Long Term Care insurance provides you a source of funds to help pay for long term care and long term care services. Long term care expenses aren't covered by health or disability coverage. A health plan is designed to cover medical care provided by a hospital or doctor; and disability insurance replaces income if you are unable to work. Neither pays for assistance with basic daily activities over the long term, or for care in your home required by an accident or illness.
The prospect that we or our family members need long term care at some point in our lives is greater than many of us care to acknowledge. We encourage you to consider this valuable benefit offering.
Estimates for the current cost of a nursing home stay range from $55,000 to greater than $65,000 annually (depending on the nature of the care and the location of the facility), and the costs are expected to continue escalating.*
If you or a loved one is facing a long-term nursing home stay, the cost will most likely be borne by one of three sources: personal assets, Medicaid, or long-term care insurance.
Personal assets could disappear quickly for most Americans other than the very wealthy and Medicaid eligibility (under current rules) requires "spending down" assets to the poverty level. Moreover, many of the techniques (e.g. asset transfers) for shielding what would otherwise be considered countable assets (in order to qualify for Medicaid) have been severely restricted under OBRA '93 (Omnibus Budget Reconciliation Act of 1993).
Furthermore, many people mistakenly believe that Medicare will cover long-term care, but usually Medicare provides only very limited coverage (up to 100 days of skilled care), and generally Medigap Policies will not pay for long-term care at all. Enter private long-term care insurance Long-term care insurance pays for skilled, intermediate, or custodial care at a specified dollar amount per day for a certain number of days.
Skilled care encompasses around-the-clock care by a registered nurse under a doctor's supervision; intermediate care is occasional nursing and/or rehabilitative care under the supervision of medical personnel; custodial care generally means assistance with activities of daily living (not necessarily provided by trained medical personnel).
The cost of long-term care insurance varies with the comprehensiveness of services included (e.g., all three levels of care; both nursing home and home health care); the amount of the daily benefit and duration of coverage selected; the amount of the deductible; and the elimination period (the number of days you must be in a facility -- i.e., self-insured -- before benefits commence).
Many of the early long-term care insurance policies (i.e., those written in the 1980's) contained restrictions that led many observers to question their usefulness. In response to these concerns, the National Association of Insurance Commissioner (NAIC) developed a model which establishes minimum standards for long-term care policies. While individual states are not obligated to adopt the NAIC model regulations, most states have done so to varying degrees, and many insurance companies are now basing their long-term care policies on the NAIC model.
Consequently, the NAIC reforms have built a much greater level of consumer protection into the current generation of long-term care policies. However, the regulations are not retroactive, and if you purchased a policy before your state adopted new regulations, you should have it reviewed.
In its simplest form, long-term care insurance buys you time. It allows you to maintain control over your assets during the Medicaid "look-back" period (the period over which Medicaid can "disqualify" asset transfers). By having a benefit period at least as long as the "look-back" period, you will have coverage should the need arise and the time to consider the merits of asset transfers.
While paying for long-term care can spell financial hardship for the unprepared, it need not do so if you plan now with appropriate long-term care insurance.