As people grow older and begin to consider their long-term care needs, one of the main concerns that come to mind is the cost of the services. It is difficult to find a way to fund this long-term care without using up savings that may have been earmarked for things like retirement. One funding option to consider is long-term-care insurance, which can end up being more cost-efficient than paying for care privately.
Lucy M. Berkman, an estates, wills, and trusts attorney at Lipsitz Green Scime Cambria, spoke to the Buffalo Law Journal about the benefits and drawbacks of long-term-care insurance plans. The full story is available on the Buffalo Law Journal’s website.
Costs of long-term care continue to increase
According to the Buffalo Law Journal, the premiums for long-term-care insurance are going up, sometimes by 40 to 60 percent. This is a result of attempting to keep up with the price increases of the care itself. 10 to 15 years ago, nursing homes cost about $150 to $200 per day. Now, the Law Journal reports, that number is closer to $400 a day, or $12,000 per month. Bruce Reinoso of Magavern Magavern Grimm says that the insurance companies undersaved for this eventual price increase and must now manage the risk either by raising premiums or stopping sale of the policies altogether.
When deciding whether or not to pursue a long-term-care insurance policy, there are some factors to be taken into consideration. Instead of a policy, the Law Journal reports that many people often rely on family members and home care. However, issues may develop that put an individual in a position of needing something beyond home care, and the cost of that switch is very high. According to the Law Journal, often the only other option is Medicaid, which is available when an individual has a little over $14,000. Even if you have money saved up, it is easy to go through hundreds of thousands of dollars over the course of several years of care. Long-term-care insurance alleviates that stress, but premiums can be fairly high. Reinoso says that, despite the high premiums, a person does not get the same value for their money paying privately as they would through an insurance policy.
Benefits of insurance outweigh cost
When asked for her take, Ms. Berkman said that the affordability of an insurance policy depends on the individual’s income and assets, but that it is probably better to pay for insurance, despite the premium increases. She recommends using an investment account to pay for the policy. From that account, you may get a dividend which can be used as cash in hand to pay for premium increases. Ms. Berkman also told the Buffalo Law Journal that a good strategy is to closely examine the policy and decide if the policy-holder would just need the nursing home portion or the home care portion of coverage. With the current nursing home costs, Ms. Berkman says, it would only take a few years of long-term care before a premium paid over many years would cover the cost. “Just like anything else, it’s insurance and it’s kind of a hedge: you may or may not ever use it. So when you’re looking at the numbers, even with increased policy premiums here, if you do the math on it you’re still going to be better off at the end of the day (with it),” she says.
The State of New York has passed continuing care at home legislation, which calls for payment of a one-time life care premium instead of an annual long-term care premium. It is important not to wait until it is too late to purchase that insurance. Despite the difficulty of the conversation, Laurie Menzies of Pfalzgraf Beinhauer & Menzies says that you may want to take the time to speak with aging parents about a plan for future care.
About Lucy M. Berkman
Lucy M. Berkman is a member of Lipsitz Green Scime Cambria’s Estates, Wills, and Trusts department. She offers legal assistance to individuals, families, and corporations to help make the most of clients’ end-of-life wishes.
