Long
Term Care Insurance
The
Guide to Long Term Care Insurance
The Guide
to Long Term Care Insurance will answer the following questions:
a. What Is Long Term Care Insurance?
b. Who Usually Pays For Long Term Care Insurance?
c. Who Should Buy Long Term Care Insurance?
d. How it Long Term Care Insurance works?
e. You Are Your Own Best Protection
f. When to Say No
Are you concerned about coping with an extended illness or disability
as you get older? Since Medicare doesn't pay for long term care, you
may be wondering if private insurance is your best option. Here we
tell you why this type of policy is not right for everyone.
The good news is that people are living longer. The dark side of this
fact is that many people fear they won't have the money to pay for
extended medical care and/or their families won't be able to take
care of them. Long term care insurance is a fairly new type of coverage
designed to pay for long term care services, which can drain a tidy
nest egg very quickly.
The cost for nursing home care, home care and adult day center care
varies from one part of the country to another. In 1996, the average
cost of care in a nursing home ranged from about $46,000 to over $60,000.
Home care costs range from $50 to $200 a day, depending on the type
of care provided and the number of hours of care each day, and the
cost for adult day services range from about $30 to $130 per day.
With figures like these, paying an annual premium for insurance to
cover possible long term care bills may sound like a great idea. However,
long term care insurance costs a pretty penny itself and simply doesn't
make financial sense for most people. Here are some basics to help
you decide if you are a good candidate for this type of policy.
What Is
Long Term Care according to the Guide to Long Term Care Insurance?
Many people live to a healthy ripe old age and remain perfectly independent.
But it's impossible to predict who will have that kind of luck and
who will be hit with an illness or disability that will require some
kind of on-going help. Depending on the situation, long term care
may involve aid with activities at home, such as bathing and dressing;
home health care; or skilled nursing care in a nursing home. Long
term care is provided by home care agencies, senior centers, adult
day care centers, traditional nursing homes and continuing care retirement
communities. Families often provide long term care as well. Below
is an explanation of the three major types of long term care.
Skilled nursing care is needed for medical conditions that require
care by skilled medical personnel such as registered nurses or professional
therapists. This care is usually needed 24 hours a day and is ordered
by a physician who outlines a treatment plan. Some people need skilled
care for a short time after an acute illness, while others require
it for longer periods. Skilled care is usually provided in nursing
homes but visiting nurses or therapists may also give it in a person's
home.
Intermediate
nursing care is needed for stable conditions that require daily, but
not 24-hour nursing supervision. Such care is ordered by a physician
and supervised by registered nurses. Intermediate care is less specialized
than skilled nursing care and often involves more personal care. It
is generally needed for a long period of time.
Custodial
care helps a person with chores or activities of daily living, which
may include bathing, eating, dressing, and other routine tasks. Custodial
care, sometimes called personal care, is less complicated than skilled
or intermediate care and can be given in a variety of settings (at
home, adult day care centers, or nursing homes) by people without
medical training.
Who Usually Pays for Care
according to the Guide to Long Term Care Insurance?
Medicaid:
Getting the Help You Need
Medicaid, the federal and state health care program for low-income
Americans, covers almost half of the nation's nursing home costs.
To qualify for Medicaid benefits, your income and assets cannot be
above a certain level (the financial criteria differ in each state).
Many people who receive Medicaid assistance were low-income when they
entered a nursing home. Other people qualify for Medicaid long term
benefits once they have spent down their savings--that is, they pay
for expenses out-of-pocket until their savings are depleted. Long
term care insurance is definitely not for you if you know you would
spend your assets within a short period after entering a nursing home.
Under federal Spousal Impoverishment provisions in Medicaid, states
must allow a nursing home resident's spouse who lives at the family
home to keep at least $1,382.50 per month of income (up to a maximum
of $2,103.00) and anywhere from $16,824 (minimum allowed) to $84,120
(maximum allowed) in other resources. These numbers are for 2000 and
increase every year. For information about how your state applies
these rules, please contact your state directly. The health Care Financing
Administration has a list of State Medicaid Contacts.
