Long Term Care

Have you ever asked yourself about long term care insurance? Maybe you have heard of the term, but have not fully understood what it meant and how it could serve an importance purpose in your life.

As working individuals, we hope to save our hard-earned income throughout our lives so we can enjoy a laid-back lifestyle during retirement. However, many unforeseen dangers can arise and strike our families at any given time. If something happens where you or your spouse is forced to live in a long term medical care facility, the money saved will disappear quickly and could potentially wipe out what was left to care for your family. Studies show that 2 of every 5 Americans over age 65 will enter a nursing home during the remainder of their life (A.D. Banker). Long term care insurance will protect these assets, leaving your family protected if you need permanent medical care. Some states, such as Virginia, even demand all policies must provide inflation protection, which only further benefits you.

Long term care policies have many options for coverage. The policies must offer care for a skilled nursing facility, an intermediate care facility, and a custodial care facility. Some insurers will offer additional optional coverage. This includes home health care, which consists of home convalescent care and residential care. Home convalescent care is health care that is provided in the insured’s home. The insured’s physician sets a recovery program that must be followed by the patient. Residential care provides living accommodations within a long term care facility, but tends to be much more expensive. Other optional coverages include hospice care, adult day care, and respite care.

Because of the nice benefits and coverage long term care insurance provides, steep price tags are usually associated with the policies. However, premiums can be reduced by increasing the elimination period and benefit period. Most benefit periods hover between two and five years, but policies can be written for the life of the insured. Obviously, lifetime benefits will result in a higher monthly premium. The length of the benefit period is chosen based on what you feel comfortable with and what you can afford. In Virginia, benefit periods cannot be less than 12 months, but this can vary among states.

As costs of medical care continue to increase, the holding of a long term care policy becomes more important. According to a study by the US Department of Health and Human services, the average cost of a semiprivate room in a skilled nursing facility is around $66,000 a year. Medicare covers skilled nursing facility care for approximately 3 months, so the bills can build quickly. If you have a valuable collection of assets you wish to leave for your family, you should consider checking into a long term care policy to prevent your money from being sucked down the drain. It would be a shame to gamble away your savings accumulated throughout your life by not being insured with long term care.

Have You Heard of The CLASS Act?

The CLASS act is not an old movie or a book about rules for good behavior. Instead it is a provision of health reform, that is voluntary, and may help some families make nursing care more affordable.

CLASS stands for Community Living Assistance Services and Supports. It is a pat of the new health reform bill. It was passed by the US Senate and House of Representatives. Workers will be enrolled in this program, but may choose to decline it at any time according to the wording in the bill.

What Does the CLASS Act Do?

• It is a voluntary program. Employers will be required to deduct premiums, but employees can opt out of this program if they choose to.
• Premiums have not been determined yet. It is believed they will be lower tor people with low incomes, but.that average workers can expect to pay about $120 a month
• If people under the program become disabled, it will pay about $50 a day for nursing care. Note that these people do not have to be over 65 years old.
• The nursing care could be from a nursing home, but it could also be in-home care, such as a home health aide, adult day care or assisted living. So it pays for nursing homes or alternatives.
• The plan premiums are set to be adjusted at a rate that will keep it solvent without any federal funds.
• The CLASS act is NOT A TAX. It is voluntary.

Will This Health Reform Measure Help?

There is no doubt that nursing care is expensive, and that most of us faced a high chance of needing long term care at some point in our lives. A nursing home can cost well over $100 a day so this new bill is just part of the picture. It would help, but not totally keep us from needing to rely upon other assets, long term care insurance or government aid.

Is There Already Government Help To Pay For Nursing Care?

Note that Medicare, the federal health insurance program for seniors and disabled people, does not pay for long term nursing care today. It only pays for short term stays. Medicaid, the federal heath insurance for the poor, only starts to pay after a person has almost exhausted their other assets.

Many people confuse Medicare and Medicaid. They do have similar names, but are very different programs. Some people are on both Medicare and Medicaid, but they are on them for different reasons. Medicare is for seniors and disabled people. Medicaid is for people with low assets and incomes.

What About Private Long Term Care Insurance Policies?

Again, even if a worker opts into the health reform plan, they cannot rely on $50 a day to fully pay for nursing home care. In fact, it may pay 30 – 50 percent of it. The other $50 – $100 a day would have to come from another source. This could be a private or group nursing home insurance policy, assets, or Medicaid.

