What is Long-Term Care? Long-term care refers to the kind of medical care or health related care that you could need if you have a long-term illness or long-term disability, which leaves you unable to care for yourself. Long- term care can be provided in an assisted living facility or at home. It provides care with activities of daily living such as dressing, personal hygiene or household chores. There generally are four different types of long-term care: skilled nursing care, intermediate care, custodial care and home health care.
Skilled Nursing Care - Daily nursing and rehabilitative care that can be performed only by, or under the supervision of, skilled medical personnel. The care received must be based on a doctor’s orders.
Intermediate Care - Occasional nursing and rehabilitative care that must be based on a doctor’s orders and can only be performed by, or under the supervision of, skilled medical personnel.
Custodial Care - Primarily for the purpose of meeting personal needs such as walking, bathing, dressing, eating or taking medicine. It is usually provided by someone without professional medical skills or training.
Home Health Care - Usually received at home as part-time skilled nursing care, speech therapy, physical or occupational therapy, part-time services from home health aides or help from homemakers or chore workers. How are Long-Term Care expenses paid? Long-term care services can be expensive. There are four main ways that long-term care expenses are paid:
Medicare “may” pay 100% of skilled nursing facility care for the first 20 days and 80% for the next 80 days if Medicare determines the benefit or care is warranted and covered by Medicare. The Medicare benefit covers a maximum of 100 days in a skilled nursing facility, so after the 100 days is exhausted there is no more coverage or payment. This benefit is only provided if you are admitted to a Medicare certified facility within 30 days after a minimum three-day hospital stay. A physician must certify that your admission is medically necessary. Medicare may also pay for part-time skilled home health care if you are homebound and a physician certifies the care is medically necessary. Medicare supplement or “medigap” policies generally only cover the enrollee’s portion of a Medicare covered benefit and generally do not cover long-term care expenses beyond the 100-day Medicare benefit.
Medicaid will pay your nursing home only if your income and assets are less than a set amount (which is currently $2,400). If you are single, that means you must spend virtually all of your savings and other assets before Medicaid will provide coverage. If you are married, your spouse may be able to keep sufficient assets to provide for themselves, but there are strict limits.
Long-term care insurance (LTCI) is coverage you can purchase privately from insurance companies to cover or supplement the long term care expenses that government programs do not cover. There are several type of LTC insurance and a good LTC agent can assist you with them.
Self-insuring / Pay as you go is what most people end up doing since relatively few properly plan. There are some plans that let you “smartly” self insure. What do insurance companies consider when establishing premium rates? Insurance companies generally consider the following criteria when establishing premium rates: age, elimination or deductible periods, amount paid/duration of benefits, optional inflation riders, non forfeiture of benefits and optional return of premium.
Age - In general, the younger you are when you buy a policy, the lower the premium will be. Most companies will not sell policies to individuals over 79 years of age.
Elimination or deductible periods - These periods are the number of days you must stay in a facility, or the number of home care visits you must have received, before policy benefits begin. Usually, the longer the elimination or deductible period, the lower the premium.
Amount paid and duration of benefits - In general, the more money the policy will pay or the longer the benefit period, the more you will pay for the policy. For example, a policy that pays you $200 a day for up to five years of nursing home care will cost more than a policy that pays $100 a day for three years.
Optional Inflation Riders - Tax qualified policies are required to offer inflation riders as an option to insureds. Many insurers offering non-tax qualified policies offer optional inflation riders for an additional premium. These riders usually increase the daily benefit each year by a specified amount of at least 3%.
