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Long Term Care Insurance

Question: My mother needs homecare assistance. She currently has long term health insurance, will she also need to apply for Medicaid?
December 20, 2019
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Question: My mother needs homecare assistance. She currently has long term health insurance, will she also need to apply for Medicaid?

Answer: Long Term Care (LTC) insurance is a great tool to cover some or all of the costs of long-term care. Depending on the plan she purchased and how much care your mother will need, her LTC insurance may cover a large portion of the expense. When the insurance is not enough to cover the level of care your mother needs, Medicaid can help supplement.

While some policies have a lifetime benefit without term limits, most LTC insurance has a maximum benefit amount. These plans will pay out a certain amount of money per day, and the policy will expire after a certain number of years. If your mother needs just a few hours per day, her LTC insurance will likely be sufficient to pay for the care in full. However, should she require a more extensive amount of care, her policy may only cover some of the costs.

Let’s say mom needs 12 hours of care each day and her policy limit is $200 per day for five years. Further, assume that the cost of care with a private agency is $27 per hour. Her daily cost for private care would be $324 per day. Therefore, there will be a daily shortfall of $124 (or approximately $3,720 a month) that would have to be paid out of pocket. This is where it may be helpful for someone to apply for Medicaid benefits even if they have LTC insurance. If mom were to apply for Medicaid and receive the same 12 hours of care, not only would Medicaid pick up the shortfall, but the cost of care would be lower since she would only be charged the Medicaid rate.

There are two ways that the LTC insurance will pay out benefits. One way is paying the home care agency directly. Under this scenario, Medicaid will pay the agency the balance due for any sums the LTC insurance is not covering. The other method is when the LTC insurance issues a check directly to the beneficiary. In this case, Medicaid will cover the entire cost of care and the LTC payout will be considered income to the beneficiary.

Under the Medicaid financial eligibility requirements, an applicant can have a limited amount of income. Any income in excess of the limit must be deposited into a pooled income trust, which can then be used towards the applicant’s expenses. If your mom’s LTC payouts are paid directly to her, this money can be paid out of the pooled income trust for rent, mortgage, cable, utilities, additional therapies, etc.

Another benefit of qualifying for Medicaid benefits and having LTC insurance is that most LTC policies have a waiting period before the insurance will start covering the cost of care. Medicaid can be used to pay for the care during the waiting period so that you can avoid a large bill which will need to be paid out of pocket. It can also pick up the cost of care when the LTC policy is reaching its expiration date.

When deciding how to move forward with the care for your mother, it is important to sit down with an elder law attorney to discuss all viable options and come up with a plan that is best suitable for mom.