When you hear "long-term care" many people assume it refers to medical needs but that's not what the phrase means. Most long-term care is for basic personal needs, which are referred to as Activities of Daily Living (ADL) by medical professionals. ADL means the tasks of everyday living such as:
- Caring for incontinence
- Getting dressed
In addition, long-term care can refer to Instructional Activities of Daily Living (IADL) which refers to normal independent living chores such as:
- Managing medications
- House cleaning
- Money management
- Food prep
- Personal shopping
- Pet care
According to the U.S. Department of Health and Human Services ADL and IADL is costly: in 2016 the average cost was $20.50 per hour for a health aide and almost as much for a homemaker service. If you're faced with the burden of paying for long-term senior care it's a good idea to take a close look at your life insurance policy because it may help pay for your long-term needs. On the other hand, if you want to use Medicare to pay for long-term care any life insurance policy valued at over $2000 is considered an unqualified asset and must be included in your spend-down before you qualify for Medicaid.
If you have a specific long-term care insurance policy you should check with your agent to see exactly what services are covered and how much the policy will pay. Other types of insurance policies such as hybrid life insurance may also cover the cost of care, so you should read the policy carefully or ask an advocate at your county Counsel on Aging to help you decipher the policy.
If your insurance policy doesn't cover long-term care you may be able to convert the policy to a long-term care benefit plan, which is a different type of insurance policy. Basically, a long-term plan converts your life insurance to a pre-funded account that disburses a monthly payment to pay for long-term needs. Because the plan transfers ownership to a benefits administrator your insurance policy will no longer be considered a qualified asset by Medicaid so it won't count against you in the spend-down.
A long-term plan can be used in a variety of ways such as:
- Home care
- Assisted living
- Nursing home care
- Hospice care
If your policy doesn't cover long-term care and can't be converted you still have a couple of options. Many seniors surrender the policy or just stop making payments in order to remove life insurance from their Medicaid spend-down. Here are a couple of things you may be able to do:
Take a loan from the cash accumulation. You can usually take a cash value loan from your life insurance policy and then pay the loan (with interest) back to yourself. This may free up money for health care while leaving a portion of the death benefit intact.
Surrender the insurance policy for cash value. This means you give up the death benefit and ownership of the policy in return for the cash it has accumulated. You may have to pay taxes on the cash and it may count as an asset against your Medicaid spend-down so you should determine these factors before surrendering your policy.