This part of the plan has not been implemented yet. I also understand that there will be a waiting period, so nobody can sign up for the plan a few days before they need it. The benefits of this part of health reform are not going to affect us in the next few years, but may help younger people with their retirement planning.

It’s always reported in the news that the long term care costs in certain state have increased by some percent. It’s not surprising or you wont consider it as phenomenal, since you’re getting used to the rants of your grandparents or older relatives on how expensive long term care is.

The rates of nursing homes and assisted living rise almost every year. In 2008, a year stay in a private nursing home room amounted to $80,000, but within three years, the rate have increased to over $252,000. Imagine how much would the increment be in the next five to 10 years? For sure, the costs can wipe out a person’s finances.

So how can you protect yourself from the rapidly increasing costs of long term care? A policy with inflation protection, or insurance rider, is the best means to cope with the yearly increase on long term care. There are four options for inflation protection that should suit your age.

No Inflation Protection

Most people think of not getting an inflation protection, and, otherwise, buy daily benefits that are under their budget. People above or in their 80s do not necessarily need some form of inflation protection.

Guarantee Purchase Option

This is also called as COLI or future purchase. It adds minimal charge of 2 percent or more. In this option, the policy benefiys may increase within two to three years depending on the written agreement, without extensive and additional underwriting. However, the disadvantage of this option is that the increased amount varies on the current age of the insured. This type is appropriate for people in their 70s.

It also allows the policyholder to purchase additional coverage for future use. If you are on claim, or refused to use this option many times, it will become unavailable. This can be expensive because the person’s current age will always be considered, not the age at the time of purchase.

Simple Inflation

This option adds 40 % to 60% in the insurance premium. Simple inflation automatically adds 5 percent on the daily benefits on a yearly basis. One advantage of this is the daily benefits can double within 19 and a half years. This is a big help for the insured to use the money in keeping up the cost of long term care.This type is suitable for people in their 60s.

Compound Inflation

One of the best options is the compound inflation. With compund inflation, your policy benefits increase faster than the simple inflation. This adds 5 percent on your daily benefit and is compounded annually, the daily benefit, in return, doubles in 14 and a half year versus the 19 years in simple inflation. People below 60 years old should resort to using this inflation protection type.

If you’re buying long term care insurance policy, always think twice of getting an inflation rider. Remember that the future costs of your LTC will not be the same as it were today or in the last five years.

Now, think again. With an inflation protection, your daily benefit may increase each year at fixed percentage, meaning you can save money that can be used to compensate the increase in the costs of LTC.

Some people choose to pay out-of-pocket expenses for their long term care, unaware of the financial disasters that could ruin their lifetime savings. After you’ve worked hard your entire life, it’s distressing to see your entire finances used only for nursing care, although it has been saved up for your children’s college or future business.

Long-term care insurance saves you from the guilt of using your own money in paying for long term care services. Purchasing LTCi policies prepares you as time flies by when you will need long term care coverage for your chronic illness or disability. In fact, financial experts advise people who are in their late 50′s or early 60′s to purchase long-term care insurance. That age is a perfect timing wherein the cost of premiums is quite affordardable and the person’s health is still good.

There are three basic types of long term care insurance policies. All of these LTCi policies help you receive decent long term care at the time you most need it, but each types has its own role or variations. The type of LTCi varies on the person’s needs.

Reimbursement LTC Insurance Policy

This type is the most common LTCi policy. As the name suggests, the policy would recompense you for the actual charges or expenses on your long term care, but it should not exceed your daily, monthly, or weekly benefit limit.

The policy may contain a written agreement that states that if the long term care cost does not consume all the benefit amount, the remaining amount can be used in the succeeding years. Therefore, if you purchase a $200 daily policy and your charges cost $150 a day, you’ll be reimbursed with $150 and the balance will stay in your treasury. This can be paid by the private insurer, or you can pay the policy first and then the remaining will be continued by the insurer.

Indemnity Policy

This policy type is much expensive than the reimbursement policy. A “plan of care” is required and must be approved. This policy only pays for the actual days you received the care from a nursing home or assisted living faciltiy.

Unlike the reimbursement policy, an indemnity plan is more manageable and controlled. The insurer will give you a check that shows the allowable daily benefit amount of your indemnity policy. You could use that either as incurred expenses or save it for future use. It relieves you from the hassle of filing claims and issuing receipts or invoices.

