Planning for long-term care in Texas: what Medicare skips and what a policy may cover

Worth a serious look if you want to protect savings and choices

Long-term care insurance is worth considering if you want to protect your savings from the cost of extended care and keep more control over where and how you receive it. Medicare generally does not pay for long-term care, and federal estimates suggest most people turning 65 will need some form of it. Texas also offers Partnership policies, which the Texas Department of Insurance says include an asset disregard benefit, inflation protection and tax qualification benefits. Whether a policy is right for you depends on your age, health, savings and family situation, and the decision is easier and usually less expensive the earlier you make it.

I am a New York Life agent in Frisco, and long-term care comes up in two kinds of conversations: clients planning for themselves, and clients watching their parents age and realizing nobody has a plan. This guide is general information. Long-term care decisions touch on taxes, Medicaid rules and estate planning, so talk with licensed professionals in each of those areas before you decide.

What long-term care means, and how likely you are to need it

Long-term care is help with everyday living over an extended period, often because of a chronic illness, a disability, cognitive decline or simply aging. It includes help with bathing, dressing, eating, moving around and managing medications. TDI describes it well: long-term care helps you maintain your current lifestyle, but it may not improve or correct your medical problems.

Care can happen in many places. TDI notes it may be provided at home or in settings such as nursing homes and assisted living facilities. Much of it is provided by family members, which carries its own costs in lost work, stress and strained relationships.

The federal Administration for Community Living states that someone turning 65 today has almost a 70 percent chance of needing some type of long-term care services and supports in their remaining years. It also notes that women need care longer, an average of 3.7 years compared with 2.2 years for men.

Those are averages, and averages hide a wide range. Some people need little or no care; others need years of it. Insurance exists precisely for that uncertainty: you cannot know in advance which group you will fall into, but you can decide how much of the risk you want to carry yourself.

Medicare and health insurance mostly leave it out

This is the part that surprises families most. Medicare.gov states that Medicare does not pay for long-term care, also called custodial care. Because most long-term care is non-medical, Medicare and most health insurance plans exclude it, and Medigap policies do not cover it either. Medicare.gov says you pay all costs for non-covered services, including most long-term care, and points to Medicaid, depending on your state, or private long-term care insurance as possible ways to cover those costs.

In practice, that leaves families with three main sources: their own savings and income, Medicaid once assets are low enough to qualify, or insurance purchased in advance. The planning question is which mix you want, and how much of your savings you are willing to spend before other help begins.

Self-funding is a legitimate choice for some households, but it should be a deliberate one. If you plan to pay for care from savings, decide which assets you would draw on first, how that would affect a surviving spouse, and what you would want to leave to your children. Writing that down is a plan; assuming it will work out is not.

The main ways families pay for care

There is no single right way to plan. These are the approaches I see most often, and many families use more than one.

• Self-funding from savings, investments and retirement income, which works best for households with substantial assets and a willingness to spend them.
• A traditional long-term care insurance policy, which pays benefits for qualifying care up to the limits in the policy.
• A Texas Partnership long-term care policy, which adds the features TDI describes below.
• Life insurance with an accelerated death benefit, which TDI explains can prepay some or all of the death benefit while you are living if you have a long-term care illness as defined by the policy.
• Medicaid, which has strict financial eligibility rules and is best discussed with an attorney who handles elder law.
• Family caregiving, often combined with one of the options above.

The Texas Long-Term Care Partnership, in plain terms

Texas created its Long-Term Care Partnership Program as a joint effort between private insurers and the state. According to TDI, Partnership policies have an asset disregard benefit, inflation protection and tax qualification benefits. The asset disregard relates to how your assets are counted if you later need Medicaid after using your policy's benefits; TDI's Shopper's Guide explains exactly how it works, and it is worth reading before you buy.

TDI also provides a Long-Term Care Insurance Suitability Worksheet and a Policy Comparison Worksheet, and lists the companies that sell Partnership policies in Texas. For questions about a policy you have or are considering, the TDI Help Line is 800-252-3439. Whether a Partnership policy, a traditional policy or a life insurance policy with long-term care features is the better fit depends on your goals, and that is a decision to make with a licensed agent and, where Medicaid is involved, an attorney.

What drives the price of a policy

Long-term care premiums depend on choices you make and on who you are when you apply. The earlier you buy, the more options you usually have, because health changes can make coverage harder to get or unavailable. These are the main levers.

• Your age and health when you apply.
• The benefit amount, usually expressed as a daily or monthly maximum.
• The benefit period or total pool of money available.
• The elimination period before benefits begin.
• Inflation protection, which helps benefits keep pace with rising care costs over decades.
• Whether the coverage is a standalone policy or a feature of a life insurance policy.

Questions to ask about any long-term care coverage

Long-term care policies vary more than most insurance, and the details decide whether a policy helps when it is needed. Before you buy, make sure you can answer each of these about the specific policy in front of you, in writing. TDI's Policy Comparison Worksheet is a useful way to line up two options side by side.

• What triggers benefits, and who decides whether I qualify?
• Which settings are covered: my home, assisted living, a nursing home, adult day care?
• How much does it pay, for how long, and is there a lifetime maximum?
• How long is the elimination period, and how are days counted?
• Does it include inflation protection, and how does it work?
• Can the premium change after I buy, and under what conditions?
• What happens if I stop paying premiums after many years?

The cost of waiting

The most common reason families never plan for long-term care is that it feels far away. The trouble is that the options narrow with time. Premiums are based on your age when you apply, and a diagnosis that shows up in your records can make traditional coverage difficult or impossible to obtain. By the time care feels real, often because a parent needs it, the window for affordable coverage may be closing for you as well.

Waiting also shifts the decision to someone else. If no plan exists when care is needed, the choices about where and how care is provided are often made in a hurry, by a spouse or adult children, under stress and with whatever money happens to be available. A plan made early gives you a say in those choices.

When it is your parents who need a plan

Many of my clients come to this topic through their parents. They are in their 40s or 50s, raising children and building their careers, and they suddenly realize that if Mom or Dad needed care, the money and the caregiving would likely come from them. For families carrying generational responsibility, something I understand from my own upbringing, this can be the most important financial conversation of the decade.

Start with questions, not products. What do your parents want if they need help? What resources do they have, including savings, income and any existing policies? Who would make decisions if they could not? Do they have powers of attorney and an up-to-date estate plan? An estate planning attorney can help with the legal documents, and a licensed agent can help you understand what coverage, if any, is still available for them at their age and health.

The answers also shape your own plan. If you expect to help support your parents, your own life and disability coverage may need to account for that, a point I cover in my household stress test.

How I help families think it through

Long-term care insurance may help protect your future, or a family member's, and help preserve assets. My role is to help you understand the options before you need them. We look at your goals, your savings and your family, and then at how a traditional policy, a Partnership policy or a life insurance policy with long-term care features would each fit, including what each costs and what each does not cover.

I work with families in Frisco, Plano and across the Dallas area, and there is no obligation to buy. Long-term care is also a good topic to revisit periodically, along with your life and disability coverage; my yearly review checklist includes it.

Questions people ask me