Paying for Long Term Care
It is likely that you will need long term care at some time. The following discussion will address long term custodial care. Custodial care is for assistance with Activities of Daily Living (“ADL”) such as eating, bathing, ambulating or dressing as opposed to medically necessary care for rehabilitation from an injury or illness.
There are three ways to cover the cost of long term custodial care:
Currently, approximately 40% of the people receiving custodial nursing care (not rehabilitation services, which are often paid for by Medicare and supplemental insurance policies) in nursing facilities are paying the cost from their own funds;
Public Insurance (Medicaid)
Medicaid is need-based insurance. You may not qualify for or be able to afford long term care insurance. If you meet financial eligibility requirements, you will qualify for Medicaid. Medicaid will pay for the long term care needs of a resident in a skilled or intermediate care facility. The Waiver program may also pay for certain other care costs in the home or elsewhere if you are eligible. The Waiver program is part of Medicaid so you will need to have met similar eligibility requirements.
To be eligible for Waiver you must:
1. Be 60 years of age or older
2. Have no more than $8,000 in liquid assets (does not include exempt resources)
3. Have income of less than 300% of SSI (Supplemental Security Income, currently $2,250 per month).
Long Term Care insurance covers the cost of various types of long term care services. Less than 10% of society has a policy. The following are a few points to consider when investigating the purchase of long term health care insurance policy:
- Coverage: Skilled, intermediate and custodial care in nursing homes, as well as, assisted living, home care and adult day care benefits in the same policy;
- ADL Requirements: The best policies only require you to be unable to perform 2 activities of daily living (i.e. feeding, bathing, etc.) to qualify for benefits;
- No Prior Hospitalization: Spending time in a hospital before entering a long-term care facility should not be necessary to qualify for benefits;
- Waiver of Premium: Premium payments cease after the policy starts to pay benefits;
- Guaranteed Renewable: Once the policy is issued, it should only be canceled for non-payment of premiums;
- Memory Lapse Provision: This provision requires the insurance company to reinstate a lapsed policy if you can prove that non-payment of premium was a result of cognitive impairment;
- Care Coordination: Essentially managed care for long term care providers. Remember to ask if it is mandatory that you use their coordinator or if a care coordinator is necessary to obtain the benefits from the policy;
- Submission of Bills: Will the providers of care be paid directly or will you have to pay them and submit the bills to the long term health care company;
- Approved Services: Make sure you know what services are approved by the policy before you buy it. Services that you will want may not be covered;
- Partnership Approved: Many policies today are approved as Long Term Care Partnership Policies. These policies have certain provisions that are required and if the policy benefits are exhausted, owners of these policies can apply for Medicaid and retain more assets than they would otherwise be able to keep under normal Medicaid provisions.
- These variables affect the price:
A. Elimination Period: How long insured must wait for the policy to pay benefits. The longer you wait, the lower the premium you pay. Pick the longest wait you feel comfortable with because the extra premium paid for immediate coverage may never be recovered;
B. Benefit Period: Choose a period tied to the eligibility period for public assistance (Medicaid) and the average survival rate in nursing facilities (around two years). Lifetime benefits are expensive and are sometimes unnecessary.
C. Daily Benefit Limits: One should pick a daily benefit (the amount the insurer will pay per day in a facility) based on cost today and predicted cost in the future. You can purchase an inflation rider which increases benefits (and the premium) with inflation. This is especially important for younger purchasers.
D. Inflation Protection: Since people are purchasing this type of insurance earlier and earlier, it is important that inflation protection is considered. If you are not going to use the policy for 25+ years the daily benefit you purchase in 2019 is not going to cover very much in 2039. Simple Inflation Protection gives you a 3% increase every year with compound protection inflation the amount of annual increase is larger. The younger you are, the more beneficial the Compound Inflation Protection becomes and is often required to get the Partnership benefits.
E. Partnership Policies: A Partnership policy is a policy that meets certain legal requirements. In exchange for purchasing certain coverage you get a significant benefit. Normally someone has to spend down most or all of their assets to be eligible for Medicaid. Under Partnership rules if you purchase a LTC policy with, for instance, $250,000 of total policy benefits and then use up those benefits, you will be able to retain $250,000 worth of assets and still apply for Medicaid.
Long term care insurance policies are expensive and therefore you should deal with a broker who is experienced and has a good selection of policies. Each policy has different terms and exclusions. An experienced Elder Law attorney should review any long term care policy before you buy it.