The purchase of indemnity policy is advisable for younger people, not those above their mid-60s. This is because indemnity policy pays out the maximum benefits, not the actual expenses. The premiums are much higher than the reimbursement policy, and you receive back the exact amount of your policy. For example, if you have a policy that pays $200 a day benefits and your total expense is only $150 a day, you still get the $200 back.

Partnership Policy

Most of the states in America are using this type of policy. This policy makes it easy for people to qualify on Medicaid program, regardless if they have already exhausted their policy benefits or have assets that exceed the maximum asset limit.

Primarily, partnership policies were designed to lessen Medicaid expenditures on LTC by allowing Americans finance their own long term care needs. However, the program has gone beyond its goals, and it solved the woes of billions of Americans for Medicaid eligibility. Qualified partnership policies offered nowadays have asset disregard, tax deductions, inflation protection, and reciprocity agreement.

Facility Care Benefit Amount

Daily nursing home benefit is the core of any long-term care insurance coverage. These policy benefits normally cover services related to custodial or nursing care that are incorporated in packages from its corresponding institution. Everything that is covered by Medicaid will be excluded from the policy; however, Medicaid can pay the services as adjunct to insurance coverage.

Licensed facilities include in its coverage the Alzheimer’s facilities, skilled care, intermediate care, and custodial care facilities. Assisted living facilities or alternative care facilities are covered by most modern insurance policies. Assisted living facilities may be covered by either home and community policy or facilities policy. Nevertheless, the best policies offer it under facilities.

Many modern LTC policies pay the benefits acquired on a weekly or monthly basis instead of daily. For instance, the daily benefit amount may pay for $100 per day while monthly benefit amount may pay $3,000 per month. The total benefits paid by the policy are equivalent on either policy provided that there’s no combination of claims happenedin any given day that exceeds $100. The policy paying weekly or monthly benefits more likely pay all the long term care costs unlike the daily policy benefit. The monthly paying benefit is an important windfall to your policy, and it can be purchased as additional rider. This extended benefit may be used in home care or nursing care or it may apply to all benefits offered under the policy,

The amount of the daily benefit should be determined to make the most out of LTC insurance. The amount of daily benefit is based on the sources of retirement income of the policyholder and the portion of that income to cover the long term care costs.

Home and Community Care Benefit Amount

All surveys and studies unveil that people choose home rather than institutional care and any other options available. Actually, 78% of long-term care is provided in the community. However, some policies are biased on facility care, making home-based care below the levels of institutional care. One concrete example is group plan. Most group plans are inclined to cut home care to about 50%, 75%, or 80% of the amount allocated for facilities. For instance, a $120 daily home care policy would only pay half or quarter, say $60, for home care, adult day care or hospice, and some poorly-designed policy would pay only $60 for assisted living.

Most insurance companies tell that home care costs less than institutional that’s why nursing care is given much priority and importance. This idea may be true or not. To some strength, it’s true because government shows statistics revealing that home care cost is only a fraction than that of nursing homes. Throughout the country, the family members take care of their sick loved ones primarily because they have insufficient budget to accommodate the costly services of nursing homes. Therefore, this reflects that home care is less expensive than nursing care. However, when the care giving family member has to end or limit his or her responsibilities to the sick/disabled loved one, paid services or institutional care comes in between.

Policies for home care normally cover the services of licensed nurses, aides, and therapists. Some companies, otherwise, include in the coverage the services of non-licensed providers and even the personal care-giving family. However, home care is usually limited to five or six daily living activities as defined in the policy. Several add-ons such as “homemaker” services should be stated in the policy before it takes effect.

Elimination period in long term care insurance is commonly referred to as deductible, or “waiting period” that the coverage starts to pay out the benefits. These are the number of days that the policyholder must pay out of his or her own money before the insurance takes over. This so-called deductible works the same as major medical insurance policies. The only difference is that instead of dollar amount you will pay for the initial expenses there are number of days required to shoulder your own care.

There are various provisions for elimination period set forth in policies and the state where you live. It’s important to know and understand everything stated in your policy to prevent problems in the future.

What are the periods offered?
It’s rare to find companies offering zero-day period these days. The period could be 30, 60, 90, 180, and 365 days, but these periods vary on the insurer.The periods of 180 or 365 days are chosen only by policyholders with bulk assets of their own. In fact, the longer the elimination period you get, the lower the LTCi becomes. Even 90-day period can put significant benefits on your assets that having no protection at all.

