LONG TERM CARE
What Is It and How Is It Useful?
Long-term care insurance can protect you against the cost of long-term
nursing home care, home health care and other health or disability-related services you
If you're independently wealthy, the potential cost might not concern
you. For many, however, the costs will become a significant burden because they do not
have private insurance and most employer health plans do not include long-term care
Will Medicare help?
Certain costs are covered by Medicare:- up to 150
days of inpatient hospital care and 100 days of nursing home care per benefit period, but
only in a Medicare-certified skilled nursing facility, and then only if admission to the
nursing home follows a hospital stay. These restrictions may result in little or no
coverage for you. Other costs of long-term care may be covered by a Medicare Supplemental
Plan (or a "Medigap" plan).
Hospital Care. You have up to ninety day
coverage for each benefit period. You pay a deductible of $716 for the first 60 days of
coverage and then a coinsurance charge of $179 per day for up to 30 additional days.
Finally, you have a lifetime 60 day reserve in which you are required to pay a coinsurance
amount of $358 per day.
Nursing Home Care. Currently, the first 20
days of your stay in a skilled nursing facility are paid for by Medicare. After 20 days,
coverage continues for up to 80 more days; however, you are required to pay a coinsurance
charge of $89.50 per day.
Benefit Period. A benefit period starts
when you enter the hospital and ends 60 days after the day you leave. There is no limit on
the number of benefit periods during your lifetime.
Will Medigap help?
Medicare supplement (or Medigap) insurance is private insurance that you
purchase that is designed to pay expenses not covered by Medicare. Examples of expenses
covered include the hospital and medical deductibles and the coinsurance payments. Medigap
policies generally do not extend coverage. Therefore, Medigap insurance should not be
viewed as long-term care insurance.
What about Medicaid?
Medicaid is the health insurance system for the indigent. It covers
long-term care and, in fact, pays almost half of all nursing home costs. Many people will
not qualify for Medicaid benefits because of certain income and asset limitations. You
must "spend down" your income or assets to a level determined by each state
before you can begin to receive benefits. You may have to give up control over most or all
of your assets before you receive benefits.
In addition to Medicare, Medicaid and Medigap insurance, you can purchase long-term
care insurance, a relatively new product.
How Do You Assess Your Needs?
Could you afford nursing home care if it cost as much as $6,000
To assess your need for long-term care insurance, consider these
- Are your assets or income enough to both cover the cost of nursing home
care and provide support for your family?
- What is the average cost of nursing home care in your state?
- Do you come from a family with a history of medical problems or issues? A "dread disease" policy can cover
you against the cost of a particular disease, such as cancer. This type of policy may be
suitable if a particular kind of illness runs in your family.
- If you cannot pay for care yourself, can you count on support from family
members or friends?
- Do you come from a family with extended life expectancies? The longer you live, the more likely it is that you may require some type of
on-going nursing care. In this situation, long-term care insurance should be considered
What Products are Available?
Long-term care insurance is relatively new. The policy usually covers
one or all of the following needs:
- Nursing Home. A public or private facility that
provides a variety of types of care ranging from custodial to skilled care. You need to
determine if the benefits under a particular policy cover the type of care provided by a
particular nursing home.
- In-Home Care. The care is provided in your
own home. The type of care can be limited by a particular policy. You should look for a
policy that pays for a variety of in-home services (skilled nursing care, home health
aides, homemaker assistance) since your needs may vary over time.
- Respite Care. The
care provided by a medical professional as a temporary substitute for a family member who
is providing in-home care on a daily basis.
- Hospice Care. The
care provided to help and support an individual who is terminally ill.
The care given for each of the above needs is generally categorized as:
- Skilled Care. Care that is
provided by skilled medical personnel such as doctors, registered nurses and professional
- Intermediate Care. Care
that is less specialized than skilled care and is delivered by trained personnel under the
orders of a doctor and supervision of registered nurses. This type of care is often needed
for a long period of time.
- Custodial Care. Care
that focuses on the activities of normal daily living such as bathing, eating, dressing,
and other routine activities. It is usually provided by non-medical personnel. It may also
be referred to as personal care.
Premium and Policy Considerations
The costs of premiums associated with long-term care insurance differ
dramatically, depending on the type of benefit the policy offers, as well as the terms and
exceptions that are specified in the policy. Generally, policies differ on the amount of
benefit they will pay each year and the total benefit to be paid over the life of the
Some of the terms you will encounter when purchasing a long-term care
- Guaranteed Renewability. A policy that is
guaranteed renewable for life prevents the insurer from canceling the policy except for
nonpayment of premiums.
- Elimination, Waiting or Deductible Period. The
elimination, waiting or deductible period specifies the number of days you must wait
before the policy will begin paying benefits to you. This period will vary depending upon
the particular policy and may be as long as 200 days.
Tip: If you have adequate cash reserves, consider a
policy with a longer waiting period as a way of reducing your premium cost .
- Inflation Rider. This feature provides for
the anticipated rise in the cost of long-term care. A rider to offset inflationary
increases, however, can increase premium cost by as much as one-third.
- Waiver of Premium. A waiver of premium will
allow you to stop making your premium payments once you begin to receive benefits.
- Non-Forfeiture Clause. This clause will
allow you to receive either a refund of a portion of the premiums that you have paid or a
reduced paid-up benefit if you terminate your coverage before you collect any benefits.
- Non-Cancelable Clause. A policy that will remain in force
with the same cost of premiums throughout the life of the policy. The policy can only be
canceled is for nonpayment of premiums.
Policies will often except or exclude certain conditions. You should carefully
read the policy to determine if coverage is excluded or affected by any of the following:
- Custodial Care. The policy should provide
coverage for skilled, intermediate and custodial care. Custodial care is basic and does
not need for licensed medical professionals. It is an essential element of any coverage.
- Pre-Hospitalization Requirement. Some
policies require the individual to be hospitalized before receiving long-term care for
benefits to be paid. Many individuals do not go to long-term care facilities directly from
a hospital, so this requirement can result in a denial of benefits at a crucial time.
- Pre-Existing Condition. A medical condition
for which you have sought medical advice or treatment or had symptoms within a specified
period before applying for coverage. An insurance company may refuse to pay benefits for
care for pre-existing conditions.
- Alzheimer's Coverage. A good policy will
provide coverage in the event of Alzheimer's disease. This disease is generally described
in policy language as "organically based mental conditions." If such coverage is
not specifically mentioned, Alzheimer's coverage is probably not included in the policy.
Since long-term care insurance is relatively new, it can be difficult to
compare policies. Policies offer different benefits, include different terms, and exclude
Check out the financial condition of the insurance company. As with any
kind of insurance, investigate the ratings of the insurer.
Comparison shop for premiums and features. Do your shopping as early as
possible. If you wait until age 75 to purchase this insurance, your premiums can be double
the premiums you would pay at age 65. If you are considering
changing or switching long-term care policies, do not cancel the old policy until you have
determined that any pre-existing condition clauses in the new policy do not apply.