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Published: Jun 28th, 2017

Long-Term Care Insurance Has Positive Impact on Families & Assets

Long-Term Care Insurance Has Positive Impact on Families
Article Updated:January 22nd, 2020

Long-Term Care Insurance has had—and will continue to have—a positive impact on hundreds of thousands of policyholders and their families. The positive impact of Long-Term Care Insurance is already leading to reductions in public expenditures on long-term care services and supports.

The benefits of Long-Term Care Insurance are outlined in a study funded by AHIP, America's Health Insurance Plans,  a national political advocacy and trade association.

Over $11 Billion Paid by LTC Insurance in 2019

More Americans are looking to protect their future retirement income and savings from the financial costs of long-term care. The results of the study show these plans are doing precisely that. The nation's long-term care insurance companies paid $11 Billion in claim benefits in 2019 according to the American Association for Long-Term Care Insurance (AALTCI), a national consumer education and advocacy group. But what is the impact?

The study shows that American's who have a Long-Term Care Insurance policy has a substantial amount of services paid by the insurance. The caregiving services being paid for by Long-Term Care Insurance would otherwise be paid from their own savings and income or be provided by family caregivers.  Much of this care is care at home, which most people prefer. 

The problem of long-term care has become near a national crisis as America ages. With more Americans living a longer life with advances in medical science, the consequences result in an increased risk of needing extended care.

 "The amazing statistic -- and it is still one that's hard for me to get my arms around -- is that 70 percent of people over the age of 65 will need care of some kind, whether in their home or in institutions before the end of their life."

Tom Daschle, former Democratic Senate Majority Leader

With the risk of needing long-term care high, the financial costs and burdens of aging impact the American family in a significant way as often the default caregiver, in the absence of any advance plan, is a daughter or daughter-in-law.

Quality Care and Asset Protection

This is where Long-Term Care Insurance has become a considerable value. The study shows people with a Long-Term Care policy pay much less out of pocket expenses than those who do not. Since policyholders receive benefits to cover care costs, they pay much less out of their own pockets than those without insurance.  

When you own a Long-Term Care Insurance policy, the amount of money drained from your family’s retirement savings is reduced tremendously.  The policy is protecting assets and promoting the lifestyle of the other spouse. Even a small policy would provide asset protection, not to mention a reduction of burden on the family.

The study also says that Long-Term Care insurance offers benefits that are not strictly monetary. Insureds may be better able to obtain care in the setting of their choice, including their own homes. Many people think that Long-Term Care Insurance pays for only nursing homes. Not true. Most policies provide benefits for all types of care at home plus benefits for adult daycare centers, assisted living facilities, memory care facilities, as well as a traditional nursing home.

Perhaps one of the most significant benefits reported by the study was the fact that LTC policyholders received more care than they would have if they were paying for care with their own money.

"With LTC insurance benefits, policyholders can afford more care; those without insurance may be forced to rely more on family caregivers or simply make do with less care than they really need. We set out to ascertain whether those with insurance, in fact, receive more hours of care than those without. We looked at data from a population of people with insurance who had an impairment (an inability to perform at least two activities of daily living (ADLs) or a cognitive condition) who were receiving home care. For data on non-insured persons with similar levels of impairment."

National Health and Aging Trends Study (NHATS)

Those with LTC Insurance Get More Care

The study shows insured individuals receive substantially more hours of care (35 percent more) than the uninsured.  The insured receives almost twice as much paid care, but only 10 percent less unpaid care. This suggests family members can spend more time with companionship and less time with help with activities of daily living. When you receive benefits from a Long-Term Care policy, it places less stress on loved ones and perhaps provides a better quality of care than that provided by an unpaid family member.

Long-Term Care Insurance is very useful in paying or a majority of the costs associated with extended care. An LTC policy safeguards a more significant portion of a policyholder’s assets for either lifestyle needs for them and spouse or partner or for inheritance purposes as opposed to spending own their savings.  

The study does not talk about the federal/state Long-Term Care Partnership Program. Forty-five states currently have active partnership programs in place. This program provides additional dollar-for-dollar asset protection in the event a person exhausts their benefits in a qualified partnership LTC policy. You can learn more about Partnership Long-Term Care Insurance by clicking here.  

“We have said the Partnership Long-Term Care program was the best-kept secret because it was created to provide middle-income individuals with a special incentive to purchase coverage.” 

Jesse Slome, the executive director of the AALTCI

Partnership PoliciesOffer Dollar-for-Dollar Asset Protection

The 45 states that have partnership plans in place offer these unique policies which provide dollar-for-dollar asset protection. This is known as “asset disregard,” allowing a family to keep assets in an equal amount of the total of all benefits paid by their LTC insurance policy and still qualify for Medicaid long-term care benefits. Most states require a spend-down to $2000 in assets to be eligible for Medicaid long-term care benefits. Even a small policy can provide outstanding asset protection.

The National Association of Insurance Commissioners (NAIC) “State of Long-Term Care Insurance” report in May 2016, suggested expanding the support and promotion of these Partnership Programs between state Medicaid programs and the private Long-Term Care Insurance.

Tax Benefits

The report also called for more tax incentives for the purchase of Long-Term Care Insurance policies. Some states already have a deduction or credit in place, and federal law allows some people and businesses to deduct the cost of long-term care insurance premiums.

President Trump’s administration has talked about several ways to help people purchase Long-Term Care Insurance, including an above-the-line tax deduction for both health insurance premiums and Long-Term Care Insurance. The administration has also indicated they want to expand Health Savings Accounts, which already can be used to pay for LTC Insurance using pre-tax money.

Several Democrat candidates for President have also mentioned additional tax benefits for both Long-Term Care Insurance and the cost of caregivers, including Sen. Amy Klobuchar (D-MN), who has outlined several proposals. Former Vice President Joe Biden and Mayor Pete Buttigieg have proposals which many experts suggest could be workable.