By Nancy Burner, ESQ.
With the ever-changing health care landscape both federally and on a state level, and the aging of the baby boomers, it may be time to take a second look at long-term care insurance. Historically, New York State residents have had the opportunity to receive long-term care benefits through the Medicaid program.
New York has been one of the most generous states in providing care for disabled and aged residents. But you do not have to be a health care expert to see that state and federal budgets are threatening to curtail Medicaid benefits, and many current programs cannot be relied upon to provide the same amount of care that they have in the past.
To battle these changes, a proper estate plan should provide an arsenal to protect against catastrophic health care costs. It is often advisable to consider all available resources when putting together a long-term care estate plan.
We do not have a crystal ball that will show the future of Medicaid or what the needs of each individual will be. But we do know that the baby boomers represent a critical mass of individuals moving toward unprecedented longevity.
In addition, we know that a large percentage of these individuals living longer will likely need care. Further, while many baby boomers and their relatives traditionally cared for aging parents, the economics facing future generations shows that third-party caregivers will be the norm, not the exception.
For clients facing these looming questions of who will provide care, where will the care be provided and how will it be paid for, long-term care insurance is one possible solution. Prudent estate planning may require putting together a team of professionals to help make decisions to protect your assets and autonomy, regardless of what the future holds. This team may include an elder law attorney, financial advisor and an insurance professional. Working together, they can provide you with options for protecting assets to avail yourself of public benefits, preserving and growing assets and purchasing insurance products that make sense in your plan.
Long-term care insurance can often pay for home care assistance or the cost of a nursing facility. If you start accessing your long-term care benefit while living at home and then transition into a nursing facility, the proper planning could make a huge difference in the amount paid toward the cost of care.
Also, many individuals do estate/elder law planning by creating irrevocable trusts, which commences the five-year look-back period for Medicaid nursing home care. They purchase long-term care insurance to cover the initial five-syear period.
Some clients find themselves in a position where they have high income and therefore fear that they will never qualify for Medicaid. Some have income that exceeds the lower Medicaid rate charged by the facility. This leaves them in the dubious position of not qualifying for Medicaid and therefore forced to pay the higher private pay rate.
Needless to say, current daily rates for nursing home care can be financially ruinous. Fortunately, there is a federal law that states that if an individual is eligible for Medicaid but for the fact that their monthly income exceeds the Medicaid rate at the nursing facility, the facility must allow that individual to pay privately at the Medicaid rate. This offers a large savings in the cost of nursing care; and, in the final analysis, the individual is never a Medicaid recipient.
The income of the individual can include Social Security payments, pensions, distributions from retirement assets, payouts on a long-term care policy, etc. With proper long-term care planning, the assets could be protected in an irrevocable Medicaid asset protection trust while the income is being used to pay for the facility.
While many will need long-term care in their lifetime, not everyone will require prolonged care. A common concern is that after paying premiums on a long-term care policy for years, it will never be accessed for care. It’s the age-old problem of paying for insurance that they hope they will never use. This creates a mental bias against insurance to pay for that kind of care.
Individuals prefer to believe that they will never need long-term care. For those with this concern, there are new policies commonly referred to as “hybrid policies.” These are life insurance policies with a long-term care rider attached. In this way, you can access the policy to cover the cost of care while living, but heirs can receive a death benefit if it is not used up. Some polices also allow the insured to cancel the policy and receive their investment back at any time.
The bottom line is that the landscape is ever changing, the assumptions we relied upon have changed, and if you plan on living long, you need to live and plan smarter. Maybe it’s time to reconsider long-term care insurance. If you can qualify medically and you can afford it, it may be just another necessary tool in your arsenal of weapons for “aging in place” and with autonomy. It may not be for everyone but it could be right for you. Take a second look.
Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.