Long-Term Care Planning

LONG-TERM CARE INSURANCE

Long-term care insurance has been available in one form or another for decades. As with other insurance, the premium cost depends in part on age, the amount of coverage sought, and health of the applicant.

Traditional LTC Insurance
Traditional long-term care policies paid an agreed-upon amount of dollars per day, after a waiting period of between 30 and 90 days. So a typical policy of this type would provide, for a monthly or annual premium, $100 per day toward the cost of nursing care. Some policies had an inflation protection component that would increase the amount paid per day by 2% to 3% per year, so that the protection increased as the cost of care increased.

The problems with traditional long-term care policies include the fact that they often don’t cover the entire cost of care. For example, the average daily cost of nursing care in Texas is $5,200, or about $174 per day. Coverage of $100 per day may be all that is needed to bridge the gap between your disposable income and the cost of care, but it may not fully cover your shortfall.

Another problem with traditional LTC policies is that it is typically more expensive than other forms of insurance. The additional cost is not only driven by age, but it is driven by the fact that traditional LTC policies created a level of demand for coverage that the insurance companies did not expect. The premiums paid into a traditional LTC policy were wasted if the policy was never used. Those premium dollars were simply gone, “wasted” if not used. So holders of those policies became much more likely to opt for nursing care in order to prevent waste of their premiums.

Life Insurance Based Coverage
In recent years, a new and more affordable type of LTC policy was developed. This new policy provided a death benefit, just like other life insurance policies. Let’s say $500,000 for the purposes of this illustration. But the newer policies also contained an option to accelerate that death benefit over a three to four-year period to cover, among other things, the cost of residential nursing care. The policy would pay out $125,000 per year for four years, for example, making that amount available to pay for your nursing care.

These policies had the advantage that, if the death benefit was not used to cover long-term care costs, the premium dollars were not wasted. The death benefit was still available to pass on to spouse or children, just as with any other life insurance. For the policy owner, then, the availability of the death benefit means that their premium dollars are not wasted if you don’t need nursing care. Those dollars have still provided a death benefit for your beneficiaries.

Medicaid Program Options

Medicaid is a state-administered program, but it is largely funded by the federal government. It is designed to protect the long-term health and support of persons who have insufficient resources to fully provide for themselves. Medicaid programs are complicated – too complicated to be fully addressed here. But perhaps a look at their most basic characteristics will be helpful to you; among other reasons, to help you prepare to discuss your life care plans with an elder law attorney.

MEDICAID BASICS

Qualification is Based on Need

Not everyone qualifies for Medicaid. For example, when it comes to long-term nursing care benefits, there are three separate criteria. All three must be met in order for you to qualify for benefits.

Medical Necessity

The first requirement for Medicaid is documentation that you or a loved one has medical needs and/or needs with the activities of daily living that can only be provided in a nursing home or assisted living setting. The needs could be in preparation of food, bathing, regulating medication, insertion of medical devices like catheters, or care for bed sores.

Income Limit

The maximum income that a Medicaid applicant in Texas can receive is $2,523 per month for an individual ($5,046 for a married couple). For people with medical need for care, who are over the income limit, Breshears Law can prepare a specialized type of trust to handle the excess income and qualify you for benefits. The trust is technically referred to as a Qualified Income Trust (QIT), but it is commonly known as a “Miller Trust“, named for the family that first obtained approval of this type of income-qualification trust.

The applicant’s excess income is deposited into the Miller Trust and is no longer counted as income for the purpose of income qualification. The excess income is held in the trust and can only be spent for things like unreimbursed medical expenses. At the death of the Medicaid beneficiary, the state can recover some or all of the benefits it paid from the Miller Trust.

Asset Limit

In Texas a Medicaid applicant can only have a total of $2,000 in countable resources. As the word “countable” suggests, certain assets are counted as resources toward the $2,000 limit, but other assets are not counted as resources. Among the assets that are not counted as resources are the following:

Countable resources include bank, credit union, and other deposit accounts, stocks, bonds, mutual funds, and other real estate in which you don’t live. For married couples, the healthy spouse is able to keep 50% of the couple’s community assets, up to a maximum of $137,400. The healthy spouse, called the “community spouse” in Medicaid terms, is able to keep up to $137,400 in assets that will not be counted as a resource available to the applicant spouse.