At one point 20+ candidates were seeking the Democrat nomination to face President Trump in November. The issue of long-term care had captured the attention of candidates and voters alike. This attention has gained ground as a result of the COVID-19 pandemic. The virus crisis and the resulting market downturn illustrates the need for long-term care planning.
Currently, health insurance, including Medicare, pays only a limited amount of skilled long-term care services and nothing toward “custodial” care which is what most people end up needing at some point. People require long-term care due to illness, accident, or the impact of aging. The risk of needing care increases dramatically with age. The U.S. Department of Health and Human Services says if you reach age 65 you have a seven in ten chance of needing some long-term care service, including supervision due to cognitive decline.
Two Government Plans Today – Medicaid and LTC Partnership Program
Medicaid will pay for long-term care services, including custodial care, but only if you have little or no assets and income. The Long-Term Care Partnership Program, which currently 45 states participate in, provides dollar-for-dollar asset protection if you own a qualified Long-Term Care Insurance policy. This is a safety-net program that allows the person to qualify for Medicaid without exhausting all their assets. They can shelter part of their estate based on the total amount of benefits paid by the policy and still qualify for the Medicaid long-term care benefit.
Much of the attention was focused on the so-called “Medicare-for-All” that Sen. Bernie Sanders has spearheaded in his campaign. This proposal was also embraced by Sen. Elizabeth Warren and Andrew Yang. Those proposals, which many on the Democrat side will still support, would eliminate private insurance and would include benefits for long-term care. While many argue the cost of this program would make it impossible to implement even with large tax increases, they claim it is the only way to provide adequate health care for all Americans.
Klobuchar’s Long-Term Care Insurance Credit
However, Sen Amy Klobuchar, as a potential Vice Presidential candidate, may have influence on the policy plans of former Vice President Joe Biden. She had supported a program for those who are now in need of care or future care, as well as for those who wish to plan for their future care. She supported a tax credit for caregivers and private Long-Term Care Insurance. The tax credit can assist in paying for long-term care services and supports either at home or in a facility. It could also be used to pay for assistive technologies, respite care and required home modifications. She would pay for this credit with a new tax on certain types of investments. Klobuchar’s Long-Term Care Insurance tax credit would be equal to 20% of the total premium which can make premiums even more affordable.
Joe Biden and Long-Term Care
Former Vice President Joe Biden, now the presumptive Democratic presidential nominee, is talking about long-term care issues. Biden's plan includes tax relief to help solve the long-term care challenge. The plan provides tax benefits for those who purchase long-term care insurance as well as supporting caregivers who are providing care for family members.
He wants to create a $5,000 tax credit for informal caregivers, modeled off of legislation supported by AARP. Informal caregivers – whether family members or other loved ones – provide much of the long-term care in the home.
The former Vice President says he will increase the generosity of tax benefits for people who choose to buy Long-Term Care Insurance and the ability to access qualified retirement accounts to pay for the premium.
President Trump – Tax Incentives for LTC Insurance – Expanded HSA
Meanwhile, President Trump had supported a tax credit for all health insurance as part of his tax plan, including Long-Term Care Insurance. However, the tax plan which was passed by Congress did not include that option.
The President also supports an expansion of Health Savings Accounts. These pre-tax – tax-deferred accounts can be used for all types of health-related expenses including Long-Term Care Insurance. An expansion would allow more people to have these accounts and add more money than what is currently allowed.
The administration is looking into ways to increase the private Long-Term Care Insurance market. This would include additional tax incentives for Long-Term Care Insurance. At the moment, Long-Term Care Insurance premiums can only be deductible if you itemize (part of overall medical expenses), you are self-employed, or as a business expense for S Corporations, C Corporations, LLCs and other limited partnerships.
In March, speaking at the 19th Annual Intercompany Long-Term Care Insurance (ILTCI) Conference, several political insiders specializing in healthcare, from both sides of the aisle, agreed that a complete healthcare reform like Medicare-for-All would never be passed by Congress.
With long-term care, many people are in denial about their future need for long-term care. Yet, many American families are personally dealing with a parent or other family member who is receiving extended care services. Longevity will increase this risk in the decades to come.
LTC Insurance is Affordable for Many Americans
Some people assume Long-Term Care Insurance is expensive. However, as more people purchase plans before retirement, in their 40s and 50s, they are finding these policies are very affordable. Additional tax benefits will help make the costs even more affordable for more American families.
Premiums today are also rate-stable as many states have rate stability rules in place (click here to find your state). In addition, single premium products exist with death benefits in the event you never require care. While campaigns will come and go, the need to plan for the financial costs and burdens of aging remains a major part of retirement planning that needs to be addressed.
There are several types of policies to choose from. No matter which type of plan you purchase, Long-Term Care Insurance is easy, affordable and rate stable income and asset protection. Many people can take advantage of tax incentives that are available today. These policies are custom designed but be cautious since premiums can vary over 100% between companies for the exact same coverage. This is why you should seek the help of a qualified Long-Term Care Insurance specialist. Find a specialist by clicking here.
Items to Discuss with a Long-Term Care Specialist
- Partnership – Most states offer special policies that provide dollar-for-dollar asset protection. The Long-Term Care Insurance Partnership Program might be one of the best-kept secrets in retirement planning. Make sure the specialist explains this program and how it might help you.
- Tax incentives – There are federal tax incentives available for some people. If you own your own business be sure to ask.
- Health Savings Accounts – If you have an HSA you can use the pre-tax money in your account to pay for the premium.
- Asset-Based or Hybrid policies – These are life insurance or annuities with a rider for long-term care. Careful, only a handful are actually a long-term care benefit. However, one of these policies can provide you with the flexibility of both a long-term care benefit or a death benefit. They are expensive but can be paid with a single premium.
- Health and Family History - Make sure the specialist asks you detailed questions about your health, family history, and retirement plans. Underwritingcriteria varies with each insurance company. If they are not asking you detailed questions then find another specialist.
Long-Term Care Cost Calculator
Take a moment and find the current and future costs of long-term care in the area you live in. This will help you decide the amount of coverage is appropriate for you in your situation. For example, if you have a defined pension when you retire the amount of benefits you would need for long-term care would be less than an individual who will fund their future retirement with earnings off investments. In that case, protecting the principal is essential since that will produce your future income.
Find your state and use the LTC News cost of care calculator by clicking here.
It is always best to start planning before you retire. Once you have your plan in place you will enjoy peace-of-mind and your family will thank you decades from now.
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