Date: Fri 18-Jun-1999
Educational Workshop Examines Long-Term Care Options
BY JAN HOWARD
Long-term care is something most people don't like to think about. They don't
think they will ever need it. However, statistics say that 43 percent of
Americans who reach the age of 65 can expect to spend some time in a nursing
Many of them will not be prepared for the expense. According to the American
Health Care Association, failure to prepare for the cost of long-term care is
the primary cause of impoverishment among the elderly.
About 35 area residents learned about options for funding long-term care and
how to avoid using property and personal savings to pay for it during an
educational workshop June 9 at the Cyrenius H. Booth Library.
The purpose of the workshop, presented by financial consultants Joan Bouchard
of Financial Underwriters in Danbury and Neil Miller of Secure Future Services
of Trumbull, was to help participants evaluate their financial situations,
identify goals, and provide them with the tools to make wise decisions to
improve their financial situations. Complimentary consultations were offered
to those who wanted them.
Cost Of Long-Term Care
Ms Bouchard emphasized the need for adequate coverage for long-term care,
noting costs can be prohibitive. "The average cost in Connecticut is $6,000 a
month and going up," she said. "The average stay is two and a half years, and
ten percent of the patients stay five-plus years."
In the case of most Americans, she said, current insurance would not take care
of assistance and physical and rehabilitative therapy. Long-term care costs
are largely uncovered by private or group health insurance policies. They are
rarely covered by Medicare or Medigap insurance, and then only in a limited
way and if certain strict requirements are met.
One of the common misconceptions is that a person's family will care for them.
"Most family members don't have the medical expertise or aren't able to give
up a job to care for a family member," Ms Bouchard said.
Ms Bouchard noted that Medicare was designed to pay for short hospital stays,
not long-term care. For the first 60 days of inpatient hospital care, Medicare
will pay all but the $768 deductible; for 61-90 days, it pays all but $192 a
day; for days 91-150, it pays all but $384 a day. Beyond 150 days, Medicare
pays nothing, and the patient assumes all costs.
Medigap insurance, private insurance designed to cover the gaps in Medicare
coverage, covers the deductibles and co-payments that a person pays under
Medicare, and provides coverage for many things Medicare doesn't cover.
One of the options for people faced with the possibility of long-term care is
to self insure. However, at an inflation rate of only five percent, the
average nursing home will cost $75,000 per year in ten years.
Future nursing home costs in Connecticut will be over $100,000 a year, Ms
Bouchard said, if the inflation trend continues.
People with very low incomes and few assets may qualify for Medicaid, a joint
federal and state program that provides medical assistance to needy families.
Ms Bouchard said Medicaid offers broad coverage but has strict requirements.
Often families may have to "spend down" assets in order to qualify.
Medicaid recipients have to be impoverished, she said. They are allowed to
keep $50 a month of income for personal needs and $1,600 in assets. They also
can keep the following assets: a burial plot, a pre-paid irrevocable funeral
contract, and life insurance of any amount that has no cash surrender value,
such as term policies.
If the patient is single, any other income or assets must be used for their
A person's residence is not counted as an asset if the patient intends or is
expected to return home. If the patient is married, his or her spouse is
allowed to keep the house and $81,960 of assets to maintain their lifestyle.
They may appeal if this amount is not sufficient to their needs.
Another option is Medicaid planning, a variety of strategies people use to
establish Medicaid eligibility without becoming poverty stricken. These
include outright transfer, irrevocable trust, 50/50 strategy, and home
Ms Bouchard advised that Medicaid planning be discussed with a financial
professional to make sure everything is done legally and within certain time
limits. These rules are subject to change.
With outright transfer of an asset, the Department of Social Services (DSS)
can "look back" over the past 36 months to see whether a person intentionally
gave away money or property to become eligible for Medicaid. Some transfers to
or from a trust are subject to a five-year "look back" period.
In a 50-50 strategy, assets such as stocks, bonds, certificates of deposit
(CDs), and checking accounts, owned jointly, are divided. Rather than having a
CD owned jointly for $20,000, each spouse should have one for $10,000 in their
The DSS looks only at a patient's own income to decide if they are eligible
for Medicaid. Assets owned jointly are "up for grabs," Ms Bouchard said. "They
can go into it for what the asset is worth."
Long-term Care Insurance
Another option is a long-term care insurance policy. With long-term care
insurance, a person transfers the financial risk of long-term care costs to an
insurance company. In exchange for current premiums, it enables a person to
preserve their assets.
A person must determine if long-term care insurance is right for them. They
need to consider their net worth, the potential out-of-pocket costs associated
with long-term care, and the premiums that would have to be paid for a policy.
Each person has to decide whether to transfer the risk of covering costs of
long-term care to an insurance company or having to pay a very large bill him
or herself should long-term care at home or in a nursing facility become
It is also necessary to determine if one can afford the premiums for the
insurance. Premiums can be reduced by discount for good health, Ms Bouchard
Long-term care insurance can cover the two main types of care, nursing home
and home health care at 100 percent. Some also cover community care, such as
adult day care, respite care, assisted living, or continuing care.
They can also cover three types of long-term care Á skilled, intermediate, or
custodial. Most insurance companies allow a person to choose the level of
care, Ms Bouchard said.
Ms Bouchard said long-term care benefits can help a person preserve their
independence, preserve their freedom of choice and present standard of living,
protect assets, and help them avoid welfare.
To preserve independence and freedom of choice are the top two reasons people
give for choosing long-term care insurance, she said.
Premiums for long-term care insurance may be deductible from federal taxes,
she said. Also, insurance benefits are no longer considered taxable income.
Long-term care premiums and expenses are tax deductible to the extent they,
along with other eligible medical expenses, exceed 7.5 percent of a taxpayer's
adjusted gross income.
Ms Bouchard said women, who represent 75 percent of nursing home residents,
children of aging parents, and people with a family history of debilitating
illnesses or diseases should consider long-term care coverage.
Pre-existing conditions are not covered by most policies. A policy must be in
place before a person needs to use it. "Once a condition crops up, an
insurance company will refuse a policy," Ms Bouchard said.
Premiums increase with age, she said. The longer a person waits, the higher
the premium. Buying a policy at age 50 instead of age 65 can save as much as
50 percent of the monthly premium.
Connecticut residents can also protect their assets under a Connecticut
Partnership Policy. Long-term care insurance policies that participate in this
program contain unique features and are certified by the Connecticut Insurance
"Connecticut is one of a few states where this is available," Ms Bouchard
said. "It makes it easier to qualify for Medicaid and shelter more family
assets. It involves you, your state and the insurance company."
Under this plan, the policy owner is allowed to protect assets equal to the
amount of benefits paid by the Partnership-approved policy and still be
eligible for Medicaid assistance.
For more information on long-term care insurance, contact a financial
The long-term care option that is best depends upon a person's circumstances,
Ms Bouchard said. "Long-term care coverage can be a prudent solution to this
Ms Bouchard will be teaching courses on long-term care and estate conservation
in the fall session of Newtown Adult Education.