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Do You Really Need Planning for Long-term Care?

By Deborah Jeanne Sergeant

About 70% of people aged 65 today will need some type of long-term care in the future, according to the Administration on Aging, part of the US Department of Health & Human Services.

A Place For Mom, a senior care referral company headquartered in Seattle, states on its website that the average length of residency in a long-term care facility is 3.2 years, and more than 20% of residents will need more than 5 years of care.

Currently, Medicaid covers only 54% of the nation’s long-term care costs. The rest requires private resources or long-term care benefits.

Care provided in nursing homes is much more costly than home-based care. Receiving care at home can help insurance funding and self-funding of long-term care go further. Most people prefer home health so they can remain in their homes. However, the industry lacks workers.

“There is a definite gap in home healthcare in Central New York,” said Jeffrey Hopp, bachelor’s trained nurse and director of patient services at Oswego Health Home Care. “This is not a new shortage and is worsening.”

The scarcity of workers played a part in driving home health companies out of business. Hopp said that Onondaga County lost two certified home health agencies recently, just as the pandemic increased the need for services at home.

Hopp hopes that greater advocacy within the industry will spur legislators to increase reimbursement, which can help homecare agencies increase payrates and attract more workers to their companies.

Most insurance companies have phased out their long-term care policies. They’re costly to pay out and many policyholders will use the benefits. But you do have options for funding long-term care.

Sara E. Davis, Attorney at Law, PC in Oswego. “The options [for long-term care] are very complex, but I try to educate my clients that even if you choose to not do any pre-planning, know that if you end up in a nursing home, it’s imperative you speak with a Medicaid attorney so you can save your assets.”

Sara E. Davis, Attorney at Law, PC in Oswego, said that many long-term care insurance plans “have had difficulties. If it’s been in place a decade or more, many of the premiums have quadrupled and many of the benefits have been slashed. A lot of people built their long-term planning around policies they assumed would be viable for them. There are different policies that financial advisers can recommend. We look at what products will work.”

Overall, she recommends preplanning rather than “emergency” planning. The latter limits the options available.

“A big mistake is when their loved one goes into a nursing home and they just pay the bill until they’re down to the Medicaid resource level,” Davis said. “The options are very complex, but I try to educate my clients that even if you choose to not do any pre-planning, know that if you end up in a nursing home, it’s imperative you speak with a Medicaid attorney so you can save your assets.”

A few financial tools can help the “community spouse”—the one not in a nursing home or receiving long-term care at home — retain assets.

“I can’t tell you how many clients come in for legal advice after their loved one has been in the nursing home for months and they have paid the bill until they are down to the Medicaid resource level,” Davis said. “It breaks my heart because had they come in when the loved one went into the nursing home, they could have saved some of their assets.”

Vicki R. Brackens, chartered financial consultant and president and financial planner at Brackens Financial Solutions Network, LLC in Syracuse

For those who plan early enough, long-term care insurance can help. Vicki R. Brackens, chartered financial consultant and president and financial planner at Brackens Financial Solutions Network, LLC in Syracuse, said that hybrid life insurance contracts now available offer provisions and riders that “convert the face amount of the contract into a pool of money available for indemnification of services provided based on qualifying activities of daily living categories.”

Although somewhat complicated, the plans allow policyholders to tap into the death benefit while still living to cover long-term care needs. But be ready to dig deeply to cover a plan like this.

Brackens said these plans work best for people who still need life insurance but are planning to supplement the cost of their long-term care.

“If you do not use it, the death benefit is still there to handle your estate planning,” Brackens said. “The contract will be used one way or the other, which is not something under traditional long-term care policies unless you had a death benefit rider.

“It requires that you work heavily with your financial consultants, so you have a contract that satisfies both needs. It does require underwriting like any insurance contract, but several major carriers offer that hybrid structure. It’s not a term contract. It does not qualify as New York state tax deduction because it’s not a classic long-term care policy.”

Arranging for family members to provide care initially at least can also help. For example, living with an adult grandchild may be all you need for a number of years until your needs increase and you need medical assistance. Discussing the terms of the care in advance can help make decisions that your family feels good about.

When considering long-term care needs, it is best to discuss funding them with a financial adviser who knows your situation.