Long-Term-Care Insurance

What is long-term care (LTC)?

Long-term-care (LTC) usually means medical and physical care for people with a chronic illness or disability. For example, the care may include help with things like bathing, dressing, grooming, and eating.

You can get LTC in a nursing facility, an assisted-living facility, your own home, or community settings such as adult day care programs. Although most LTC is given to older adults, a person of any age may need these services.

Long-term-care can be very costly. Long-term-care insurance is one way to cover the cost.

What does LTC insurance cover?

Most current LTC policies cover care in a nursing facility, in-home services, and adult day care programs. Assisted living, the fastest growing type of long-term care, is not commonly covered.

Most LTC policies start paying for services when you become unable to do some or all of your own personal care. Most policies allow you to choose the type of service that will be best for you in your given situation. Once it is agreed that you need LTC, the insurance company pays the daily benefit, which is usually less than the actual cost of care. You decide from whom to purchase the care.

Other types of insurance, such as Medicare, major medical, Medigap, and HMOs do not pay for long-term nursing-home stays. These plans pay for medical care, not day-to-day personal care or room and board. Medicaid, the government program for people with low incomes and limited assets, does usually help pay for long-term care for people who qualify.

Not everyone can get LTC insurance. Some LTC policies are not sold to people who have reached a certain age (for example, age 75). Some policies are not sold to people with certain illnesses, such as Alzheimer's disease.

How do I decide if I need long-term-care insurance?

Many people today are living into their 80s and beyond. The longer you live, the greater the chance that you will spend some time in a nursing facility. Researchers estimate that 40% of people over age 65 will spend some time in a nursing home during their lives. Most of the people who live in a nursing facility long term are over age 80. Women are more likely than men to need LTC because they tend to live longer than men. Wives are often younger than their husbands and are more likely to be available to be their husband's caregiver. Long-term-care insurance can prevent you or your family from having to spend a lot of money if and when you need long-term care later in your life.

Without LTC insurance, a 1-year stay in a nursing facility may cost $50,000 to $75,000 per year. The amount you pay depends on where you live and if you have a private room. This kind of expense can wipe out a family nest egg and leave a spouse without enough money for living expenses.

Here are some things to think about:

• Do you feel it is important to leave an estate to your family when you die? If not, you could spend your money on LTC itself, if and when you need it, rather than on the insurance to protect your assets.
• How do you feel about counting on Medicaid to pay for your nursing facility costs? LTC insurance may be right for you if you do not want to spend all of your own money and then rely on government funding for care in a nursing facility.
• How much would your family help you to pay for long-term care?
• How important is it for you to choose where you will receive long-term care? Since Medicaid beds for LTC are limited everywhere, you may have little choice about which nursing facility you live in if you rely on Medicaid to pay for your care. With LTC insurance, you may have more choices in types and locations of service (nursing facility versus adult day care program).

What types of LTC insurance plans are available?

For most LTC insurance, you pay a premium and the insurance company agrees to pay a certain daily amount to help cover the cost of long-term care when you need it. Most LTC insurance policies do not cover the full cost of LTC. Most plans limit the number of years or the amount they will pay. Some long-term-care policies pay only when a nursing facility provides the care. Other plans will also pay for care given in your home. They may cover services not covered by Medicare or Medigap insurance.

Policyholders can usually choose benefits from about $50 to $150 per day to be paid by the insurance company for care. Some companies set the daily amount and then the policyholder can choose what type of care the insurance will pay for. Other companies set different payments for different types of care. For example, the payment for care in a nursing facility might be higher than for adult day care.

How much does LTC insurance cost?

The cost of LTC insurance varies greatly. Average premiums range from $2,000 to $4,000 per year. Premiums depend on how old you are and your physical condition when you buy the policy, the level of benefits you choose, and an estimate of when you may need benefits. The younger you are when you buy long-term-care insurance, the lower the premiums are, but you will be paying those premiums for more years before you are likely to need long-term care. You may choose to add a delay period (called a deductible period), which means that when you start needing care, you will personally pay for services for the stated time period in return for lower premiums.

How do I evaluate policies?

Talk to representatives from several companies to compare prices and benefits. Ask for summaries of the policy benefits, and then look at each policy side by side. Be sure you understand the differences. When considering a policy, here are some important questions to ask:

• What types of care are covered and in what settings (skilled nursing care, home care, assisted living, adult day care programs)?
• What are the daily and maximum benefit amounts of the policy?
• What disabilities or illnesses are covered and which ones are not? Are certain illnesses, such as mental health or nervous conditions or Alzheimer's disease not covered by the policy?
• Is there a waiting period for coverage, or for coverage of preexisting conditions?
• Are the premiums going to get higher with time?
• Does the amount of daily benefit rise with inflation or over time?
• Is the policy automatically renewed?
• What happens if you cancel the policy?

Take your time before buying. Have everything in writing. Do not be pressured into buying over the phone. Never buy a policy from a door-to-door salesperson. Ask for references that include customers who have had claims paid. Talk to these customers about their experiences, such as how quickly the company paid claims and any complaints the customer had. Never buy more than 1 long-term-care insurance policy. One company will not pay if another is covering the same benefit.

Where can I purchase long-term-care insurance?

Many companies sell LTC insurance. For information about companies that offer policies in your state contact:

America's Health Insurance Plans Phone: 1-202-778-3200 Web site: http://www.ahip.org.

Some senior groups and hospitals may have helpful information. You can also contact your state's insurance commission. Ask if there is a comparison guide or counseling program to help you.

Written by Carolyn Norrgard, RNC, BA, MEd, and Carol Matheis-Kraft, PhD, RNC, for RelayHealth.
Published by RelayHealth.
© 2009 RelayHealth and/or its affiliates. All Rights Reserved.