Someone with a physical illness or disability often needs hands-on or stand-by assistance with activities of daily living. People with cognitive impairments usually need supervision, protection, or verbal reminders to do everday activities.
The way long-term care services are proveded is changing. Skilled care and personal care are still the terms used most often to describe long-term care and the type or level of care you may need.
People usually need skilled care for medical conditions that require care by medical personnel such as registered nurses or professional therapists. This care is usually needed 24 hours a day, a physician must order it, and the care must follow a plan. Individuals usually get skilled care in a nursing home but may also receive it in other places. For example, you might get skilled care in your home with help from visiting nurses of therapists. Example of skilled care including physical therapy, caring for a wound, or supervising the administration of intravenous medication.
*NOTE: Medicare and Medicaid have their own definitions of skilled care. Please refer to The Guide to Health Insurance for People with Medicare of The Medicare Handbook to find out how Medicare defines skilled care. Contact your local social services office for questions about Medicaid's definition of skilled care. For copies of these publications, contact your state insurance department or State Health Insurance Assistance Program.
Personal care (sometimes called custodial care) helps one with activities of daily living (ADLs). These activities include bathing, eating, dressing, toileting, continence, and transferring. Personal care is less involved than skilled care, and it may be given in many settings.
How Much Does Long-Term Care Cost?
Long-term care can be expensive. The cost depends on the amount and type of care you need and where you get it. Below are some average annual costs for care provided in a nursing home, in an assisted living facility, and in your own home.
Nursing Home Costs
In 2001, the national average cost of nusing home care was $56,000 per year, or about $153 per day. This cost does not include items such as therapies and medications, which could make the cost much higher.
Assisted Living Facility Costs
In 2001, assisted living facilities reported charging an average fee of $1,873 per month, or $22,476 per year, including rent and most other fees. Some residents in the facilities may pay a lot more if their care needs are higher.
Home Care Costs
In 2001, the national average cost of part-time basic home care ranged from $12,000 to $16,000 per year. Skilled care provided by a nurse is more expensive than care provided by a home health aide. Annual costs for home health care will vary based on the number of days per week the caregiver visits, the type of care required and the length of each visit. Home health care can be expensive if round-the-clock care is required. These costs are different across the country. Your state insurance department or the insurance counseling program in your state may have costs for your area.
Who Pays For Long-Term Care?
People pay for long-term care in a variety of ways. These include: using the personal resources of individuals or their families, long-term care insurance, and some assistance from Medicaid for those who qualify. Medicare, Medicare supplement insurance, and the health insurance you may have at work usually will not pay for long-term care.
Individual Personal Resources
Individuals and their families generally pay for part of all of the costs of long-term care from their own funds. Many use savings and investments. Some people sell assets, such as their homes, to pay for their long-term care needs.
Medicare and Medicare Supplement Insurance
Medicare. Medicare's skilled nursing facility (SNF) benefit does not cover most nursing home care. Medicare will pay the cost of some skilled care in an approved nursing home or in your home but only in specific situations. The SNF benefit only covers you if a medical professional says you need daily skilled care after you have been in the hospital for at least three days and you are receiving that care in a nusing home that is a Medicare-certified skilled nusing facility. While Medicare may cover up to 100 days of skilled nusing home care per benefit period when these conditions are met, after 20 days beneficiaris must pay a coinsurance fee. In 2002, that coinsurance was $101.50 per day. While Medicare may pay for nursing home care sometimes, it doesn't cover the costs of care in assisted living facilities.
While many people would like to receive care in their own homes, Medicare does not cover homemaker servies. In addition, Medicare doesn't pay for home health aides to give you personal care unless you are homebound and are also getting skilled care such as nursing or therapy. The personal care must also relate to the treatment of an illness or injury and you can only get a limited amount of care in any week.
You should not rely on Medicare to pay for your long-term care needs.
Medicare Supplement Insurance
Medicare supplement insurance is private insurance that helps pay for some of the gaps in Medicare coverage, such as hospital deductibles and excess physicians' charges above what Medicare approves. Medicare supplement policies do not cover long-term care costs. However, four Medicare supplement policies - Plans D, G, I, and J - do pay up to $1,600 per year for services to people recovering at home from an illness, injury, or surgery. The benefit will pay for short-term, at-home help with activities of daily living. You must qualify for Medicare-covered home health services before thie Medicare supplement benefit is available.
Medicaid
Medicaid is the governemt-funded program that pays nursing home care only for individuals who are low income and who have spent most of their assets. Medicaird pays for nearly half of all nursing home care on an aggregate basis, but many people who need long term care never qualify for Medicaid assistance. Medicaid also pays for some home and community-based services. To get Medicaid help, you must meet federal and state guidelines for income and assets. Many people start paying for nursing home care out of their own funds and "spend down" their income until they eligible for Medicaid. Medicaid may then pay pert or all of their nursing home costs. You may have to use up most of your assets on your health care beffore Medicaid is able to help. Some assets and income can be protected for a spouse who remains at home. In addition, some of your assets my be protected if you long-term care insurance approved under one of the state programs.
