A: Long-term care provides assistance to people who are no longer able to live independently. This may be the result of a chronic illness like diabetes, a disability caused by a stroke, cognitive impairment such as Alzheimer's disease or simply growing old and becoming frail. It encompasses a variety of services including medical care provided by medical professionals and non-medical care provided by health care aides. 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. Designed as custodial care long-term care is very different from traditional healthcare or Medicare which are curative or rehabilitative in design.
A: Almost all 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. Many policies also cover hospice care. Contracts differ but most long-term care insurance policies will pay for assistance with activities of daily living. These include bathing, dressing, eating, toileting, continence and transferring. Also covered is supervision for cognitive impairment to keep the policyholder safe. If receiving care at home instrumental activities of daily living may also be covered. These include tasks like grocery shopping, meal preparation, light housekeeping and laundry. Care can be hands-on or standby assistance.
A: Most of us think of long-term care as an end of life issue for the elderly. The U.S. Department of Health and Human Services projects by age 65 and older 70% of us will experience a long-term care event in our remaining years. Today, 43% of the 12 million Americans receiving long-term care in the U.S. are between the ages of 18 and 64. The primary reason for their care is motor vehicle accidents followed by spinal injuries. The need for long-term care could arise at any time.
A: The cost for long-term care varies depending on the type of care required and the geographical area. Today, the national median cost of non-medical home care is $27 per hour. An average of 44 hours of home care per week costs $61,776 annually. The national median cost for a private room in a nursing home is $297 per day or $108,405 annually. In the past five years, costs have increased between 2% and 12% depending on the venue. You can review the current cost of care and project future costs in your area using the Genworth 2020 Cost of Care Overview.
A: Original Medicare, Medicare supplements and other health insurance plans are designed to pay for curative treatments or short-term skilled rehabilitation services. Original Medicare may cover up to 100 days of long-term care if specific requirements are met which include being admitted to a hospital and requiring skilled care daily. Claims history indicates that Medicare pays for 22 days on average.
Beginning in January 2019, Medicare Advantage plans have the option to cover some home safety improvements and assistance with daily activities if health related. This is new and few insurers have included these options which can change annually.
Many people mistakenly think their disability insurance pays for long-term care. It does not. Disability insurance is designed to replace income. It does not cover long-term care expenses.
A: There are just three funding options available to most Americans: 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. Private charities and other government agencies such as the Bureau of Indian Affairs and U.S. Department of Veterans Affairs pick up the remaining costs but most of us cannot qualify for these funding options. Today, private funding – income, savings, assets, insurance and charities -- pays for 28% of long-term care expense. Public funding – Medicare, Medicaid and other government agencies -- picks up the remaining 72%. These public programs are already stretched and this is well before the impact of aging baby boomers.
A: Medicaid is a state/federal welfare program funded through tax revenues. In most states Medicaid will fund long-term care in a skilled nursing facility. In some states Medicaid will also pay for home care or care in an assisted living facility. Medicaid is means-tested. To qualify financially for Medicaid, an applicant must meet government asset and income requirements.
A: Long-term care can be provided in a variety of settings. Most care is provided in the home of the person receiving care or in a community setting such as an adult day care center. If care requirements exceed what can be accommodated at home, the individual receiving care may move to a group home, an assisted living community, a memory care community or a skilled nursing home.
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 and insurance company. 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 and we tend to be healthier than in later years. Consumers with assets between $500,000 and $5,000,000, excluding their homes, should seriously consider purchasing long-term care insurance. In this wealth range, an average long-term care event could impact the family’s wealth and standard of living.
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, family health history, current health status and lifestyle. When you apply, you must be mentally fit and able to perform all activities of daily living which are defined as bathing, dressing, eating, toileting, continence and transferring. If you're in great health, don't use tobacco products and don’t take any medications, carriers will be quick to insure you because you represent minimal risk. Certain health conditions could prevent you from qualifying for long-term care insurance.
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.
A: Long-term care insurance companies offer discounts for married couples and partners. Discounts are also available for applicants with preferred health histories. Additional discounts are available through affinity programs designed for members of professional associations and employee groups when long-term care insurance is offered as an employee benefit.
A: Today, less than 20% of long-term care insurance policies sold are of this standalone or pool-of-funds 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). For example, $100 per day and 10-year benefit period would create a pool of $365,000 ($100 per day X 365 days X 10 years = $365,000). Most standalone 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. Several 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 individuals, couples, small business owners, professional organizations and large employers. It is this product type that offers partnership policies that provide additional safeguards from Medicaid resource reduction requirements. Premiums are paid annually, semi-annually, quarterly or monthly. If clients need care, these policies end up being the least costly insurance solution.
A: Life insurance and annuity based long-term care solutions are referred to as asset-based or hybrid products. These products have contract provisions that allow withdrawals to be used to pay for long-term care expenses. They are also referred to as linked products as the design may include an extension of benefits rider that is linked to the life insurance or annuity component. This extension rider will continue to pay for long-term care expenses after the death benefit or annuity funds are exhausted. Generally, a large single premium is required to fund these products. The premium creates the 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. If the policyholder dies never having needed care the death benefit or annuity funds are paid to the policyholder’s estate or beneficiary.
A: It depends on the type of policy. Standalone or pool-of-funds products are classified as guaranteed renewable. This means the insurance company may increase premiums but only on an entire class of policies not on an individual policy. In order for this to happen, the insurance company must file a business case justifying the increase with each state’s insurance commissioner in which it wants to increase rates. The increase may be approved, modified or rejected by the insurance commissioner. If approved, every policyholder that purchased the same class of policy within the state would receive the increase. Hybrid products are classified as non-cancellable which means that the insurance company cannot change the rates.
A: Much has been written recently about filial responsibility laws given a Pennsylvania court case that ruled a son was responsible for his mother's $93,000 nursing home bill. With the majority of states struggling with budgets and how to deal with mounting Medicaid costs, some are speculating that enforcement of filial responsibility laws may be the next strategy to shore up Medicaid budgets. More information about the 29 states with filial responsibility laws and the specific law for each state can be found here. These laws vary and can range from simple fines to civil remedies.
