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By John M. Bigler Many of us are faced with the possibility of a disabling illness that requires care and assistance on a long-term basis. The cost of long-term care is so great that most people simply would not be able to pay for it out of their own pocket for more than a few months. The point of planning for future Medicaid eligibility is to get some help meeting those crushing expenses before having a lifetime of savings completely wiped out. However, in a situation where illness comes on quickly, and without warning, a person may be required to spend half or even more of their resources to pay for medical expenses in order to become eligible for Medicaid.
Reprinted with permission of the Suffolk Times © 2002
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Long-term care insurance is intended to create a greater degree of security in planning for the future. As one might expect, premiums for long-term care insurance will vary greatly depending on the circumstances of the person buying the policy and the coverage the policy offers. Among the factors used to determine premiums are age, level of benefit to be paid and the period of time during which benefits will be paid.
Once the policy is in place, premiums may not be changed unless they are changed for everyone in the whole class of policyholders.
You may be very thorough in calculating the level of benefits you believe would be necessary if you required long-term care, but the costs will almost certainly rise over time. It is important to choose a policy that will periodically increase its daily benefit in order to keep up with inflation. Policies that offer this feature are more expensive, but the rising cost of care will quickly overtake a fixed benefit, leaving the policyholder with the large long-term care bills that insurance was intended to avoid.
Some policies may use the periodic increase in benefits as a reason to ask for medical proof of insurability. A policy with this provision should be avoided.
Other sources of help available should be considered in deciding on the benefits to be included in a long-term care policy.
Policies include an elimination period. This is the amount of time before benefits begin to be paid and can be thought of as being similar to the deductible on other insurance policies. Having a shorter elimination period will make the policy more expensive. Medicare will cover the first 100 days of care. Therefore, persons eligible for Medicare coverage can have expenses incurred during an elimination period of up to 100 days paid for by Medicare.
You may also choose how long benefits are to be paid. A longer period of benefits will result in a more expensive policy. The cost of long-term care insurance can be very high and it might make sense to use it only as a bridge to Medicaid eligibility. This would involve buying insurance that pays benefits for a time equal to the period Medicaid is allowed to look back to scrutinize transfers. A person could then face the prospect of sudden illness with a little more confidence. Transfers intended to create Medicaid eligibility could be made at the onset of a disabling illness and the private long-term care insurance would carry the person through the penalty period for those transfers.
It is important to remember that long-term care insurance is only attractive if a person has enough assets to protect. You must weigh the cost of premiums, which may be quite high, against the resources that would otherwise need to be used to pay for medical expenses.