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Q: What is long-term care?
A: Long-term care provides assistance to people who have a chronic illness, disability or cognitive impairment. It encompasses a variety of services and includes medical services, sometimes referred to as skilled care or long-term health care, and non-medical care, commonly called non-skilled or custodial care. Long-term care assists people with activities of daily living which are defined as bathing, dressing, eating, toileting, continence and transferring. It also assists people who need supervision or prompting due to cognitive impairment.
Q: What does long-term care insurance cover?
A: It all depends on the type of plan you choose. The vast majority of policies sold today are integrated plans which cover medical and non-medical services in a variety of settings including one’s own home, adult day care, assisted living facilities, memory care communities and skilled nursing facilities.
Q: Who needs long-term care?
A: Most of us think of long-term care as an end of life issue for the elderly. The projections are that by the time we reach age 65 that 70% of us will experience a long-term care event before we die. Today, 41% of the 12 million Americans receiving long-term care are between the ages of 18 and 64. The primary reason for their care is motor vehicle accidents. The need for long-term care could arise at any time.
Q: How much does long-term care cost?
A: The cost for long-term care varies depending on the type of care and the geographical area. Today, the average cost of non-medical home care is $19 per hour. The average of eight hours per day or 40 hours per week of home care costs about $43,472 annually. The national average for a private room in a nursing home is $213 per day or $77,745 annually. Review the current cost of care and project future costs in your city and state using the Genworth Cost of Care Survey – May 2011: http://tinyurl.com/LTC-Costs.
Q: Will Medicare pay for long-term care?
A: Medicare, Medicare supplements and other health insurance plans are designed to pay for curative treatments or short-term skilled rehabilitation services not long-term care which is custodial care. Medicare may cover up to 100 days of long-term care if specific requirements are met. Many people mistakenly think their disability insurance pays for long-term care. It does not. Disability insurance provides income replacement and does not cover long-term care expenses.
Q: Who pays for long-term care services?
A: There are just three ways to pay for long-term care expenses: 1) self-fund expenses using income, savings and/or liquidating assets to pay for care, 2) private insurance, or 3) qualifying for Medicaid which is government assistance. Self-funding and qualifying for Medicaid require that you spend your income and assets to pay for care. Relying on private insurance allows you to safeguard assets and income, preserving your family’s wealth and standard of living.
Q: How does Medicaid work?
A: Medicaid is a state/federal welfare program funded through tax revenues. It provides long-term care in a skilled nursing facility. In a few states Medicaid also provides limited home care. To qualify for Medicaid, assets must be spent down in accordance with government regulations. Income requirements also apply.
Q: Where do people receive long-term care?
A: Long-term care can be provided in a variety of settings. The majority of care is provided at the home of the person receiving care or in a community setting such as an adult day care center. When an individual is no longer able to live independently, he/she may move to an assisted living community, a memory care community or a skilled nursing home.
Q: Who should buy long-term care insurance?
A: Consumers who have assets that they want to protect should become educated about long-term care issues and consider purchasing long-term care insurance. We define the market for long-term care insurance using two factors: age and wealth. This insurance is available to adults between the ages of 18 and 85 depending on the product. The ideal age to buy long-term care insurance is between 45 and 65 for two reasons: insurability and affordability. At younger ages the premiums are less expensive. Consumers with assets between $70,000 and $4,000,000, excluding their homes, should seriously consider purchasing long-term care insurance. In this wealth range, even an average long-term care event could impact the family’s wealth, financial goals and standard of living.
Q: How do I qualify for long-term care insurance?
A: The state of your health is the most important factor in determining if you can qualify for long-term care insurance. Long-term care insurance is underwritten based on your medical history and current health status. When you apply, you must be mentally fit and able to perform all of your activities of daily living which are defined as bathing, dressing, eating, toileting and transferring. If you're in great health, don't use tobacco products and don’t take any medications, carriers will be quick to accept you because you will be a minimal risk. Certain health conditions could prevent you from qualifying for long-term care insurance.
Q: If I move to another state will my policy pay for my care?
A: Yes. Policies sold today are portable which means they can be used anywhere within the U.S. Some carriers have policies that cover benefits outside of the U.S.
Q: What discounts are available?
A: Long-term care insurance companies offer discounts for married couples, partners, even siblings if they live in the same household, share finances and apply together. Discounts are also available for applicants with preferred health histories. Additional discounts are available through programs designed for members of professional associations and employee groups when long-term care insurance is offered as an employee benefit. Employer programs may be offered as employer-paid or employee-paid and may result in tax advantages for the employer.
Q: What are pool-of-funds products?
A: The vast majority of long-term care insurance (LTCI) policies sold are of this design. In designing these products we literally create a pool of funds using the daily benefit amount (how much coverage) and the benefit period (how long it will last). Most pool-of-funds products are tax-qualified which means benefits paid are not taxable and premiums may be deductible depending on how policyholders file taxes. These are integrated plans which cover services in all long-term care venues: home care, adult day care, assisted living, nursing home and hospice. Numerous top-rated carriers offer these highly customizable products. Contract provisions include many benefits. A wide range of riders is also available to fit the likes and needs of clients, couples, small business owners, professional organizations and large employers. It is this product type that offers Partnership Policies and provides additional safeguards from Medicaid spend down requirements. If clients need care, these policies end up being the least costly insurance solution.
Q: What are hybrid products?
A: Life insurance and annuity based long-term care solutions are referred to as asset-based or hybrid products. Generally, a large single premium is required to fund these products. The premium creates cash value and also earns interest which explains the asset-based design of this product. These, too, are integrated plans and cover services in all venues. Fewer options are available to customize these products. These products are more appropriate for people 65 and older for two reasons: 1) inflation protection becomes less critical when purchased at older ages, and 2) most carriers’ underwriting guidelines are more lenient.
