Long-Term Care Insurance Vs. Medicaid Trust

Long-term care needs can have a significant impact on a person's financial status during retirement without some sort of insurance protection in place. People who require ongoing care may encounter large, out-of-pocket costs not covered by Medicare insurance. Both long-term care insurance and Medicaid trusts help to protect a person's asset reserves, though individual needs may determine which form of protection will work best.

Long-Term Care

• Long-term care includes a range of services involving necessary treatments as well as services that are not necessary, but nonetheless important. Services deemed not necessary fall outside Medicare benefit coverage guidelines, leaving recipients to pay out-of-pocket or have another form of insurance in place to cover the costs. These services include help with personal care needs, such as bathing, dressing and using the bathroom. People unable to afford these costs can receive assistance through Medicaid's health insurance program, though Medicaid guidelines limit the amount of assets or resources a person can have in order to qualify.

Long-Term Care Insurance

• Long-term care insurance---also known as LTC insurance---is designed to pay for many of the costs not covered by Medicare benefits, such as personal care needs. And while long-term care coverage can come in handy, maintaining an LTC plan requires a long-term investment. According to the Wall Street Journal Online, the premium rate cost for a long-term care policy averaged around $2,150 a year in 2010. Plan coverages and costs can vary from company to company so individual need plays a significant role when deciding on which plan to purchase. In many cases, it's difficult to predict future long-term care needs, so policy coverage amounts may still leave some policyholders paying unexpected out-of-pocket costs.

Medicaid Income Trust

• The Medicaid health insurance program has served as a last resort option for low-income individuals in need of assistance with long-term care costs as well as for people who outspent their long-term care insurance coverage. For retirees with income levels that exceed Medicaid requirements, Medicaid income trusts provide a form of asset protection. Rather than relinquish existing assets to meet Medicaid's strict eligibility guidelines, Medicaid income trusts enable a person to place a portion of their assets in a trust account. In effect, any monies placed in a Medicaid trust account is under the control of an assigned trustee. By placing a designated amount of monthly income into a trust, a person can meet Medicaid's eligibility requirements without draining their financial reserves.

Medicaid Asset Protection Trust

• The ongoing cost of maintaining a long-term care insurance policy is unaffordable for many people, with some people being denied coverage altogether due to health status. Medicaid Asset Protection Trusts provide an alternative for those unable to afford long-term care insurance or qualify for coverage. A Medicaid Asset Protection Trust works in much the same way as a Medicaid Income Trust in terms of assigning a trustee to manage a fund where monthly income assets are deposited. Someone considering a Medicaid Asset Protection Trust may want to set it up at least 5 years before long-term care is needed to avoid Medicaid's "look-back" period. Medicaid uses a 5-year look-back period when figuring a person's countable income, according to Ettinger Law Firm's reference site. In effect, any countable income becomes the amount a recipient must pay upfront before Medicaid coverage begins. This same provision also applies for Medicaid Income Trusts.