Villa Rose Associates Ltd.
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Villa Rose Associates Ltd.
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FOR IMMEDIATE RELEASE
LONG TERM HEALTH CARE, a guide to What Everyone Should know
Glossary of terms - Form Companionship Care - IN YOUR HOME [Click Here] Long Term Care QUOTES [Click Here] One of the most significant issues facing Americans today is financing the cost of long-term health care. Based upon the most recent available studies, it is estimated that 43% of people aged 65 -greater than one in three- will at some time enter a nursing home, and many more will need long-term care at home.1 Seven out of ten couples can expect to see at least one spouse enter a nursing home.2 Half of those who enter a nursing facility will stay for at least one year.2 Increasing life expectancy and a rapidly increasing elderly population are combining to create a financing crisis of staggering proportions. A year's stay in a nursing home typically costs between $50,000 and $60,000, 3 so for the average stay of around three years, 4 many middle-income families could see their life's savings wiped out. Medicare covers only short-term, rehabilitative care. Medicaid, the last resort for those who become impoverished, is in danger of collapsing under escalating demand. The government is now actively promoting private insurance as the solution to this crisis. These days, long-term care policies being issued are of much higher quality than in the past. Still, purchasers need to be well informed in order to purchase the best possible coverage for their circumstances. Long-Term care insurance is best explained by an expert--someone who specializes in this complex product. CUSTODIAL CARE Most nursing-home patients receive what is called custodial care. Some require assistance with activities of daily living (know as ADLs), which include bathing, dressing, toileting, maintaining continence, transferring in and out of bed, and eating. Others, such as those suffering from Alzheimer's Disease, require supervision during daily activities. This care and supervision can be provided by licensed non-professionals. While older policies may have offered benefits only for care by skilled nursing personnel, virtually all policies being offered today make no distinction between skilled care and custodial care. BENEFIT ELIGIBILITY REQUIREMENTS These days, virtually all policies being offered base eligibility for benefits on the need for either supervision (in the case of mental impairment) or assistance with a certain number of ADLs (usually two or three). A person may not be ill, but may still need assistance, and so the restrictive "medical necessity" requirement found in older policies has been dropped. Most currently available plans do not require that a person be hospitalized first in order to become eligible for benefits upon transfer to a nursing home or upon discharge to a home-care setting. This requirement of older policies, know as the "three-day prior hospitalization requirement," has been abandoned as unduly restrictive. The better plans now available pay for care in any licensed nursing facility, whether a nursing home, and assisted-living facility, or other approved alternative setting.
COVERAGE FOR MENTAL OR NERVOUS DISORDERS Approximately half of those residing in nursing facilities today suffer from mental onerous disorders, such as Alzheimer's Disease, and so coverage for such conditions is vital. Older plans often excluded from coverage some or all of these disorders. The plans offered today by leading insurers do provide benefits for care or supervision required by policyholders suffering from all forms of mental and nervous disorder.
HOME AND COMMUNITY CARE People who would not enter a nursing facility may prefer to draw upon the wide range of home-care services available today. Older policies placed many restrictions on the amount and type of home or community care for which they would pay benefits. Today more extensive coverage is available for services received outside of a facility. Policies are usually structured in one of two ways. Type A policies cover care in an approved facility, and offer the option of a rider to cover any home or community care that may be required. Type B are sometimes called integrated or "bag-of-money" policies; they provide a benefit account for the policyholder, from which benefits are paid (up to certain limits) for approved care in whatever setting is appropriate -- home, community, or facility. The advantage to the consumer in the latter type of policy is flexibility: benefits can be paid up to the full limit of the account for either home care or for care in a facility, or for a combination of the two. With facility coverage plus a home care rider, separate benefit limits apply. "Bag-of-Money" policies can also result in the preservation of benefits for future needs, because choosing lower-cost care preserves the money that remains for future care. Full-time home care is not practical, as it would be more costly than care in a facility. Policy benefits limits do not normally allow for payment of the whole cost of full-time home care. If a person can cope alone overnight and for part of the day, home care may be workable. If no, home care is useful only as a supplement to care by family or friends.
UNDERWRITING AND HEALTH Today most insurers underwrite the policy before it is issued. This means that the company investigates the applicant's health history and decides whether or not to issue coverage based on information from the applicant, the applicant's doctor, and in some cases a paramedical examination. This assures the applicant that, if her or she is accepted, there will be no questions about the validity of the coverage at the time of claim. Certain health problems may make a person either uninsurable or only able to obtain limited coverage. The best plans available do not impose a waiting period for pre-existing conditions. A few companies may still underwrite at the time of claim, a practice known as post-claims underwriting. Under certain circumstances, especially if full health information was not provided by the applicant on the application for insurance, such a company may refuse to pay benefits or cancel the policy just when it is needed most. The safest approach is to deal with a company that underwrites at the time of application. Even though it takes longer to get the policy issued, it usually means that a claim will be paid more quickly. The assurance that you are really insured is worth extra time.
