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Long Term Care – Paying for the Nursing Home

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following information on the paying for Long Term Care and incorporating it into your Estate Planning:

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There are misconceptions regarding Long Term Care and who is responsible for paying for any care. This information may be used for informational purposes only.  For more information, or to speak with an experienced Medicaid planning attorney, contact Dan Baron at Baron Law.

Medicare:

In Ohio, Medicare only pays for Long Term Care IF you require rehabilitative care or skilled services. Skilled services are:

    • If you are in a nursing home, the maximum number of days Medicare pays for is 100; however the average covered stay is much shorter at 22 days
    • If you are able to stay at your own home, Medicare pays for skilled home health care or other skilled in-home services but only for a short period of time
    • Medicare does not pay for any non-skilled assistance for your ADL’s (Activities of Daily Living) which tend to make up the majority of in home Long Term Care.
    • You are solely responsible for paying for Long Term Care services provided to you that would not be covered by any other public or private insurance programs. For additional information regarding Medicare, please visit https://www.medicare.gov/

 

Medicaid:

  • Pays for the largest portion of Long Term Care services, provided your income meets the states minimum eligibility requirements.
  • Medicaid will cover your costs depending on how much assistance you need with Activities of Daily Living.
  • There are numerous considerations when considering Medicaid and it’s important to talk with a Medicaid planning attorney.  To learn more about some considerations, visit this Medicaid Considerations Article.
  • There are other federal programs available for specific populations and circumstances that may pay for Long Term Care
    • Older Americans Act
    • Department of Veterans Affairs

Private Health Insurance

  • Employer sponsored or private health insurance, cover the same kinds of limited services as Medicare
  • If your carrier does cover Long Term Care, typically it will only be for skilled care but only short term

Other Private Payment Options can include

For more information on reviewing your goals for Long Term Care as part of your Estate Planning, contact Daniel A. Baron of Baron Law at 216-573-3723.

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When Should You Start Planning For Long Term Care?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on when you should start planning for Long Term Care and including this as part of your Estate Planning:

 

When should you start planning for Long Term Care? If you are under 50, the answer is – “there is no time like the present”.  Approximately 70% of today’s population will need some sort of Long Term Care sometime within their lifetime.

What you should know about planning for the future

When in later years and you are in need of skilled services or should you require rehabilitation services, Medicare pays for this type of long term care. Unfortunately, Medicare does not pay for any non-skilled assistance with your ADL’s (Activities of Daily Life) or IADL’s (Instrumental Activities of Daily Living) which tend to make up the majority of Long Term Care.

You should start thinking now about how you are going to pay for Long Term Care as it is much more expensive than you might think.

There are a number of ways you can use to pay for your long term care. Being 50 of under, this may be the best time in your life financially to start planning for long term care, rather than after you have had a serious illness or become disabled.

You may also consider securing an Advance Directive which informs your family and other loved ones how you would like your medical matters handles, should you become incapacitated and are no longer able to communicate your wishes of your medical care.

For more information on reviewing your goals for Long Term Care as part of your Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723.

Is Annuity-Based Long-Term Care Right for You?

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Annuity-Based Long-Term Care and the Pension Protection Act of 2006

Medicaid and long-term care are unquestionably a hot topic.  Estate planning and Medicaid planning attorneys have long been waiting for an opportunity that would allow those wishing to enroll in Medicaid to shelter all or a portion of their savings – legally!  Cleveland, Ohio estate planning attorney Dan Baron offers the following information on long-term care and how the Pension Protection Act of 2006 has created one of these sought after opportunities.

In 2006, the President signed into law The Pension Protection Act of 2006 (the “Act”).  The act changed certain tax laws and allows for those owning annuity contracts to take advantage of certain tax savings.  In sum, the Act allows the cash value of annuity contracts to be used to pay premiums on long-term care contracts.  The payment of premiums in this way will reduce the cost basis of the annuity contract.  In addition, the Act allow annuity contracts without long-term care riders to be exchanged for contracts with such a rider in a tax-free transfer under Section 1035 of the Internal Revenue Code of 1986, as amended (IRC).

Here’s an example of how the Act’s changes might benefit someone considering long-term care insurance.   Let’s say that Kathy, age 70, lives in Cleveland.  Her children live out of state but are concerned with a recent diagnosis of diabetes, along with a history of heart disease.   Because of these illnesses, she was not a good candidate for traditional long-term care insurance.  However, by taking advantage of an annuity based long-term care strategy that takes advantage of the Pension Protection Act, Kathy could likely be insured.

Look at the illustration below.  Kathy can take her $140,000 fixed annuity with a cost basis of only $40,000 (i.e. the amount she actually deposited) and using the tax-free exchange from his existing fixed annuity to a new annuity that complied with the Act’s rules, Kathy’s $140,000 fixed annuity could continue to earn interest.  However, if she needed long-term care to pay for home care, assisted living, or skilled care, she now had a long-term care pool of money equal to $420,000.