Individuals and their families pay one-third of all nursing home expenses.
To do this, they may use savings or sell assets such as their homes.
State Medicaid programs pay for almost half of all nursing home care.
You cannot count on Medicare, Medicare supplemental insurance, or
Medigap for long term care. For example, Medicare beneficiaries who
meet strict eligibility criteria are covered for 100 days of skilled
nursing home care and must pay a hefty co-payment after the 20th day.
Though Medicare may pay for some at-home assistance for beneficiaries
who meet certain conditions, the program does not cover custodial
or intermediate care or prolonged home health care. And Medicare supplemental
insurance, or Medigap, does not cover long term care either. Of the
standardized Medicare supplement policies, Plans D, G, I and J contain
an at-home recovery benefit that may pay up to $1,600 per year for
short term assistance with daily activities, but only for those recovering
from an illness, injury or surgery.
Who Should
buy Insurance according to the Guide to Long Term Care Insurance?
Long term care insurance might be a reasonable option if you have
considerable assets that you want to protect so that you can leave
an estate for your family. Or if leaving an estate is not your goal,
you may simply feel you can afford to buy good long term care insurance
and still maintain a comfortable lifestyle.
The main reason people buy private insurance is to avoid being financially
wiped out by long term care costs. But impoverishment is exactly what
you may face with a long term insurance policy because:
The premiums
are high
You may have to pay for premium increases
You may have to pay for certain expenses out-of-pocket
If you let your policy lapse and don't have nonforfeiture protection
(which, of course, costs more) your will lose your benefits
Long term care insurance is really a gamble on your health. The bet
can pay off, but it's more likely you'll pay those premiums year after
year and never need the coverage. It's true that nursing home costs
are staggering, but what is your chance of winding up in one? Though
studies show that a 65 year-old's chance of being in a nursing home
at some point range from 20 percent to 50 percent, experts point out
that those figures sound worse than they actually are because they
reflect even short term stays. According to research published in
the New England Journal of Medicine in 1991, 2 out of 3 people who
turned 65 in 1990 will either never go to a nursing home or will spend
less than three months in one.
A long term care insurance plan should not put a crimp in your lifestyle
by causing financial hardship. Here are some factors to help you determine
if you may need long term care insurance:
Your health
background. Your family has a history of chronic illness, such as
cardiovascular disease, diabetes or Alzheimer's, a long term care
insurance plan might make sense--especially if close relatives have
fallen ill early (in their sixties as opposed to their nineties).
Your family situation.
You have no relatives who could take care of you at home. (Before
you decide this is the case, discuss the possibilities with your family.)
Your financial
situation. According to the United Seniors Health Cooperative, a non-profit
organization based in Washington DC, people should not consider long
term care insurance unless they have at least: $75,000 (excluding
home and car); an annual retirement income of at least $35,000 (depending
on costs in the state where you live); the ability to pay premiums
without making any lifestyle changes; and the ability to afford the
long term care insurance plan even if premiums increase during your
lifetime. If you don't fit this profile, you would be better off letting
your money earn interest, paying for care as the need arises, and
relying on Medicaid if long term care becomes necessary (see sidebar).
Even if you do fit the above profile, be sure to consult a financial
adviser, life or health insurance counselor, or an attorney who specializes
in estate planning or elder law about all your options.
How Does Long Term Care Insurance Work?
Long term care insurance policies are not standardized, so the services
covered by different companies vary greatly. Each policy has its own
eligibility requirements, restrictions, costs and benefits. Services
generally covered include: nursing home care (skilled, intermediate
and custodial), care in your own home and in adult day care centers,
assisted living, personal care, hospice care, and care for people
with cognitive disorders like Alzheimer's disease. Services generally
excluded include: psychological disorders, such as anxiety or depression,
alcohol or drug addiction, illness or injury caused by war, attempted
suicide or intentional, self-inflicted injuries.
