Medicare is an important program to the elderly citizens in the Ohio Valley. However, there are some common misconceptions surrounding what Medicare will actually cover when it comes to long term care and other senior care needs.

Many long term care options revolve around non-medical support services. Since so much of long term care is non-medical, Medicare is often far less help than clients and families originally think.

Here is what Medicare does cover:

1. Care in a Long-Term Care Hospital
2. Medical-Related Home Health Services
3. Physical therapy
4. Speech and Language Pathology Services
5. Occupational Services
6. Hospice and Respite Care
7. Short Term Skilled Nursing Care in a Skilled Nursing Facility

Medicare does NOT pay for:

1. 24-Hour-a-Day Care at Home
2. Meals Delivered to Your Home
3. Homemaker Services
4. Personal and Custodial Care
5. Long Term Stays in a Nursing Home
6. Transportation Assistance for Appointments and Errands

Often, we see or talk to people that confuse Medicare with Medicaid. While both are government programs, they are very different.

Medicare is governmental program that ensures that our elderly citizens have access to healthcare beyond their working years when they need it the most.

Medicaid is a governmental program put into place so that those living around the poverty line and below are able to access healthcare services.

If you were counting on Medicare to help pay for your long term care, please click below to talk to one of our staff. There’s no need to be anxious. There are many ways to be creative with providing quality care and stay within a reasonable budget.

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It surprises most seniors to learn that their life insurance policy is considered an asset when they are trying to “spend down” to qualify for Medicaid.

Though life insurance is meant to be spent after death or to be left to those we love, governmental organizations considers any policy worth more than $2,000 to be an unqualified asset that must be liquidated or counted against the individual when considering Medicaid and other financial assistance.

Some seniors end up letting their policy lapse or surrendering them for their current cash value, but there is a little known third option that often solves two problems at once for someone who needs help financing their long term senior care. It’s called the Long-Term Care Benefit Plan.

How Does the Long-Term Care Benefit Plan Work?

The Long-Term Care Benefit Plan takes your in-force life insurance policy and transforms it into a pre-funded financial account that will pay-out a dedicated monthly benefit to help pay for the policy holder’s long term care needs. However, unlike their insurance policy, a long-term care benefit plan account is a Medicaid qualified asset because the conversion process moves the ownership from the original policyholder to a named benefits administrator.

Who Owns or Manages a Long-Term Care Benefit Plan?

The benefits administrator is responsible for making the payments to the person’s in-home care, nursing home, assisted living facility, hospice care, or other long term care service. It is important to note that the Long-Term Care Benefit Plan disbursements can only be used to pay for long-term care and no other need.

What are the Advantages and Disadvantages of the Long-Term Care Benefit Plan?

Here are the advantages of the Long-Term Care Benefit Plan:

• there are no monthly premium payments
• any type of life insurance is convertible (whole, term, or universal)
• disbursement amounts are adjustable by length of payments (You would get double the monthly disbursement over 12 months than you would get over 24 months.)
• monthly disbursements don’t count against Medicaid coverage
• all dollars are “private pay”, and the owner still gets to maintain a special fund set aside for funeral expenses.

Long-Term Care Benefit Plans may seem like it would be a great option for anyone needing to pay down their assets, but that isn’t always the case. In the case of smaller policies for $10,000 or less, a person is normally better off keeping the policy or exchanging it for their cash value. On the other end of the spectrum, if you have a policy with a large cash value built in, you would normally be better off taking the cash value rather than converting.

Reverse mortgages are an often misunderstood tool that seniors can use to make home modifications, pay for long term care, and provide senior care that would otherwise be unaffordable.

Reverse mortgages aren’t the best option in every situation, but its ability to provide much needed dollars without immediate payment offers relief to many elderly homeowners.

Quick Facts

• A homeowner can never owe more than their home’s value.
• A homeowner will never be forced out of their home.
• The loan becomes due after the last borrower sells the home, is out of the home for more than a year, or passes away.
• Reverse mortgages do not affect Medicare or Social Security Benefits, but they may impact Medicaid and some veteran benefits.
• A homeowner can borrow between 20%-70% of their home’s value.
• There are no restrictions on how the money from a reverse mortgage can be used.

What is a Reverse Mortgage?

A reverse mortgage is a loan against your home’s equity. The lending bank will make payments in a single lump sum, monthly installments, or as a line of credit. The loan is paid back when the last borrower (if a couple signs together) sells the home, is out of the home for over a year, or passes away. In most cases, the lender is not paid back in installments, but rather through selling the house. The lender is paid back the full loan amount plus the accrued interest.

Although there are several reverse mortgage options, a Home Equity Conversion Mortgage (HECM) is an option that many find most useful.

When Should You Consider a Reverse Mortgage to Pay for Long Term Care?

Whether or not you should consider a reverse mortgage to help pay for senior care depends a lot on how your situation aligns with the way reverse mortgages work.

Single or Married in Poor Health: If you are single and in poor health, you will most likely be better served to sell your home and take the lump sum to help pay for long term care.

