Why Purchase Long Term Care Insurance

Nursing costs continue to rise. Today a $100,000 nursing home stay will be nearly $300,000 in twenty years at 5% inflation. Many financial advisors remind clients to be sure and remember capital gains taxation on appreciated assets. An industry accepted rule of thumb is to sell approximately $1.50 in appreciated assets to have $1.00 after payment of all taxes due[1]. Capital gains taxation inflates the cost of care. Capital gains are on virtually all assets held for appreciation purposes by seniors. They include land, rental property, stock, bonds and many other appreciated assets.

Medicaid regulations for qualification continue to become more restrictive. The government currently pays about half of all nursing home costs, but it's likely that individuals will have to pick up a bigger share. And it may be even more difficult for middle- and upper-middle-income people to qualify for Medicaid by shielding assets from the state's tax reach through gifts to family members or transfers to trusts. A recent study found that about one in four people admitted to nursing homes stay long enough to spend down to Medicaid levels. But Medicaid can't go on this way. A study by the U.S. Department of Health and Human Services indicates that people of age 65 face at least a 40% lifetime risk of entering a nursing home.[2] The cost of care could destroy state budgets unless new sources of financing can be found.

Manage this health care insurance risk like all other insurance risks. Many people consider purchasing long term care insurance for reasons that go beyond protecting personal assets, such as wanting to retain the ability to choose between receiving care in their homes or in a facility, wanting to avoid becoming a Medicaid patient, and/or the desire not to burden family members with having to pay for and/or provide care.