Three Surprises to Watch Out for When Paying for Long Term Care

Chris Orestis, executive vice president of GWG Life, has penned an excellent article for The Independent: 

"More than 70 percent of Americans over the age of 65 will need long-term health care services, according to the U.S. Department of Health and Human Services. Yet, according to the Employee Benefit Research Institute, only 13 percent of those who received professional home health care had long-term insurance policies, which can protect seniors from high out-of-pocket costs.

There is a wide gap of people without long-term care insurance, or LTCI, and some of the alternatives carry little-known laws and legal liabilities that can pose  problem to the care recipient and their families.

The growing long-term care funding crisis has brought lawsuits and mandated claw-back actions against families in attempts to recover monies spent on long-term care. There is a growing need for consumers to consider all their available financial options to fund long-term care, and that can include selling a life insurance policy.

Often the weight for long-term care falls on the family, and they need to avoid a financial surprise that can come late in life for their loved ones.

There are three surprises to watch out for when paying for long-term care and key things people should know about alternative ways of paying for it as well as the possible problems those can present down the road.

States can sue for Medicaid recovery of LTC

Many families assume that once a senior is approved for Medicaid coverage of long-term care, the only thing left to worry about is maintaining financial and functional eligibility. You’ve proven that a loved one cannot afford the level of care he or she requires, but that doesn’t mean there isn’t anything left to worry about in terms of covering and repaying costs. The Omnibus Budget Reconciliation Act of 1993 requires states to implement a Medicaid estate-recovery program, which allows states to sue families via probate court to recover Medicaid dollars spent on a family member’s long-term care. A report by the Office of the Inspector General showed that Medicaid, the primary source of long-term coverage, recovers hundreds of millions of dollars from families every year. But as budget pressures on states increase, estate-recovery actions are likely to become even more aggressive.

Watch out for withheld information on life insurance

Selling or borrowing against a life insurance policy in the secondary market, a process called a life settlement, is a way to help people find alternative funding sources for long-term care. A number of states have passed legislation mandating consumer disclosure about the secondary market before their policies ill be allowed to lapse.

Be aware of filial responsibility laws

These impose a duty upon adult children for the support of their impoverished parents and can be extended to other relatives. These laws can include criminal penalties for adult children or close relatives who fail to provide for family members when challenged to do so. Attorneys for nursing homes are testing the laws by filing lawsuits on behalf of indigent parents to recover funds. Currently, 28 states [including Ohio]  and Puerto Rico have filial responsibility laws in place."

Proper estate and financial planning, and Aging in Place Planning in particular, demands consideration of  long term care financing opportunities, and avoidance of adverse consequences like those discussed in the article.