What are tax deductible medical expenses?
Tax-deductible medical expenses may include the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They may also include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Dental expenses are also covered. The incurred expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Expenses that are merely beneficial to general health are not included.

What is long term care?
Long-term care comprises a variety of services that include medical and non-medical care to people who have a chronic illness or disability such as Alzheimer’s disease, Parkinson’s disease, stroke, congestive heart failure, ALS, arthritis, diabetes, and MS.  Long-term care helps meet health or personal needs. Most long-term care is to assist people with support services such as activities of daily living like dressing, bathing, and using the bathroom. Long-term care can be provided at home, in the community, in assisted living or in nursing homes. It is important to remember that persons of any age may need long-term care. 

What amount may be deducted and by whom?
To compute the allowable amount of medical deductions for the taxable year, the medical expenses must exceed 7.5% of the taxpayer’s adjusted gross income.
Medical expenses paid for by and for taxpayer, taxpayer’s spouse and dependents are includible in this calculation. Such expenses for someone with chronic illness or disability disease may be deducted on his or her own return, on a joint return filed with his or her spouse, or on the return of another person if the ill person is the other person’s dependent.

What are some tax deductible expenses that might be incurred by someone in need of long-term care?

•Home care, attendant care and home-based respite care: If certification of chronic illness is obtained and services are provided under a plan of care prescribed by a licensed health-care practitioner, the cost of an attendant to perform qualified long-term-care services is a medical expense and is tax deductible.

•Nursing homes, assisted-living facilities, group homes, congregate-living facilities, adult-day-care programs, facility-based respite, etc. The tax code does not specify that qualified-long-term care services must be provided in any particular setting. Thus, as long as a certification of chronic illness is obtained and the services are provided under a plan of care prescribed by a licensed health-care practitioner, qualified long-term-care services should be considered medical expenses irrespective of the type of facility in which provided.

•Home improvements:  Reasonable costs to make home improvements are considered medical expenses if the main purpose is medical care and the expense is directly related to medical care.

•Psychiatric care.

•Health insurance premiums including those premiums for qualified long-term-care insurance (not life insurance).

•Nursing services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient’s condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. 

•Personal-care services: These are services intended to provide needed assistance with any of the disabilities that cause the individual to be chronically ill and include protection from threats to health and safety due to severe cognitive impairment.

•Prescription medicines and drugs must be prescribed by a doctor.  With the exception of insulin, amounts paid for medicines or drugs that are not prescribed (or for any drugs which have been imported from other countries) are not deductible.

•Durable medical equipment, supplies, diapers.

•Entrance and accommodation fees for CCRC (Continuing Care Retirement Community).

How is qualified long-term-care services defined?
Qualified long-term-care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal-care services that are (1) required by a chronically-ill individual, and; (2) provided under a plan of care prescribed by a licensed health-care practitioner.

Who is a chronically-ill Individual?
Patients may qualify as “chronically-ill individuals” if they meet one of these two tests:

•Activities of Daily Living (ADLs): patient must be certified as unable to perform, without substantial assistance from another person, at least two ADLs (eating, toileting, bathing, dressing and continence).  This disability must exist for at least 90 days and be due to a loss of functional capacity,

•Substantial Supervision/Cognitive Impairment Test: patients must be certified as requiring substantial supervision to protect themselves from threats to health and safety due to “severe cognitive impairment”.

The federal tax authorities have given guidance that “severe cognitive impairment” means a loss or deterioration in intellectual capacity that includes Alzheimer’s disease and similar forms of irreversible dementia, and is reported in good faith by clinical evidence and standardized tests that measure impairment in (1) short- or long-term memory, (2) orientation to people, places or time, and (3) deductive or abstract reasoning.

Guidance also exists stating that “substantial supervision” means continual supervision by another person that is necessary to protect severely cognitively-impaired individuals against threats to their health or safety.

What are the required certifications, care plans, etc.? 
For purposes of the tax deduction, a person must be certified as meeting the requirements of a chronically-ill individual. This certification must be done by a licensed health-care practitioner (MD, RN, or licensed social worker “within the preceding 12-month period,” which implies an annual review for a person with a chronic illness or disability.) 

In your twenties, thirties or forties and healthy? Now is the time to consider long term care insurance while you can qualify for preferred rates, which is a code word for substantial discounts, due to both your age and your perfect health.

