As I always explain to people, there are 3 ways to pay for long term care. One way is to use your own money. A second source is long term care insurance and the third is government benefits – primarily Medicaid and the VA Aid and Attendance program.
I have written much in this blog about government benefits, especially Medicaid. Because long term care is so expensive and so many people run out of money, Medicaid, as a last resort, must always be considered.
But, the economy is still struggling and tax revenues, which provide the funding for Medicaid, are down. State and Federal governments are looking for ways to cut costs and Medicaid is likely to continue to be a target. The VA Aid and Attendance benefit, which has been a help but not a total solution by itself, is also likely to be more restrictive. And, of course, it has never been an option for the non-Veteran senior population. As we see fewer World War II veterans, there are fewer Korean veterans behind them, and still fewer Vietnam veterans coming behind them.
Long term care insurance is an important piece as well but, unfortunately, we find that many people don’t have it and when they do seriously consider purchasing the insurance – as they start to see that maybe they just might need long term care – it’s too late. They are too old and ill to pass inurance underwriting requirements.
What we have also seen, and which I have written about in the past, is the change occurring as a result of an aging population and poor forecasting by the insurance industry. Many companies have dropped out of the long term care market entirely. Others have presented their policyholders with large premium increases with the promise of more to follow each year. Seniors are faced with the choice of paying the increases or cutting their coverage.
So, what other options are there? Let’s go back to the first way to pay for care – self funding or using your own money. We see so many seniors who fall into one of two categories. Some have their savings heavily invested in the stock market and other investments that are too risky for someone who could need large chunks of principal to pay for long term care. If the market drop by 25% or more as it did 5 years ago, many seniors won’t have the ability to hold on till their investments recover.
Others have gone the other way and put their savings in bank accounts and CDs that earn less than 1%. The principal is safe but they are getting a next to nothing rate of return. Coupled with Social Security and small pensions, most seniors today have income in the $2000 to $4000 per month range, not enough to meet their monthly expenses without dipping into principal.
So, is there are another way? The answer is yes. With asset based long term care products, there is a way to self fund the cost of long term care and have something left for your spouse, children and loved ones. I’ll tell you more about it in next week’s blog so be sure to tune in.