Cost Effective Options of Paying for Long Term Care

Published by Mike Lovell on July 2, 2024July 2, 2024

Paying for Long Term Care

There’s several options to pay for Long Term Care.  The order I view them in is:

1. Traditional Long Term Care Insurance
2. Hybrid/combination Life/Long Term Care Insurance
3. Short Term Care Insurance
4. Self-Pay
5. Medicaid

There’s an article for each of these with more detail but here’s a quick overview.

Traditional Long Term Care Insurance

Pros

• Premiums can be low compared to how much coverage the policy provides
• Personalized – these can be highly customized to each person
• Possible tax advantages
• Potential State Partnership benefits relating to Medicaid qualification

Cons

• This is the strictest underwriting meaning this is the most difficult coverage to qualify for
• The “optimal” time to buy this is in your 50s. It can be expensive to buy if you are older.
• Premiums aren’t guaranteed for life. They can increase over time
• Use it or lose it type of insurance. If you don’t need care, the policy doesn’t pay out benefits

Hybrid Life/Long Term Care Insurance

Pros

• Premiums guaranteed to stay the same for life
• Can make 1 payment and policy is paid up for life
• Easier to qualify for compared to traditional long term care insurance
• Policy is guaranteed to pay long term care or a death benefit if you pass away without needing care

Cons

• No state partnership eligibility
• Premiums can be expensive

Short Term Care

Pros

• Lower premiums compared to the first 2 options
• Lenient underwriting means people are more likely to qualify for this coverage
• Fast application processing time. Some long-term care applications type a month or longer to get a decision. You normally have a decision on these applications within 2 business days

Cons

• No state partnership
• Use it or lose it type of insurance. If you don’t need care, the policy doesn’t pay out benefits
• Limits of care. Short Term Care has limits of coverage up to 360 days so the length of time is less than the first 2 options
• Premiums aren’t guaranteed for life

Self-Pay

Pros

• No applications or health reviews
• No premium payments

Cons

• Zero leverage. You are responsible for all payments
• Tax consequences depending on where you are taking the money to make the payments
• Do you have enough savings to self-pay or will you run out of money?

Medicaid

Pros

• It’s paid by the state

Cons

• You need to qualify for Medicaid by spending down your assets.
  • (Each state is different but here is Wisconsin for an example)
    • A single Nursing Home Medicaid application must meet the following criteria
      • Income under $2,829/month & Assets under $2,000 & Require a Nursing Home Level of Care
      • – Wisconsin Medicaid Qualification

What’s next?

Read more about the 3 different types of insurance which are:

• Traditional long term care insurance
• Hybrid Life/Long term care insurance
• Short Term Care Insurance
  There are several companies that offer this type of coverage. If you’d like to explore your options, give me a call a 608-571-4461, or click the link below to schedule time for us to talk.