The Office of Personnel Management suspended new applications for the FLTCIP as of December 19, 2022. For background on this decision consider Ralph Smith’s article, FLTCIP Problem: OPM Suspending Long-Term Care Insurance Applications.
Today, however, I would like to address an especially important yet frequently not appreciated aspect of purchasing any long-term care insurance contract. It explains an important component existing in almost all long-term care insurance contracts.
Long-Term Care Insurance Waiting Period
When you purchase almost every long-term care insurance product you agree to pay for the initial care out of your pocket thru the elimination period. This means you are responsible for the care bill during the first 30, 60, or 90 days of your long-term care.
The elimination period is sometimes referred to as the waiting period. The Federal Long-Term Care Insurance Program (FLTCIP) website defines this as “The time between becoming eligible for benefits and when long-term begins paying benefits. Sometimes known as an elimination period or a deductible, it helps keep premiums affordable. The longer the waiting period, the lower the premiums. The waiting period can be measured in calendar days or days of service. FLTCIP 3.0, for example, offers a 90-calendar day waiting period.” The website also offers an informative webinar on further details of the waiting period.
Can You Afford to Pay the Bill?
So, do you have access to a ready source of funding to pay for your long-term care during the waiting period? Even if you do not have FLTCIP, another long-term care policy, or have no long-term care insurance protection, the reality is when you first will need care, there is a bill that must be paid which is probably not part of your budget.
What if you were admitted to a care facility and your condition was such that you could not access the needed funds because you were incapacitated or had been diagnosed with cognitive decline? Such a situation may mean you could not write that check. Do you have in place an arrangement for someone to act on your behalf to pay the initial bill?
You must be prepared for two factors if you are admitted to a care facility. First, you should have to have a ready source of accessible liquid resources to pay for the care. Second, you should have, if needed, another person able to use the resources on your behalf.
How much do you need to pay for the first 90 days of care? A quick example may be having enough assets to cover 90 care days X $500 per day. This would be $45,000. This amount would ideally be in a money market account or certificates of deposit for liquidity. If you already have an emergency fund and it is large enough, that source will be able to be used. But is the emergency fund accessible to others for your benefit?
Do not forget to assure each spouse has access to the emergency account for potential care. Set it up similarly to a joint checking or savings account with rights for survivorship.
But what if you do not share joint ownership with someone? Even if you do, you may want to explore legal documents like a Durable Power of Attorney for Health Care to ensure wishes for health care are honored if you are physically or mentally unable to tell your doctors what you want. A Financial or General Power of Attorney authorizes someone to act on your behalf in financial or other matters. You and your spouse can each have both a Durable Power of Attorney for Health Care and a Financial or General Power of Attorney. Each person in a marriage may name different agents for each document.
When you make an appointment with an estate attorney to create wills and other legal documents make sure the conversation includes planning for the contingency of being prepared for others to be acting on your behalf for contingencies like incapacity. Having liquid assets for you and your spouse’s care needs is not enough. Someone other than you or your spouse might have to pay care bills in a hurry. Have a strategy for a smooth plan to include those you are trusting to help can help when needed.