A Publication of WTVP

Almost half of the population will need long-term care at some point in their life. An average stay in a nursing home typically lasts about two and a half years. Such stays can be very expensive and quickly deplete your family’s financial resources. It’s estimated by 2030, when most baby boomers will have retired, nursing home care will cost about $190,000 annually.

Who Will Pay?

Amid rising medical costs and falling state funding, the price of a nursing home room jumped about 8 percent between April 2002 and August 2003, according to a study conducted by MetLife Mature Market Institute, a resources center on aging issues based in Westport, Conn. For those paying their own bills, the average annual expense for a private room in a nursing home today is $66,000.

People are living longer, but many need help or medical treatment. The U.S. Census Bureau reports the fourth fastest growing population in the country are those aged 90 to 94, a group that’s grown 44.6 percent since 1990. A study from AARP shows 83 percent of individuals aged 85 and older have a chronic condition or disability for which they might need help.

LTC policies pay a certain amount for each day you receive care. You generally can choose the amount you want, from $40 to more than $200 a day. Most policies also allow you to select other benefits, such as an inflation rider to help ensure payments will keep up with care costs, a home health care rider, a choice of how long you must reside in a nursing home or the number of home care visits you must receive before benefits begin, and how long you want payments to continue.

Tax Breaks

Corporations, which sponsor LTC insurance plans, can pay for policies for their employees and their spouses on a pre-tax basis. Employees don’t report the premium as income. Consult your tax advisor, as the procedure varies between C-Corporations and S-Corporations and owners and non-owners.

To help individuals with the high costs of long-term care, the Health Insurance Portability and Accountability Act of 1996 introduced three federal income tax incentives designed to encourage people to buy LTC insurance. First, if you buy a tax-qualified LTC insurance policy individually or at work, part of your premium may be deductible on your federal tax return as a medical expense. Also, before you can claim a medical expense deducation, your total medical expenses–including LTC premiums–must exceed 7.5 percent of your gross adjusted income.

Second, any amounts you receive under a qualified LTC policy generally are excluded from income for federal income tax purposes. Again, a limit applies. In 2003, the maximum LTC insurance payment you can exclude is $220 a day or $80,300 a year. This limit, as well as the premium limit, is subject to an annual inflation adjustment.

Third, if you make out-of-pocket payments for long-term care expenses incurred for yourself, your spouse, or a dependent, you generally can deduct these payments as medical expenses, as long as your expenses meet the 7.5 percent of adjusted gross income requirement.

More than Asset Protection

While protection for your assets may be a powerful reason for buying LTC insurance, it’s not the only reason. Making LTC insurance an integral part of your overall financial plan also gives you the opportunity to choose the level of long-term care you want should the need arise. The wide variety of policy options available let you select the coverage features you feel will best meet your future needs.

Moreover, people with private-pay insurance, as opposed to Medicaid, generally have a greater choice of care facilities and a shorter waiting period to be admitted to the facility of their choice. Perhaps most important of all, you gain the satisfaction of knowing you won’t be a burden to your family in your older years-either financially or physically. IBI