Answers to Common Long Term Care Insurance Questions
It's a Women's Thing...
The Long Term Care insurance industry has finally come to the conclusion that women must pay higher premiums than men. Why? Because long term care facility residents are mostly women, and 70%-80% of LTC insurance claims are from women - it's that simple.
The first to raise it's rates is Genworth, starting in April 2013, but other insurers have already applied to states' insurance commissioners for gender specific rate increases. This does not apply to Montana and Colorado residents, as "gender-district" pricing for long term care insurance is prohibited there, but women living in the other states will feel the pinch sooner or later. So, to save on premium prices every year, buy now while you still can.
The hardest hit will be women who never married, are currently divorced or widowed, although most insurers will honor same sex or unmarried domestic partners for couples discounts. Some industry experts predict premiums for single women will be 10% or higher than ever before, and could climb as much as 20%-40% more than men's. This will apply to married women who apply as individuals, too.
This rather upsetting, yet not unexpected, change means you must GET YOURS while the getting is good. If you've been procrastinating, now is the time to move ahead to protect your finances, as well as your future.
If higher prices for women is not enough reason to buy now, here's another one: Insurers will soon be taking a harder look at your health. Genworth is planning to require all applicants to have blood tests - looking for nicotine and drug usage, as well as the possibility of a future stroke or cardiovscular event.
Will You Need Long Term Care?
It's hard to believe, but the estimated risk for needing Long Term Care continues to climb with each passing year. Contrary to what one website says, the Federal government estimate of each individual having a 70% chance of needing Long Term Care sometime in his or her lifetime is not only an accurate number, it is an important number. Whether you need LTC for one week or 10 years, 70% will need care and someone will have to pay for that care, one way or another. You won't know if you'll need long term care unti lit's too late. Whether you have a 50-50 chance or a 70% chance, those are tremendous odds that you WILL need care. Who will pay?
Medicare will only pay for LTC for a few months and only if:
1) You are actually enrolled in Medicare
2) You meet the prior hospitalization requirements
3) There actually IS Medicare in the future - appallingly, some members of Congress are trying to defund and/or abolish Medicare entirely!
State assistance will pay if you are destitute. However, the state doesn't pay well. Therefore, state dependents don't receive the same care or consideration as private pay residents in LTC facilities.
Long Term Care insurance will pay according to the contract.
Bottom line: Buy the best LTCi policy that you are able to afford now and in the future. If you skimp to save money on premiums by choosing a 90 day elimination period, lower daily benefits or less years of coverage, you could end up paying anwhere from $5000 - $20,000 per month out-of-pocket (check the Care Calculator on this site to find out how much LTC is in your area). While some protection is better than none, make sure you insulate your savings by opting for a more comprehensive policy, if you can.
Who Is More At Risk for Needing Long Term Care?
Your age, marital status, gender, lifestyle and, to some extent, your family health history all play a part in the possibility of needing long term care.
According to insurance actuaries, you are more at risk if you:
- are older
- are a woman
- are single
- have a poor diet
- don't exercise regularly
- have a family history of Alzheimer's, stroke, arthritis, or other degenerative diseases.
- Also, physical activities that can cause severe accidents should be included as a definite risk.
The Long Term Care Cycle
91% of Americans surveyed said they would prefer receiving Long Term Care at home. Indeed, of those needing care only 5% are in Skilled Nursing Facilities.
12% are in Assisted Living Facilities and more than
80% are receiving Home Care
Therefore, it isn't a surprise that most Long Term Care starts at home with the help of family or friends until the caregiving burden becomes a too much of a hardship. The next step might be to hire a paid caregiver to help with care duties in the home. Yet many people can't afford such a luxury, even if they hire unskilled, unlicensed, unsupervised "grey market" caregivers. As care needs increase the next care setting of preference is Assisted Living Facilities, as they are more like hotels than the hospital-type setting of a Skilled Nursing Facility. Most people do everything in their power to stay out of nursing homes, which is one reason why the average nursing home stay is only 2.5 years. It's not that people only need an average of 2.5 years of care. It's that nursing homes are used as the last resort when no other options is available.
