Planning for long term care isn’t as simple as setting money aside and being done with it, especially in states where care costs more than the national average. California is one of those states and residents can benefit significantly from taking the time to prepare for long term care costs in advance. The California Partnership for Long-Term Care provides a way to help Californians plan for the expenses associated with long term care without breaking the bank.
Long Term Care Expenses
The California Medi-Cal system currently pays for the majority of long term care facility expenses throughout the state. With the “Silver Tsunami” on its way, Medi-Cal can’t continue to support the growing aging population indefinitely. That’s why in 1987, a statewide grant began being used to promote Long Term Care Insurance to Californians. The program is called the California Partnership for Long-Term Care and it helps encourage people to buy Long Term Care Insurance in order to reduce the burden on the state and improve financial independence of state residents, most of whom will not be able to afford long term care costs on their own when the time comes.
Long term care is provided to those who need assistance with basic daily tasks due to a disability, illness, or simply old age. Unfortunately, the cost is so high that paying for care out of pocket can quickly run someone broke. In California, the median cost of nursing home care for one year runs more than $104,000, according to the most recent Cost of Care Survey released by Genworth Financial. One year of care at an assisted living facility, which focuses less on medical care than a nursing home, has a median cost of $45,000. The median cost of one year of home health care in California is $52,624. These costs are not something the average middle-income Californian can afford to pay out of pocket, which highlights the need to plan ahead.
Unfortunately, many Californians aren’t planning for long term care because they already think they are covered. A 1994 study conducted in California found that 45% of Californians underestimate their risk of needing long term care, while 43% underestimate the cost. It’s an old study, but recent nationwide surveys have found the same thing: people think their health insurance or Medicare will foot the bill for their long term care. That’s simply not the case.
What is the Partnership?
The California Partnership for Long-Term Care is a joint venture between the state and private Long Term Care Insurance providers. The policies that qualify for the partnership can help people preserve their assets and ensure they won’t have to rely on a family member or friend for care. The policies are designed to be affordable while also providing invaluable benefits to the policyholders.
If you buy a policy that is part of the partnership, you are eligible for a Medicaid spend-down waiver, meaning if you need care for longer than your insurance policy lasts, you are not subject to the same spend-down requirements that uninsured state residents are. The spend-down requirements mandate that you spend your cash assets down to next to nothing in order to qualify for public benefits. By purchasing a Long Term Care Insurance policy from the California Partnership, you forgo that requirement and receive care while also holding onto your assets.
Buying a Partnership-Qualified Policy
In order to be eligible for the partnership benefits, a policy must include both Inflation Protection and Care Coordination. Most newer policies now include Care Coordination, but Inflation Protection is an optional rider that you must add on. While it costs more up front, it helps grow the value of your benefits over time to keep pace with inflation, so it actually adds monetary value to your policy without you having to do anything except pay your premiums. Without Inflation Protection, you run a high risk of having a policy that is worth very little when it comes time to receive long term care, which is typically 20 or 30 years after buying a policy. Because inflation is so unpredictable and the cost of care is growing every year, Inflation Protection is a vital rider to include in your policy no matter what.
The same California study found that 34% of state residents think their current health insurance plan includes long term care. Taking the time to educate yourself about long term care and understand the difference between the types of insurance can help you avoid the mistake of assumption and instead put you in a place of financial security rather than financial risk. If you are in your late 40s and you have financial assets that you are looking to protect throughout retirement, the time to start thinking about Long Term Care Insurance is now. Buying in your early 50s will help you get the best rates and the best chance of medically qualifying. The insurance companies understand the huge costs of care and therefore will only write policies for healthy individuals.