Long-term care requires careful planning

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

Let’s face it: when planning for the future, we have a lot to think about. We plan for our children’s college educations by starting a college fund. We prepare for various possible issues by carrying medical insurance, and homeowners’ insurance and auto insurance. We plan for retirement by funding a retirement account. We plan for our beneficiaries’ financial futures with life insurance. We plan for all of these potential scenarios, but one that we very often neglect to plan for is what happens if we need long-term care in our golden years.

The term “long-term care,” in general, refers to care that an individual needs on an ongoing basis due to some chronic condition or illness, and it encompasses assistance with anything from normal activities of daily living such as bathing and eating, to more skilled care such as ongoing health monitoring and administration of medication. The biggest problem is that long-term care is expensive, averaging anywhere from about $13,000 annually for adult day health care to more than $82,000 per year for a private room in a nursing facility.

When you consider that the average stay is upwards of two years, these costs really add up. To further complicate matters, most private medical coverage will not pay for this type of daily care on any long-term basis, and most standard private medical policies have strict limits of perhaps up to a few months’ stay.

While Medicare will cover short nursing homes stays, or limited amounts of in-home care, the conditions are rather strict. State Medicaid programs are most often the fallback providers of this type of coverage, but qualification for these benefits will often only come after the vast majority of your assets have been exhausted. And, while many would-be Medicaid recipients attempt to quickly get rid of assets by giving them to children in order to qualify, there is a five-year look back period that will generally foil this plan, meaning an unexpected need for nursing care may deplete any inheritance you had hoped to leave for your heirs.

To help solve the problem of coverage, many individuals choose to obtain special long-term care insurance, and it can be a great investment to protect yourself and your loved ones. These policies generally offer multiple coverage options, and you can often obtain a policy with flexible options in order to be prepared for multiple eventualities.

Here are some things to consider when shopping for a policy:

Your income, assets and savings – if you already qualify for Medicaid, this type of insurance is not likely to be of much benefit to you. And, of course, if you are not able to maintain the premiums over time, the benefit will evaporate and you will have spent a good bit of money for no benefit at all.

Your average tax burden – benefits paid out through a long-term care policy generally are not considered taxable income and, if you itemize your deductions and have excessive medical costs, you may be able to take the premium expenses as a tax-deduction.

Your current health – these policies generally cost less when you are younger and healthier, meaning they may be more affordable if they are purchased well in advance of your actual need for such coverage.

Your support system – obviously a long-term care policy assumes you might at some point in time need third-party long-term care. If you are fortunate enough to have a support system to help you in this eventuality, you may find that such coverage is excessive and unnecessary.

If you consider these factors and decide that long-term care coverage is something that is right for you and your family, you will find that you have several options to choose from. When shopping around, consider consulting a trusted financial advisor or insurance agent (make sure he or she works with multiple companies. Check out companies that are rated financially strong by top rating services, such as Moody’s and Standard & Poor’s. And, most importantly, compare multiple policies from multiple carriers to make sure you are getting the best choice to meet your needs.

*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.