States May 'Tax' You if You Don't Have LTC Insurance.

With 78 million people are expected to develop dementia by 2030 worldwide. In the United States, more than 7 million people aged 65 or older had dementia in 2020. Now, some U.S. states are considering taxing you if you don't own a Long-Term Care Insurance policy. One state, Washington, has already done so, with others readying their legislation. 

Medicaid is the primary payer for long-term care services in the U.S., but it requires the care recipient to have little or no income and assets to qualify. This joint federal and state program puts considerable financial pressure on the states, which are primarily responsible for funding the program. Many states are looking for additional revenue to cover these expenses as more people need long-term health care.

There may be nothing that robs a person's humanity more than dementia. Dementia is one of many reasons why people need long-term health care services. People with dementia experience short and long-term memory loss. Plus, people with dementia experience changes in thinking, reasoning, behavior, and mobility difficulties. Your loved one may look like the person you knew for a long time, but they no longer are that same person. Over decades of a lifetime, the memories we all form start to erase away. 

The World Health Organization (WHO) reports that about 55 million people live with dementia today. Aging and longevity will increase this number in the decades ahead. WHO expects by the year 2030, there will be 78 million who will have dementia; by the year 2050, the number should reach 139 million people worldwide. 

People need long-term health care due to declining health, illnesses, accidents, mobility problems, and general aging and frailty. The costs of care services are rising rapidly nationwide, putting financial pressure on American families. 

Nursing homes are already costing over $100,000 a year, according to information available on the LTC NEWS Cost of Care Calculator. Most long-term care services are provided outside of nursing homes. There are quality care options for those with Alzheimer's and other types of dementia in memory care units in assisted living facilities and nursing homes. Some in-home care providers have experience with memory care. 

With the growing demand for long-term health care, Washington State is taxing people who don't have a qualified Long-Term Care Insurance policy starting in July of 2023. Your state may be next.

Elderly Not Only Ones Struck by Dementia 

Aging is the most significant known risk factor for dementia; however, WHO says it is not an inevitable consequence of biological aging. In addition, age is not the only factor in dementia risk. Young-onset dementia (symptoms before the age of 65 years) accounts for up to 10% of cases. 

For example, Frontotemporal dementia (FTD) often hits individuals in the prime of their lives. FTD often changes behavior in a way they no longer act like the person you once knew - FTD – Robbing Those Under 60 of Their Very Essence.

The Alzheimer's Association says dementia is a broad term used to describe a person's decline in mental ability severe enough to interfere with daily life. Alzheimer's is the most common cause of dementia.

Tedros Adhanom Ghebreyesus, the WHO director-general, says there should be concerted action to ensure that all people with dementia can live with the support and dignity they deserve.

Dementia robs millions of people of their memories, independence, and dignity, but it also robs the rest of us of the people we know and love.

Long-Term Care Differs by Country

Some countries are offering long-term health care services to their populations. In some cases, it is a state-sponsored Long-Term Care Insurance plan. Others include a combination of public and private insurance, and still, others either have public welfare programs or no programs at all. 

In the United States, Medicaid is the largest payer for long-term health care services. To qualify for Medicaid, a person must have little or no income and assets. Those with Alzheimer's or other forms of dementia will need supervision and additional assistance with daily activities. 

In the U.S. Health Insurance & Medicare Pay Little Toward Dementia Care

Medicare and other forms of health insurance will only pay for a limited amount of skilled long-term care services (typically 100 days). However, most long-term health care services, including supervision for dementia, are considered "custodial care" and are not covered by these health insurance programs.

Private Long-Term Care Insurance is available in the United States and other countries, including Canada. LTC Insurance will pay for all types of long-term care services and supports. Dementia is one of the most common reasons people use their LTC Insurance benefits. In 2021 the top insurance companies in the U.S. paid over $12.3 Billion in benefits to policyholders.

Partnership Long-Term Care Insurance is a federal, state, and private partnership offering policyholders additional asset protection - What is a Long-Term Care Partnership Policy?. Even with a smaller policy, a policyholder can have substantial asset protection. 

