Do I need long term care insurance?

The cost of long term care is ever-rising. For 2021, The Genworth Annual Cost of Care Survey pinned the national average cost of a private room in a skilled nursing facility at $9,034. Even worse, the same study projects the same room and care will average $12,141 ten years from now.

Elderly Couple - long term care insurance

So what’s the solution?

There is long term care insurance that comes with its own costs. There are also certain types of annuities and life insurance geared to cover potential longterm care costs. But then there is Medicaid, which most people think of as a safety net for broke seniors who need long term care. The thing is you are paying into the system your whole life, and Medicaid covering long term care costs are looked at as your tax dollars being used to pay for others. However, the Medicaid program should be looked at as a long term care insurance policy you can opt to use to pay for care.

The problem is people think of “being broke” to use this Medicaid long term care insurance when instead they should be thinking about:

  • Deductible: All of your countable assets minus $2,000, a primary residence (with limits), and a vehicle has to be spent first as your deductible; and
  • Co-Payments: All of your income (minus a personal needs allowance) has to go to pay the facility first, and then the “insurance” through Medicaid pays the rest of the bill.

The challenge in Medicaid Planning is maximizing the assets that are excluded or non-countable so they are not part of your deductible. However, people shouldn’t think of Medicaid as just being for seniors who are destitute. In fact, these are the words of President Lyndon Johnson when signing the legislation enacting Medicaid:

“No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to care for their parents, their uncles, and their aunts. And no longer will this Nation refuse the hand of justice to those who have given a lifetime of service and wisdom and Labor to the progress of this progressive country.”

While there are other ways to pay for long term care which may bring about more care options, don’t discount the insurance program you have been paying for through your tax dollars as “for the poor.” If you were the beneficiary of a life insurance policy, would you refuse to take the death benefit just because you felt you didn’t need the money?