While most Americans suspect that they might need long term care "sometime" in the future, many underestimate care costs and falsely assume that Medicare or their health insurance will pay for extended care. They will not. Medicare will only pay for a short time and only under specific, limited circumstances. The only government agencies that pay for Long Term Care are state run programs such as Medicaid and the federally run Veteran's Administration. Both are notorious for their lack of care quality and poor quality of life for their residents.
Boomers have been raised to expect a decent quality of life and the freedom to make their own choices. They cherish independence, pleasure and, as they have matured, the joys of family and friends.
As a generation, Boomers were not raised to expect or shoulder sacrifice, although they can and do rise to the occasion. For most, the mere thought of a loved one enduring the extraordinary burden and sacrifice of day-to-day caregiving is enough to motivate Boomers to protect themselves and their families.
The value of Long Term Care insurance is that it:
1) Supports independence by providing the ability to pay for Home Care and Assisted Living costs. It gives people choices.
2) Protects loved ones from the burdens of caregiving.
Long Term Care insurance should be called "nursing home and family caregiving prevention insurance", and for these benefits alone it is worth its price.
Either having LTC insurance or paying for care costs out-of-pocket allows you to choose where to receive care, even when caregiving needs increase. However, Long Term Care insurance is less expensive in the long run.
When Should I Buy Long Term Care Insurance?
The sooner the better! LTC insurance premiums - the older you are when you buy, the higher the price, although once you buy a policy your premiums do not rise due to aging or health. For years, financial planners were telling their clients to wait until age 65, but this is no longer considered sound advice! The Federal and State Partnership Programs encourage people to buy as early as age 40, mostly to increase the financial security of the programs, but also to ensure that people do not become a burden on Welfare/Medicaid if they get sick or injured at an early age and need long term care. This is wise advice. Waiting is too risky, considering people are developing health issues at younger ages, such as diabetes, Multiple Sclerosis, and heart disease. Don't wait until you are uninsurable.
If you can afford the premium for years to come, buy now to protect yourself and your family.
Long Term Care Insurance - 101
Long Term Care is needed when a person cannot perform essential Activities of Daily Living.
Tax-Qualified Policies have 6 Activities of Daily Living triggers:
- Transferring - help moving from a bed, chair or vehicle
Non-tax qualified adds the ADL of Ambulating. Ambulating is the ability to move around by yourself, on your own feet...walking in some fashion. The addition of another "trigger" may seem beneficial, but Non-Tax Qualified policies can require assistance with 3 ADLs before being eligible for LTCI benefits. Since Tax Qualified only requires help with two ADLs before triggering payout of benefits, comparing TQ'ed or Non-TQ'ed policies is moot.
* Alzheimer's, Dementia or organic brain diseases are also triggers for both TQ'ed and Non- TQ'ed policies.
The Problem with Non-Tax Qualified Policies:
Non-Tax Qualified policies are usually not deductible as a medically related expense.
Non-Tax Qualified policies' benefits may become taxable income in the future and the benefits you receive could even be taxed retroactively! You may end up receiving 10's to 100's of thousands of dollars worth of benefits that the IRS may consider "income" - retroactively - sometime in the future. That is the scariest part of Non-TQ'ed policies.
The Biggest Potential Benefit of Tax-Qualified Policies:
Tax Qualified policies are deductible. The older you are, the more you can deduct.
The government has guaranteed that Tax Qualified policies' benefits will not be taxed.
Long Term Care Insurance Policy Choices
Most Long Term Care policy decisions revolve around Setting of Care, Benefit and Elimination Periods and, if you wisely want it and can afford it, Inflation Protection. While every policy is different ( and you should thoroughly understand all the wording ) the most common decision are found below:
Where Might You Need Long Term Care?
Facility Only - Covers care received in a licensed Assisted Living or Skilled Nursing Facility, but not for care received in your home or in non-licensed care settings.
100% Integrated Home Care - Covers care received both in a licensed Assisted Living or Skilled Nursing Facility, plus non-licensed settings and home care.
How Much Will You Need?
Maximum Daily Benefit can be from $50 - $400.
How much will your Long Term Care insurance policy pay out per day? This can also be paid in weekly amounts.
Benefit Period choices: Can be 2, 3, 4, 5 or Unlimited years.
How long will your policy pay for your Long Term Care?
Elimination Period: Can be for 0, 20, 30, 60, 90 or 100+ days.
