We found a story in the USA Today on the growing need for Long-Term Health insurance in today’s climate that highlights a popular trend on how to afford it.
Several factors have been working against Long-Term-Care insurance for years. The biggest knock against it was it’s too expensive for individuals to buy and too expensive for insurance companies to sell. Because it wasn’t cost effective for either side, the industry saw some dramatic rate increases in the past several years; a few insurance companies have even got out of the business entirely.
The other big issue was you could pay the premium for years then never need it.
“Historically (other than cost) the big turn-off with long-term-care insurance was that all premiums paid were lost in the event policy benefits were not used,” said Manhattan attorney Ann-Margaret Carrozza. “Now we are seeing more flexible products built around a life insurance model.”
The trend that seems to be taking hold is people are buying a single premium life insurance policy that contains a long-term-care rider.
That’s what Byron Udell, CEO and founder of AccuQuote.com, says he and his wife have on their life insurance policies of $1 million. “If I don’t ever need it, my family gets the million,” said Udell. Another benefit to this type of policy, he says, is the premiums can be guaranteed whereas traditional long-term care premiums do not offer a guarantee against price hikes.
Still “the big question is how do you pay for it?” Udell said. “If you had no money and have need, Medicaid will pay for it. But you have to be broke. If you have a lot of money you don’t need it. It’s the people in the middle, $100,000 to $1 million that have the issues. A few years (of long-term care) can wipe out entire savings and you have no legacy. More and more those people are willing to spend a few thousand a year (for the insurance).”
It’s worth noting people who expect Medicaid to pay for their Long-Term Care Insurance should know that eligibility has gotten tougher in recent years. “We can no longer rely on Medicaid to cover custodial type care,” said Carrozza.
“In 2006 the so-called look-back period was extended from three years to five years,” she said. This allows the government to go back five years and check to see if you have sheltered assets. If you have, it triggers a penalty period when you’re ineligible for Medicaid. “There are now proposals in Congress to increase it to 10 years,” Carrozza said. Remember, “Medicare only covers up to 100 days of rehabilitation following hospitalization. Then nothing.”
If you are like most families who choose to pay for your Long-Term Healthcare out-of-pocket, know that the cost “is a really big number,” says David Richmond, president of Richmond Brothers, a financial and retirement planning firm. “Retirees are getting an idea because they are dealing with their parents. Care is not cheap and insurance will not pay for it. Once you have exhausted your 100 days, Medicare will not pay. You (need) to make a plan and (understand) what it will do to your portfolio and your family.”
Read the story here.