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ElderLaw News

ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President., William S. Fralin, Esq., President.

What You Need To Know About Long-Term Care Planning

by Jeffrey A. Gump, CB&H Wealth Management Services, LLC

Facts about Long-term Care (LTC) Planning

Baby boomers started turning 65 in 2011 and the number of senior citizens will increase dramatically during the 2010 to 2030 period. The senior citizen population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million. Between 2000 and 2040 the number of older adults with disabilities will more than double, increasing from about 10 million to 21 million [1]. By 2050, the number of individuals using paid long-term care services in any setting (e.g., at home, residential care such as assisted living, or skilled nursing facilities) will likely double from the 13 million using services in 2000, to 27 million people. This estimate is influenced by growth in the population of senior citizens in need of care [2].

People generally think there are four ways to pay for long-term care: Medicare; Medicaid, out of pocket, or private long-term care insurance. Those who are thinking of relying on Medicare or Medicaid to provide long-term care services need to be well informed about the advantages and limitations of these programs. Medicare may pay up to 100 days of care in a skilled nursing facility per benefit period- 100% for the first 20 days (after a three-day hospital stay, provided skilled care is needed). Then, for days 21-100, Medicare requires a co-payment.  Medicaid generally pays for certain health services and nursing home care for those with low incomes and limited resources [3].

Without private insurance or public program coverage, the high cost of long-term care is unaffordable for most Americans. According to Genworth Financial 2012 Cost of Care Study the average cost of a private room nursing home stay in 2012 was $82,125 per year in Virginia. The base rate for assisted living facilities averaged $41,775 per year in 2012, and adult day services averaged $55 per day in the Commonwealth. During the same period, hourly home care agency rates averaged $18 for a licensed home health aide [3].

The market for private Long-Term Care Insurance (LTCI) developed as an alternative to public program coverage (Medicare and Medicaid) or direct payments (self-insure) for services, but LTCI is underutilized. A 65 year old female has a 2.6% chance of a major house fire, 18% chance of a severe car accident, and/or a 72% chance of needing some kind of long term care in her lifetime. The majority of Americans do not think twice about purchasing auto and home insurance, but only 8 million Americans currently own Long-Term Care Insurance [4].

Facts about Traditional (Standard) Long-Term Care Insurance (LTCI)

Long-Term Care Insurance (LTCI) helps provide for the cost of long-term care beyond a predetermined period. LTCI covers care generally not covered by health insurance, Medicare, or Medicaid. Individuals who require long-term care are generally not sick in the traditional sense, but instead, have a severe cognitive impairment or are unable to perform at least 2 of the 6 basic activities of daily living (ADLs): eating, bathing, getting dressed, using the restroom, transferring – moving in and out of bed/chair, and continence- controlling ones bowel/bladder.

The American Association for Long-Term Care Insurance, 2012 LTCi Sourcebook, research found that over 8.2 million Americans are protected with long-term care insurance and 337,000 Americans applied and obtained long-term care insurance coverage in 2011. Three out of every four individuals that applied for LTCI in 2011 were between 45 and 65 years old with over half of them applying when they were 55 to 64 years old.

The LTCi Sourcebook also found that over 200,000 individuals received long-term care insurance benefits in 2011 with those claims being paid totaling over 6.6 billion.  89.6% of the new claims opened in 2011 were Americans over the age of 70 with 65.5% of them over 80 years old. In home care accounted for 56.5% of the new claims while nursing home care accounted for 31%, and assisted living claims accounted for 19%.

Are Long-Term Care Insurance Premiums Deductible?

In 2013, LTCI premiums are tax-deductible up to a certain amount that is determined by the insured attained age on December 31, 2013 using the following table:

$360: 40 years old or under
$680: 41 to 50 years old
$1,360: 51 to 60 years old
$3,640: 61 to 70 years old
$4,550: 71 years old or older

Current Landscape of the Long-Term Care Insurance Marketplace

As the senior citizen population grows so does the rapidly increasing need for long-term care; even with this increased demand in the marketplace to sell their products the companies that offer traditional LTCI are shrinking. Since 2010, insurance giants Unum and Met Life have pulled out of the marketplace entirely while Prudential has stopped offering policies to individuals and now they only sell group polices. There are roughly 15 insurance companies offering standard (traditional) long-term care insurance with the majority of the new policies being written by Genworth, John Hancock, MassMutual, Mutual of Omaha, New York Life, Northwestern Mutual, and Transamerica.

If you are considering buying Traditional (Standard) Long-Term Care Insurance, then the old saying “there is no time like the present” has never been more true.  Carriers are fleeing the marketplace and the companies that are still around are becoming more restrictive in their underwriting guidelines while raising premiums.  Out of the quotes I ran for the last couple years, Genworth Financial has typically been the least expensive of all the carriers for most Virginians. If you are considering buying LTCI and are a female or are less than 55 years old, then time is of the essence to take advantage of lower premiums with Genworth.  In mid to late April, Genworth is making changes to their product that will bring them in line with changes other carriers have already made. They are increasing prices for single females often by 50% to 80%, partly because of new gender-distinct pricing.  For couples and single males ages 35 to 55 their premiums will go up by as much as 18%. They will also be reducing the discount couples get for purchasing LTCI at the same time from 40% to 25%.

Americans typically purchase Long-Term Care Insurance not because they expect to need care; but because of the consequences to them and their family if they ever did need care. Having a plan in place for a long-term care event, with or without insurance, should be an essential part of everyone’s overall financial planning.

[1] Source: American Association for Long-Term Care Insurance- 2009 LTCi Sourcebook,
[2] [U.S. Department of Health and Human Services and U.S. Department of Labor - The future supply of long-term care workers in relation to the aging baby boom generation: Report to Congress. (Washington, DC)
[3] Source: Genworth Financial- Genworth 2012 Cost of Care Study
[4] Source: Source: American Association for Long-Term Care Insurance- 2011 LTCi Sourcebook. Need for long-term care based in being ADL Disabled or cognitively impaired.

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The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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