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Long-Term Care Insurance

Terry RiffleOwner/Senior Advisor

Paramount Insurance Agency, LLC

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What is long-term care insurance?

• Health insurance and Medicare help pay for immediate medical expenses, whereas long-term care insurance helps people cope with the cost of chronic illnesses. Long-term care insurance typically covers out-of-pocket expenses that come with home care, assisted-living facilities, and nursing homes. The policies pay for help with everything from the basics, like dressing and bathing, to skilled care.

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What are the risks?• According to the Centers for Medicare and Medicaid Services, at least

70% of people over 65 will need long-term care services at some point

• Compare this risk to the following: a. Odds of your home burning to the ground: 1 in 16,000 b. Probability of totaling your car: 1 in 100 c. Chance of meeting a $2,500 medical insurance deductible annually: 1 in 25• Of those who reach age 85, 50% will develop Alzheimer’s Disease or dementia• Nearly 40% of people using long-term care services are under the age

of 65

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How much does long-term care cost?

Genworth 2015 Cost of Care Survey

Region Rate Range MedianCanton-Massillon Median Annual Rate Homemaker Services (Licensed) $122/day $44,616 Home Health Aide Services (Licensed) $122/day $44,616Adult Day Health Care $45/day $11,700Assisted Living Facility $120/day $43,740Nursing Home (Semi-Private Room) $205/day $74,825Nursing Home (Private Room) $227/day $82,673*

*Assuming a 3% inflation rate, this cost is projected to be $95,840 in 5 years, $111,105 in 10 years, $128,801 in 15 years, and $149,316 in 20 years.

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What are the options for paying for long-term care?

1. Spending down assets (self-insure)2. Relying on family3. Medicaid (not to be confused with Medicare) a. Medicaid Spend-Down Rules b. Medicaid Recovery4. Buying long-term care insurance. Policyholders

typically cite “not wanting to be a burden on family” as the main reason for purchase.

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What are the different types of long-term care insurance policies?

1. Traditional a. Premiums are based on the age and health of the applicant b. The applicant must choose an elimination period, daily benefit amount, inflation factor, and benefit period c. A policyholder can stop making premium payments once he/she qualifies to go on claim (requires assistance with 2 of the 6 activities of daily living) d. Ohio’s Partnership Program for Long-Term Care Insurance e. Premiums may be tax-deductible (Publication 502, Medical and Dental Expenses) f. Premiums may increase

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What are the different types of long-term care insurance policies (cont.)?

2. Hybrid a. Life insurance policy with a long-term care rider3. Asset-Based Long-Term Care Insurance a. Can be funded with cash, a nonqualified annuity, or even qualified money b. The Pension Protection Act of 2006

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Filial Support Laws

Some 29 states (Ohio is one of them) currently have laws making adult children responsible for their parents if their parents can’t afford to take care of themselves. These “filial responsibility” laws have rarely been enforced, but seven years ago when federal rules made it more difficult to qualify for Medicaid long-term care coverage, some elder law attorneys predicted that nursing homes would start using the laws as a way to get care paid for.

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Filial Support Laws (cont.)

A Pennsylvania appeals court found a son liable for his mother’s $93,000 nursing home bill under the state’s filial responsibility law. Health Care & Retirement Corporation of America v. Pittas (Pa. Super.Ct., No. 536 EDA 2011, May 7, 2012).

John Pittas’ mother entered a nursing home for rehabilitation following a car accident. She later left the nursing home and moved to Greece, and a large portion of her bill at the nursing home went unpaid. Mr. Pittas’ mother applied to Medicaid to cover her care.

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Filial Support Laws (cont.)While her Medicaid application was pending, the nursing home sued Mr. Pittas for nearly $93,000 under the state’s filial responsibility law, which requires a child to provide support for an indigent parent. The trial court ruled in favor of the nursing home, and Mr. Pittas appealed. Mr. Pittas argued in part that the court should have considered alternate forms of payment, such as Medicaid or going after his mother’s husband and her two other adult children.

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Filial Support Laws (cont.)

The Pennsylvania Superior Court, an appeals court, agreed with the trial court that Mr. Pittas is liable for his mother’s nursing home debt. The court held that the law does not require it to consider other sources of income or to wait until Mrs. Pittas’ Medicaid claim is resolved. It also said that the nursing home had every right to choose which family members to pursue for the money owed.

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Additional Lunch and Learn Topics Medicare basics Medicaid Spend Down Rules and Medicaid Recovery A Roth IRA alternative for a tax-free retirement

income Wealth Transfer Strategies Why your clients should never invest in actively-

managed mutual funds, especially if they involve sales charges