Long-Term Care

Long-term care (LTC) is a phrase, which is used to describe a variety of services in the area of health, personal care and social needs of persons who are chronically ill or infirm.

What Are The Chances That You Will Need Long – Term Care?

Recent studies based on nursing home admissions indicate that 40% of all persons age 65 and over will enter a nursing home in the future.

What Portion Of These Expenses Will Be Paid By Medicare?

A study conducted in 1987 showed that Medicare paid for less than 2% of the costs and private insurance paid for even less. Medicaid paid for 42% of the expenses, and the patient or his or her family paid over one-half of these costs.

Can Medicaid Help Pay For Long–Term Care?

Medicaid is a welfare program funded by both federal and state governments. It was enacted to provide health care services for the truly impoverished of our nation. Eligibility for benefits under the Medicaid program is determined by each state, based on an individual’s assets and income. Recent legislation has made it extremely difficult to qualify for Medicaid benefits by gifting or otherwise disposing of personal assets for less than fair market value.

The Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) provided that gifts of assets within 36 months (60 months for gifts to certain trusts) prior to applying for Medicaid could delay one’s eligibility for benefits. Other provisions of OBRA ’93 allowed a state to recover from a person’s estate (including trusts, jointly held assets, etc.) all of the payments made by Medicaid.

Even gifts to one’s spouse do not help, since the combined assets of couples must fall within specified eligibility levels. These eligibility levels range from approximately $16,800 to $84,000, and are selected by each state. Some assets, such as a personal residence, may be exempt from the eligibility calculations.

If Medicaid is the only solution for providing long–term care to an elderly individual, inquiries should be directed to the local welfare office.

How To Minimize Impact On The Estate

How can you keep your estate from being depleted by the need for long–term care? There are currently a number of insurance companies that offer LTC insurance policies. Some are individual policies, while others are obtained through an association or employer (group policies.)

Common Elements In Long–Term Care Insurance Policies

• Amount of the benefit: Most policies pay a fixed dollar amount for each day you are eligible for the benefit; e.g., $100 per day. In Maryland, $150.00 per day appears to be the average.

• Inflation protection: Since costs inevitably increase, a policy without a provision for inflation may be outdated in a few years. Of course, an additional charge is incurred for this protection.

• Guaranteed renewability: This provision will prevent the insurance company from canceling your policy for as long as you continue to pay the premium when it is due. However, the insurer may be able to raise rates on a class basis. Currently, long-term care policies sold in most states are guaranteed renewable.

• Waiver of premium: Some policies will waive the future premiums after you have been in the nursing home for a specified number of days; e.g., 90 days.

• Prior hospitalization: This policy provision requires one to be hospitalized (for the same condition) prior to entering the nursing home, or no benefits will be paid under the policy. Although prior hospitalization clauses have been outlawed in all states, some older policies still in force may contain this provision. Policies currently sold do not contain prior hospitalization clauses.

• Place of care: Does the policy require that the nursing home be licensed or otherwise certified by the state to provide skilled or intermediate nursing care? Must the facility meet certain record keeping requirements?

• Plan of care: A plan of care is part of the health care claims process. It is the result of an assessment prepared by the insured’s physician, and a multi-disciplinary team, including practical nurses, social workers, and other health care professionals. The plan outlines the appropriate level of care needed to assist the insured in performing the activities of daily living.

• Level of care: Three generally recognized levels of care, in an institutional

setting:

§ Skilled care: Daily nursing and rehabilitation care under the supervision of skilled medical personnel; e.g., registered nurses and based on a physician’s orders.

§ Intermediate care: The same as skilled care, except it requires only intermittent or occasional nursing and rehabilitative care.

§ Custodial care: Help in one’s daily activities including eating, getting up, bathing, dressing, use of toilet, etc. Persons performing the assistance do not need to be medically skilled, but the care is usually based on the physician’s certification that the care is needed.

· Pre – existing conditions: Depending on the state, a policy may limit coverage of pre–existing conditions to discourage persons who are already ill from purchasing the policy.

Many policies will provide benefits if the pre–existing condition was overcome six months or more prior to applying for the policy. Also, some policies will not pay benefits if the pre-existing condition re-occurs within six months after the effective date of coverage.

· Deductible or waiting period: Most LTC policies require you to “pay your own way” for a specified number of days (generally ranging between zero and 120 days) before the insurance company will begin to pay benefits. Of course, the shorter the waiting period, the higher the cost will be. This usually referred to as an elimination period.

· Alzheimer’s disease: Most policies now include coverage for organic brain disorders like Alzheimer’s disease.

· Home health care (home care): Many long-term care policies can provide coverage in the insured’s home. It is most often offered as a rider

(requiring an additional premium) to nursing facility coverage, and reimburses the cost of long –term care received at home.

· Rating the company: Companies should be financially sound and have a reputation of treating policyholders fairly.

Comment: The management of risk is a crucial part of financial planning. The potential need for long-term care is a genuine risk. The prudent estate owner will examine long-term insurance to see if it has a proper place in his or her overall financial plan. Once the disabling condition appears, it is obviously too late to act.