Nonforfeiture Benefits and Optional Return of Premium - Tax qualified policies are required to offer nonforfeiture benefits as an option to insureds. After ?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" /March 17, 2003, insurers must begin offering optional nonforfeiture benefits for all long-term care insurance policies (both non-tax qualified and tax qualified). If an insured stops paying premiums, a nonforfeiture rider provides paid long-term care coverage equal to at least 30 times the daily benefit. These benefits are generally not available until the insured has been covered by the policy for three or four years. Some insurers offer a return of premium rider for an additional premium. Some return of premium riders may pay a benefit only if an insured dies while other return of premium riders provide a benefit when either the insured dies or stops paying premiums. In either case, the return of premium benefit returns a pre-defined portion of the total premiums paid for the policy. How will insurance companies who sell long term care insurance determine if they will sell me a policy? Most insurers who sell long-term care insurance use medical underwriting to determine if they will sell you a long-term care insurance policy. Medical underwriting is a process done by insurance companies that reviews a number of factors including your health history. Long-term care insurance companies use the information gathered during the underwriting process to determine if you will be sold a policy. Long-term care insurers are not required to sell you a long-term care insurance policy if you do not meet their underwriting standards. What are Tax Qualified Long-Term Care Policies? Federal law allows individuals to deduct a portion of the premium of a tax-qualified long-term care policy from your taxes if you itemize your taxes and your medical and dental expenses exceed 7.5% of your adjusted gross income. In addition, benefits received from a tax qualified long-term care policy may not be taxable. An individual must meet the eligibility requirements for a tax-qualified long-term care policy to qualify for benefits under that policy. A licensed health care practitioner must certify that an individual is “chronically ill” and prescribe a plan of care. An individual is considered chronically ill if care is expected to be needed for at least 90 days or requires substantial supervision due to severe cognitive impairment. What are the limitations on Long-Term Care Insurance? All insurance policies contain limitations and exclusions that you should know and understand. The following limitations are long-term care specific:
• Pre-existing condition waiting period — The waiting period that must pass before the policy pays for care related to a health problem you had when you applied for the policy. There could be a waiting period of up to six months before you would receive benefits for that condition.
Eligibility — Each company sets its own age limits after which time you will be unable to buy a policy. Most policies are available to those individuals between the ages of 18 and 79. The renewability provision lists the circumstances under which the policy can be cancelled by the insurance company or how much and when premiums can be raised. All policies must be guaranteed renewable.
Exclusions — Specific conditions for which long-term care insurance will not pay. For example, policies may not pay for long-term care related to mental or nervous conditions, alcoholism or other health conditions or situations. However, organic disorders such as Alzheimer’s Disease must be covered. How can I be prepared to look for Long Term Care Insurance that meets my needs? Determine your resources — What kind of resources do you have or do you plan to have to take care of your long-term care needs? This information will help you decide if you need long-term care insurance at all and how much coverage you may need. If you need advice, consult a relative, friend, attorney or financial planner who understands your financial needs. Your Area Agency on Aging has trained individuals through the APPRISE program who can also help you understand your insurance needs.
Shop and compare — Approximately 15 companies sell long- term care insurance. Agents must supply you with the publication “A Shopper’s Guide to Long-Term Care Insurance” prior to presentation of an application. If one is not provided, ask for it.
Look for specifications — Policies generally pay only for expenses in facilities that are licensed by the Commonwealth and participate in Medicaid/Medicare or meet the policy’s definition of skilled, intermediate or custodial care. Check the nursing homes in your area to make sure they meet policy definitions.
Know the policy’s coverages and limitations — Ask your agent to explain all coverages and any provisions that would limit or restrict the benefits contained in the policy. The agent must provide you with a “Long-Term Care Insurance Outline of Coverage.” This document will provide you with the terms, conditions, benefits, limitations, and exclusions of the recommended policy. It is the agent’s responsibility to explain anything that may be confusing to you. If an agent refuses to explain the policy and provide an outline of coverage, do not buy from that agent.
Don’t be pressured — Take advantage of 30-day free look provision for long-term care policies. Once you receive a policy, you have 30 days to review and return it (we suggest registered mail), if you change your mind. If the policy is purchased through a direct response solicitation, you will have the right to return it within 30 days of its delivery. For your protection, agents are prohibited from engaging in “high pressure” sales tactics to induce or force you to purchase a long-term care insurance policy.
Be awares of the Medical Underwriting criteria - Most long-term care policies require that you pass medical underwriting criteria. This is usually either an examination or signing a release for information from your physician
Be aware of the difference between Accelerated Benefits and Long Term Care Insurance- Many insurance companies offer accelerated benefit riders that can be added to life insurance policies and annuities. These benefit riders are not long-term care insurance.
Be aware of the difference between Home Service Contracts and Long Term Care Insurance- Home service contracts that provide for services such as cooking, lawn care and laundry are not long-term care insurance. These contracts are not insurance and are not regulated by the Insurance Department.