Cost of Buying Affordable, Long Term Care Health Insurance Coverage

People often base their decision about LTCi on things they have heard or on experiences their families have had. The former may be irrelevant, based on rumor or misconception; experiences, while relevant, could turn out differently today and in the future because laws regarding nursing home care and Medicare have changed. Here we will identify the most common opinions—usually erroneous—about LTC and help you to decide if the insurance is right for you.

I am a very healthy person. I have never been hospitalized and have rarely been sick. I'll probably just die in my sleep and never need Long Term Care.

As nice as that sounds, statistics show us that six of ever ten people will need some form of extended care before they die. Cognitive diseases like Alzheimer's can creep up on you, resulting in a long, slow decline. Once diagnosed, you are not eligible for any kind of insurance and your family has to shoulder the burden. The odds of never getting sick or needing care during your senior years are very slim.

We have money put aside. We could pay for the cost of care ourselves if we ever needed it.

That's great, and it may even be true. If you are a millionaire and could buy the nursing home, you don't need insurance. However, if your assets are in the range of a few hundred thousand, consider that the national average for nursing home care is now $72,000 per year. Very few nursing homes anywhere are below $60,000 per year. How long would your savings last at that rate? And what will your spouse live on once the money is gone to care for you?

My father just transferred all of his assets and let Medicaid pay the bill. I plan on doing the same.

The government has changed the rules regarding the use of Medicaid to prevent people from doing what your father did. It is still possible, but if the government thinks you transferred assets for that reason, they can actually look back ten years and penalize you accordingly. In any case, they currently look back three years, and as of 2011, will be looking back 5 years. If any assets were transferred, including money given as "gifts," you will be ineligible for Medicaid for a penalty period equal to the value of the assets. Additionally, transferring assets to children may expose them to capital gains taxes and make your grandchildren ineligible for financial aid for college.

I've heard that Long Term Health Care Coverage is not that affordable.

It does get more expensive as you get older. Also, if you income is limited to social security alone, and you have no liquid assets, you would have difficulty paying for it. In general, however, if LTCi is purchased by the time you are in your mid-sixties, the annual premium for two people will be about half of what it would cost you to keep just one person in a nursing home for one month.

The only people who should NOT purchase LTCi are those with extremely low income and no assets. These individuals will be eligible for Medicaid. The government will take your social security check, your home, and your life insurance.

Those with a moderate income who cannot afford the premium may want to discuss LTCi with the family. If you have several children, they may be willing to contribute to the premium in exchange for preserving the family home and protecting your modest retirement. In doing so, they protect themselves as well, ensuring that they will receive your life insurance and any other assets you intended to pass on. Furthermore, the protection will give you the right to choose the kind of care you want.
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