Long-Term Care Insurance

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For many people, long-term care insurance is a wasteful expenditure of funds that could be better used elsewhere. At current rates ranging between approximately $6,000 to $13,000 a month for 8 to 24 hours per day of home health services, and up to $15,000 a month or more for nursing facility care in the New York City area (less, but still expensive in other geographic areas), the policy you'll need for full coverage is going to be expensive. Unless you can afford enough insurance to cover these stratospheric costs – or have passive cash flows from your investments -- you may require Medicaid assistance anyway.

Without asset protection strategies, you'll be forced to spend down your resources to pay for whatever the policy does not cover, before Medicaid provides any benefits. In these unfortunate circumstances, you may still wind up depleting your life’s savings, and the policy will have benefited Medicaid, not you.

Here is an actual case history that illustrates this point. A married couple came to Lamson & Cutner for Elder Law planning. They had previously purchased long-term care insurance. Their policies provided coverage of only $163 per day. The husband needed nursing home care that cost over $300 per day. Since the insurance left a shortfall of more than $137 per day, the couple had out-of-pocket costs of over $4,100 per month. They could not afford to pay this amount without rapidly depleting their savings, and jeopardizing the wife’s security and ability to support herself independently going forward.

The solution to their problem was to qualify the husband for Medicaid, using the methods discussed in Your Situation -- Married Couple: Spouse needs Nursing Home Care. With the strategies Lamson & Cutner was able to implement for the couple, Medicaid will cover all of the husband’s long-term care expenses above the amount covered by their long-term care insurance policy. If the couple had not purchased this insurance, Medicaid would have covered all of the costs. The high premiums that the couple had paid for many years did not help them at all, and all of this money could have been saved.

We do not mean to suggest that long-term care insurance is a bad or useless product. For some people, it can make very good sense. If you have sufficient financial resources and passive cash flows, can afford a large enough policy, and don't intend to avail yourself of Medicaid, long-term care insurance might be appropriate for you.

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