How long can you afford to wait before your LTCi policy starts to pay? Longer elimination period = lower premium, but if you choose a longer elimination period, make sure you have the savings or assets to cover that period of care.
Inflation Protection: 5% Annually Compounded or 5% Simple inflation. Some carriers are offering 4% simple now.
Increases the dollar value of your benefit each policy year. 5% Compounded is highly recommended for people under 70 years of age in order to keep up with the 6% inflation that is currently being experienced in the health care sector. Many individuals age 70-80 choose 5% Simple and most people over 80 choose not to pay for an Inflation Rider, as it might not be needed.
Inflation Riders increase the premium price considerably for regular LTCi policies, but considering the rate of inflation, not buying one at a younger age is risky.
How Will The Long Term Care Policy Pay Out Benefits?
Two common LTCI policy payout structures are Reimbursement and Indemnity.
Reimbursement pays you for care costs up to the amount of your daily or weekly benefit. These policies can have wording that restricts your care to state licensed facilities or licensed Home Health Care agencies. They also require you to pay up front for your care, and then be reimbursed once they have determined that your care is being provided in the manner stated in the policy. Due to these restrictions, Reimbursement policies are usually less expensive.
Indemnity pays out the maximum benefit up front and allows you to spend it as you please. This is the type of policy to buy if you want your friends or relatives to get paid to take care of you. Indemnity policies are more expensive.
Every Long Term Care insurance policy has exclusions. Some states do not allow certain exclusions and the Federal LTCI Program's policies have less exclusions than others. Many Long Term Care insurance policies' exclusion include:
- Mental and nervous disorders/diseases (except organic brain disorders, such as Alzheimer's)
- Attempted suicide or self-inflicted injury
- Alcoholism and/or drug addiction
- Long Term Care needs caused by an "Act of War"
- Treatment paid for by government agencies, such as the Veteran's Administration or Medicare
Long Term Care Insurance Points to Consider
* Assess your need for Long Term Care Insurance by weighing:
1) Your desire to receive quality care by staying off of Medicaid and to protect your loved ones from financial hardship or caregiving burdens.
2) The assets you wish to protect, and
3) Your ability to pay your premiums, even if they increase in the future.
* Understand how much your premium will be and how often it must be paid.
* Your premium may increase after your purchase not due to your age or health, but due to the insurance company's need to adjust their rates due to a higher than expected percentage of claims.
The Federal Long Term Care Insurance Program
If you are a Federal or U.S. Postal Service employee or annuitant, a member or retired member of the Uniformed Services or their spouse (or other qualified relative), then the U.S. Federal Government demonstrates it's full endorsement of long term care insurance by offering you the opportunity to buy long term care insurance at a group rate.
Note: This rate may or may not be more affordable than non-Federal Program, non-group coverage. It is always wise to get expert assistance before buying an LTCI policy.
Under the Federal Long Term Care Insurance Program (FLTCIP), the Government works with insurers that are selected and approved by a Government agency. Together, they design long-term care insurance policies for individuals who qualify. To learn the full details about this program, see www.ltcfeds.com. But read on before you do.
The Federal website clearly states on its home page that:
"More than 70% of us who live to retirement age will need long term care at some time in our lives..."
This can be a sobering fact for citizens who have been unaware of the financial risk involved with Long Term Care, in addition to the 24-hour caregiving burden placed upon the caring family.
In addition, most people are unaware that Long Term Care Insurance helps cover expenses for services for which most health plans and Medicare provide only limited (if any) coverage.
In fact, health plans (including the FEHB Program, TRICARE, and TRICARE for Life) typically do not cover "ongoing chronic care" such as an extended stay in an assisted living facility or nursing home or a continuing need for a home health aide to help you bathe, eat, toilet, get in and out of bed, etc. And while Medicare pays very limited amounts under limited conditions for recuperative, convalescent, skilled care following at least a 3-day hospital stay, Medicare does not cover most long term care services which assist people with the activities of daily living over a long period of time. It's no wonder that people "in the know" are turning to Long Term Care Insurance to protect themselves and their families.
For those who qualify for FLTCIP, the Federal Long Term Care Insurance Program, it's important to note the following...