Insurance companies also offer policy holders a choice of daily benefits
(how much the company will pay per day for care). This usually ranges
from $40 to $250 a day for care in nursing homes. To decide what you
need, it is important to know how much nursing facilities in your
area charge. Home care benefits are usually one-half of that for nursing
home care and only pay up to a fixed amount per hour of service. For
example, $60 a day or $20 per hour. Keep in mind that your policy
usually does not pay for your needs in full, so you will have to pay
the balance out of your own pocket.
In addition
to the daily benefit, you will have to choose a benefit period, meaning
how long you want the insurance company to pay your long term care
bills. Benefit periods may run one, two, four, six, ten years or,
sometimes, for the rest of your life. Naturally the higher the daily
benefit and the longer the benefit period, the more expensive the
long term care insurance plan is.
For more
detailed information on different types of long term care insurance
plans, benefits, and costs, send for the brochures Before You Buy:
A Guide to Long Term Care Insurance offered by the American Association
of Retired Persons and A Shopper's Guide to Long Term Care Insurance
put out by the National Association of Insurance Commissioners. Both
addresses are listed at the end of this article.
You Are
Your Own Best Protection
Every long term care insurance policy is different, so it is crucial
to read the fine print before you sign on the dotted line. Here are
some questions to ask about any policy you may be considering:
What conditions must be met in order to collect benefits? For example,
some policies require prior hospitalization before coverage for long
term care services.
Does it
pay for any type of nursing home costs or just the costs of nursing
homes that provide skilled care?
When will
it pay for custodial home care or hospice care?
What types
of facilities are covered? Some policies will only pay for care in
facilities that meet their definitions of skilled, intermediate, or
custodial care.
Are there
built-in benefit increases to allow for inflation or is the benefit
amount pre-fixed?
Are there
provisions that would provide some coverage should your policy lapse
in future years?
Are expenses
outside your local area covered?
What is
specifically excluded from coverage?
Will your
premiums go up as you get older?
Will you
have to continue paying premiums if you go into a nursing home?
Is the
long term care insurance plan guaranteed renewable? Such a provision
means that the long term care insurance plan cannot be canceled by
the company for any reason except nonpayment of premiums.
It is also
important to research the background of the company providing the
long term care insurance plan. Find out how long they've been in business
and check with the Better Business Bureau to see if any complaints
have been registered.
The American Association of Retired Persons (AARP) has put together
a list of absolute don'ts you should keep in mind when deciding which
long term care insurance plan to purchase:
Don't ever sign a long term care insurance plan if the insurer has
the sole option of canceling insurance plan (make sure it has a guaranteed
renewable provision).
Don't sign
a long term care insurance plan that has a provision you don't understand.
Don't buy
a long term care insurance plan you can just barely afford; chances
are the premium will be raised.
Don't buy
any policy if your income is such that you will spend down your assets
to qualify for Medicaid benefits within six months of needing care
(see sidebar).
Don't buy
a long term care insurance plan that pays home care or custodial benefits
only after skilled care is given first.
Don't buy
a long term care insurance plan that covers only skilled nursing care.
Don't buy
a long term care insurance plan that covers only care received in
a Medicare certified nursing home unless there are several of these
in your area.
For More
Information:
The following organizations offer free pamphlets that describe the
nuts and bolts of long term care insurance as well as what to look
for and what to avoid in the LTC policy:
National Association of Insurance Commissioners
Publishes A Shopper's Guide to Long Term Care Insurance, which provides
a set of guidelines to use in shopping for long-term care insurance.
It is available for $0.50 a copy.
Publications Department
2301 McGee, Suite 800
Kansas City, MO 64108-2604
816-842-3600
National Association of Retired Persons guide ot long term care insurance:
Offers a free booklet entitled Before You Buy: A Guide to Long Term
Care Insurance
