Questions & Answers on Long-Term
The following information has been provided by Long-Term Care Quote.
When planning for the future, many people close their eyes to a
significant fact of life: One day, they-or someone close to them-may suffer a chronic
condition requiring care at home or in a nursing facility. If this occurs, it can be
emotionally devastating. If it lasts long, it can be financially devastating as well.
The good news is your retirement years can be comfortable and secure
even if you do encounter health problems. But it won't happen automatically. You
need to take action. You need to have a plan. This concise, easy-to-read Q&A guide
will help. It explains your options in simple language, so that you can confidently choose
the best strategy for you. And it gives you a helpful overview of what to look for in a
good policy and how to get started.
Q. What is long-term care?
A. Long-term care is the help needed to cope-and sometimes survive-when a chronic
disability such as arthritis, heart disease, stroke or memory loss impairs your capacity
to perform the basic activities of everyday living. Today, it includes a broad range of
supportive medical, personal and social services which can be provided in a nursing home,
in your own home, in an
adult-day care facility, or in an assisted living facility. There are three levels of
care: skilled (or acute) care; intermediate care; and custodial (or personal) care.
Custodial is by far the most common.
Q. What are the odds you or your spouse will need long-term care?
A. According to the Health Insurance Association of America, your risk of needing
long-term care at age 50 is one in five. At age 65, it's four in 10. And at age 75, it's
seven in 10. That's significant. The average stay is two and one-half years. About 10%
stay five years or longer.
Q. What's the cost of long-term care?
A. According to the National Association of Insurance Commissioners, the average cost
nationally of a year in a nursing home is $38,000, but costs can range as high as $80,000.
Home-care expenses can range from $90 to $150 a day. Inflation is a important factor to
consider. According to the U.S. General Accounting Office, these costs could triple in the
next 20 years.
Q. Who pays for long-term care?
A. According to the U.S. Health Care Financing Administration, nearly one-third of all
long-term care bills are paid by individuals and families out of their own pocket. About
40% are paid by Medicaid, but only after an individual's assets have been reduced to the
poverty level. Only about 18% of services are paid by Medicare. The rest is paid by
miscellaneous sources. Here's a frightening fact: According to Business & Health
Magazine, 70% of single people and 50% of married couples with one partner requiring
long-term care become impoverished within one year.
Q. If the risk and cost are so high, why don't more Americans have a
A. Because they falsely believe they're already covered, either by Medicare, Medicare
supplement insurance or health insurance. Or they cling to the hope that the federal
government will eventually pay their long-term care bills-or that their family, even
though they may be geographically dispersed and raising families of their own, will be
able to take care of them on a
daily basis. Or they believe it will never happen to them-and if it does, their personal
savings will be enough to cover the expense. These are all dangerous misconceptions.
Q Does Medicare, Medicare supplement or major medical insurance pay
long- term care?
A. Unfortunately, no. Medicare primarily covers medical expenses, hospital bills and
doctor's fees. When it comes to long-term care, Medicare is limited and restrictive. It
pays only when your care follows a hospital stay of at least three days; is given in a
skilled-nursing facility approved by Medicare; is given pursuant to a physician's written
plan; and is daily skilled nursing care. (Remember, practically all long-term care
administered in the U.S. is custodial, not skilled). And even if you meet all of the
above requirements, Medicare will only pay for 100 days of skilled care. After that,
you're completely on your own!
What about Medicare supplement insurance? "Medigap policies," as they're
called, cover the smaller deductibles and co-payments in Medicare. They do not, however,
fill the largest gap-and that is the high cost of long-term
care. Will major medical insurance help? No, your medical insurance, like Medicare, covers
acute care prescribed by a doctor and given in a hospital. It does not cover low level,
custodial or intermediate nursing care.
Q. Will Medicaid cover long-term care?
A. Medicaid, the federal/state welfare system that finances health care for the poor, will
pay your long-term care bills. But to qualify, you must exhaust virtually all of your
income and assets. You must become impoverished; a ward of the state. Then, and only then,
does Medicaid pay. In fact, in most states, you will qualify for food stamps before you
qualify for Medicaid.
Q. Can you shelter assets and still take advantage of Medicaid?
A. Today, that's very difficult to do. The period you can set up a trust before applying
for Medicaid has recently been lengthened from two-and-one-half years to five years. Also,
it's more difficult now to purposely "spend down" to the $2,000 in assets
necessary to qualify for Medicaid. You have to wait 36 months if you transfer assets for
less than their "fair market value." Worse yet, states now have the right to
force your heirs to sell your assets-including your house-after you've passed away to
repay the Medicaid coffers. And finally, the 1996 Health Insurance Portability and
Accountability Act made the practice of purposely sheltering assets to qualify for
Q. What are the options to pay for care-and how do you determine
your best strategy?
A. When it comes to paying for long-term care, you have four options: (1) Do nothing and
hope for the best; (2) Spend down to poverty and let the government pay your bills through
welfare; (3) Self insure through personal savings; or (4) Transfer the risk through
private insurance. Which alternative is best for you? That depends on your age, the status
of your health (both physical and mental) and your financial worth. Here's a rule of
thumb: If you're age 50 or older, relatively healthy and have a net worth of between
$100,000 and $1.5 million, you should seriously consider private long-term care insurance.
It's the single most important insurance purchase you can make.
Q. What is long-term care insurance and why should I consider it?
A. Long-term care insurance is a relatively new type of coverage which allows you to
transfer the risk of needing expensive long-term care to an insurance company in return
for the payment of a premium. You should consider this type of policy to protect your
income and assets, assure access to top-quality care and avoid dependence on others,
including your family and the government.
Q. How do private long-term care policies work?
A. That's easy. You pay a premium-which is based on your age when you apply and is
projected to stay the same year after year-and in return the insurance company gives you
access to a "pool of money." This pool of money is available to you if you need
long-term care in the future. It's like setting up a "rainy day" account at your
bank for pennies on the dollar. When you buy a policy, you can design a plan to fit your
needs and budget. To do so, you make four choices. You select:
- A benefit period. This is the length of time, after you file a
claim, that the insurer will pay for your care. Choose anywhere from one year (365 days)
to 10 years (3650 days). You can even choose a Lifetime/Unlimited policy.
- A daily benefit. This is the maximum amount per day the insurer will
pay for your care. Choose between $30 and $300 in $10 increments.
- An elimination period, or deductible. This is the number of
days which you must pay out of pocket when you first need care. Choose from first day
coverage up to a one-year wait.
- An inflation protection option. Available for additional premium,
this will increase your daily maximum amount over time to help keep up with inflation.
Choose either a "5% simple" or a "5% compound." For applicants up to
age 65, we generally recommend 5% compound; for applicants age 66 to 75, we generally
recommend 5% simple; and for those age 76 and older, we recommend you forego this option
and simply buy more daily benefit than you'd actually need today.
Q. How do you determine the total value of your "pool of
A. The total value of your policy is determined by multiplying the number of days in your
benefit period by your daily benefit. For example: If you selected a benefit period of
5-Years (or 1825 days) and a daily benefit of $100, your total policy value would be
$182,500 (1825 days multiplied by $100). Of course, if you elect inflation protection,
this amount will increase over time.
Q. At what age can you apply?
A. People age 18 to 99 can apply.
Q. How do you tell a good long-term care policy from a bad one?
A. There are a lot of considerations when it comes to purchasing a long-term care policy.
However, there are some features you must insist on. For example, you must insist on:
- A large, well-rated, experienced insurance company.
- Favorable benefit triggers. These are the requirements you must meet
before your insurance company pays for your care. Look for a policy that allows your
doctor to certify your eligibility and one that includes "hands-on" and
- A policy that pays 100% of actual expenses-up to your daily
maximum-regardless of where you receive care.
- A policy that waives your premium in the event you need care.
- A policy that requires you to satisfy your deductible only once.
- A company that has a track record of not increasing premiums often.
- A reasonable premium.
Q. What is a tax-qualified long-term care policy?
A. In 1996, the U.S. Congress enacted the Health Insurance Portability and Accountability
Act (HIPAA). HIPAA created "qualified long-term care insurance." If a policy
meets the Act's requirements, its receives certain tax advantages. As of January 1, 1997,
premiums paid for qualified long-term care insurance may be deductible as a medical
expense for Federal income tax
purposes, up to a specific limit, based on your age. This means you can claim your
premiums as itemized medical deductions in Schedule A, Form 1040, if they-in addition to
other medical expenses-exceed 7.5% of your adjusted gross income. Also, benefits you
receive from a qualified long-term care insurance policy are not subject to Federal income
taxation. All other
policies are considered to be "non-qualified." Note: Corporations and self
employed individuals were given exceptionally favorable tax incentives.
Q. How do you qualify for long-term care coverage?
A. You have to be in relatively good health, both mentally and physically. If so, you
select a policy, complete an application and submit it with one sixth, or two month's
premium. Your eligibility is based on your answers to the application questions, a review
of your medical records and, in some cases, a face-to-face assessment, or interview, with
a nurse. The approval process usually takes four to six weeks. Note: Very rarely is a
physical exam required. Plus, you'll be glad to know there's no risk to you to apply.
Every policy by law comes with a 30-day money-back guarantee, or "buyer's remorse
clause." If you change you mind, you can receive a complete refund by simply
returning your policy during the free look period.
Q. How do you find the best policy?
A. There's really only one way to find the best policy: Shop around. That's right. You
must take the time and expend the energy to thoroughly compare companies, policies and
Q. At what age should I apply?
A. The sooner, the better. Here are three good reasons not to delay:
- Your premiums are based on your age at the time of application. So
the sooner you apply, the less expensive it will be to get coverage.
- Once you're approved, your rate does not go up as you get older.
- The longer you wait, the greater your chance of becoming uninsurable.
Remember, your eligibility is based on your health at the time of application. So the
sooner you apply, the easier it will be to get coverage. Fact: One in four applicants are
turned down for health problems.
Q. You insure the things in life that are important to you, right? So why not insure your
financial security and retirement dreams?
A. Consider this. Your risk of needing long-term care-and therefore using this type of
insurance-is high. In fact, it's much greater than many other risks you face in your
life-risks you wouldn't consider going one day without insuring. For example:
- Your risk of a major fire in your home is 1 in 1200, yet I'm certain
you have homeowners insurance.
- Your risk of a major auto accident is 1 in 240, yet I'm certain you
have car insurance.
- Your risk of spending more than $30,000 in a hospital is 1 in 15, yet
I'm certain you have health insurance or Medicare.
Now, consider this: Your risk at age 65 of needing long-term
care-which could easily cost you $100,000 or more-is practically 1 in 2, or 50%! At age
75, it's 70%! With odds like these, doesn't it make sense to insure your financial
Proceed to Step 2: What To Look For - And
Insist On - In a Long-Term Care Policy
This information has been provided by Long-Term Care Quote.
ElderCare Online assumes no responsibility or liability for information provided here.