Guide To
Long-Term Care (LTC) Insurance
What
is long-term care?
Are
you likely to need long-term care?
What
does long-term care cost?
Who pays
the bills?
What
kind of insurance is available?
What
do policies cost?
What
do long-term care insurance policies cover?
What is
not covered?
What
else should I know before I buy?
What
about switching policies?
A
summary of features
Before you
buy
Long-term
care policy checklist
HIPAA's
impact on long-term care insurance
Tax clarification
Consumer
protection standards
If you need
help
What
is Long-Term Care?
Most Americans know about
the kind of health insurance that pays doctor and hospital bills. But
the kind that pays for long-term care in a nursing home or at home is
not as familiar.
Long-term care goes beyond
medical care and nursing care to include all the assistance you could
need if you ever have a chronic illness or disability that leaves you
unable to care for yourself for an extended period of time. You can receive
long-term care in a nursing home, or in your own home, in the form of
help with such activities as bathing or dressing. Long-term care can be
of help to a young or middle-aged person who has been in an accident or
suffered a debilitating illness. But most long-term care services are
used by older people.
Beyond nursing homes, there
is a range of services available in the community to help meet long-term
care needs. Care given by family members can be supplemented by visiting
nurses, home health aides, friendly visitor programs, home-delivered meals,
chore services, adult daycare centers, and respite services for caregivers
who need a break from daily responsibilities.
These services are becoming
more widely available. Some or all of them may be found in your community.
Your local Area Agency on Aging or Office on Aging can help you locate
the services you need. Call the Eldercare
Locator at 800-677-1116 to identify your local office.
Are
You Likely To Need Long-Term Care?
This year about seven million
men and women over the age of 65 will need long-term care. By the year
2005, the number will increase to nine million. By the year 2020, 12 million
older Americans will need long-term care. Most will be cared for at home;
family members and friends are the sole caregivers for 70 percent of elderly
people. But a study by the U.S. Department of Health and Human Services
indicates that people of age 65 face at least a 40 percent lifetime risk
of entering a nursing home. About 10 percent will stay there five years
or longer.
The American population is
growing older, and the group over age 85 is now the fastest-growing segment
of the population. The odds of entering a nursing home, and staying for
longer periods, increase with age. In fact, statistics show that at any
given time, 22 percent of those age 85 and older are in a nursing home.
Because women generally outlive men by several years, they face a 50 percent
greater likelihood than men of entering a nursing home after age 65.
You may never need a nursing
home. But the longer you live, the greater the chance that you will need
some form of long-term care.
What
Does Long-Term Care Cost?
Long-term care can be very
expensive. As a national average, a year in a nursing home is estimated
to cost more than $50,000. In some regions, it can easily cost twice that
amount.
Home care is less expensive
but it still adds up. Bringing an aide into your home just three times
a week (two to three hours per visit) to help with dressing, bathing,
preparing meals, and similar household chores-can easily cost $1,000 each
month, or $12,000 a year. Add in the cost of skilled help, such as physical
therapists, and these costs can be much greater.
Who
Pays The Bills?
For the most part, the people
who need the care pay the bills. Generally, neither Medicare nor private
Medicare supplement insurance nor the health insurance you may have either
on your own or through your employer will pay for long-term care.
Medicare supplement insurance
(often called Medigap or MedSupp) is private insurance that helps cover
some of the gaps in Medicare coverage. Those gaps are hospital deductibles,
doctors' deductibles, and coinsurance payments or what Medicare considers
excess physician charges-but they are not long-term care.
About one-third of all nursing
home costs are paid outof-pocket by individuals and their families. Only
about 12 percent is paid by Medicare, for short-term skilled nursing home
care following hospitalization. Medicare also pays for some skilled at-home
care but only for short-term unstable medical conditions and not for the
ongoing assistance that many elderly people need. Most of the balance
of the nation's long-term care bill-almost half of all nursing home costs-is
picked up by Medicaid, either immediately, for people meeting federal
poverty guidelines, or after nursing home residents "spend down"
their own savings and become eligible. Many people who begin paying for
nursing home care find that their savings are not enough to cover lengthy
confinements. If they become impoverished after entering a nursing home,
they turn to Medicaid to pay the bills. Turning to Medicaid once meant
impoverishing the spouse who remained at home as well as the spouse confined
to a nursing home. Recent changes in the law, however, permit the at-home
spouse to retain specified levels of assets and income.
You cannot predict what kind
of care you might need in the future, or know exactly what the costs will
be. But since you may have long-term care expenses, you need to know if
long-term care insurance is appropriate for you.
What
Kind of Insurance is Available?
Long-term care insurance is
similar to other insurance in that it allows people to pay a known and
affordable premium that offsets the risk of much larger out-of-pocket
expenses. Although long-term care insurance is relatively new, more than
100 companies now offer coverage.
Several types of policies
are available, but most are indemnity policies. This means that they pay
a fixed dollar amount for each day you receive specified care either in
a nursing home or at home.
Today, many companies also
offer "integrated policies" or policies with "pooled benefits."
This type of policy provides a total dollar amount that may be used for
different types of long-term care services. There is usually a daily,
weekly, or monthly dollar limit for your covered long-term care expenses.
