Long Term Care
What is long-term care?
Long-term care is care needed by people who require assistance with the everyday activities of daily living due to physical or cognitive impairment – things like bathing, dressing, toileting, eating, transferring, and continence.
Where can I receive it?
Care can be provided at home, in an adult day care center, an assisted living facility, or a nursing home. More than 80% of care is received outside of a nursing home.
Who needs long-term care?
Over 20% of people 65 and older who are still living in their own homes have some sort of long-term care need. The chance of spending at least some time in a nursing home after age 65 is over 40% and the chance of needing home healthcare is greaten than 70%.
Who pays for long-term care?
Government programs seldom cover long-term care expenses. Medicare pays only 14% of all long-term care costs, according to 2001 data from the Office of National Health Statistics. But, for those who qualify, coverage is typically for short-term skilled care. Medicare does not pay for custodial care. Medicaid pays a large portion of long-term care expenses for those who have spent down their assets to the state-required level ($2,200 or less in most states.)
Long-term Care Insurance
The most popular long-term care coverage is a comprehensive plan that covers home care, adult daycare, assisted living, and nursing home. There are four basic choices made to build a plan: the daily benefit, the benefit period, the elimination period, and the inflation option.
Daily Benefit
This is the daily amount the policy will pay when you are receiving care either at a nursing home or at home.
Benefit Period
This is the length of time you want your policy to pay benefits – typically, two, three, six years or unlimited benefits.
Lifetime Benefit
This is the total amount the policy will pay during your lifetime for all benefits provided by the policy. This is figured by multiplying the maximum daily benefit by the benefit period. For example:
- Six years = 2,190 days
- 2,190 x $150 max. daily benefit = $328,500 max. lifetime benefits
This is your “pool of money” you can use for any type of care covered by your policy. The daily benefit chosen should be adequate for your area.
Inflation Protection
This option increases the daily benefit provided under the policy. This could be an automatic 5% compound or simple annual increase. Both the daily maximum and the maximum lifetime benefit increase with the option.
Elimination Period
This is the number of days you must be unable to do 2 of 6 activities of daily living before the policy provides benefits. The most common choices are 30 or 90 days.
Benefit Eligibility
You become eligible for benefits when a licensed healthcare practitioner certifies that you need substantial assistance with two activities of daily living for a period expected to last 90 days or when you need substantial supervision due to a cognitive impairment. The activities of daily living are bathing, continence, dressing, transferring, toileting, and eating.
Tax Benefits
Benefits received at claim time are income tax free regardless of whether an individual or a business paid the premium. Some or all of the premiums for these policies may be tax deductible depending on the business entity involved. Most LTC carriers publish excellent guides to the tax deductibility of LTC insurance.
The Cost of Waiting
If you decide that long-term care insurance is the right decision to protect your assets and your family’s financial future, the best time to buy is now. Buying at a younger age mean a lower premium. Even though you pay that lower premium for more years, the cumulative lifetime premiums are much less. In addition, you avoid the risk of developing a condition that would make you uninsurable later.
