Longer long-term care

The Legislature has given Minnesotans an enticing incentive to sign up for long-term care insurance. The new program, called the "Minnesota Long Term Care Insurance Partnership Plan," will give some policyholders a great way to hold onto more of their assets if they ever require extensive long-term care.

While the state has yet to formally launch the program, many insurance agents have received the required 80 hours of training and are selling policies that will fit the program's requirements.

Long-term care insurance pays for treatment of ailing individuals who need medical care over an extended period. It can help cover the cost of in-home assistance, adult day care, assisted living services, or nursing home care.

"One important benefit is that the policies pay for you to receive care in the setting of your choice, whether it's in your home, a nursing home or an assisted-living center," said Debra Newman, president of Bloomington-based Newman Long-term Care. Newman, who has been in the long-term care insurance business for 17 years, was recently named one of the nation's 10 most influential people for long-term care by Senior Market Advisor magazine.

If you don't have long-term care insurance, and you meet certain maximum asset guidelines, Medicaid will step in to cover the cost of your care.

The big downside to not having long-term care insurance is that you have to spend down nearly all of your assets before the government steps in and starts paying your bills. For instance, if you're single, the state will only start paying your bills if your total assets drop to $3,000. If you're married, you can keep half of your other assets up to about $100,000 and your spouse can stay in your house as long as it's valued at no more than $500,000. (If it's valued at over $500,000, you might take a home equity loan and spend the excess dollars until your investment in your home drops to $500,000.)

With long-term care insurance, a good policy will generally cover most of your nursing home or assisted living expenses so that you and your family can hold onto your assets.

In other words, if your long-term care policy covers up to $500,000 in long-term care, and you exhaust that entire amount of the policy, you would only be required to spend your own assets down to the $500,000 level before Medicaid kicks in. So the new rule allows you and your family to hold onto a substantial amount of your assets rather than to spend down to the poverty level.

"The purpose of the new law is to give individuals more incentive to buy long-term care insurance," Newman said. And with good reason. With more baby boomers reaching retirement age, state-sponsored long-term care could become a tremendous burden for the government. Only about 10 percent of the middle-aged and older population now has long-term care insurance.

When to buy it

Long-term care insurance is most suitable for people with substantial assets to protect. If your assets are already near the poverty level, there is probably not much benefit to owning long-term care insurance, and you probably can't afford the premiums. But if you have assets of several hundred thousand dollars or more, a long-term care policy will help you preserve those assets for you and your family.

The younger you are when you buy a policy, the lower the premium. If you buy a policy when you are 50, you will pay the 50-year-old rate for as long as you hold the policy (unless the rate goes up for all who own that kind of policy). If you wait until you are 60 or 70, the annual rate increases substantially. In fact, if you wait too long, your health may deteriorate to the point where you no longer qualify to buy long-term care insurance.

"The one feature that we would usually build up from this," Newman said, "would be to make the maximum benefit longer -- for instance, five years rather than three years." The total benefit for a five-year plan would be $360,000. So under the new state partnership plan, you would be able to receive coverage for five years and, if you needed continued care beyond that point, you would preserve $360,000 in assets when the state starts to pay.