DEDUCTIBLES Many plans offer a choice of deductible or elimination periods. This is a waiting period, e.g. 20 or 100 days, at the beginning of covered services for which no benefits are payable. The longer the elimination period, the lower the premium. The prudent consumer would choose a longer elimination period with a lower premium. This may mean no coverage for stays shorter than the elimination period, but most insured's could save more in premium than they would pay out for a short period of care.
RENEW ABILITY Some older plans are conditionally renewable, which means that the company could cancel coverage if it does so for all holders of like policies in a state. At least one company has already done just that, after only a few years of offering a policy. Plans guaranteed renewable for life are better, because they cannot be cancelled except for nonpayment of premium. Virtually all currently available plans are guaranteed renewable. However, the guarantee is only as good as the company behind it.
COST AND VALUE The cost of long-term care insurance depends on a wide number of variables. These include age (some plans have age limits), the amount and type of benefits, the dollar maximum or length of time benefits are payable, the elimination period, etc. Generally, the younger an applicant the lower the premium. Plans currently available usually waive premium after a certain period of paid benefits. Consumers should avoid plans that have premiums that increase with age, as such plans may become unaffordable just when they are most needed. The best plans have level premiums that do not increase with changes in age or health. Almost all reserve the right to change rates on a statewide basis. Cost is only one component of value. A less expensive plan ma prove no bargain if it doesn't provide the coverage needed. Companies that have entered the long-term care insurance field within the last few years have little experience to validate their pricing: several such companies have already had to raise their rates, and some have gone out of the business. A company with a long history of insurance long-term care will demonstrate more stable rates because it has based them on experience.
BENEFITS VARY Many reimbursement-style plans pay a benefit for the costs of covered care (up to a selected daily maximum), and reduce the benefit period by each day for which benefits were paid. Better plans of the integrated type deduct only the dollar amount paid from the policy's benefit maximum. Indemnity-type plans pay a selected daily amount for covered services regardless of the actual expenses incurred. Generally, the amount selected should be enough to cover the portion of the cost of care a purchaser cannot afford to pay out of pocket. To protect against rising costs, younger purchasers should purchase an automatic benefit increase feature. The duration of benefits can carry from one year to lifetime. Leaving aside short stays of less than three months, the average stay in a facility lasts about three years, and only 10% of those entering a nursing home will stay five years or longer.4 Still, those who do may stay many years. Wise consumers will purchase the longest benefit they can afford. It is important to evaluate carefully the types of services to be covered. A home-care-only plan may appeal to those averse to the idea of nursing home, but could provide a false sense of security. Facility care is often unavoidable, so the potentially catastrophic cost of this type of care is the more important financial risk to cover. Remember, everyone's needs are different. There is no single plan that is best for everyone. The wise shopper seeks the plan that best fits his or her needs. For this reason, it makes sense to use the services of a specialist in long-term care insurance. Only a trained professional can guide you through the often confusing maze of available features to find the plan that best suits your circumstances. These comments have been excepted from Dale M. Larson (6/95) President and CEO of LTC, Incorporated. Dale Larson is the author of consumer guides and articles on long-term care insurance. He is a member of Gerontological Society of America and the American Society on Aging. Foot Notes: 1. Health Magazine, 10/93. 2. U.S. News & World Report 4/26/93. 3. Chicago Sun-Times 8/28/94. 4. Chicago Sun-Times 4/9/95.
Special notes and comments: Both Jeffrey Rosenthal, CFP©, E.A. and Margaret Diaz are qualified to assist you in selecting the right product for your situation by a A-Rated company (according to the BEST RATING SYSTEM). Also look four our article on MEDICADE FUNDING FOR LONG-TERM HEALTH CARE. Additional Help Careguide.com - www.careguide.com Eldercare Locator - 800 677-1116 www.aoa.dhhs.gov/elderpage/locator.html Extendedcare.com - www.extendedcare.com National Association for Home Care 202 547-7424 www.nahc.org National Association for Professional Geriatric Care Managers 520 818-8008 www.caremanager.org This material is not intended to replace specific advice for your situation. You are advised to discuss your situation with a qualified attorney, tax advisor, financial advisor, or insurance agent. The rules are quite complex and we did not intend to over-simplify these complicated rules. Our intention was to familiarize you the concepts and vocabulary so that you may have an informed discussion with a qualified professional. |
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