29 Sep Long-term care insurance and Medicaid

Q. I have long-term care insurance with a $250,000 maximum and dropped the inflation rider. Does this mean that after using $250,000 of benefits, I’ll have to use my assets to fund further long-term care until they’re depleted before I can apply for Medicaid?

A. Let’s look more closely at how payouts from long-term care policies work.

Your current policy benefit limit of $250,000 is the maximum your insurance company will pay for your long-term care needs, but there is another component to consider, said Steven Gallo, a certified public accountant with U.S. Financial Services in Fairfield.

Gallo said every long-term care insurance policy has both a benefit limit — your $250,000 — and a time period over which it will pay that benefit.

He offered this example: Policies are sold with a monthly benefit. Let’s assume yours is $5,000. Then policies have a time period for which this benefit will be paid. Let’s assume four years.

“This results in an overall benefit of $240,000 ($5,000 X 48 months),” he said. “This is important because you may have long-term care costs of $7,000 per month and your monthly benefit is only $5,000, therefore forcing you to start using your own assets prior to exhausting your policy benefits.”

So to answer your question: Yes. Should you use all your policy benefits, you will need to spend down your personal assets prior to being eligible for Medicaid, Gallo said.

We wish you the best of health and that you never need to use your policy.

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This story was first posted in September 2015.