| Long Term Care |
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| Long-term care is the assistance provided when a person is unable to provide for himself or herself as the result of disability or a prolonged illness. It ranges from providing personal care at home, such as bathing and dressing, to skilled nursing services in a nursing home. Long-term care is offered through home care agencies, senior centers, adult day care centers, traditional nursing homes, and retirement communities that provide ongoing carre. Read More |
Who Should Buy It?
Do you need long term care insurance? |
Long term care insurance is a great hedge against the high costs of elderly care, but it's not for everyone. Even if it is a good choice for you, be very careful of which policy you select.
Sales of long term care insurance suffered in the early '90s from a scathing article in Consumer Reports that cited heavy-handed sales tactics and inadequate policies. Plans for a government universal health care program also hurt sales.
In response to this negative momentum, the insurance industry finally addressed some of the problems inherent in long term care policies. Today with escalating health care costs, medical advances leading to longer lives, and the development of a greater number care alternatives, there is renewed interest in long term care insurance.
Harder to qualify for Medicaid
Changes in Medicaid law makes it much less likely that the government will pick up the tab for that long term care. Prior to these changes, an increasing number of middle-class and wealthy people used creative estate planning to impoverish themselves so they could qualify for Medicaid instead of buying insurance or paying for their care themselves.
This tactic, widely thought of as welfare for elderly rich people, threatened to eventually bankrupt the some states with large populations of older people. The Health Insurance Portability and Accountability Act of 1996 made it a crime to deliberately spend down assets to go on Medicaid. The penalty was jail time. Politicians realized that not only was it unenforceable, but threatening elderly constituents with jail terms would be bad. As most politicians know, older constituents are more likely than the average person to vote.
The law was rewritten to penalize attorneys and estate planners instead. The new law makes it illegal for a lawyer to advise you to give away your assets, but only if you're later ruled ineligible for Medicaid.
Tax Incentives for Long-Term Care
The 1996 law did add incentives for purchasers of long term care insurance in the form of tax deductions. Medical expenses above 7.5 percent of adjusted gross income are deductible. Long term care insurance premiums can now be included up to these amounts:
for those 40 and younger, $200
for those 41 to 50, $375
for those 51 to 60, $750
for those 61 to 70, $2,000
for those 70 and older, $2,500.
The long term care policy must be qualified, which means that it meets certain conditions laid down by the government. For example, coverage must kick in after the beneficiary is unable to perform two of five or six specified activities (generally including bathing, dressing, eating, using the toilet and moving from one place to another) without help from another person. Severe cognitive impairment also triggers coverage under federally qualified plans. Less extreme impairment can include meal preparation, cleaning, grocery shopping, managing money and taking medicine. Be certain to ask your advisor when you are considering that the one you have selected meets Federal guidelines. |
| Odds of Needing Long-Term Care |
Studies have shown that 43% of those who turned age 65 in 1990 will enter a nursing home at some time during their life. Of those who live to age 65, nearly 1 in 3 will spend three months or more in a nursing home and 1 in 4 will spend one year or more in a nursing home. Only 1 in 11 will spend five years or more in a nursing home.
Women outnumber men in nursing homes according to studies. Thirteen percent of women as compared to 4% of men, were projected to spend five or more years in a nursing home. And obviously the risk of needing nursing home care increases with age.
After assessing the odds, consumers must stringently analyze the reasons for a policy and the ability to pay for it for the balance of a person's life. It makes no sense to buy a policy unless it can be paid every year until death. Far too many policies are cancelled by policyholders on fixed incomes as they grow older and their premiums increase accordingly. |
Understanding the Product
How to compare long-term care insurance policies Buying tips Shopping checklist Tax considerations |
Here are the most commonly used types of policies and their generally accepted meaning. Carriers can of course give special meaning to certain terms under their contracts, so it is important to always read the fine print.' Skilled nursing care is needed for medical conditions that require care by specially trained, and usually state-licensed nurses or therapists. It is given either during or just after the severest level of an illness, and is usually required around the clock, 24 hours a day. Skilled care can be provided in a person's home with help from practical, as opposed to registered, nurses. Intermediate nursing care is associated with stable conditions that require daily supervision, but not around the clock care. It is less specialized than skilled nursing care, often involves much personal care, and is supervised by registered nurses. Intermediate care is often needed for many months or years. Custodial care is intended to assist with daily living, which includes bathing, eating, dressing, and other routine activities. Special training or medical skills are not required. It is provided by unskilled nursing assistants in nursing homes, day care centers, and at home. It is often called personal care. |
| The Cost of Long-term Care |
Long-term care is expensive, depending on the severity of a disability, the degree of care needed and where it is to be provided. In 1991, the cost of a year in a nursing home averaged $30,000 across the United States. Skilled nursing care at home with two hour visits by a nurse three times a week over a year might cost about $12,500. Personal care at home from an aide three times a week for two hours would cost about $8,400 a year.
In major cities, the cost can be expected to reach $60,000 a year and as much as $100,000. With an average nursing home stay of 19 months, seniors living in major metropolitan areas, can expect to pay $100,000 on long-term care in addition to medical bills and prescriptions. |
Who Pays for Long-term Care?
Combine Medicare, Medigap and long-term care insurance for best coverage |
The answer is simple: it comes from your cash and your assets, your family's assets. For those without assets, it is paid by Medicaid programs administered by state government. More than half of nursing home bills are paid out-of-pocket by individuals and their families, and somewhat less than half are paid by state Medicaid programs. Group insurance does not pay for most long-term care expenses, and Medicare does not offer long-term care as a benefit. Only in certain cases will Medicare cover the cost of some skilled nursing care in approved nursing homes or in your home, but there is no coverage for custodial or intermediate care or prolonged home health care. |
| Beware of the Hard Sell Buying tips |
Seniors fear losing physical independence and becoming financially dependent. They buy long-term care insurance coverage to avoid becoming a burden to family or friends. The fear of nursing homes makes them especially vulnerable to high pressure sales tactics focusing upon the risk of losing assets and reassuring promises of protection.
Loneliness clearly magnifies seniors' concerns and their vulnerabilities as consumers. One-third of those who are older than 65 live alone, and the ratio of women to men is two to one. When people are isolated, their beliefs are readily influenced by those who fill the loneliness of their lives.
The most common slimy sales tactic is known as "turning, turn to earn, or churning, " in which sales agents return once a year to pitch a "new and improved" insurance policy. By convincing a buyer to cancel a good policy a sales agent subjects a customer to higher premiums and new waiting periods for the sake of earning a new commission. |
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