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Consumer Guide to Long-Term Care

September 1, 2017  |  By: NAHU
Long-term Care

What is Long-Term Care?

Long-term care (LTC) describes the need for assistance from another person with everyday tasks. This type of care is typically non-medical (custodial) and not covered by health insurance. LTC describes the need for custodial (unskilled) help from another person, for an extended period of time. LTC needs consists of services and support related to a prolonged illness, injury or chronic condition. As more Americans expect to live a long life and the population ages, the need for these services will grow. Planning for LTC should be part of everyone’s retirement planning.

Long-term care services include help with “activities of daily living (ADLs)” such as:

  • Bathing
  • Dressing
  • Using the toilet
  • Transferring (to or from bed or chair)
  • Caring for incontinence
  • Eating

As well as help with “instrumental activities of daily living (IADLs)” that allow people to remain independent as:

  • Housework
  • Managing money
  • Taking medication
  • Preparing meals
  • Shopping for groceries
  • Responding to emergency alerts such as fire alarms

The need for LTC may also include monitoring and supervision due to cognitive impairment such as Alzheimer’s disease.

Longer lifespans and breakthroughs in medical technology, combined with changes in family structure, will force people to plan ahead. Ninety-five percent of long-term care in the United States is custodial in nature. Health insurance, disability income coverage, and Medicare do very little to reimburse these costs. None of these products or Medicare fund LTC expenses, only short-term medical (skilled) care.

A LTC care event can be devastating both financially and emotionally. Medicare does not provide is needed for anything but a short length of time and people are unprepared, there may be severe financial and emotional consequences.

How much do Long-Term Care services cost?

Research shows that at least 70% of people over the age of 65 will need LTC services. Between the ages of 40 and 50, 8% of people have a disability that requires long-term care services.

Paying for long-term care services can quickly outstrip savings. In 2015, the national median cost for nursing home care was $80,300/year for a semi-private room. The national median rate for assisted living was $43,200/year. The national median rate for a home health aide was $45,760 annually.

The average annual cost of care in your state can be viewed by clicking here.

What is LTC Insurance (LTCI)?

LTCI helps finance long-term care services. It may be purchased individually or through an employer. Most LTCI policies can cover a myriad of care options, including home care, adult day care, assisted living, and finally, nursing home care.

LTCI offers asset and income protection when the need for LTC becomes necessary. It can also greatly relieve physical and emotional stress for family members.

How Much Does LTC Insurance Cost?

If LTC is needed, cumulative LTCI premiums are much less costly than paying for long-term care needs out-of-pocket.

These major factors impact the cost of LTCI:

  • Age at policy issue: Age is locked in when the policy is issued. The younger one's age, the less expensive the policy.
  • Plan design: The greater level of coverage and the richer the plan design, the higher the cost.
  • Automatic Inflation: Protection riders increase the amount of money LTCI will pay each year.
  • Health: Discounts of as much as 10% can be offered to those in excellent health. Those with many health problems may pay an extra premium.
  • Marital/Couple status: Couples applying at the same time may be offered significant discounts.
  • Group Sponsorship: Members of an employer- or association-sponsored plan may qualify for special discounts on the premium and enjoy preferred underwriting with few or no health status questions.
  • The Elimination Period: Is the number of days one must self-insure before the LTCI begins to pay for LTC.
  • Policy Benefit: Period, or Pool of Money, which is the length of time over which your LTCI will pay if LTC assistance is required.
  • Policy Daily or Monthly Benefit: The amount of money that will be paid out per day or per month.
  • LTCI policies are guaranteed renewable contracts. This means that it is designed to have stable rates. Although uncommon, LTCI premiums may increase by class, but an individual may not be singled out for a rate hike.

Should I buy LTCI?

Purchasing LTCI is a decision with financial consequences, whether or not it is purchased. And, it’s important to note that Medicare does not pay for most long term care services. For example, Medicare doesn’t cover custodial care which is often the reason for care in a nursing home.

If you choose not to purchase LTC insurance and require LTC in the future, your personal savings may be used to finance such care. With LTCI, premium payments help prevent spending personal savings to pay for LTC.

How LTCI Helps:

Control and Access to Quality

It’s about choice. LTCI helps ensure full access to a broad range of options when the need for LTC arises; it enables people to choose where and how to receive LTC.

Independence

LTCI can provide options to remain in one's home instead of obtaining care in a nursing home or similar setting. Receiving care at one's home will not force the disabled person's children or spouse to become caregivers out of necessity. Instead, children can play whatever role they wish and parents will not feel guilty about interrupting their children's lives.

Asset Protection

LTCI can save money and ensure that personal savings and other assets will be used for the purpose originally intended rather than paying for long-term care health expenses.

Peace of Mind

LTCI provides financial security during a stressful time, and is not subject to the woes of the stock market. This type of financial freedom and security is one of the primary reasons people purchase LTCI.

Taxes

LTC insurance premiums may be tax-deductible. The deduction is more likely to be realized by a business owner than an individual, but there are some guidelines for LTC insurance deductions based on age if an individual itemizes medical expenses. Consult an accountant for more specific information. .

What Determines LTCI rates?

Policyholders can choose:

  • How much LTCI pays each day or month
  • How long LTCI pays out for
  • Elimination Period (waiting period before benefits begin)
  • Whether a policy has automatic inflation protection

Popular LTCI Riders include:

  • Future purchase option
  • Return of premium, less claims paid
  • Joint waiver of premium
  • Shared Care

(Consult a licensed, independent agent for more information on what is best for you)

Types of Policies

LTCI policies may be similar to “traditional” health insurance products with premiums that are paid over a lifetime or until LTC is needed. There are also life or annuity-based contracts with LTC riders. Premiums for such policies may be paid once, over a set number of years, or over a lifetime.

Where can I Purchase LTCI?

LTCI can be purchased through licensed health insurance salespeople known as agents or brokers. Independent agents and brokers sell insurance plans from many companies, and they can help you find the coverage that best suits your individual needs. Your insurance professional can show you LTCI from well-rated companies with excellent reputations for client service and the assets to pay benefits in the future.

Agents and brokers also provide service on the policies they have sold, and can help you process claims or with anything else you need regarding your policy. The insurance companies for which agents and brokers sell coverage pay them a commission for their work, so you will not be charged a direct fee if you want to use the services of an agent or broker. You can find agents and brokers who sell long-term care coverage via the Internet, or you may prefer to consult with one in-person. To find an NAHU member near you who can help you purchase long-term care insurance coverage, use our agent locator.

What are LTC Partnership Insurance Policies?

LTC partnership insurance policies are a special type of coverage that combine private LTC insurance coverage with the backstop of coverage by the federal Medicaid program. The purpose of these partnership programs is to provide access to affordable private long-term care insurance for individuals of moderate income who may not have been able to otherwise afford private coverage Through the Partnership Program, you can protect your personal assets without spending down your assets first to qualify for Medicaid assistance. A policyholder is able to keep personal assets equal to the benefits paid by the policy but should you continue to need services once your policy is exhausted, Medicaid would take over the financial support. Medicaid is the largest payer of LTC services providing qualified individuals limited LTC benefits with fewer choices and to qualify an individual has to be financially eligible. Eligibility standards vary from state-to-state but the asset threshold to qualify is typically stringent. Federal legislation enabling most states to create Partnership programs was passed in 2005. So some states do not have partnership programs in place yet, but many are in the process of creating them.

To discover more about LTC partnerships, and the specific types of coverage offered in your state, please click here.

Additional Resources

Guide for Caregivers - MetLife Mature Institute has published a guide for caregivers who are helping loved ones get healthcare.

US Dept. of Health and Human Services