Dec. 22--Beginning early next year, Texans who plan for their old age will get a special break from the state.
People who buy long-term care insurance will be allowed to keep more of their savings if they ever need to turn to Medicaid to pay for nursing home care or in-home aides.
State officials hope the new break will encourage more people to purchase private long-term care insurance and save the state's Medicaid program some money.
"Many people don't realize that long-term care can decimate their retirement nest eggs as much as any stock market collapse," said Dallas insurance agent Nancy Gordon.
Two-thirds of adults 65 and older will require caregivers, and that care will last an average of three years, says the Center for Retirement Research at Boston College.
Nursing home care averages $68,620 a year in the Dallas-Fort Worth area, while assisted living costs $34,188, according to the MetLife Mature Market Institute.
Despite the damage a year or more in a nursing home can do to retirement savings, only about 10 percent of Americans 55 and older have purchased long-term care insurance.
"People think that it will never happen to them or that Medicare will pay for their care," said Dallas insurance agent Jerry Cavalier. "Many are in for a rude awakening."
The government may pay for some of their care, but it won't be Medicare that picks up the tab. The help will come from Medicaid, and only after seniors have spent practically their last dime.
Individuals qualifying for Medicaid can't have more than $2,000 in the bank.
Texas insurance officials hope the private "partnership policies" that will soon be marketed will make more people aware of long-term care insurance.
The new policies are likely to appeal to buyers because they will offer dollar-for-dollar asset protection, said Ana Smith-Daley, a deputy state insurance commissioner.
For every dollar that policyholders buy in benefits, they'll be able to hold on to a dollar in their nest egg if they exhaust their insurance and turn to Medicaid, she said.
For example, if a partnership policyholder uses $250,000 of benefits, that individual will be able to preserve $250,000 in personal assets and still qualify for Medicaid.
With traditional long-term care insurance, someone who used all of a policy's benefits would then have to spend almost all personal assets to get Medicaid.
Peace of mind
Experts hope the ability to shelter some savings will be popular with policyholders who want to provide more for spouses or leave more for children or other heirs.
"I talk with families who are worried sick that the government will force their parents to impoverish themselves," said Dallas elder-law attorney Paul Wright. "The asset protection will buy them some sense of security and peace of mind."
Inflation protection is the other main feature of the new partnership policies, said Dallas insurance agent Sharon Luker. Daily benefits will increase to keep up with the cost of care.
Long-term care policies now offer inflation protection as an option at an added price, but the partnership policies will automatically provide it to all buyers younger than 76, she said.
Experts say the new policies will cost about the same as current policies with comparable coverage. A single person pays an average of $1,095 per year for a policy purchased at 55.
State insurance officials expect that Texans who have recently bought traditional long-term care policies with inflation protection will be able to exchange them for partnership policies.
Lou Anne Nichols, 62, of Wylie says she knows the value of long-term care insurance. Her job as an elder care adviser is to help families find senior-living communities or caregivers for parents.
"People don't plan for their old age, so the burden falls on the adult children to figure out how to pay for Mom and Dad's care," she said. "I see it every day."
Not wanting to become a burden on her two sons, Ms. Nichols bought $430,000 of long-term care insurance this year and intends to exchange it for a partnership policy.
"No one in my family will have to worry about changing my Depends if that day ever comes," she said.
Not automatic
Lewisville financial adviser Gary Crooms says the partnership policies will provide a "hard-dollar incentive" for people to buy long-term care insurance.
But people who are considering the policies should understand they won't automatically qualify for Medicaid if they deplete their insurance benefits, he said.
"Though their assets will be sheltered, they'll still need to meet Medicaid's income, medical-status and other eligibility requirements," Mr. Crooms said.
About 30 states offer partnership policies or are working to introduce them, said Jesse Slome, executive director of the American Association for Long-Term Insurance.
Insurance experts expect that most states will honor each other's policies.
State governments have a strong financial interest in persuading more people to purchase private insurance to help pay for long-term care, Mr. Slome said.
Medicaid spending will more than double over the next 20 years as baby boomers begin to require nursing homes and in-home caregivers, according to a recent study by Strategic Affairs Forecasting.
Without some form of relief, already overburdened Medicaid programs run the risk of collapsing under the weight of the 76 million aging boomers.
"Medicaid has become the payer of first resort for long-term care in this country," Mr. Slome said. "The states would like to make it the payer of last resort."
Hundreds of Texas insurance agents attended required training classes this fall so that they can market the partnership policies beginning early next year.
Ms. Gordon, who plans to sell the new policies, says the financial crisis may prompt more people to take a closer look at long-term care insurance.
"People who once thought they could pay out of pocket for any care may now stare at their smaller nest eggs and see the need for insurance," she said.
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