Long term care insurance is just not for the old. How many persons do you read about that have been injured in car or sporting accidents? In many cases these are young people. Who takes care of these young people when they are seriously injured and require days, months or years of care? In many cases their parents or family members are seriously affected financially and personally in order to care for them.

Now comes into play the benefits of long term care insurance for younger adults. If an adult has long term care insurance, this insurance will pay for and provide required care for days, months or years. And in some cases, depending on the company, the monies available for an injury due to an accident are double the normal cost of available care.

Many younger individuals taking out a long term care insurance policy also purchase an addition to their insurance called restoration of benefits. For example if an individual is in a serious accident, requires care for a period of time and then fully recovers, the entire policy benefit is reinstated once so that it can be used again when the individual is older and requires care. It is a win — win situation providing the best possible solution.

The average age most people begin to consider long term care insurance is in their fifties. The difference in premium between a twenty something and a fifty something can be significant. I often hear concern that a person will be paying premiums for the rest of their life or until they need the insurance. Consider an annual premium of $600 for 60 years versus an annual premium of $2500 for 30 years. Who pays less in total premium? Compare $36,000 versus $75,000. In either case the premium will be recovered in one year or less of care, assuming the policy was purchased with inflation protection.

And while you are considering long term care insurance. Talk to your parents. If they have not prepared financially for health care or long term care guess who will be expected to help out? It is the reverse of your parents helping you with a health care accident when you are young. Paying for care for parents is the number one cause of financial distress for children. This expense affects employment, marriages and long term retirement prospects. If your parents cannot afford their long term care insurance premium, consider splitting the premium or paying for it entirely. This will give you peace of mind that your years of hard earned money will not disappear in the blink of an eye when your parents need care.

For those of you unaware of what long term care insurance is, here is a quick rundown. This is a type of insurance that can pay for medical expenses that arise beyond the typical medical or nursing expenditures. It normally is used for people who have long term medical disabilities. 

Costs outside of medical and nursing expenditures can increase very quickly and overwhelm any person without significant resources. That is where long term care insurance comes into the picture. An example of different things long term care insurance could pay for might include: help around the house to do activities you cannot do because of your long term disabilities or potentially a nurse who may have to work at your home. 

You need to think about this before you start to get the later stages of your life. Many people may only think about long term care insurance when they actually need it. You may not necessarily be approved for it if you are going to start using it immediately. It is probably best if you apply for this when you are in the 40-50 year old range. Your premiums will be much lower and your approval is much higher at this point than when you are in the later stages of life. 

You need to decide when buying a policy whether you will want to have home care coverage or nursing home coverage. Some policies may offer multiple ways to cover where you will be taken care of. 

You then need to think about whether you want a certain coverage that is dictated by a maximum per month or per day. These amounts will vary and can determine what kind of coverage you can receive if you use the long term care insurance later in your life. 

You also have to think about how long you want the policy to last for. Some will have only certain time spans such as a year or two years while some can last for an entire lifetime. The long term care insurance that lasts for an entire lifetime will normally have higher premiums that come with it as well. 

What kind of a waiting period will you have before you can start using benefits? This may determine the policy that you buy if you need to start using the benefits at a certain period. Some policies have no waiting period while there is a waiting period with others. 

You need to think about whether there is any inflation protection that is offered as well. Health care costs have gone up significantly in the past decade or longer. If you are buying the policy in your early forties and may not use it till you are seventy, think about how little your policy will cover if there is no inflation protection. 

Long term care insurance can be a great way to supplement other types of insurance that do not normally cover certain expenses. It can be a complicated topic so take your time to do your research before you decide to buy a certain policy.

Long term care of elderly is everyone’s concern since it will most likely affect you or a loved one. In this article I’ll respond to 6 questions that encompass your long term care (LTC) concerns: What is LTC? Who needs it? Who provides help for it? What’s the cost? Who pays for it? What should you do about LTC?

What is LTC?

You need LTC when you need help carrying out your activities of daily living (ADLs) for the foreseeable future. For seniors, this most likely means for the rest of their lives. Examples of ADLs are dressing, bathing, toileting, eating, transferring from bed to bathroom and continence.

Who needs LTC?

Boston College’s Center for Retirement Research (BCCRR) (http://crr.bc.edu/images/stories/Briefs/20&ib;_7-13.pdf.) found that three of every four 65 year olds are projected to need LTC in their future. The percent breakdown of elderly needing LTC will be:

31% – no care

29% – 2 years or less

20% – 2 to 5 years

20% – 5 years or more

Who provides help for LTC?

