Nobody wants to picture getting old and frail, needing help in the house, or being moved into a nursing home. This is not a pleasant conversation. It won't make you feel happy or excited about the future. But it's a necessary one, because we have to think about the worst case. We hope and pray you never need long-term care.
But we can't go by hopes and prayers. We've all seen what happens to people when they get old and frail, whether it comes from an accident or from slowly wearing down. I'm not going to paint a scary picture. We know what the possibility is. What we can do is make sure there's enough money set aside to get the help that’s needed, as best we can.
If you've written off long-term care insurance, you probably did it based on old information, so it makes sense to get new information and reconsider it now. It used to be use it or lose it. If you never needed care, the money you paid in was gone. And there could be restrictions. I remember one policy where the only way you could use it was in a home run by Christian Scientists, and there aren't a lot of those around.
Things have changed. Many people now look at hybrid policies instead. If you need care, you get tax-free money to pay for it, and the amount you get will be much more than you put in. Different policies provide different multiples, but some can be very generous. If you never need it, you still get a decent return when you cancel the policy or when you die. There are a lot of nuances, which is why you should talk to someone who sells a lot of these and understands both the differences and what you need.
Here's the part that catches people, and it usually hits them too late. Medicare does not pay for long-term care. The only government help is Medicaid, and that's for people who have become impoverished.
Nancy's mother is one example. She had a cerebral hemorrhage at 57 and spent 27 years in a nursing home. Medical care in Ohio wasn't good, so the family moved her to South Florida, and Nancy moved there too. They came from low-income circumstances and had nothing set aside. Once the little they had was used up, Medicaid required them to sell everything they owned except $2,000 worth of assets, even though her father was still living on his own.
That included their funeral plots in Ohio. It bankrupted him, and he ended up totally dependent on his children, Nancy and Joan.
The rules have changed since then, and they keep changing. That's my point. If you think you may go the Medicaid route, do your research now. As I understand it, there's a five-year look-back on assets that were transferred out of an estate, so the planning has to happen long before anyone needs care. Talk to a lawyer who specializes in this and keep your plan up to date. Please check all of this on a government website before you rely on it. This is my understanding, not legal advice.
My own parents' story went another way. My mom declined gradually. When it got too hard for my dad to care for her, they brought in outside help. Later they moved into an assisted living facility, which gave my dad his independence and my mom more intensive care. Then he declined too, and they both needed it. Medicare never paid a dime for either of them. It was all private pay.
My mom had a long-term care policy. But my dad was handling the finances, and when they moved into an apartment, some paperwork got misplaced. He didn't know he was no longer paying the premiums. The insurance company couldn't reach him because it was sending mail to the old address, which for some reason wasn’t being forwarded. The policy lapsed. Nobody knew until it was too late. My dad had his own policy, and it did pay, but he only needed help for a few months, so he didn't get much out of it.
So it's not enough just to get a policy. It has to stay in force. I understand insurers are now required to give people the chance to designate a beneficiary in case a policy is in danger of lapsing, which is a real improvement. It also has to be sufficient. That doesn't mean a policy that covers every expense, which could be too big for most people to carry. It means that your policy and your other resources together are enough to meet the expenses you can reasonably expect. And remember that some of your spending stops once you're in care. If you're living in a facility and your spouse is no longer around, you're not maintaining a house anymore. You're not traveling, dining out, or going on cruises. Some of the income you planned to spend on those things can go toward care.
So after you read this, I hope you have more of an understanding of all the things you need to consider when planning for the future. You may have had misconceptions about long-term care, and they may be out of date. You owe it to yourself to get educated and then decide whether you'll fund this yourself or use some kind of insurance product.
If you'd like to talk it through, call me at 786-559-0339 or email me at louis@louisberlin.com.