Pros and Cons of the Federal Long Term Care Insurance Program
- Pre-Existing Health Conditions - As any group plant, Primary Insureds in poorer health will be accepted for coverage under the Federal program, however their family members must pass underwriting standards. Family members in poor health may not be accepted.
- No Exclusion for Acts of War - For those in the military, this may be a positive benefit.
- One of the only insurers offering Unlimited Lifetime Benefits.
- Expensive - Premium rates are higher when unhealthy people can enroll alongside healthy individuals. People in generally good health can get competitive coverage and pay less with a private plan.
- Restricted Eligibility - Only those in the Federal family may apply.
- Family Health Restriction - Family members are screened for health and are not accepted automatically.
- No Spousal Discount - Marrieds who apply together do not enjoy discounted rates.
- No Shared Benefit - Policy benefits cannot be blended between the couple.
- No Survivorship Benefit - Survivor's policy is not "paid up" if their insured spouse dies.
The Federal Program may be changing it's insurance partners in 2009. If the companies change, the policy benefits may likely change, as well. If you think you may be interested in buy an LTCI policy from one of the Federal Program insurance companies, do yourself a favor and speak with a professional LTCI broker who does not work for the Government or the Federal Program's insurance companies' representatives.
In conclusion: If you enjoy general good health, then a private, individual, custom-designed plan may be better for you and less costly. To get unbiased assistance, access the free Buyer's Advisory Service for personal guidance, quote comparisons and objective, unbiased, decision assistance.
To take full advantage of this free service, simply click here and submit your information.
Long Term Care Insurance Partnership Programs -
Shielding your Assets from Medicaid Spend-down & Estate Recovery:
Before you can qualify for government aid, Medicaid requires that you spend down your assets by paying for your long term care, until you are basically at poverty level. If you have a spouse/partner that depends upon your assets for a decent quality of life, it is wise to plan ahead to protect your estate for the sake of your loved one's comfort.
Many people try to give away their assets to family or trusts as soon as they know they will need long term care, but this isn't a smart strategy, nor is it as easy as it used to be. Depending upon the state, Medicaid's "look back period" can reach back as far as 5 years.
However, if an individual owns an LTC insurance policy, it can buy them some time. How? Assets can be protected if a policy pays out for as long as the Medicaid look back period. Of course, a person using this asset protection strategy will need to plan ahead by buying a regular Long Term Care insurance policy (while they are healthy). It must pay out for the entire look back period or else the individual risks having to self-pay any remainder, which could be a financial disaster.
This is where a Long Term Care insurance Partnership Program policy can help.
State Long Term Care insurance Partnership Programs join the forces of Medicaid and private long-term care insurance companies. Who might benefit from these programs?
- Those who can't afford to self-pay expensive long term care
- Can't afford a Long Term Care insurance policy with higher benefits, but
- They have too many assets to be able to qualify for Medicaid.
For people who have some assets to protect (for themselves or their loved ones) and enough discretionary income to pay for basic LTC insurance (lower benefit amounts, without all the bells and whistles), a Partnership Program may be just the thing.
All of the Partnership Programs that have been created since the Deficit Reduction Act of 2005 have certain requirements:
- They are tax qualified.
- They must provide annual compounded inflation protection for people 60 years old or younger and "some type" of inflation protection for those who are 61 - 76 years old.
- They protect your assets dollar for dollar, meaning that for every dollar your LTC Partnership policy pays out you get to keep a dollar of assets. If you buy a $200 per day 3 year policy you will get to keep $219,000 of your assets for yourself or your partner, plus whatever your state Medicaid allows everyone to keep.
The biggest drawback with Partnership Programs is if for some reason your long term care needs exceed your policy benefits, you will end up on Medicaid. If you're very lucky, the facility you originally chose will have an open Medicaid bed, but don't count on it. You could also be sent to an open Medicaid bed in another care facility that takes both private pay and Medicaid recipients. Lastly and most likely, but least desirable, you could be sent to a Medicaid-only care facility. However, having an LTCi policy might postpone an unpleasant move.