For example, you purchase a policy with $200,000 of "pooled benefits."
Under this policy, you may be allowed to use up to $150 a day towards
your covered nursing home, assisted living, or home care expenses. No
policy is guaranteed to cover all expenses fully.
Policyholders usually have
a choice of daily benefit amounts ranging from $50 to more than $300 per
day for nursing home coverage. The daily benefit for at-home care may
be less than the benefit for nursing home care. Note, though, that you
are responsible for your actual nursing home or home care costs that exceed
the daily benefit amount you purchased.
Because the per-day benefit
you buy today may be inadequate to cover higher costs after a number of
years, most policies offer an inflation adjustment feature. In many policies,
for example, the initial benefit amount will increase automatically each
year at a specified rate (such as 5 percent) compounded over the life
of the policy.
Some life insurance policies offer long-term care benefits. Under these
accelerated or living benefits provisions, a portion of the life insurance
benefit is paid to the policyholder if long-term care is needed instead
of to the beneficiary at the policyholder's death. Some companies make
these benefits available to all policyholders; others offer them only
to people buying new policies.
What
Do Policies Cost?
The cost of long-term care
insurance varies widely. Inflation adjustments can add 40 percent to over
100 percent to your premium, depending on the option you select, but can
keep benefits in line with rising costs.
The actual premium you will
pay depends on many factors, including your age, the level of benefits,
and the length of time you are willing to wait until benefits begin.
Here are details:
Age
In 1999, a policy offering
a $100 per day long-term care benefit for four years, with a 20-day
deductible, cost a 50-year-old about $409 per year. For someone who
was 65 years old, the same policy cost about $1,002, and for a 79-year-old,
the cost was $4,166. The same policy with an inflation feature may cost
$881 at age 50, $1,802 at age 65, and $5,895 at age 79.
Premiums generally don't
increase with age but remain the same each year (unless they are increased
for an entire class of policyholders at once). The younger you are when
you first buy a policy, therefore, the lower your annual premium will
be.
Benefits
The premium is also directly
affected by the size of the daily benefit and the length of time for
which benefits will be paid. For example, a policy that pays $100 a
day for up to five years of nursing home care costs more than a policy
that pays $50 a day for three years.
Elimination or deductible
periods
So-called elimination or
deductible periods refer to the number of days you must be in residence
at a nursing home or the number of home care visits you must receive
before policy benefits begin. Most policies offer a choice of deductible
ranging from zero to 100 days. A 20-day elimination period, for example,
means that your policy will begin paying benefits on the 21st day. The
longer the elimination or deductible period, the lower the premium.
You can lower your own costs
for long-term care coverage, therefore, by buying a policy at an early
age and by selecting carefully both the level of benefits and the deductible
period. In making your selection, bear in mind that while 45 percent of
nursing home stays last three months or less, more than one-third last
one year or longer. It is the costly longer stay that may be the devastating
financial blow that you may want to insure against.
What
Do Long-Term Care
Insurance Policies Cover?
Most long-term care policies
will pay benefits either when need is demonstrated by the inability to
perform a specific number of personal functions or activities of daily
living, such as bathing, dressing, or eating, or when care is needed due
to cognitive impairment.
Today's policies cover skilled,
intermediate, and custodial care in state-licensed nursing homes. Long-term
care policies usually also cover home care services such as skilled or
nonskilled nursing care, physical therapy, homemakers, and home health
aides provided by state-licensed and/or Medicare-certified home health
agencies.
Many policies also cover
assisted living, adult daycare, and other care in the community, alternate
care, and respite care for the caregiver.
Alternate care refers to non-conventional
care and services developed by a licensed health care practitioner that
can serve as an alternative to more costly nursing home care.
Benefits may be available
for special medical care and treatments, different sites of care, or medically
necessary modifications to the insured's home, like building ramps for
wheelchairs or modifications to a kitchen or bathroom. A health care professional
develops the alternate plan of care, the insured or insurer may initiate
the plan, and the insurer approves it. It is important to note that the
benefit amount will reduce the maximum or lifetime benefit available for
later confinement in a long-term care facility and that policies may limit
the expenses covered under this benefit (i.e., 60 percent of the lifetime
maximum limit).
Alzheimer's disease and other
organic cognitive disabilities, leading causes for nursing home admissions
(and a leading cause of worry for many older Americans), are generally
covered under long-term care policies.
What
is Not Covered?
All policies contain limitations
and exclusions. Otherwise premiums would become unaffordable. But the
specific limitations and exclusions are likely to differ from policy to
policy.
Consider:
Preexisting conditions
Insurance companies may
require that a period of time pass before the policy pays for care related
to a health problem you had when you became insured. Such health problems
are called preexisting conditions. Some companies exclude coverage of
preexisting conditions for six months. If you need long-term care within
six months of the policy's issue date for a condition for which treatment
was either underway or had been recommended before you took the policy,
you may be denied benefits.
Specific exclusions
Before you buy, be sure
you understand exactly what is and is not covered under a particular
policy. Some mental and nervous disorders are often not covered.
Alcoholism and drug abuse
are usually not covered, along with care necessitated by an intentionally
self-inflicted injury.
Click Here To Continue ...
Deep In Debt? — Call 1800 DEBT.COM — Get Help Today!
|
