Although the American population is aging rapidly, Long-Term Care (LTC) insurance is held by only about 1 in 30 Americans and approximately 7% of adults over the age of 50. Studies show that someone turning 65 today has almost a 70% chance of needing some type of long-term care service. Women need care longer (3.7 years) than men (2.2 years).
Currently, five states are actively considering legislation to address the high cost of long-term care, potentially through a long-term care state payroll tax, with two of the most populous states, California and New York, among them.
Many older Americans will develop health problems that make it difficult for them to complete everyday activities. Long-term care insurance provides coverage when individuals are unable to perform two or more activities of daily living (ADLs). These activities include dressing, eating, bathing, transferring, toileting, or continence. When someone requires assistance with these tasks, LTC insurance can help cover the associated costs.
Many consumers mistakenly think that Medicare picks up part of the cost of long-term care; it covers only short-term rehabilitation centers. Medicaid (Medi-Cal is the California state welfare program) will pick up LTC. However, in California, Medi-Cal is only for low-income people. Starting in 2024, California no longer requires an asset test to qualify for Medi-Cal.
However, the income is still measured on the 138% Federal Poverty Level; meaning your modified adjusted income (MAGI) has to be under $1,732 monthly for a single person or $2,352 for a couple. Medi-Cal offers cost-sharing for income levels up to 150% FPL, meaning, your MAGI is $1,883 for a single person and $2,556 for a couple. Read more details here.
The state Medi-Cal or Medicaid agency attempts reimbursement of care costs when a long-term care Medi-Cal or Medicaid beneficiary passes away, typically from the deceased individual’s remaining estate, which often includes their home.
Most older people with disabilities rely exclusively on help from unpaid family members and friends. When they need more assistance than these caregivers can provide, they often turn to paid long-term care services; such as formal home care, residential care, and nursing home care. These services are expensive. In California, the average cost for homemaker services is $6000 monthly, assisted living facilities cost $10,000 monthly; and a semi-private nursing home in Los Angeles costs $120,000 annually. You can utilize the Genworth-developed calculator to estimate your long-term care expenses based on your zip code.
Many Californians have not even had a conversation with their family about their long-term care wishes and how to finance them. Have you written these down and instructed your family on what to do if you need this type of service? Do you prefer to receive your long-term care at home, in an assisted living facility, or in a nursing home? If you prefer to remain at home, do you expect your spouse or children to care for you, or do you want outside help?
Have you allocated the necessary funds for this type of home care? If you are considering a nursing home, do you want a private room or can you handle a semi-private room? Have you discussed with your family how to finance LTC needs? An open discussion with your family will clarify for everyone what your wishes are and how you plan to finance your long-term care bills. You might even draw a letter of instruction in your estate plan so that there will be clear directives on how to handle your long-term care needs.
Private LTC insurance provides financial protection to anyone who needs long-term care. Policies cover home care, assisted living, and nursing home stays; lifetime coverage is rare due to the high premium cost. The average reimbursement rate in 2015 was $150 per day, and three-quarters of the LTC insurance plans cover some inflation protection. Annually, premiums may rise only if the insurance carrier can provide that claims for a class of policyholders—defined by issue age and year—exceed expectations. However, annual premiums rise with age at issuance and pre-existing conditions.
There are not many long-term care insurance companies in California to buy long-term care insurance from. Mutual of Omaha is one of the strongest carriers. Meanwhile, Nationwide Life Insurance Company, John Hancock, and One America offer competitively priced life insurance with long-term care riders. Moreover, these companies have stringent underwriting criteria and with the ideal age for applying being between the ages of 53 and 56 years old. Only 50% of those 65 years and older will be able to get long-term care coverage. This figure drops to 30% for those 70 years and older.
As with health insurance, buying long-term care insurance is very complex. Many variations are to be evaluated, such as elimination period, inflation riders, survivor riders, and shared care riders, just to mention a few. In addition, did you know that long-term care is fully tax-deductible for C-Corporations? The same as for individuals, there are also tax deduction incentives.
Feel free to reach out to us at Solid Health Insurance Services. We can provide you with a personalized quote and discuss the long-term care options available to you in California. You can contact us at 310-909-6135 or email us at info@solidhealthinsurance.com. We look forward to assisting you!