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Long-Term Care Insurance

Long-term care insurance is among the most misunderstood and underutilized tools in modern asset protection planning. The national average monthly cost of a nursing home facility is $5,687 a month [1] or $68,255 annually. Without adequate insurance, these costs can rapidly deplete a lifetime’s worth of planning and saving, exposing spouses and children to substantial financial hardship.

Most private health insurance and HMOs offer either very limited or no coverage for long term care costs. Medicare only covers approved charges in excess of $92 per day for a maximum of 100 days. Medi-Cal pays only 12% of all nursing home costs for short-term skilled nursing after hospitalization.[2] Additionally, in order to be eligible for Medi-Cal, you must first meet a strict range of federal and state guidelines regarding your assets and income. For many, this means spending most of their own money to cover long term care costs until their resources are sufficiently depleted to fall within these guidelines. Once dependent on Medicare or Medi-Cal, only approved charges at approved care facilities are covered, substantially limiting the scope and quality of care available. Approved facilities and charges are subject to change and are ultimately dependent upon the willingness and ability of the government to fund them.

A 2009 study published in the American Journal of Medicine found that 62% of all bankruptcies filed in 2007 had a medical cause. [3] Most medical debtors were found to be well educated, owned homes, and had middle class occupations. Three quarters had health insurance.

Does your asset protection plan sufficiently address this potential risk to your family’s financial well-being? Have your parents or other loved ones planned sufficiently?

Long-term care insurance is surprisingly affordable, and can be tailored to provide the level of protection that makes the most sense for you and your family. The premiums are even tax deductible in certain situations. As with other types of insurance, you (or your parents) should consider purchasing coverage before age, disease, or incapacity increase the cost of obtaining coverage or eliminate the possibility altogether.

[1] What Does Long-Term Care Cost? U.S. Department of Health and Human Services, April 2009,http://www.longtermcare.gov/LTC/Main_Site/Paying_LTC/Costs_of_Care/Costs_of_Care.asx Nursing Home care costs are based on a semi-private room at $187/day, 7 days per week

[2]A Guide to Long-Term Care, 2004, America’s Health Insurance Plans

[3] Himmelstein, David, Warren, Elizabeth, Thorne, Deborah and Woolhandler, Steffie (2009), “Medical Bankruptcy in the United States, 2007: Results of a National Study”, The American Journal of Medicine, available at: http://pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf