- What is long – term care?
Long – term care is the day-in, day-out assistance you need when you have a serious illness or disability that lasts for a period of time and you are not able to take care of yourself. Long term care refers to a wide range of services delivered in your own home, adult day care centers, assisted living facilities, continuing care communities and in nursing homes. The level of care may be skilled or intermediate, but most frequently is at a custodial or personal level of care. 95% of the people who reside in nursing homes are receiving custodial care. The need for custodial care may be the result of an injury, illness, chronic condition or the frailty of aging where a person requires assistance with activities of daily living (ADL) such as bathing, dressing, feeding, transferring, toileting, or continence.
- What are the chances that you will need long – term care?
70% of people over age 65 will require long – term care at some point in their lives. At age 75 the probability is greater. The older you are, the greater the probability that some form of long – term care will be required. Of those entering nursing homes, half will stay less than three months, many of these requiring care as part of a convalescing process. The average stay of the other half entering nursing homes will be approximately 3 years.
- How much does long – term care cost?
The current cost of nurses aides or home health aides ranges from $20 to $30 per hour. Home health care can amount to over $40,000 per year or more. The cost of nursing homes average about 380 per day in upstate NY – that’s an annual cost of $138,700. Downstate costs range from $140,000 – $175,000 per year.
- What is the future cost of long – term care?
Assuming a 3% inflation rate, the annual cost of a nursing home stay:
in 10 years will amount to $186,401
in 20 years will amount to $250,507
in 30 years will amount to $336,661
In 30 years, assuming an inflation rate of 3%, the average cost of a 5 year nursing home stay will cost a total of $1,683,305.
- Doesn’t my Medicare Supplement Policy or my catastrophic policy cover long – term care expenses?
Coverage is very limited. After at least a 3 day hospital stay, if continuous skilled care is required in a skilled nursing facility, then Medicare may pay in full up to 20 days and the excess amount after a significant deductible per day up to a maximum of 100 days. Some Medicare supplements will reimburse this daily deductible of Medicare approved expenses in a nursing home. Less than 2% of nursing home income is derived from Medicare and Medicare Supplements. In certain situations, if skilled care is required at home, Medicare may pay. It is estimated that Medicare paid only 11% of home health care costs last year.
- Who pays for long – term care?
3% – Medicare, Medicare Supplements, conventional health policies
0% – Catastrophic Care Policies
46% – Medicaid and state programs
51% – Your savings or Private Health InsuranceMedicare, Medicare Supplements, & health policies specifically exclude custodial care.
- How does the risk of requiring long – term care at home or in a nursing home compare to other risks I face?
- 1 in 1200 – the chance of a $100,000 loss from a fire or accident in your home
- 1 in 240 – the probability of a $100,000 or greater liability suit arising from an automobile accident
- 1 in 15 – the chance you will encounter major medical health care expenses of $100,000 or more (according to the Health Care Financing Administration)
You probably have coverage for each of the above risks, and well you should. Yet, the probability of encountering significant long – term care expenses is better than 1 in 5, and the greatest risk of all.
What steps have you taken to prepare for the possible need for long – term care?
- Do you need long – term care insurance?
Not everyone needs long – term care insurance. If you have limited assets, then Medicaid and community based programs may effectively meet your long – term care needs. If you do have assets to protect, then you probably would not qualify for Medicaid or community based programs. If you want to maintain your independence, if you want to have the most choices as to where, when, and how care is provided, then long – term care insurance may be your best answer. Financial professionals and legal advisors know the important role that a properly structured long – term care insurance policy fills.
- What provisions are included in long – term care policies?
Provisions that Affect the Annual Premium
9a. Benefit Period A policy should provide sufficient coverage for a long stay with minimum coverage of 3 to 4 years. With a lifetime benefit period there would be no limit to the total benefits paid. The longer the benefit period, the higher the premium.
9b. Daily Benefit Amount An adequate daily benefit should be selected so that assets do not have to be invaded to pay for LTC. Generally, we are recommending a minimum between $150-$200/day. This is based on average nursing home costs in Upstate NY. The amount you choose may vary based on the amount of income you have available to pay for LTC expenses. The higher the daily benefit amount selected, the higher the premium.
9c. Home Health Care Most people prefer to receive care at home for the longest possible time. Proper coverage can delay or even eliminate the need, in some situations, for nursing home care. The amount of the daily benefit and the length of the benefit period selected for home health care affects the premium. For most policies, home health care coverage is available through a rider to the policy. Some policies integrate home health care into the core policy and you can choose a home health care benefit that is 50% or 100% of the nursing home benefit. Adult day care is generally included as part of home health care coverage. Assisted living may be a part of either the nursing home or home health care provisions depending upon the policy.
