Long-Term Care Insurance Won’t Necessarily Solve the Problem

This is Strategy #24 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.”  Click here to see the other strategies.

Long term care insurance won't necessarily solve the problem. For many people, this is often a wasteful expenditure of funds that could be better used elsewhere. At current rates ranging between approximately $5,000 to $15,000 a month for 8 to 24 hours per day of home health services, and up to $20,000 a month or more for nursing facility care, the policy you'll need for full coverage is going to be expensive. Unless you can afford enough insurance to cover these stratospheric costs, you may require Medicaid assistance anyway.

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Without asset protection strategies, you'll still be in a situation where Medicaid will force you to spend down your resources to pay for whatever the policy doesn't cover, before they provide benefits. That means eventually you'd be in poverty anyway, and the policy will not have benefited you.

If you're sufficiently wealthy, can afford a large enough policy, and don't intend to avail yourself of Medicaid, long-term care insurance might make sense. Otherwise, you'll get a better return on your money by hiring a competent Elder Law firm to create a plan that allows you to retain the benefit of all of your money, investments, and property or a substantial portion. Medicaid will then pay your home or nursing facility care, and most medical expenses that your Medicare insurance doesn't cover. In that case, why would you need long-term care insurance?

Here is an actual case history that illustrates this point. A number of years ago, a married couple came to us for Elder Law planning, having previously purchased long-term care insurance. Their policies provided coverage of only $163 per day. The husband needed nursing home care that cost $300 per day. Since the insurance left a shortfall of $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 ability to support herself independently.

The solution to their problem was to qualify the husband for Medicaid using the methods discussed in this Special Report. With the strategies Lamson & Cutner was able to implement for the couple, Medicaid will cover all of the husband’s long-term care expenses. Unfortunately, however, only Medicaid will benefit from the long-term care insurance, which will reduce its costs in paying for the husband’s care. And that means 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.

Here's another case example in which long-term care insurance could not have delivered the range of financial benefits that Elder Law planning was able to. A husband and wife both needed home care. The main source of their income and savings was German war reparations, which are exempt from having to be paid towards the cost of one's own care. In this instance, a six-figure sum was involved. Our firm helped them qualify by first proving to Medicaid that all of their money was from the war reparations.

With all their income and assets secure from Medicaid eligibility requirements that would otherwise force them to pay the bill for the services they needed, the couple was now able to get fully paid home care at no cost to them. All their liquid assets were then transferred to their children without any Medicaid penalty.

The mother subsequently needed nursing facility care. Lamson & Cutner prepared a Medicaid application that allowed her to enter a nursing home penalty free, due to the effective asset protection planning that was done in advance.

Consequently, the couple and their children gained a series of advantages that could not have been duplicated in a cost effective way with long-term care insurance. Not only are all their medical and health care costs fully covered, but in addition their money and assets are safely in the family's possession, shielded from exposure to "spend down" requirements under government regulations.

25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs

  1. You can qualify for Medicaid (even if you don’t think so)
  2. The “Wait and See” Approach can Result in Ruinous Health Care Expenses.
  3. Plan for Home Care and Nursing Home Facility Care while You Still Can.
  4. What’s the difference between Medicare and Medicaid?
  5. It’s NOT too Late for Effective Medicaid Planning (even if you think it is)
  6. Why Hire an Elder Law Attorney?
  7. Don’t Prepare Your Own Medicaid Application
  8. Trusts Can Protect Your Home and Your Money!
  9. Special Trusts for Specific Purposes
  10. Protecting Co-op Apartments Require Special Handling
  11. Evaluate Your 401k or IRA Carefully when Planning for Medicaid
  12. Why Take the Lump Sum Option on Your Pension or Retirement Account?
  13. Choose Your Trustee Wisely
  14. Private Annuities can Help Protect Your Assets
  15. Caregiver Agreements Help Achieve Medicaid Eligibility
  16. Keep Your Medicare Insurance
  17. The Durable Power of Attorney
  18. Elder Law and Estate Planning
  19. The Health Care Proxy vs. the Living Will
  20. How to Choose an Elder Law Firm
  21. Streamline Your Financial Affairs and Record Keeping
  22. New York State is More Generous than Other States
  23. Your Attorney can Help Find the Best Care for You
  24. Long-Term Care Insurance Won’t Necessarily Solve the Problem
  25. Compassionate Elder Law Planning Focuses on Your Future Quality-of-Life!

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