It’s sad but true: by the time most people realize they wish they had a long term care insurance policy, they are too sick or old to buy one.
So, in an effort to mitigate the crushing financial toll long term care will have with no planning, many of them end up doing short-term planning– let’s call it crisis planning. Crisis planning isn’t about optimal strategies. It’s all about limiting the financial destruction and trying to make up for the fact that no real plan for how to pay for care is in place.
Getting long term care planning done well in advance of when you actually need it stacks the deck in your favor. That’s why people in their 40’s-60’s are benefiting themselves by visiting the topic of long term care planning decades in advance of their 80’s, when they are most likely to have a claim.
By planning far ahead, a person has at least three distinct advantages:
- The first advantage is that long term care insurance is less expensive over an extended time frame. While the occasional new policyholder suffers a claim shortly after policy purchase, the insurer is pricing the policy for the vast majority of people who will pay for many years before a claim is issued. The younger buyer benefits from this pricing reality.
- The second advantage is illustrated by a saying that long term care insurance industry insiders are fond of: the insurance may be paid for with money, but it is health that buys the policy. That’s because, to the disappointment of the vast number of people inquiring about the insurance, someone must be relatively healthy in order to purchase a policy. Did you know that at least 25% of long term care insurance applications are actually denied? The declination rate also increases with age; an advantage of planning at earlier ages.
- The third advantage is rarely considered. Not all long term care needs arise at a very old age. An accident or a diagnosis such as early-onset Alzheimer’s may make someone who is planning on purchasing long term care insurance uninsurable. And, though it would be a tragedy for a healthy younger person to suffer a need for long term care services, imagine their relief if they had done long term planning and already purchased a policy!
Crisis planning, on the other hand, is about patching together short term solutions such as trying to squeeze more care from dwindling assets, or, signing up for a government program such as Medicaid.
To this end, families will sometimes seek the services of a Medicaid planning (often called an elder law) attorney. In a typical scenario, a family may spend $20,000 in legal fees to save $80,000 in money that would otherwise need to be used on care before Medicaid would start paying the care bill.
However, utilizing Medicaid can greatly inhibit both care choices and the ability to move if you ever decide you are not happy with the care. If, for example, you would like to receive care at home, it is usually not an option with Medicaid. In general, if you are receiving Medicaid-paid long term care, you will be receiving that care in a nursing home.
Additionally, transferring money away to qualify for Medicaid planning forces taxpayers to pay for your long term care. This care would otherwise be paid privately or by insurance company claims payments and can put an unfair burden on an already straining system.
Another strategy you may see in a desperate bid to make money last, is that people sometimes seek out less than optimal care providers, which is not at all ideal as it can put your health at risk. Some people may also try purchasing a discount care card. However, these cards are not insurance and are therefore not subject to the same regulations.
Though these short-term planning strategies may be an attempt to make the best out of a bad situation, there is little debate about whether they are as good as private long term care insurance planned out well in advance. Give yourself the peace of mind knowing the payment source is the insurance company, not life savings or current income. For more information please feel free to contact Baygroup Insurance at http://www.baygroupinsurance.com/forms/contact-us or call us at 410-557-7907.
Submitted by Melissa Barnickel, MSRN Member