Medicare vs. long-term care insurance

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Q. What’s the difference between long-term care insurance and the kind of care that Medicare pays for?
— Learning

A. There’s a big difference.

Long-term care (LTC) is an ever growing need for an aging U.S. population and can be defined as someone who needs daily care due to a physical illness, physical incapacitation, disability or cognitive impairment, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.

He said LTC differs from medical care in that it generally helps you with your day-to-day functions also known as “Activities of Daily Living (ADLs)” versus improving or correcting medical and/or health problems.

ADLs include bathing, eating, dressing, toileting, continence, and transferring and are often called “custodial or personal care,” he said.

LTC may be given in a nursing home, assisted living facility, adult daycare facility or in your own home.

Papetti said the insurance industry offers LTC insurance to fund the costs of LTC.

The benefits typically are paid as a daily benefit, i.e. $300 per day or a monthly benefit, i.e. $9,000 per month, and require you satisfy an elimination period, i.e. 30, 60, or 90 days where you are required to pay 100 percent of all LTC costs incurred before the policy’s benefits kick in, he said.

“LTC insurance also has a benefit period where benefits are paid for a specified term ranging from two to seven years and some policies even provide for a lifetime benefit period,” Papetti said.

The premiums for LTC insurance have increased substantially over the past 10 years as the cost to provide care have also risen substantially, he said.

It’s important to note that for taxpayers who itemize deductions, the tax code does provide tax-qualified LTC policy premiums, within specified limits, as medical expenses and may be deductible to the extent they exceed the Adjusted Gross Income threshold of 10 percent for those under 65 and 7.5 percent for those 65 and older, he said.

Medicare, as opposed to Medicaid, pays very little towards the cost of LTC.

“Medicare provides a Skilled Nursing Facility (SNF) Benefit which can pay for some skilled care in an approved nursing home,” Papetti said. “The SNF benefit only covers you if a medical professional says you need daily skilled care after you have been in a hospital for at least three days and must get that care in a nursing home that is a Medicare-certified SNF.”

Papetti said Medicare may cover up to 100 days of skilled nursing home care in each benefit period you meet the requirements, however, after 20 days, you must pay a coinsurance fee. In 2016, the coinsurance fee is $161.

“While Medicare pays for limited skilled care, it does not cover care in an Assisted Living Facility nor provide for personal or custodial care as defined previously,” Papetti said. “You should not count on Medicare to pay for your LTC costs. ”

Papetti said Medicaid is the U.S. government funded program that pays for nursing home care, but this is only for individuals who have low income and spend down most of their assets.

According to the National Association of Insurance Commissioners (NAIC) Shoppers Guide to Long-Term Care Insurance you should not consider buying LTC insurance if:

  • You can’t afford the premiums.
  • You do not have many assets.
  • Your only source of income is Social Security
  • You often have trouble paying for utilities, food, medicine, or other important basic needs.
  • You’re on Medicaid.

You should consider buying Long-Term Care Insurance if:

  • You have many assets and/or a good income.
  • You do not want to use most of your assets or income to pay for long-term care
  • You can afford the LTC insurance premium and possible increases without a problem.
  • You do not want to depend on support from family or friends.
  • You want to be able to choose where you receive LTC.

Good luck in finding the care you need.

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This post was first published in October 2016. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.