States Taxing You if You Don't Own LTC Policy?

Washington State will tax individuals who do not have a Long-Term Care policy. The tax is on 100% of income for adults aged 18 and older. Unless a person owns an LTC policy, they must pay the tax. In return, they are eligible for $36,500 in long-term care benefits, which would not result in very much care as Washington is one of the most expensive states in the U.S. for long-term health care - Washington Long-Term Care.

There are many states which will follow. An LTC NEWS survey shows that multiple states are actively developing a tax plan, with California and New York the closest to having legislation in place. 

Many experts suggest that some of these states may not have an extended 'opt-out.' period - meaning that if you don't own a policy when the tax becomes law, you may not have any period of time to purchase coverage to avoid the tax. Since the state-provided benefits are not expected to be very meaningful, you could be in a situation of paying the tax and buying LTC Insurance at the same time.

LTC Insurance Means Choice of Quality Care

Whatever the motivation you may have for purchasing insurance, having a plan to address the costs and burdens of aging is critical for both your family and finances. Long-Term Care Insurance gives you the choice of quality care options, including care at home.

Many people find themselves having an adult child becoming their caregiver. The number of family caregivers in the United States increased by 9.5 million from 2015 to 2020 and now encompasses more than 53 million Americans - Unpaid Family Caregivers Now Total 53 Million People.

Most of these unpaid, untrained, and unprepared family caregivers must interrupt their everyday lives - careers, families, and friends - to provide the care for their parents, which could go on for years. The stress and anxiety are hard to comprehend unless you have been in that role yourself.

Long-Term Care Costs Rising with Increasing Demand and Labor Costs

The cost of long-term care services and supports varies depending on where you live. For example, in Peoria, Illinois, three years of in-home care today averages around $171,000. In twenty-five years, the same amount of in-home care is expected to run about $333,000 - Illinois Long-Term Care.

Assisted living, memory care, and nursing home costs are more expensive than most in-home care (depending on the required hours). Plus, some people will need time in a facility following in-home care. For some people, this could mean more than $750,000 in costs or more in the future.

Compare Peoria, Illinois, with Peoria, Arizona. The costs in Arizona are more expensive than Peoria's counterpart in Illinois, Arizona Long-Term Care. Considering Arizona is a popular retirement location, people planning on relocating should consider the costs of care where they live now and where they may relocate to in the future - Cost of Care Calculator - Choose Your State.

People Need Extended Care for Many Reasons - Not Just Dementia

We all experience declining health as we get older. Our bodies deteriorate as well, and many people will suffer from cognitive decline in the decades ahead. People need help with daily living activities for many reasons other than dementia. 

Preparing families and finances before retirement, generally in your 40s or 50s, has been the norm. However, if you live in states that may consider the tax, you may want to act now regardless of your current age.

In addition, some very high-income families will find it critical to obtain Long-Term Care Insurance because of the financial impact of the tax.

Be Sure LTC Policy Meets Federal Guidelines

Only tax-qualified Long-Term Care Insurance will work to avoid any future tax. Be sure any policy you consider meets the federal guidelines under Section 7702(b) of the federal code. A licensed and experienced Long-Term Care Insurance specialist can guide you - Work With a Specialist | LTC News.

You will want to avoid financial advisors or general insurance agents, especially if your state is considering the tax. Specialists will generally work with the top companies, understand underwriting rules, policy design, claims, and which policies meet federal guidelines. 

Insurance companies must file their products and pricing with each state's insurance department. However, premiums vary dramatically between insurance companies - How Much Does Long-Term Care Insurance Cost?

Aging happens. The old saying that there are only two things you cannot avoid in life - death and taxes - may now have to add a third - long-term care. 

Most every survey indicates that most of us want to age in our homes and try to avoid a facility. Most of us don't want to place a burden on our families. You can assume that most people would like to avoid paying more taxes. 

Nobody wants to suffer from dementia or other problems related to declining health and aging. But again, aging happens. Being prepared will give us the tools to be ready.