Long Term Care Scenario: Your Partnership Program Long Term Care Insurance policy pays for a room in a nice facility or even at home. The insurance benefits are eventually depleted and you qualify for Medicaid. The state starts paying their part of your long term care, but you must move to a facility with an available Medicaid bed. BUT...if there are no Medicaid beds available in your state, you can stay in the higher end facility until there is an open Medicaid bed. This means, if you originally chose a facility close to home, it will be easier for your friends and near-by relatives to visit you. So you'll likely enjoy your living conditions better than if you had to move.
If you have protected your assets with Partnership Program policy, and you finally do have to go to a Medicaid facility, you will have some assets saved that can make your life a little more pleasant.
State LTC Insurance Partnership Program Caveats:
* Partnership program protects assets, not income. If your income is too high, you won't qualify for Medicaid when a Partnership policy runs out, so it wouldn't be your best bet. You may want to consider a standard LTCi policy with a longer benefit period.
* For individuals with income less than $20,000 or couples with incomes less than $40,000, paying Long Term Care insurance premiums may not make financial sense.
* If you move to another state, the Partnership policy will pay, and the "benefit-matching" will accumulate toward your asset protection, but you may have to move back to the state in which you bought your Partnership policy in order to qualify for Medicaid and take advantage of any asset protection you gained. Some states have reciprocal Partnership Programs, but it is wise to find out how they work together before making a move.
* The inflation protection wording that qualifies policies for Partnership Programs is vague. It says that policies must provide Annual Compounded Inflation protection for people under 61 and Simple Inflation for those ages 61-75, yet it doesn't specify any percentages. Many private Long Term Care insurance policies have inflation riders of 5% Compounded or 5% Simple and for good reason. The care sector's inflation rate is about 6% per year, so a 5% Compounded is a smart choice. If your State's Partnership Program offers less of a percentage, make sure you have enough savings or assets to help cover any possible future costs.
In what phase of LTC Insurance Partnership Program creation is your State?
As of March 15, 2013 *
Partnership Program Policies are currently for sale in:
AL, AR, CA, CO, CT, ID, FL, GA, IA, IN, KS, KY, LA, MD, MO, MN, MT, ND, NE, NJ, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, WA, WV, WY
These States have an Approved State Plan Amendment:
These States have documents available:
IL, MA, VT
State Plan Amendments have been submitted in:
No Documents Available - These States are in the planning phase or have no plans yet:
AK, HI, MI, MS, NM, UT
There are 4 states that originally created Partnership Programs. They were grand-fathered in to the Federal Partnership Program. These are New York, California, Indiana and Connecticut. These states have different policy standards than the states that created Partnership Programs after the Deficit Reduction Act' of 2005 was passed. Let's look at New York for example:
New York offers four different Partnership policies, 2 Total Asset and 2 Dollar for Dollar. The Total Assets policies do just what they say, shield all your assets from Medicaid. The Total Asset 50 requires 3 years in a Nursing Home or 6 years worth of Home Care. Once the benefits run out, the policyholder can qualify for Medicaid regardless of the amount of assets he or she has accumulated.
But Buyers Beware! Since there is a longer period of facility or home care required, if you did not purchase a high enough daily benefit, there is a possibility that you could use up your assets by having to pay the difference between your policy's daily benefit and the actual cost of care in your area.
For instance: Charlotte buys a Basic Policy Total Asset 50 policy with the minimum required daily benefit of $208 (the minimum for 2008). She lives in New York City and wants to stay close to friends and family, but the private skilled nursing facility rooms in her area cost from $250 to $476, with the average being $375 dollars per day. Charlotte could be stuck paying anywhere from $40 - $268 per day out of pocket. Over the lifetime of the 3-year nursing home stay, Charlotte would end up paying between $43,200 - $289,440 of her own assets.
The #1 Long Term Care Insurance Lesson: No matter what state you live in and what kind of LTC insurance policy you buy, make sure you buy enough protection to cover the long term care costs in your area. Check our Long Term Care Cost calculator for average care costs, and then call a few long term care facilities in your area. You may also want to visit a few facilities to see if there is a difference between cost and quality of living/care.
Besides offering full asset protection, New York Partnership Policies also provide 5% annually compounded inflation protection for everyone age 79 or younger. Considering the rate of inflation, this is a very good thing! People 80 years old have the options of buying a policy without inflation protection.
* Check here for current State Partnership map: www.dehpg.net/ltcpartnership/map.aspx