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If The Governor Says It's Good...

January 30th, 2012 at 09:38 pm

Rarely does an insurance product receive an endorsement from the Governorís office, but itís happening in Indiana.

A letter from Governor Mitch Daniels has been going out to Hoosiers for the past two years, encouraging residents to consider long-term care insurance. No, the Governor isnít moonlighting as an insurance agent. He does have a vested interest, however, because nearly half of Medicaid payments come from state funds. Medicaid takes over when people run out of money and still require care. This scenario plays out far too often for nursing home residents since a nursing home stay can cost $65,000 or more per year, quickly wiping out the finances of many people. From the Governorís point of view, the more that people invest in long-term care insurance, the less likely they will require Medicaid.

Indiana added to this incentive nearly 20 years ago with the Indiana Long-Term Care Partnership. By purchasing long-term care insurance through the Partnership, residents protect assets so that Medicaid cannot take them away. Letís take a 65-year-old couple in good health. They buy a three-year policy that pays out $200 per day, which is approximately the daily cost of nursing home care. They are covered for up to $73,000 in long-term care expenses ($200 x 365 days) for each of three years. Money left over after three years can be used for long-term care until it is gone. They would spend about $585 per month to pay for the insurance, which is worth a total of $220,000 (three years x $200 per day). Under the Indiana Long-Term Care Partnership, for every dollar they spend from insurance, they keep that much in assets. So if they spend the entire $220,000 in the insurance policy, their future long-term care expenses will be covered by Medicaid once the value of their assets such as cash, savings, stocks, bonds, CDs, cash value of life insurance, even a second home, drops to $220,000. Other states have similar Partnership plans. Indiana is unique because if residents buy a Partnership policy worth a certain amount (in 2012 itís $277,000) and receive care in Indiana, they could qualify to keep all of their assets.

The younger you buy, the lower your premiumsómakes sense since youíre paying those premiums for a longer
time. Plus, putting off the purchase risks that your health may deteriorate and you become uninsurable. A 60-year-old couple that buys the same policy (three years, $200 per day) would pay approximately $420 per month, a lower amount because they are five years younger than the example above. A 60-year-old woman would pay about $275 per month.

OK, we know that long-term care insurance is a good deal for Governors who must balance a budget. Is it good for their citizens? For those with total assets under $200,000 or over $2 million, probably not. The insurance is too expensive for those in the former group, and not necessary for the latter since they can self-insure. For the rest of us, itís worth a look. Cost has scared away people in the past, but todayís policies cover in-home care, which is less expensive than nursing home care. Plus, no one wants to be shipped off to a nursing home if they can stay in their own home. Keep in mind, however, that many people purchased LTC insurance while they were working, then surrendered the policy when they couldnít afford the premiums with their reduced income during retirement.

A primary advantage to long-term care insurance is protecting assets for heirs, but there are even better reasons to consider LTC protection. Insurance can provide the money necessary to give you a wider choice of assisted living facilities or nursing homes, and keep you there. In Evansville, several popular facilities may not accept or keep Medicaid patients.

Insurance can also relieve the burden on loved ones. Everyone would like to stay at home for as long as possible, but that often means extra work for daughters and sons. Insurance can bring professional health aides into the home and alleviate the demands on children who still have their own lives to manage.
Many people purchase policies that pay only a portion of the daily in-home care or nursing home bill, but thereís nothing wrong with that. The insurance allows them to keep enough assets so they can supplement the policy, if necessary, with their own funds.

Like many complicated insurance products, this one requires another set of eyes to make sure you receive the right coverage. Second opinions from local health care organizations, senior citizen advocacy groups or your own doctor can help you decide if you are purchasing valuable protection, or an expensive product that you might drop right before you need it.

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