With nursing homes costing an average of $83,000 annually (more in urban areas), long-term care needs can stretch the finances of almost any family.
Medicare and Medicare Advantage do not cover custodial care in a nursing home, assisted living or home healthcare setting. Unless you have savings or long-term care insurance, when you can no longer take care of yourself, you would have to spend down your assets until you qualify for Medicaid.
Long-term care insurance (LTC) can help you pay for the cost of nursing home and other long-term care for yourself or for an elderly dependent.
A study by the U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more.
What LTC covers
LTC policies vary widely. However, they all cover non-medical custodial care services excluded by medical insurance (including Medicare and Medicare Advantage). Coverage kicks in when the insured cannot perform two or more “activities of daily living,” such as eating, toileting, transferring, bathing, dressing or continence, or when he/she becomes cognitively impaired due to senile dementia or Alzheimer’s disease.
What to look for
Guaranteed renewability and inflation protection
To qualify for tax advantages, LTC plans must offer these features, although insureds can elect not to buy inflation protection.
Coverage for home healthcare
Many disabled individuals do not require nursing home care, but simply need help with activities of daily living. A policy that provides benefits for home healthcare can help the insured stay in the comfort of his/her own home.
Tax considerations
Under an individual policy, insureds can include LTC premiums they pay with other unreimbursed medical expenses, subject to a cap that increases with age. Benefits received from LTC policies generally do not count toward taxable income, as long as the benefits do not exceed an insured’s actual long-term care expenses.
