Sunday, January 6, 2008
Minnesota's Long Term Care Partnership Program
Longer long-term care, Star Tribune, Dec. 8th, 2007
The Legislature has given Minnesotans an enticing incentive to sign up for long-term care insurance. The new program, called the "Minnesota Long Term Care Insurance Partnership Plan," will give some policyholders a great way to hold onto more of their assets if they ever require extensive long-term care.
Essentially, this new program allows potential Medicaid recipients to retain assets they would otherwise have to spend down or transfer, to the extent that their long term care insurance policy provides coverage.
The demographics of our society and increasing life expectancies dictate that our citizens and their government will soon be faced with enormous financial burdens as a large segment of our population will require long-term care.
However, Government programs and articles like this one may do as much harm as good.
Long Term Care insurance gives policyholders a great way to hold onto more of their assets if they ever require extensive long-term care no matter what the government will, won't, can or can't do in the future.
If you don't have long-term care insurance, and you meet certain maximum asset guidelines, Medicaid will step in to cover the cost of your care.
Even if that were true, at what point does Medicaid step in and with what form of care?
Confusion arises because consumers are not educated as to what constitutes a long term care event and what Medicare and Medicaid covers, and even if they are, it could change at any time as our country faces monumental financial burdens in the not so distant future.
Most claims made on long term care policies are not for care in a nursing home. Medicaid can not be expected to cover anything other than the most severe cases, i.e. nursing home care, in the future if at all. This creates a gap in care between where your policy or assets stop and when Medicaid may kick in.
Furthermore, from a good friend of mine who is a marketing executive for a long term care insurance company "Partnership policyholder income is not protected from Medicaid and must be paid toward the cost of care (in nursing home or elsewhere if other options exist) with Medicaid paying the difference. This could affect the lifestyle of the other family members depending on this income to maintain their lifestyle."
A long term care "event" occurs and long term care insurance kicks in when a patient is no longer able to perform two of six listed "Activities of Daily Living" (ADL's) or has severe cognitive impairment like Alzheimer's. These ADL's are eating, bathing, dressing, toileting, transferring, and continence.
As you can see, most ADL's have to do with mobility and as you might expect, a person qualifying for care may still live a great many years before needing an assisted living facility or traditional nursing home and yet the government will not step in, if at all, until that point and only if you have exhausted your liquid assets.
As such, there is a large gap between good health and mobility and a full-blown need for care in a facility or nursing home. Furthermore, statistically, care in the home occurs for a much longer period of time than care in a facility.
Statistics depicting the average nursing home stay at 2-3 years in length are misleading as it relates to the entire cost of long term care and the financial planning required to mitigate it. As it covers both in-home and facility-based care, this is where long term care insurance provides great value.
Again, from my colleague "The policyholder may spend his Partnership policy's coverage while still in the community. Since Medicaid pays little or nothing for care in the community, he/she might then be forced to invade principal or go into a nursing home."
Star Tribune: Long-term care insurance is most suitable for people with substantial assets to protect.
...or for those that prefer to receive care in their home and stay together as a family for as long as possible...or for those that choose not to rely on our government and have the means and the personal responsibility to do something about it.
If this new program results in more people buying long term care insurance, that is a good thing.
If it results in more people believing that our government will provide care if someone hasn't planned for their own care, that is a problem...it's not a great option now and certainly won't get any better.