Buying Long-Term-Care Insurance


ong-term-care (LTC) planning focuses on meeting the financial, medical, housing and personal needs of individuals who can no longer function independently. Planning must address the level of care needed, where it best can be provided and how it will be financed. CPAs can assist clients in making decisions about purchasing LTC insurance to meet the costs.

Individuals unable to function independently may receive the following care:

Acute care. The person’s medical needs warrant hospital admission.

Intermediate and skilled care (generally, nursing home care). If the patient will pay privately, the doctor and family determine whether the facility is appropriate. For Medicaid to pay, the individual must meet the state program’s “medically necessary” criterion.

Residential care or assisted living. Generally, persons who require such care do not meet the criteria for a nursing facility’s skilled or intermediate care. These facilities cost less than nursing homes. Some states provide payment assistance.

Home care. This is generally limited to those who can operate with some degree of independence and have a family support system that allows them to remain at home; the costs of such care can be offset by payment assistance from Medicare or Medicaid..

LTC costs are paid privately; by Medicaid, Medicare or Medigap; or by LTC insurance. Some limited services initially may be covered by Medicare or the Veterans’ Administration, but these are not long-term funding sources.

Private pay. Currently, nursing homes charge approximately $3,000 to $6,000 per month. Maintaining a person at home with full-time care costs even more.

Medicaid, Medicare and Medigap. Usually, Medicare and Medigap policies cover some of the first 100 days of nursing home care. These sources are not a long-term payment solution.

LTC insurance. As with life insurance, the policyholder pays monthly premiums to the insurance company; if LTC is needed, the company pays the bill, as dictated by the policy provisions. Individuals must be in reasonably good health to qualify for policies and premiums can be high. The insurance company may restrict the facilities from which individuals can choose; the services received may be limited.

An LTC policy should cover the costs of

At-home help with daily activities, such as bathing and dressing.

Community programs, such as adult day care.

Assisted living services (for example, meals, health monitoring and help with daily activities) provided in a special residential setting other than a home.

Nursing home care.

CPAs should help their clients understand the issues involved in the purchase of LTC insurance.

For more information, see the Personal Financial Planning column, written by Jay H. Kaplan, Pamela W. Kaplan and George A. Lewis, in the January 2005 issue of The Tax Adviser.

—Lesli S. Laffie, editor
The Tax Adviser

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