Long-Term Care Myth Debunk - This is not what you think (Updated 2023)

Photo by Robert Murray on Unsplash

Author: Andrew Lee
About 1 minute read.

DISCLAIMER: This article is only for educational purposes and general information, and not for advertising nor soliciting Long-Term care products. Author also does not provide any tax nor legal advise. Always perform your own due-diligence and consult with a qualified insurance, tax and financial professionals, and evaluate for your own condition and situation for various financial products before taking any action or purchase.

The Myths for Long Term Care (LTC)

HSA cannot pay for LTC - It can. If you have a Health Savings Account (HSA), you could also consider using it to pay for your LTC policy premium for a LTC insurance.

Business cannot deduct LTC premium - ask your CPA, yes, you can.

I am too young or never need it - 70% over age 65 will need some form of LTC, and 37% of those receiving LTC are under the age of 65. Chronic illness, disability (e.g. car/work accidents, strokes), and cognitive impairment could also qualify for LTC when you couldn't perform 2 or 2+ of the Activities of Daily Living.

Chronic illness could lead to the need for long-term care,  but not the other way around. Chronic illness is NOT the same as Long-Term Care. Make sure you understand the difference when shopping around.

Health insurance covers it - Health Insurance does NOT cover LTC.

MediCal/Medicaid covers it - No.

Medicare covers it - Medicare does NOT cover LTC nor custodial care. You can see this on the Medicare webpage "Medicare doesn’t cover long-term care (also called custodial care)". Medicare Supplement Plan (aka Medigap) also does NOT cover LTC.

I can only use my LTC benefit in one state - No, you can buy it in one state and use it in another state. It doesn't have to be in your resident state.

I can only use my LTC benefit in USA - No, there are LTC policies that can use abroad in another country.

LTC benefit is use it or lose it - No, that is just one type of LTC. LTC policies can come with death benefit as well / surrender value / return on premium rider, traditional / hybrid / and more. Just ask.

LTC means I go to nursing home - Long-Term Care does NOT mean you go to a nursing home. There are different facilities for LTC. Check them out here. There is about ~50% of people receiving LTC at their home or an adult day care center instead of a (skilled) nursing home.

LTC is costly- Yes it is when you need it, but the LTC insurance is not. Checkout the 2 links for LTC cost references. Transamerica Cost of LTC by State or Genworth. By the way, the benefit payout is generally tax-free as oppose to you liquidating your assets that triggers taxable events to cover your LTC expense.

A personal note. Although, our love ones can assist you, but the emotion and burden that falls onto them when you need long-term care are enormous. Some may need to quit their job, or reduce work hours, or deal with an unchartered life style (sacrifice hobbies or sleeps), and most will need to liquidate assets/retirement funds/investments to cover the bills, etc. which will not only require the right timing, but also trigger a taxable event when you sell your stocks or properties to pay the bills.

What about insurance? LTC insurance has sunk cost (use it or lose it) just like your auto-insurance. However, some Life insurance policy provides LTC riders to cover LTC claims which is flexible, and some provides death benefits if you didn't use it. Further more, qualified insurance claim and benefits are usually not taxable which will keep your other investment flexible. It is hard to predict what could happen in the future, so a family financial planning to evaluate your own situation is always recommended. 

I hope this can spark a conversation for you with your love ones or yourself to have a conversation and think about your individual or family financial planning on this topic.

Every year's September is Life Insurance Awareness Month, although, LTC seems to be left out, however, producers do provide LTC rider on life insurance policy.

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References

Transamerica Cost of LTC - https://www.taltc.com/ARC/public/costofltc.jsf
Genworth - https://www.genworth.com/aging-and-you/finances/cost-of-care.html
U.S. Department of Health and Human Services LTC - https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
National Center for Health Statistics, Feb, 2019, Series 3 Number 43- https://www.cdc.gov/nchs/data/series/sr_03/sr03_43-508.pdf
NAIC Shoopers Guide to Long-Term Care - https://content.naic.org/sites/default/files/publication-ltc-lp-shoppers-guide-long-term.pdf
NAIC Need Help Navigating Long-Term Care? Tips and Tools - https://content.naic.org/consumer/long-term-care-insurance.htm