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  • Kathy retains her $140,000 in cash value plus an additional $280,000 for a total of $420,000 for long-term care.
  • Her benefits may be used for home care, assisted living, and skilled care.
  • She pays no annual premiums
  • As her annuity grows, so does her LTC. (assuming she does not use her LTC benefits)

There are many annuity based long-term care packages available.  It’s best to consult with an attorney or Medicaid specialist who can help you choose the right plan.  For more information, or to speak with Cleveland estate planning and Medicaid planning attorney Dan Baron, contact our office at Baron Law LLC.  Baron Law LLC is a Cleveland, Ohio law firm dedicated to helping those in need of elder care, estate planning, and Medicaid planning.  Contact attorney Dan Baron today at 216-276-4282.

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Medicaid Planning – Important Considerations When Choosing a Long-Term Care Plan

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Medicaid Planning – Important Considerations When Choosing a Long-Term Care Plan

It’s no surprise that Medicaid planning has been a widely discussed topic considering the overwhelming cost of nursing home care.  For example, the average daily cost of care in the Midwest is approximately $135 per-day.   In Ohio, this same care is around $203.00 per-day. Put another way, your long term care plan must account for $6090.00 per-month.

As an estate planning attorney, I’m often asked whether it’s worth purchasing long-term care insurance. Unfortunately, the answer is specific to each individual’s goals, needs, assets, and more.   However, there are several important considerations everyone should know.   Medicaid planning and elder law are key to estate planning.  At a minimum, those planning for their financial and physical health, should consider the following when choosing a long-term care plan.

Ratings

The financial ratings of a long-term care plan are important when considering purchasing the insurance.  Every company is different and each have different ratings.  The recommendation is to choose a company with an AM BEST rating of A+ or better.  In addition, the assets of the insurance company should be in the billions.  In essence, you want the insurance company to have a high rating and be financially sound.  For more information on ratings, visit:http://www.ambest.com/home/default.aspx

Discounts

There are a number of discounts available when considering your insurance plan.  Some long-term care insurers will allow for group discounts through employers.  Senior clubs and other organizations can also offer discounts from 5%-10% on long-term care.  In addition, some companies will actually allow for a 30%-50% discount when both spouses purchase long-term care.  Good health discounts may also be given when the applicant is in excellent health which range from 10%-15%.  It’s important to realize that not all companies permit these types of discounts and its best to consult with an estate planning or Medicaid planning attorney.   Moreover, each company has its own underwriting guidelines which may change the above mentioned averages.

Tax Considerations

There are several tax considerations when thinking about long-term care insurance.  At the federal level, premiums for long-term care insurance fall into the ‘medical expense’ category.  So, if the premium (or the premium plus other medical expense) is over 7.5% of the adjusted gross income, part of that premium is tax deductible.   Additionally, business owners can deduct the full cost of long-term care insurance protection for themselves and designate individuals, including spouses.

From a national perspective, 26 states offer  some form of deduction or tax credit for long-term care insurance premiums.  In Ohio, there is a deduction for polity premiums.  However, it is absolutely paramount to consult with a Medicaid planning attorney, tax advisor, or financial planner when making these tax considerations.  The tax laws change constantly and the it’s important to understand your options fully.

Tax Qualified Plans vs. Non-Tax Qualified Plans

There are two types of long-term care insurance plans: (1) Tax qualified plans and (2) Non-tax qualified plans.  Tax qualified plans follow the federal HIPAA law (Health Insurance Portability and Accountability Act).   Under this plan, the insured must need assistance with two of the six daily activities necessary for daily living.  These activities include:

  • Bathing
  • Dressing
  • Eating
  • Toileting
  • Continence
  • Transferring

In order to be eligible, the individual must need assistance for a period of 90 days or greater.   These criteria help protect consumers by designating long-term care for those who truly need it.  However, the benefits received are not considered taxable income.   Tax qualified plans are guaranteed renewable.  This means that your coverage can never be cancelled, as long as you pay your premiums.

Non-tax qualified plans allow the consumer to access benefits more quickly.   Here, the insured only needs to fall under one of the above mentioned activities of daily living.  If you speak with a Medicaid planning attorney, you’ll find that these plans are a bit more expensive than tax qualified plans.   (Side note: Cleveland, Ohio Medicaid planning attorneys have been in great debate on the pros and cons of each plan but sticking with a tax-qualified plan is currently my recommendation).

There are numerous other considerations to discuss with your estate planning or Medicaid Planning attorney when thinking about long-term care insurance.  For more information, or to speak with a Cleveland, Ohio Medicaid planning attorney, contact Dan Baron at Baron Law LLC.   Contact Dan at 216-573-3723 today to set up a free consultation.  Dan is a Cleveland, Ohio attorney practicing in the areas of estate planning, Medicaid planning, and business law.