Long-Term Care InsuranceIs it right for you? Presented by: Les Goldstein, CSA, MBA President, Personal Financial Strategies, Inc. 1-773-282-5657
What is Long Term Care? “Long term care involves a wide variety of services for people with prolonged physical illness, disability or cognitive disorder...(Services) are aimed at helping people with chronic conditions compensate for limitations in their ability to function independently.” Shopper’s guide to Long Term Care Insurance National Association of Insurance Commissioners
Types of Long-Term Care Services • Skilled Nursing Facility • Alternate Care Facility • Assisted Living • Alzheimer’s Facility • Home Health Care • Community Care • Adult Day Care • Respite Care
1 in 1200 1 in 240 1 in 15 1 in 2 - $100,000 loss from a fire or accident in your home; - $100,000 or greater liability suit arising from an automobile accident; - Major medical health care expenses of $100,000 or more; - Major long term care expense How Does Long Term Care Compare to Other Common Risks? Source: Society of Actuaries, 1995, Rev. 12/98
Individual Long-Term Care • 40% of people 65+ will require nursing home care!1 • 70% of Couples will have at least one spouse in a nursing home! 2 1 U.S. Dept of Health and Human Services 2 The Wall Street Journal, April 1990
Nursing Facility Average National Daily Cost: $1681 $61, 320 Cost can vary as greatly as $32,000 to $126,000 per year Average Total Cost for stay: $153,300 Assisted Living 80% of Nursing Facility Costs Home Health Care $18 per hour average – Range from $12/hr to $27/hr Adult Day Care $15,000 per year2 Can you afford the costs associated with Long Term Care? • 1 Met Life Mature Market Institute, 2002 • 2 The National Underwriter’s Long Term Care Handbook, 1996 • 3 HIAA, 1997
Additional Sample Ancillary Charges • Prescription Drugs • Bill from provider • Physician Charge--> Doctor, Dentist, Podiatrist, etc. • Bill from provider • Therapists--> Physical, Occupational, Speech • Bill from provider • Meals - Guest Tray • Personal Items • Magazines/Newspapers • Candy • Telephone • Clothing
FACT: Long-Term Care is Costly!
What are Your Long Term Care Financing Options? • Medicare/Medigap; • Qualify for Medicaid; • Rely on Family to Pay; • Self-Insure...OR • Long Term Care Insurance!!
What is the Likelihood of Medicare or Medigap paying for LTC Costs? “NEITHER MEDICARE NOR MEDIGAP INSURANCE WILL PAY FOR MOST NURSING HOME CARE.” 1998 Guide to Health Insurance for People with Medicare, page 10.
Medicare does NOT cover a majority of long-term care... • Short-term skilled nursing facility stays only after a 3 day hospital stay. • No custodial Care 40% of reimbursement requests are ineligible!!!
What Is Medicaid? • Joint Federal-State Program providing Health Care Payment for persons with low incomes. • Provides Benefits for Long Term Nursing Home Care once Income and Assets have been “SPENT DOWN” to eligibility levels.
Why you don’t want to rely on Medicaid... • Typical assets you can keep while growing poorer: • $2,000 in liquid assets (cash, bank accounts, stocks, bonds, etc.); • Burial plots for immediate family members; • Burial fund up to $1,500 for you and your spouse; • Life insurance policy with total face value of $1,500; • In many cases, you can only keep your house, car and property used in a trade or business. • Your spouse can only keep from $ 15,000 to $ 79,020 in assets depending on which state you live in. • You MUST spend down all other assets to qualify for Medicaid!!! (Medicaid rules are very complex and subject to change. This illustration should not be relied upon as representing state Medicaid eligibility requirements.)
Divorce Mis-Use of Funds College Financial Aid Capital-Gains Exclusion Lose Control Financial Difficulties Lawsuits Cost-Basis Early Death of Adult Child Pitfalls of Transferring Assets
The Health Insurance Portability and Accountability Act of 1996 The Government has sent a clear message that it is your responsibility to take care of your Long Term Care needs.
The Tax Deal: • Individual 1040 Taxpayer • S-Corporation Principals, Partnerships and Individual Proprietors • Plus Spouses & Retirees • C-Corporations • Plus Spouses & Retirees
Individual 1040 Taxpayer • LTC premiums are deductible as a medical expense and subject to the 7.5% AGI Rule. • 2003 Eligible LTC Premium: Age 40 or Below $250 41 through 50 $470 51 through 60 $940 61 through 70 $2,510 71 and Above $3,130 • Benefits for tax-qualified LTC policies are received tax-free
S-Corporation Principals, Partnerships and Individual Proprietors (Plus Spouses & Retirees) May Deduct 100% of LTC Premiums up to the Individual Deduction Limits in 2003 as a Business Expense Deductibility Schedule: AgePremium 40 or Less $ 250 2003 100% 41- 50 $ 470 51- 60 $ 940 61 - 70 $2510 71 & Older $3130 2003 Per Diem Limitations Indemnity Plans - 220.00 Reimbursement - No Limit
For S-Corporations, Partnerships and Proprietorships:Employees and Spouses without Ownership Employer can purchase an LTC policy and: • Premiums are deductible • There is no limit on premium • Premium is not considered income • Benefits are tax-free
C-Corporations(Plus Spouses & Retirees) • LTCI premiums are deductible to the Corporation. • Benefits: • are not income to Employee; • are Tax-Free. • Employer Can “Pick ‘n Choose”. • Must be an Employee of the company. • No dollar limit on the premium.
The Essential Factors in a Good Long Term Care Policy... • Tax-Qualified Policy or the ability to convert to a Tax-Qualified policy in the Future • Financially Stable Company • Sensibly Priced Product • “Bucket of Money” Concept
Policy Options to Know about... • Dollar Benefits • Daily, Weekly or Monthly Benefits • Benefit Periods • 1-10 years or Lifetime • Lifetime Maximum (Bucket of Money) • Number of days in the Benefit Period X Daily Benefit Chosen • Example: 1460 days (4 year plan) X $120 = $175,200 • Elimination Periods (Deductible) • 0, 30, 60, 90, 100 or 180 days • Inflation Protection • Guaranteed Purchase Option or CPI; 5% Simple, 5% Compound;
Nursing Home: $120/day Adult Day Care $48/day Assisted Living: $96/day Home Health Care: $60/day How does LTC Insurance work ?
Reasons why you need Long-Term Care Insurance... • Independence • Freedom of Choice • Protects Assets • Favorable Tax Treatment
What Should You Do Now? • Contact Personal Financial Strategies, Inc. at 1-773-282-5657. • Set an appointment to investigate how we can help you address this critical issue.