What is a Reasonable and Cost-effective Elimination Period?
Some financial planners using shorter and even zero period. The shorter period means the lesser expenses when the time comes for you to receive care. However, shorter elimination periods can affect the premiums that you are going to pay in the long run. Most sales pitches say that longer elimination periods can save more on insurance premiums.

In deciding on which elimination period to purchase, many policy holders compromise the costs to the benefit it could give in the long run. Many consider using this insurance to avoid financial losses rather than focusing on future or current expenses.
The Smartest Thing You Can Do

What’s working with others or most people does not mean will work best on you. It’s always crucial to look at your situation and your own needs, rather than comparing with other people. In choosing the best period, it is sensible to consider the costs that will be accrued for the care you may have to receive particularly the facility care. Once you have a clear quotation of daily facility care in your chosen institution, multiply that costs by the various elimination period choices, and from there, choose the most affordable. After you determined the best elimination period for you, allocate those savings for your care and allow them to increase value so they go along with the inflation.

There are ways on how to avoid the costly risks of elimination period:
- Always review the terms of coverage in your policy. If there are things you can’t understand, never hesitate to ask questions from the agent regarding your concern
- Secure funds for your out-of-pocket expenses and for the rest of your care as well
- You may ask help from your friends, relatives, and family members to reduce the costs you’ll have to pay for a home health aide or a caregiver. If someone can bring you home-cooked meals or clean the house for you, then the need for other paid services will be reduced.
- Some policies count your stay in Medicare/Medicaid licensed homes and rehabilitation facility. It would be better to ask your insurer on what paperwork is required to qualify for Medicare and Rehab visit counts.

Many people do not understand the importance of Social Security for their lives and their family’s. Being able to understand the benefits of this is important.

Having a social security account is very important as you will need this for you to get a job and pay taxes. Your social security number is your link to enjoying many benefits. The government uses your SSN to track your earnings while you are working and benefits after you apply for benefits.

The government considers your SSN as highly confidential. If any person tries to ask for your personal information that the government has about you, they will not give it without your consent, and unless required by the law.

Retirement Benefits are benefits a person can get from having an SSN. Choosing the time that your will retire is very important and will affect your retirement benefits for the rest of your life. Retiring by the time you reach full retirement age will let you receive full retirement benefits. But if you decide to retire earlier than this, you will only get to receive reduced benefits for the rest of your life.

Disability Benefits are given when you are one of those persons who are not able to work because of physical or mental condition and is expected to last a year or result in death. This may make you eligible for a disability benefit.

Having a statement from your doctor does not mean that you are already eligible for these benefits. People with disabilities, whether children or parents, and have a little income or few resources, may be eligible for disability payments through Supplemental Security Income program.

If you have a social security account and you die, your family might be eligible for survivor benefits based on your work history.

A family member or widow or widower is able to collect the benefits if they are able to meet the following requirements:

• 60 years old or older; or

• 50 years old and disabled; or

• Any age if that person is taking care for your child who is 16 years old and younger and entitled to

Social Security benefits on your records.

Those are 3 of the many benefits that you or your family will be able to get from applying a social security account. Preparing for you and your family’s future should not be delayed and should be done immediately because time is not a luxury we have.

We all like to stay carefree. But there is a catch here. Only when you have everything planned out carefully can you manage to be so. Thus, essentially being careful is a pre-requisite to being carefree. Well the point that we are trying to make here is that in our youth, when we are at pinnacle of our career, retirement planning is the last thing on our minds. But only those who tread carefully at such a time will be carefree and have the freedom to age gracefully and independently. To do this you have long term care insurance.

Unlike other insurances dealing with health and life, this one distinguishes itself by providing assistance not necessarily in some catastrophic situation but helps you cope with your basic routine. It has listed out some activities of daily living (ADLs) which are as simple as eating, going to the bathroom, walking etc. As you grow older, these are the things which you need maximum help with. Even though you may not be suffering from any disease in particular and do not require hospitalization as such, a simple bed rest and care may be recommended in your older days. In such a situation, you can’t claim health insurance as you are not sick literally. But to pay for a caretaker, you can avail your long term care insurance.

It is not necessary that hardships in activities of daily living emerge only with age. Many people less than the age of 65, who were struck down with a medical problem, became dependent on a caretaker, which their long term care insurance now pays for.

