THE BLOG
01/25/2016 08:54 am ET Updated Jan 22, 2017

Baby Boomers and Long-Term Care Insurance

Although Obamacare has insured and lowered costs for some, many advanced-age seniors are becoming more vulnerable to the costs of care. One major cause of this vulnerability is the rising cost of long-term care. Most baby boomers are not ready for long-term care, but they need to start planning now because they are coming into old age in a different environment than previous generations.

When it comes to paying for medical bills outside of doctor visits, the elderly are generally on fixed incomes. Therefore, they don't have as much flexibility as younger, fully employed individuals. With long-term care, the cost of care oftentimes exceeds many people's salaries, making it extremely difficult to prepare for.

Genworth Financial calculated that a semi-private room in a nursing home cost an average of $80,300 in 2015. Long-term care is not something that only happens to a small minority, either. According to the Wall Street Journal, 33% of people aged 65 and older will need long-term care at some point in their lives. How can someone plan for costs so high? Sometimes, the answer is long-term care insurance.

Older adults should start thinking about long-term care beginning in their 50s, when they are still able to get reasonable premiums as well as higher payouts. If you are able to qualify for long-term care insurance before anything changes with your health, such as Alzheimer's or a fall, the premium is greatly reduced and there is less of a chance of being denied. A healthy 55 year old can find a reasonable policy that provides adequate daily benefits in the event they need care.

Seniors often think they can rely on government programs such as Medicaid or Medicare, but many people are unaware that Medicare does not cover long-term care. Medicaid covers long-term care, but an applicant must meet certain medical and financial requirements.

To qualify for Medicaid long-term care, most states have an asset limit of $2,000. See this guide for your state's unique requirements. To help people bypass that asset limit, many states offer a long-term care insurance partnership.

A partnership means that for every dollar you spend on long-term care insurance, an equal amount of assets will be saved in the event you continue to need long-term care, but your insurance coverage runs out. For example, if your policy covers up to $300,000 worth of care and you spend through that, you can now apply for Medicaid with $300,000 worth of assets exempted from their qualification process. These partnerships are great for those hoping to leave a legacy behind for their loved ones.

Another situation where long-term care insurance is useful is when a spouse is still working and long-term care is needed earlier than planned. Medicaid has an income cap so a working spouse can disqualify the medically needy spouse.

As you age, long-term care insurers will be less likely to give you a policy because of pre-existing health conditions. If they do, you will most likely have to pay higher premiums, which is why it is important to start looking for policies when you are healthy and active. It's a good idea to call an agent and ask what options are available because long-term care insurance is a valuable asset for any older adult.

Max Gottlieb is the content manager of Senior Planning in Phoenix, Arizona. While not affiliated with any long-term care insurance provider, we receive numerous questions regarding this topic each day. Senior Planning gives free assistance to seniors and their families, helping them secure benefits and find the care they need.