More than 70 percent of Americans over the age of 65 will need long-term 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 (LTCI), and some of the alternatives carry little-known laws and legal liabilities that can pose a problem to the care recipient and their family, says Chris Orestis, Executive Vice President of GWG Life (www.gwglife.com) and author of the books Help on the Way and A Survival Guide to Aging.
“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,” Orestis says. “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.”
Orestis shares three key things people should know about alternative ways of covering long-term care and possible problems those can present down the road.
1. 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 they require, but that doesn’t mean there isn’t anything left to worry about in terms of covering and repaying costs,” Orestis says. 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,” Orestis says. “But as budget pressures on states increase, estate-recovery actions are likely to become even more aggressive.”
2. 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 will be allowed to lapse,” Orestis says.
3. 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,” Orestis says. “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 and Puerto Rico have filial responsibility laws in place.