Long term caregivers do. They’re either skilled or custodial caregivers. Custodial caregivers are typically family or friends, volunteers, or paid helpers. Heath care plans pay for skilled caregivers (i.e. medical specialists like doctors, nurses, etc.) but only for custodial services if these are given as part of a skilled care procedure.

You receive LTC in your home, at an adult day center, an assisted living facility, a hospice facility or at a nursing home.

What’s the cost of LTC?

The cost for LTC services depends on where you’re living and what level of long term care you’re getting. Approximate annual costs may be $25,000 for home care at home; $40,000 for an assisted living base rate; and $80,000 or more for nursing home costs. These costs can cut deeply into your savings or legacy.

Who pays for LTC costs?

The BCCRR study shows that 18% of dollars spent on LTC come from direct out-of-pocket payments by individuals. Medicaid pays about 50% of LTC costs but only for those who have almost no assets since Medicaid is for the poor. Medicare paid 20% probably as transition costs only since Medicare is not intended to pay continual LTC costs. Only 7% of LTC dollars were paid for by private LTC insurance policies.

What should you do about LTC?

Clearly, you or a loved one will probably need some long term care in the last stages of life. And it’s very costly. It can wipe out all your savings or legacy if you require a year or more of it. So you need to plan for how you can handle paying your LTC costs.

Three options for paying for LTC are:

1. Pay it out of your pocket (i.e. your own savings)

2. Buy LTC insurance so the insurance can pay it

3. Let Medicare pay it.

Paying for LTC yourself requires having a lot of money – enough earnings on your money to not jeopardize losing all your savings and legacy. Perhaps you should have at least $750,000 not including your home.

If you buy LTC insurance, you’ll have to pay premiums each year. This is more costly the older you are when you start paying them. You get tax breaks for premiums paid. But starting earlier makes premiums less.

Medicaid will pay a person’s LTC costs but only if they’re unable to contribute their own money or assets to what Medicaid pays for you. Only until you have less than about $3,000, will Medicare pay for you at no cost to you. But you can’t just transfer all your assets to loved ones one day and apply for Medicaid the next. You must transfer your assets away some 5 years earlier than when you apply.

So you can see that you need to look into what is the best strategy for you. Depending on your age and wealth you can find a strategy that minimizes your loss of wealth for dealing with the probability of needing LTC.

If you plan early and transfer assets away early, you can possibly save a fortune for you beneficiaries.

Long term care insurance is a protection against the high costs of health care.

It is a well known fact that long term illness can wipe out a families savings and long term care insurance or nursing home insurance is promoted as a safety net in case a person requires long term care due to a long illness or accident.

Long term care policies have many benefits:

1. The policy will cover nursing home care or even care at home. Most policies cover home health care, personal care, adult day care, long term health care, respite care and hospice care.

2. Long term care policies cover needs of nursing, physical therapy, speech therapy as well as home aide services for those who are ill and need extensive care.

3. Home care includes assistance with personal hygiene, dressing, feeding, health related tasks, cooking, cleaning and more.

4. Adult day care includes supervision, social and recreational help and more.

5. Long term care covers services of a nursing home, and alternate level care. Many policies include respite care too, where family members are given a break from care giving responsibilities.

6. Most long term care policies cover health care not covered by Medicare and other services.

7. Most long term care policies cover at least 24 months of care and comply with state and country laws.

8. Most long term care policies are medically underwritten. So the earlier a policy is purchased the greater the benefits. Ideally you should be in great health at the time of purchasing a long term care policy.

Since a long term care policy may only be used when a person is aged it is important to buy a policy form a long term player in insurance. The financial soundness of the insurer must be verified through the A M Best or Fitch ratings. Always read through the policy carefully and get the insurance company or agent to explain clearly terms you do not understand. Before purchasing a long term care policy work on your person financial plan and make provisions for the premiums. Most long term care policies have premiums that increase with time/age. So find out clearly what you need to be prepared for in terms of paying premiums.

In case of a long term care policy you need to study and plan your retirement objectives, income, and wealth. If just sustaining is a strain on finances think twice before making a long term commitment of buying a long term care insurance policy. Always check with the state insurance website and see what the recommendations are regarding purchasing a long term care policy, the tax benefits, as well as pros and cons.

Long term care polices can be bought from insurance companies, stock and mutual companies, and online insurance directories. Long term care policies are sold through mail order, insurance consultants and agents as well as through senior citizen organizations.

Always be an informed investor.