Long-term care is a general term that includes a wide range of services that address the health, medical, personal care, and social needs of people with chronic or prolonged illnesses, disabilities, and cognitive disorders, such as Alzheimer's disease. These services are typically required by the elderly, but may also be used by disabled people of any age. Types of long-term care include:
- Personal care or custodial care for people who only need help with activities of daily living (ADLs), such as eating, bathing, dressing or taking medication.
- Skilled care that is generally provided in a nursing home by licensed medical personnel under physician's orders, but may also be provided at home with help from visiting nurses or therapists.
Should I buy Long-Term Care Insurance?
Long-term care insurance is not a good buy for everyone. If you have significant assets you wish to protect and income that will allow you to pay premiums without financial difficulty, long-term care insurance may be right for you. However, if you have a limited income or have trouble stretching your income to meet financial obligations, such as paying for rent, utilities, food, or medicine, you should not buy a policy. People with very limited income and assets may qualify for Medicaid's Long-Term Care Services Program. The decision to purchase long-term care insurance will depend on your health, age, overall retirement objectives, and your income. you should discuss this purchase with a family member or financial advisor. Use the “Shopper's Guide to Long-term Care Insurance” which includes a policy comparison worksheet, available to you from DMAB (800) 336-9500 or call DMAB for information on Medicaid.
How do Benefits and Coverage Vary?
- The amount the policy will pay for each day of long-term care. This amount can be chosen form a range usually between $50 and $250 per day.
- The policy's maximum benefit. All policies must cover at least 12 months of nursing home care, but you can select a policy with benefit periods of two, four, six, ten years, or a lifetime benefit period.
- Elimination period. This is the time you can receive long-term care before benefits begin, usually 30, 60 or 90 days. The longer the elimination period you choose, the lower the premium.
- Home and community care benefits, such as the services of visiting nurses, therapists, and home care aides. The daily benefit must be at least 50% of the nursing home benefit.
- Waiver of premium. This feature allows you to stop paying premiums once you start receiving benefits from the policy.
- Third party notification. To avoid a lapse of the policy for non-payment of premiums, companies must offer to notify a person you designated of that impending lapse.
What Must be Included in a Long-Term Care Policy?
Like most insurance policies, the details of services covered and benefits paid will vary from policy to policy. However, state law requires that certain provisions be included in all long-term care insurance policies. Some of these provisions are:
- Coverage for all levels of nursing home care: skilled, intermediate, and custodial;
- Coverage for 12 months or longer;
- Policies must be guaranteed renewable. This means the company cannot cancel your policy for any reason except non-payment of premiums or a misrepresentation on your application for coverage;
- No longer than 6-month pre-existing condition exclusion;
- 30-day free look period. You can return the policy for any reason during this time and receive a full refund.;
- Benefits cannot be conditioned on a hospital stay prior to admission to a nursing home;
- Benefits cannot differ based on the type of illness or disability being treated. However, policies do not pay for drug or alcohol treatments, or mental or nervous disorders. Coverage for those diagnosed as having Alzheimer's disease and other organic brain disorders is required.
Other long-term care benefits do vary widely by policy. For example some policies:
- Pay a fixed benefit amount per day;
- Have daily limits on payouts;
- Have a ceiling on total benefits;
- Offer benefit periods of 2, 4, 6, 10 years, or a lifetime;
- Offer elimination periods of 30, 60, or 90 days. The longer the elimination period you choose, the lower the premium;
- Have a waiver of premium benefit which allows you to stop paying premiums once you start receiving benefits.
What are my Tax Benefits?
Under the Health Insurance Portability and Accountability Act of 1996, long-term care insurance policies that meet certain requirements become eligible for federal income tax advantages. These policies became known as Qualified Long-Term Care Insurance policies. Policies purchased through the end of 1996 were "grandfathered" under this new law which meant they automatically qualified for tax-favored treatment. Policies purchased after 1996 must be clearly identified as qualified Long-Term Care Insurance policies having met the requirements to be considered tax qualified. Consumers who have purchased a Qualified Long-Term Care Insurance Policy may deduct premiums as a medical expense for payments made in 1999, when they file their income tax return in 2000. It is recommended you contact your personal tax advisor for complete details before filing your return.
What Must be Offered in a Long-Term Care Policy?
The option to purchase inflation protection of at least 5% compounded annually. This feature will increase the benefits of your policy over time. Therefore, the younger you are when you buy a policy, the more important it is for you to consider adding inflation protection. Keep in mind the cost of this additional benefit could add significantly to your premiums. If you decline to purchase inflation protection, you will be asked to sign a statement rejecting the coverage. Be sure you understand what you are signing.
Third party notification. To avoid a lapse of the policy for non-payment of premiums, companies must offer to notify a person you designate of the impending lapse.
The Option to purchase a nonforfeiture benefit which will allow you to receive some value for the money you've paid into the policy should you have to drop your coverage. A nonforfeiture benefit can add roughly 10% to 100% to a policy's cost. If you decline to purchase this benefit you will be asked to sign a statement rejecting the offer. If you reject the offer, the company is required to provide a "contingent benefit upon lapse." This benefit will take effect when your premiums increase to a certain level (based on a table of increases). You will then be offered the opportunity to accept: 1) a reduction in the benefits provided by the current policy so that premium costs stay the same; or 2) a conversion of the policy to paid-up status with a shorter benefit period. You may also choose to keep your policy and continue to pay the higher premium.
Who Pays for Long-Term Care?
Nationally, more than half of all nursing home expenses are paid out-of-pocket by individuals and their families. Less than half are paid by state Medicaid programs.
Medicaid, however, does not pay until the person has "spent-down" his/her money on medical expenses. Medicaid will pay for a person who has less than $1,230 in monthly income and less than $2,000 in countable resources.
A small percentage is paid by Medicare. Medicare will pay for a limited number of days of nursing home residents who require and are placed in Skilled Nursing Facilities. Neither Medicare, Medicare supplement insurance, nor the health insurance provided by employers will pay for most long-term care expenses.
How Much Does Long-Term Care Cost?
Long-term care can be expensive, depending on the amount and the type of care needed and on the setting in which it is provided. LongTermCare.gov provides a chart that compares costs for various long-term care options.
Medicare Supplement Insurance
Medicare Supplement insurance, or “Medigap”, is health insurance sold by insurance companies to help fill the “gaps” in the original Medicare fee-for-service program. Medigap insurance policies pay most, if not all of the original Medicare plan coinsurance amounts, and may provide coverage for the original plan deductibles.
Medigap insurance is sold in one of ten standardized policies. The ten plan types must be labeled with the letters A through J. Some of the ten standard plans pay for services not covered by Medicare, such as out-patient prescription drugs, or emergency medical care while traveling outside the United States.
All standard Medigap policies are guaranteed renewable. This means that the insurance company must allow you to renew your Medigap policy unless you do not pay the premiums.
The Department of Insurance publishes an annual Delaware Medicare Supplement Insurance Shopper's Guide. This guide features up-to-date price comparisons for Medigap policies, private insurance designed to supplement your Medicare coverage.
A Shopper's Guide to Long-Term Care Insurance PDF from the National Association of Insurance Commissioners.