Last posted at lifehappens.org
The three primary ways to get long-term care coverage are to buy it on your own with the help of an agent, through your employer, or through an association/membership group. Some benefits also are available from the government, through Medicare and Medicaid.
However, you should be careful about relying on government programs. Medicare covers only short-term skilled nursing home care, and Medicaid will pay for your care only if your assets are very limited.
Some states have Long-Term Care Insurance Partnership Programs that allow you to buy private long-term care insurance and remain eligible for Medicaid benefits if your private insurance runs out. Read on to learn more about the various sources of protection.
Buy It on Your Own
Purchasing it yourself with the help of an agent who specializes in long-term care insurance provides you with a lot of flexibility and options. Your agent can help you shop around for the best policy among multiple insurance companies, and customize a plan to include the combination of features and benefits that works best for your needs and budget.
If you’re in good health, you may qualify for preferred pricing. That’s because the policy will be individually underwritten, meaning the insurance company will base its price on a thorough medical exam and personal health history.
Get It Through Your Employer
A growing number of employers offer group long-term care insurance as a voluntary employee benefit. Typically, an employer will contract with a particular insurance carrier and allow its employees to purchase coverage, often through automatic payroll deductions.
Because employees pay for coverage out of their own pockets, the policies are almost always portable, meaning you can keep them in force if you change jobs. One potential advantage of buying through your employer is that you can sometimes get coverage that would have been more difficult to obtain on the open market. This is especially true of employees who have health problems or a poor family health history.
Why? Because with most group plans, employees are offered the same premium as others in their general age bracket (e.g., 45-54 year olds), regardless of their health status or actual age. So if you’re an older employee or perhaps have some health issues, the one-size-fits-all premium offered through your employer may be lower than what you’d be able to obtain if you tried to get coverage on your own. A downside of buying through work is that you’re limited to the companies and products that your employer makes available to you through your benefits package, and you might be able to find a better price or policy by shopping on your own.
Purchase It Through an Association or Membership Group
Policies offered through alumni groups, trade groups and other organizations are another option that may be available to you. The pros and cons are similar to employer-sponsored coverage. Premiums are often discounted and are based primarily on your age and health. You may, however, be limited in your ability to customize the policy to your specific needs.
Benefits Through the Government
Medicare is the federal government’s program that pays health-care bills for older Americans. When it comes to long-term care, there’s a common misconception that Medicare will pay a good chunk of the cost of long-term care. Not true. Medicare only covers short-term skilled nursing home care that you receive after being hospitalized for at least three days.
For instance, if you get in a car accident, Medicare may cover your care in a rehabilitation facility for a period of up to 100 days. Medicare also pays for some skilled at-home care but only for short-term unstable medical conditions and not for the ongoing assistance that many elderly people need. Medicare will not pay for any custodial care, and 95% of all long-term care is custodial, not skilled. For more information, visit the Medicare website.
Medicaid is the federal government’s program that pays health-care bills for Americans who meet federal poverty guidelines. In addition to covering doctor visits, hospital stays and other standard medical expenses, Medicaid pays for about half of all nursing home costs in the U.S and a smaller, but growing, portion of the nation’s home care costs. But remember, Medicaid will only pay for care if you have very limited assets.
Qualifications vary by state, but generally you may keep only the house in which your spouse or dependent resides, the furniture, a car, a burial plot and funeral funds, and a modest amount of cash. Having Medicaid pay for your care also means you may not have much say in choosing the facility that will provide your care. For more information, visit the Medicaid website.
Partnership Programs and Tax Incentives
To encourage more Americans to take responsibility for their future care needs, the government has developed a variety of incentives to reward those who buy long-term care insurance. Here are some you should know about.
Partnership programs: Long-term care insurance partnership programs are designed to encourage consumers to buy private long-term care insurance, which will help you avoid spending down most of your assets to qualify for Medicaid-sponsored long-term care. Over the long haul, these partnerships between states and private insurance companies save money for both consumers and the government. Programs vary by state, so talk to your agent about how this could apply to you.
Federal tax incentives: If you buy a federally qualified policy (and most policies are), your insurance premiums may be deductible as part of your medical expenses on federal tax returns and benefits are received tax-free.
State tax incentives: A majority of states have a state tax incentive for residents who purchase long-term care insurance.
Make sure to consult with your tax advisor to fully understand which tax benefits may apply to your particular situation.