at home.

q        Features:  When considering long-term care insurance, it is important to consider the policy features and benefits.  Now is not the time to look for a bargain.  Buying a policy solely based on price may end up costing more if you have inadequate coverage.   So do some research and ask some important questions, such as: Does the policy cover all care levels? Is there automatic inflation protection?  Is there a mandatory elimination period?  (In other words, once the claim is filled, how long is it before you begin to receive benefits?) Eligibility:  As with any insurance policy or contract, make sure to read the fine print.  Some policies do not cover mental or nervous disorders, patients with substance abuse problems, or intentionally inflicted injuries. 

q       Tax Benefits:  In 1996 Congress passed the Health Insurance Portability and Accountability Act, which allows you to deduct your long-term care insurance premiums from your taxable income.  In order to deduct medical expenses, the total costs must exceed 7.5 % of your adjusted gross income.  Check with your tax advisor or financial planner to find out if your state also offers income tax deductions or credits for long-term care insurance.  

q       Partnership States: Some states have approved Medicaid programs called Long-Term Care Partnerships or “partnership” policies.  These partnerships grant easier qualifying and asset protection when applicants have long-term care insurance policies in place.  

Get Help 

A qualified financial advisor can help you develop a comprehensive financial plan that includes long-term care considerations, such as insurance and retirement planning. 

###

      This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.

Brandon Miller has a website that can be found at http://gayfinancialadvisors.com/California.htm