The premiums which you pay for your long-term care insurance will mostly be accounted for during income tax deduction. How much is deducted though is variable and is based on the age of the person. But the benefits that your long term insurance pays you needn’t be shown as part of your income.

Actually, depending on whether the benefits offered are taxable or not, there are two types of long term insurance policies; tax qualified or non-tax qualified. Naturally the tax-qualified in which the benefits are not taxed is the more preferred and popular across America.

The rates of long term care insurance are variable and have some deciding factors:

1. Age of the person – It must be kept in mind that to get long term care, insurance gets costlier the later you purchase it. So, at the age of 65, if you desire to get insurance, it will be more expensive than if you had got it when you were younger because your coverage costs increase substantially.

2. Amount of the benefit (daily/monthly) – More the benefit sought, more will the premium be.

3. The duration time for benefits paying – Again simply, more the time you want your insurance to support you, more the payment would have to be paid as premium.

4. The elimination period – The long term care insurance will pay your benefits after you have paid for your care a certain amount of time on your own. This period can be as long as 120 days or just 20 days but varies with each insurer. It is also called a waiting period or a deductible. Shorter this period, more the premium one will have to pay.

So plan well and go ahead into the future without a worry. Take care!

According to the Decennial Census in 2000, the population of Americans aged 65 and above will have ballooned to over 70 million by 2030. This is alarming for thousands of uninsured baby boomers who have no option but rely on their old spouse and children for care.

The publicly-funded Medicare is said to be America’s saving grace on elder care, but Medicare undermines such role. Although billions have been allocated on Medicare, the program is bent on its promise of providing affordable and continuous long term care services to low and middle-income groups. Medicare does not guarantee excellent services, and, otherwise, provide second-rate or rather “poor” programs for the elderly.

What is the best time to purchase long term care policy?
Your age determines the cost of the LTC policy. Most insurance companies offer cheaper policies to those who purchase the policy at younger age. Thus, the younger you are, the cheaper the premiums you’ll get. But, keep in mind that you will be paying the premiums for longer time before you receive the benefits.

Most insurers don’t sell long term care policies to people over 85 and with pre-existing medical condition such as heart disease and dementia. This is reasonable because chronically ill people will not be able to pay for the premiums and they will be needing extensive care in the future. Only credible insurance companies offer policies to healthy individuals who will make most of the benefits in the future.

Significant Policy Features
The most critical factor is determining the set of conditions that triggers the flow of the benefit coverage. All policies must have comprehensive eligibility requirements or rules to abide before the policyholder starts paying for the premiums.

The type or level of care should be also considered in the policy. Bathing is one the most important activities of daily living (ADLs). This benefit begins when you are no longer capable of performing activities without assistance.

However, in some states, a good long term care policy shall include all levels of care from custodial to personal care provided in various types of settings. The types of settings are as follows:

Adult Day Care – This facility provides specialized care or activities for the elderly and the handicapped. Some adult day care offers excellent environment for elders with Alzheimer’s or dementia. It normally operates under the social or health care model to provide skilled recreational activities and care for the elders.

Assisted living facilities – This kind of facility provides assistance including personal care to the elders through the help of healthcare providers. The services include administration of medication and individual care for seniors who can no longer do activities independently. The 24-hour monitoring of the trained staff ensures health and safety of the residents.

Facility Care Services – This provides skilled nursing care, occupational therapy, and others through the assistance of qualified health aides. This facility is good for ill and frail individuals who need 24-hour supervision.

Nursing facilities – Most of these types are certified by the state and federal government agencies to provide custodial and nursing care to the residents. The services offered here are perfect for those who need daily care. However, many patients use nursing homes for short rehabilitative care after an acute illness or injury.

Always determine the type of services and facilities covered under your long term care your policy. It’s best to ask your insurance agent to understand more of the terms and conditions of the policy.

Another important feature not to overlook at is the waiver of premium. It allows you to discontinue paying the premiums during the time you are receiving the benefits. Overview the policy to see the important regulations on this feature, including the requirement to stay in nursing home for certain period of around 60 to 90 days before your premiums are waived.

Most of all make sure that your policy has guaranteed “non-forfeiture” benefit to protect the incurred policy benefits even if you drop the policy or let it lapse. This benefit somehow increases your premiums.

All long term care policies today are guaranteed renewable. You should know what your insurance company rules out on this feature to avoid unwanted expenses and disputes in the future.