With 78 million people expected to develop dementia by 2030, 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 who have the primary responsibility of funding the program. Many states are looking at ways to bring in 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 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 that 78 million 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.
With the growing demand for long-term health care, Washington State is now taxing people that don't own a Long-Term Care policy. 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 | LTC News.
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.
"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," said Tedros Adhanom Ghebreyesus, WHO director-general.
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 payor of long-term health care services. To qualify for Medicaid, a person needs 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 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 2020 the top insurance companies in the U.S. paid over $11.6 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? | LTC News. Even with a smaller policy, a policyholder can have substantial asset protection.
States Taxing You if You Don't Own LTC Policy?
Washington State is now taxing individuals who do not own 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 | LTC News.
There are many states which will follow. An LTC NEWS survey shows that 12 states are actively developing a tax plan, with California and Minnesota 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 | LTC News.
Most of these unpaid, untrained, and unprepared family caregivers must interrupt their normal 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 about $171,000. The same amount of in-home care in twenty-five years is expected to run about $333,000 - Illinois Long-Term Care | LTC News.
Assisted living, memory care, and nursing home costs are more expensive, and some people will need time in a facility following in-home care. For some people, this could mean more than $750,000 of 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 | LTC News. Considering that 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 | LTC News.
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. There are many reasons people need help with daily living activities 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.
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 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. Most of us want to avoid having to pay 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.
About the Author
Linda is a freelance writer interested in retirement planning, health and aging.
Contributor since October 31st, 2017
It is hard to deny that we get older each and every day. This fact of life requires proactive action to safeguard income and assets, access quality care options, and reduce the stress and anxiety otherwise placed on family members. Many of us will need help with daily living activities or supervision due to memory loss, and this care we will need costs a lot of money.
The truth is that Long-Term Care Insurance can be very affordable for many American families if you have good health, and you don't wait too long to purchase coverage. Most people obtain coverage in their 50s when they still enjoy good health, and premiums are much more affordable.
Most states offer Partnership Long-Term Care Insurance that will provide dollar-for-dollar asset protection. These policies shelter part of our estates allowing the policyholder to access Medicaid long-term care benefits without being poor.
Since Long-Term Care Insurance is custom designed, with the help of a specialist, you can obtain the appropriate amount of coverage without spending more than you need.
However, remember that long-term care is more than just a cash flow problem - it is a family problem. Your adult children usually get tagged to become your caregiver without any advance planning. The responsibility of caregiving usually falls on one daughter or daughter-in-law who is untrained and unprepared for this demanding role.
Long-Term Care Insurance safeguards income and assets, ensures access to your choice of quality care services, including in-home care, and reduces the stress and anxiety otherwise placed on those you love.
Get Expert Help in Planning
Experts recommend seeking the help of a qualified and experienced Long-Term Care Insurance specialist to help you find the right coverage. A specialist will match your age, health, and family history with the right coverage at the right price.
Long-term care is a very specialized area, and few insurance agents and financial advisors have the expertise. Seek the help of a specialist who represents the top companies. Top specialists will often have over 500 clients with Long-Term Care Insurance, some in the thousands. This experience is necessary as every company has its own underwriting criteria. Plus, premiums can vary over 100% between insurance companies.
A specialist will save you money, and you will have peace of mind knowing they are making the appropriate recommendations - Work With a Specialist | LTC News.
Planning Tools and Resources on LTC NEWS
You can find many tools and resources on LTC NEWS to assist you in your research for a planning solution or help your family find the appropriate care for a loved one at the time of crisis.
To help you plan the costs and burdens of changing health and aging, LTC NEWS has put in place several resources, including:
- The LTC NEWS Cost of Care Calculator will show you the current and future cost of long-term health care services where you live. Plus, each state has vital state-specific information you should know - Cost of Care Calculator - Choose Your State | LTC News
- The Ultimate Long-Term Care Guide is an outstanding read to help you get a good overview of the topic area.
- Compare the major insurance companies that offer Long-Term Care Insurance products here - Top Insurers for Long-Term Care Insurance | LTC News.
- A detailed tax guide that includes available tax incentives can be found by reviewing the Long-Term Care Tax Benefits Guide.
Find all the resources on LTC NEWS - Resources for Long-Term Care Planning | LTC News.
Finding Quality Care for Mom or Dad
Start by reading our four guides -
- Finding Quality In-Home Care | LTC News
- Adult Day Care Centers (ADCCs) | LTC News
- Assisted Living and Memory Care Facilities | LTC News
- Finding a Quality Nursing Home | LTC News
If they are lucky enough to own a Long-Term Care Insurance policy, be sure they use it. Sometimes families wait, thinking they can save the benefits for a rainy day. Waiting on using available Long-Term Care Insurance benefits is not a wise idea.
Get Help in Filing a Long-Term Care Insurance Claim
Quality care obtained early will help provide a better quality of life and reduce the risk of a deep decline and facility care. If you need help in starting the process of a Long-Term Care Insurance claim, LTC NEWS can help.
LTC NEWS provides free assistance with no obligation to help you or a loved one complete the claims process with a Long-Term Care Insurance policy. We have teamed up with Amada Senior Care, who will do all the work, free with no obligation.
Get help finding quality caregivers or long-term care facilities and get recommendations for a proper care plan, whether a person has a policy. - Filing a Long-Term Care Insurance Claim | LTC News.
Benefits of Reverse Mortgages
Today's reverse mortgages for those aged 62 and older could be an ideal resource to fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance.
Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, even help with cash flow during your retirement.
Learn more by asking questions to an expert. LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages.
- Just "Ask Mike." - Reverse Mortgages | LTC News.
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