Let me ask you a question: If you were to go to the Nursing Home, do you believe that Medicare will pay for your long term care needs?
For those of you, who think Medicare is the answer to your long term care needs, let me explain how Medicare and Medicaid work. Medicare will only pay if you have first, spent at least three days in the hospital and then secondly, go to a skilled nursing facility. If you have done these two things then Medicare will pay for the first 20 days of skilled nursing care. From days 21 through 100 the patient must pay in 2012 the first $144.50 per day. If you have Medicare Supplement insurance, typically the Medicare Supplement insurance will pay the $144.50 per day through Day 100. After day 100 Medicare and your Medicare Supplement Insurance will pay nothing! Also keep in mind, Medicare does not pay for custodial care or intermediate care, only skilled care and you must be making progress or Medicare will not pay that cost. Medicaid on the other hand will pay for custodial care. However since Medicaid is a program for the impoverished, the patient must first spend down assets in order to qualify.
Private insurance is often considered by those desiring independence and choice of care and benefits to be the best option for taking care of your long term care needs and it also provides asset protection from the Medicaid spend down requirements. It is important to note that the premium for long term care insurance is going to be based on your age and the condition of your health when you apply. So obviously, the younger you are and the better your health is when you apply, will result in a lower premium.
Private insurance provides flexibility by allowing individuals to obtain care in various settings and at different care levels. Care levels include skilled nursing care, intermediate care and custodial care. Contracts do not require prior hospitalization, they are guaranteed renewable and offer level premiums. But keep in mind these premiums are not guaranteed and can go up through the years. You can also add coverage for home health care, assisted living and adult day care.
You can choose a daily benefit that can range from $50 to $300 or more per day and the daily benefit can be paid to you for anytime period you choose typically from 2 years through a lifetime. Benefits are paid when the insured has a cognitive impairment or is unable to perform certain activities called benefit triggers or activities of daily living. An elimination period, which is the time before the daily benefit is paid to you, will generally last from 0 to 180 days, and you can choose the elimination period. Two more riders that you can add which is of importance is waiver of premiums to limit premium costs and inflation protection to ensure that you have enough daily benefit in the future. In addition to these basic components, other benefits are often available and you can build your long term care insurance policy to be what you want it to be or what you can afford.
In closing, if you can’t self insure for long term care needs and most people can not. Then purchasing a long term care insurance policy is the best answer to help you protect all of the assets that you have worked hard to accumulate your entire life from being spent down.
Disclaimer: Investing involves risk. Always do your own due diligence and consult a trusted financial professional before making any investing or financial decisions. John Bearss is founding member of our Christian Financial Advisor Network. John Bearss is a registered representative of and offers securities through SICOR Securities, Inc., Member FINRA, MSRB, SIPC, 6500 Poe Avenue, Suite 105, Dayton, OH 45414 | (937) 890.3101. Neither SICOR Securities, Inc., Lifetime Decisions Management nor their representatives provide legal or tax advice. Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. and SICOR Securities, Inc. are not affiliated.