9d. Inflation Protection It is important that policy benefits keep pace with increasing nursing home and home health care costs. For an additional premium, a number of nursing home policies include inflation protection, with benefits increasing at 5% annually. At National Long-Term Care Brokers we usually recommend this additional protection to those under 75 years of age. For those 75 and up, depending upon the insurance company selected, it may be more cost effective to choose a higher daily benefit amount without the Inflation Protection Option. Be cautious about policies offering inflation protection by permitting you to buy additional coverage every one, two or three years. If you want to protect against inflation, make certain that your premium includes an automatic inflation provision where premiums stay level while your daily benefit increases each year.
9e. Elimination Period (Deductible or Waiting Period) The elimination period choices vary from one policy to the next — generally from 0 to 100 days. The longer the elimination period you choose, the lower the premium will be.
Essential Factors In A Good Long Term Care Policy
Financially Stable Company It is important to make certain that the insurance company you select will be capable of paying benefits when they are needed. A.M. Best, Duff & Phelps, Standard and Poor’s, Moody’s and Weiss Research are companies which specialize in evaluating the financial condition of life and health insurance companies. High ratings from at least two of the above rating services are recommended.
Guaranteed Renewable As long as the premium is paid on time, the insurance company must renew the policy annually, even if the client’s health has deteriorated. Premiums will stay level for the life of the policy and can change only if the state insurance commissioner approves the change for everyone who has a policy in that state.
No Prior Hospital Stay is Required You do not need a prior hospitalization to be eligible for benefits. This is particularly important since only half the people entering nursing homes have received care first in a hospital. Many people are admitted to a long term care facility following a period of care at home.
Well Defined Benefit Triggers
There are 2 ways to access benefits:
Activities of daily living – your physician certifies that you require help with bathing, dressing, mobility, toileting, continence, or taking medications. Access to policy benefits is based on your failure to perform at least 2 or more activities of daily living.
Cognitive impairment – you physically may be able to perform the activities of daily living, but need to be reminded to do so because of organically based dementia such as Alzheimer’s.
The Kennedy-Kassebaum Bill passed by Congress in early August 1996 and subsequently signed by President Clinton set standards for LTC products. To meet the benefit trigger under a tax-qualified policy, the policyholder needs to meet the law’s definition of a “chronically ill individual.” A “chronically ill individual” is someone who has been certified within the preceding 12 months by a licensed health care practitioner as:
- One who will be unable to perform without substantial assistance at least two activities of daily living (ADL) for at least 90 days due to a loss of functional capacity. The 90 day requirement is an indicator of the severity of the condition; it is not a policy elimination period
- One who requires substantial supervision to protect such individual from threats to safety due to severe cognitive impairment.
No Requirement For Skilled Care In A Nursing Home Before Benefits are Paid
There are three levels of care in a nursing home: Skilled, Intermediate and Custodial. Since fewer than 1/2% of the residents in a nursing home receive skilled care, it is important that the nursing home policy pay benefits no matter what level of care the person qualifies for. Most people in a nursing home (95%) receive care at the custodial care level.
Home Health Care Which Does Not Require Confinement in a Nursing Home
If a person purchases a policy that includes home health care, the policy should stipulate that home health care benefits be paid without having to enter a nursing home first. Many people require home health care assistance after leaving a hospital. Usually, people enter a nursing home only after the home health care arrangements have become unsatisfactory.
Waiver of Premium Benefit
The waiver of premium benefit says that you no longer need to continue premium payments under certain policy provisions when you are receiving benefits. This feature can vary greatly, depending upon the company. The best waiver of premium benefits waive the premium when you are receiving either home care or nursing home care. Some are limited to just nursing home care benefits. Be sure that you understand how you waiver of premium benefits work in your policy, BEFORE you buy it!
Covers Alzheimer’s Disease and Senile Dementia
Nursing home and home health care benefits must be paid for those suffering from these illnesses, providing the diagnosis was after the policy issue date.
- How do I know which coverage I should choose or which company I should select? Evaluate the new information you have received based on your particular requirements. Talk with an insurance or financial professional who understands long – term care, and can properly evaluate and meet your needs by looking at several different carriers. When appropriate, this professional can work with you, your family, and your financial or legal advisors to provide you with effective protection at an affordable premium.
- Why do people buy long – term care insurance?
- Assures independence
- Helps protect your family
- Provides you with choices
- Helps protect your retirement savings, property and family assets
- Gives you peace of mind
- To avoid becoming a burden on family members
- Planning ahead makes a difference! Planning ahead will keep you financially sound, while providing you with more choices and more control should you require long – term care. The secure retirement you and your family have been looking forward to can be assured, but only if you act.