Single or Married in Fair Health: If you are single or married in fair health but one or both members need some support to stay in the home, a reverse mortgage could provide the financial boost needed to pay for long term care since the loan will not need paid until after the last borrower passes away or moves out of the home for more than 12 months. Sometimes reverse mortgages are utilized when one member of a married couple needs skilled care and the other member can maintain a level of independence. In this case, a reverse mortgage allows for the more independent member to stay in the home while providing the financial means to care for the person needing more attentive care.

What are the Requirements and Recommendations for Reverse Mortgages?

Age: Seniors must be at least 62 years old before they qualify for a reverse mortgage, but there is no maximum age limit. Older seniors are eligible for higher amounts.

Health: There are no health requirements or medical exams necessary for a reverse mortgage since the structure of the loan requires that repayment be made after the home is no longer a consideration and the payment of the loan is found in the house’s equity.

Financial Health: Financial stability is a consideration in obtaining a reverse mortgage. Since the borrowers are not making monthly payments, lending institutions instead focus on the borrower’s ability to maintain the home. If this ability is questioned, the borrower may be required to set aside a portion of the proceeds to cover these costs.

Mortgage Debt: The reverse mortgage must be the primary debt against the house. However, it is common for there to be remaining mortgage debt at the time of the reverse mortgage. In these cases, a portion of the reverse mortgage is used to pay off the remaining mortgage debt.

Long Term Care Insurance (LTCI) began just over 30 years ago, so it is a relatively new product in the insurance market. While only around 8% of Americans have purchased LTCI, rising life expectancies and senior care costs have interest in LTCI at an all-time high.

Long Term Care Insurance pays a specific daily benefit over a specific amount of time once certain conditions have been met, often fulfilling conditions like a policy holder’s inability to dress or care for themselves, an inability to keep up their home, or cook and prepare meals.

LTCI is meant to bridge the gap between quality long-term care and the financial shortfalls that often occur with prolonged care plans. According to a Harvard University study, 72% of Americans cross the poverty threshold after just one year of care.

The problem is further complicated because long term care is normally not covered under private medical insurance. Medicare only pays for skilled care after a three-day hospital stay and excludes custodial care, and the Medicaid only covers nursing home care after a patient’s assets have been depleted completely.

In recent Cost of Care Surveys, private nursing home care costs average $83,950, while 40 hours of in-home care averages approximately $57,000. LTCI is meant to offset these costs for the patient and their family whether the need for care is short term or long term.

The Benefits of Long Term Care Insurance

Long Term Care policies aren’t cheap, although those costs can be mitigated by purchasing policies at a younger age, and experts agree that they aren’t for everyone. No LTCI policy should exceed more than 7% of your annual income.

However, for the right person, a good LTCI policy can provide a lot of peace of mind and financial assistance during times that most families are left looking for creative ways to pay for the long term care that is needed.

A quality LTCI policy will do the following:

• Protect savings and assets
• Help maintain a policy holder’s financial independence
• Make professional care affordable
• Provide options for the kind of care provided
• Expand the range and depth of services available

LTCI premiums are calculated based on a few different factors.

Age and Health at the Time of Purchase: Just like any insurance, premiums are usually cheaper for younger policy holders as well as those who are healthier at the time of purchase. Most companies offer policies for clients between the ages of 18-85.

Benefit Period: The benefit period is the amount of time that the policy will pay out for long term care. This is usually stated in years.

Elimination Period: The elimination period is very similar to a deductible in health insurance. It is the amount of days that must be paid for before the LTCI policy kicks in. This is usually between 30-180 days. Longer elimination periods will lower the cost of premiums because it lowers the amount of care that the insurance company will ultimately be responsible for since many long-term care situations are shorter in duration.

The National Association of Insurance Commissioners recommends only purchasing policies from reputable companies that offer the following:

• A minimum of one year of nursing home health care coverage
• Coverage of Alzheimer’s disease and other degenerative diseases
• A guarantee that your policy won’t be canceled because of age or deterioration in physical, emotional, or mental health
• A 30 day free look period
• No hospitalization requirement to receive nursing or home health care

The baby boomers are starting to retire, and America’s senior population is expected to double in size at a rate of 10,000 seniors turning 65 each day for the next 20 years according to the National Institute of Aging (NIA).

With the average age of the Ohio Valley’s population continuing to rise ahead of the national averages, senior care and the costs associated with caring for our loved ones is set to be an important topic for the foreseeable future. The good news is that there are a wide range of options available.

 The real question often comes down to, “How much is senior care going to cost?” Of course we want the best possible care for ourselves or our loved one, but at the end of the day, we must be able to pay the bill.

While there are a lot of variables that come into play when considering the cost of elder care, there is hard data that can be helpful as you begin to map out your options. Below, we have included a chart that shows some of the indexed prices and national averages according to A Place for Mom’s 2015 Senior Living Price Index.

Each of these options presents its own list of pros and cons.

As is the case with most things, there is no one-size-fits-all option with senior care. Each case is unique to its own situation and needs of the client, their families, prior financial planning, and budgets.

However, those variables only begin setting the rules. A good in-home care agency, assisted living facility, or nursing home will not try to sell you just their services but will begin to walk you through your options and help to guide you toward a path that is best for the client, their family, and the value of each of their dollars.

If you would like to talk to one of our team members at IC Care and have a conversation about your own unique conversation, please click below, fill out a short form, and someone from IC Care will reach out to you.