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Disclaimer: This website provides general information. It is not intended as a substitute for personal financial, legal or insurance advice.

Self Insuring

Self insuring means you accept the full financial risk of long-term care costs. Self insuring all of the risk is typically appropriate only for very high net worth individuals, whose estate and family would not be burdened by the potentially high costs of long-term care. Funds used to self insure long-term care cannot be devoted to other important financial goals without jeopardizing the long-term care plan. Likewise, without funds set aside for long-term care, the rest of the retirement plan is in jeopardy of being diverted for long-term care. Be sure you've considered all the tradeoffs. For instance, many high net worth people puchase long-term care insurance so they won't have to liquidate assets at an inopportune time, often creating a taxable event as well.

MYTH: Those with over $1,000,000 don't need long-term care insurance.

FACT: It depends on their financial priorities and goals, especially when the projected cost of care in 2031 is expected to average $250,000 a year.1

Long-Term Care Insurance

Long-term care insurance allows you to transfer some or all of the financial risk of long-term care costs to an insurance company. This allows you to commit your assets to other important goals (such as retirement for a surviving spouse or leaving an estate to heirs), and it protects your family from being burdened by providing your care. Many planners conclude that self-insuring some of their long-term care risk, while transferring the remaining risk to an insurance company, is the most cost-effective and prudent path.

MYTH: Long-term care insurance is fraught with dangers.

FACT: While some early policies contained severe restrictions and saw onerous premium increases, 1996 HIPAA rules enhanced consumer protection and rate stabilization. In addition, Wisconsin (among other states) adopted the 2000 National Association of Insurance Commissioners "Long-Term Care Insurance Model Act and Model Regulation." While no one can provide a guarantee that rates won't go up, this Act provides a number of disincentives for companies to raise rates or to price policies unrealistically low. A specialist will help you get customized protection from top companies that have not raised rates on existing policy holders.

Medicaid

Medicaid has a place for some in long-term care planning, but it is inadequate to provide for most people's needs and wants. That's true today, but it may be even more true in the future. Medicaid faces enormous financing issues as the population ages. While the quality of care provided through Medicaid is already compromised by inadequate reimbursement to care providers, the huge wave of aging baby boomers will stretch the system further. If Medicaid is the right course of action for you for financial reasons, be sure to consult an experienced elder law attorney to ensure your Medicaid planning does not cause needless adverse financial consequences.

MYTH: Medicaid Planning is never appropriate and attorneys who provide such advice are criminals.

FACT: Medicaid Planning can implement important financial safeguards in unique situations (such as protecting the financial needs of a disabled dependent) that are entirely unrelated to protecting an estate for one's children. Advice given by good Medicaid Planners is legal.

Veterans Benefits

Use caution when relying on the VA to cover long-term care costs. Only about 34,000 of 235,000 veterans who needed long-term care received long-term care services through the VA.² That's because VA custodial care is primarily reserved for veterans who have significant service-related disabilities. Out of 139 VA facilities, 126 offered limited or no long-term care services.³ Sadly, the Veterans' Millenium Health Care and Benefits Act requiring the VA to provide long-term care is not implemented due to severe funding restrictions.⁴ That's why the government is promoting long-term care insurance among veterans. See the VA's directive on eligibility for nursing home care.

1. Lankford, Kimberly, "A Fresh Look at Long-Term Care," Kiplinger's. May 2006.

2. VA Health Care: Better Data Needed to Effectively Use Limited Nursing Home Resources, General Accounting Office, HRD-97-27, 1996.

3. VA Long-Term Care: Service Gaps and Facility Restrictions Limit Veteran's Access to Non-Institutional Care, General Accounting Office May 9, 2003.

4. VA Long-Term Care: Service Gaps and Facility Restrictions Limit Veteran's Access to Non-Institutional Care, General Accounting Office May 9, 2003.

Copyright © Martha H. Bowes, 2005, 2006, 2007