The last thing anyone wants after years of saving for retirement is to see all that hard-earned money whittled away by medical costs for ongoing assistance, particular when personal help is required. Both nurses and medical assistant services are expensive, even if just part-time, and these costs can quickly eat away at bank accounts that took years to build up.
What is Long Term Care Insurance?
Long term care insurance is designed to avoid the financial hit medical costs can incur on your retirement, particularly when involving hospitals stays or assistance needs at home. Long term care insurance is designed to pick up those expenses not normally covered by traditional plans such as HMO policies or Medicare. These include normal living functions such as personal hygiene, movement assistance, special medical diet, and monitoring at home. Even when using basic living assistant labor, the aggregate monthly charge can be quite expensive, making the insurance a significant benefit once it is in place.
Long Term Care Insurance Costs and Price Determination
Determining factors for eligibility don’t depend so much on a policy-holder’s age; instead, the cost calculations focus on a person’s health. If one’s health is already poor, a new plan will likely be far more expensive than for someone who has already been paying in when healthy. Many policyholders originally start their plan through their employment as an added job benefit, and then continue to the policy into retirement via monthly premiums.
The Medicare Doughnut Hole Impact of Long Term Care Insurance
For seniors, long term care provides an additional safety net that may not be covered by Medicare. While Medicare Part A and B provide for in-hospital services as well as outpatient services, it doesn’t necessarily address all the expense of ongoing home care for ailing seniors. Particularly when a person’s health expenses for drugs reach enough to go into the doughnut hole ($2,840 in 2011), the financial window between what Medicare covers for basic drug needs and catastrophic coverage where Medicare picks the tab up again (after spending a total of $4,550 out of pocket in 2011). Many seniors can find themselves seriously pinched by required drug charges half of a year. This unexpected financial hit eats away at money that could be otherwise used for medical assistance at home. Long term care can provide a safety net and buffer, reducing the cost of in-home care and making funds leftover from Medicare’s drug coverage gap last longer.
Choosing a Long Term Care Insurance Plan
Choosing long term care insurance plan can be a bit tricky. As a result, it’s a good idea to work with a health insurance adviser who is skilled and knowledgeable particularly about the long term care offerings. While some plans may make great coverage promises, the numbers may not work out for a person’s particular situation. In other cases an advertised offering may not be long term care insurance at all. Using a skilled adviser can avoid some of these pitfalls when seeking an appropriate coverage plan.
Tax Ramifications of Long Term Care Insurance
Depending on your financial situation, the premiums associated with a long term care insurance plan may be tax deductible on your annual tax return. It qualifies as a medical insurance and health cost, so it could be added to your annual medical costs if you itemize deductions on your tax return (this benefit doesn’t apply if you claim the standard deduction instead). If your annual medical costs in total reach above 10% of your earnings, the difference can reduce your tax liability for the year. It’s best to check with a certified tax adviser to be sure for your particular case.