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Options for Paying for Long Term Care

Sudhir Mathuria HEALTHLIFE 360  713-771-2900

Sudhir Mathuria

Long-term care is expensive and is becoming more so every year. With individuals facing a high probability of needing long-term care at some point in their lives, finding a way to pay for long-term care services is not trivial. In very general terms, the funding for an individual’s long-term care needs comes from two types of sources: public and private. On the public side are two government programs: Medicare and Medicaid. On the private side are an individual’s own resources and assets, including long-term care insurance.
The high cost of long-term care services and the high probability of needing them make it imperative that individuals evaluate carefully the various potential sources of long-term care funding. Many people mistakenly think that Medicare covers long-term care costs. In fact, Medicare’s coverage of long-term care is very limited: it does not pay for personal or custodial care, which is the type of long-term care most people need. Medicare primarily covers medically necessary care provided either while the individual is an inpatient in a skilled nursing facility or in the individual’s home. It covers skilled nursing facility care only if the individual was hospitalized for at least three days before admission to the skilled nursing facility for the same medical condition that requires the skilled nursing care. Medicare covers medically necessary, physician-ordered home health care only (1) if the individual is home bound and the care is provided by a Medicare-certified agency, and (2) if the personal care is provided in conjunction with and during the same period that skilled medical treatment is provided. Medicaid covers long-term care costs, and it has even expanded from its original policy of paying only for facility-based care to the point where it now also pays for home-based and community based care. To meet Medicaid’s eligibility requirements, an individual must be impoverished. Certain protections against impoverishing a Medicaid recipient’s community spouse have been put in place, but assets must still be spent down to low levels before Medicaid will pay for an individual’s long-term care. In addition, after a Medicaid recipient dies, a state’s Medicaid agency can seek to recover the amount of Medicaid benefits paid to the individual from the individual’s estate.
However, as we have learned, both have their drawbacks. Medicare covers care on a very limited basis for a limited time, and only if it is provided in conjunction with covered medical care and services. Medicaid does cover a wide spectrum of long-term care needs, but its eligibility requirements limit its application to those who are basically impoverished (or must become so to qualify). Relying on government programs for long-term care also means that an individual may be forced to give up choice as to where and how care is received and delivered.
The other source of paying for long-term care is personal resources, which can encompass a wide variety of financial vehicles and financial options.
Sources of long-term care funding: 1) Personal savings and investments 2) Life insurance 3) Annuities 4) Reverse mortgages 5) Long-term care insurance
Hybrid Annuities Innovations in annuity designs over the past few years have led to hybrid annuities, which are intended to meet two objectives: 1) Provide a means to cover the cost of LTC insurance and to generate LTC benefits if that need arises 2) Accumulate funds on a tax-deferred basis for any future purpose, if LTC is not needed. Typical hybrid annuity product is a single premium fixed deferred annuity with a long-term care insurance rider. Like a conventional deferred annuity, the product is credited with a certain amount of interest on a regular basis, which accumulates on a tax-deferred basis. Then, also on a regular basis, the annuity’s accumulating cash value is charged an amount for the cost of the LTC insurance rider. The amount of the long-term care benefit, the product will deliver is typically set at some multiple of the annuity’s cash value when the first claim for long-term care benefits is made, such as two or three times the value. For example, an individual who deposited $100,000 in a hybrid annuity that grew to $150,000 by the time an LTC claim occurred would have $300,000 to $450,000 of long-term care coverage, depending on the multiple.
To learn more about Long Term Care contact Sudhir Mathuria 713-771-2900. Read complete report online:www.voiceofasiaonline.com

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