State laws differ about how much money and assets you can keep and be eligible for Medicaid. (Some assets, such as your home, may not count when deciding if you are eligible for Medicaid.) However, federal law requires your state to recover from your estate the costs of the Medicaid-paid benefits you receive. Contact your state Medicaid office, office on aging, or state department of social services to learn about the rules in your state. The insurance counseling program in your state also may have some Medicaid information.
Long-Term Care Insurance
Long-term care insurance is one other way you may pay for long-term care. This type of insurance will pay for some or all of your long-term care. It was introduced in the 1980s as nursing home insurance but has changed a lot and now covers much more than nursing home care. The rest of this Shopper's Guide will give you information on long-term care insurance.
You should know that a federal law, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, gives some federal income tax advantages to people who buy certain long-term care insurance policies. These policies are called Tax-Qualifies Long-Term Care Insurance Contracts, or simply Qualifies Contracts. The tax advantages of these policies are outlines on page 13. There may be other tax advantages in your state. You should check with your state insurance department or insurance counseling program for information about tax-qualified policies.
Who May Need Long-Term Care?
The need for long-term care may gein gradually as you find that you need more and more help with activities of daily living, such as bathing and dressing. Or you may suddenly need long-term care after a major illness, such as a stroke or a heart attack.
If you do need care, you may need nursing home or home health care for only a short time. Or, you may need these services for many months, years, or the rest of your life.
It is head to know if and when you will need long-term care, but there are some statistics that may help. For example:
- Life expectancy after age 65 has now increased to 17.9 years, up from 1940 when life expectancy after 65 was only 13 extra years. The longer people live, the greater the changes they will need assistance due to chronic conditions.
- About 12.8 million Amdericans of all ages requires long term care, but only 2.4 million live in nursing homes.
- About 44% of people reaching age 65 are expected to enter a nursing home at least once in their lifetime. Of those who do enter a nursing home about 53% will for one year or more.
Do You Need Long-Term Care Insurance?
Whether you should buy a long-term care insurance policy will depend on your age, health status, overall retirement goals, income, and assets. For instance, if you only sourance of income is a Social Security benefit or Supplemental Security Income (SSI), you probably shouldn't buy long-term care insurance since you may not be able to afford the premium.
On the other hand, if you have a large amount of assets but don't want to use them to pay for long-term care, you may want to buy a long-term care insurance policy. Many people buy a policy because they want to stay independent of government aid or the help of family. They don't want to burden anyone with having to care for them. However, you should not buy a policy if you can't afford the premium or aren't sure you can pay the premium for the rest of your life.
If you already have health preoblems that are likely to mean you will need long-term care (for example, Alzheimer's disease or Parkinson's disease), you probably won't be able to buy a policy. Insurance companies have medical underwriting standards to keep the cost of long-term care insurance affordable. Without such stanards, most people would not buy coverage until they needed long-term care services.
Some states have a regulation requiring the insurance company and the agest to go through a worksheet with you to decide if long-term care insurance is right for you. The worksheet describes the premium for the policy you're thinking about buying and asks you questions about the source and amount of your income and the amount of your savings and investments. Some states require that you fille out the worksheet and send it to the insurance company. Even if you aren't required to fill out this worksheet, it might help you decide if long-term care insurance is right for you.
Remember, not everyone should buy a long-term care insurance policy. For some, a policy is affordable and worth the cost. For others, the cost is too great, or the policy they can afford doesn't offer enough benefits to make it worthwhile. You should bot buy a long-term care insurance if the only way you can afford to pay for it is by not paying other important bills. Look closely at your needs and resources, and discuss it with a family member to decide if long-term care insurance is right for you.
If, after careful consideration, you decide that long-term care insurance is right for you, check out the company and the agent, if one is involved, before you buy a policy. Insrance companies and agest must be licensed in your state to sell long-term care insurance. If you're not sure, contact your state insurance department.
How Can You Buy Long-Term Care Insurance?
Private insurance companies sell long-term care insurance policies. You can buy an indicidual policy from an agent or through the mail. Or, you can buy coverage under a group policy through an employer or through membership in an association. The federal government and several state government off long-term care insurance coverage to their employees, retirees and their families. This program is voluntary and premiums are paid by perticipants. You can also get long-term care benefits through a life insurance policy.
Individual Policies
Today, most long-term care insurance policies are sold to individuals. Insurance agents sell many of these policies but companies also sell policies through the mail or by telephone. You will find that individual policies can be very different from one company to the next. Each company may also offer policies with different combinations of benefits. Be sure to shop among policies, companies, and agents to get the coverage that best fits your needs.
Policies From Your Employer
Your employer may offer a group long-term care insurance plan or offer individual policies at a group discount. An increasing number of emploers offer this benefit, especially since the passage of the Health Insurance Portability and Accountability Act (HIPAA). HIPAA allows employers the same type of federal tax benefit when they pay for their employee's long-term care insurance as when they pay for their health insurance.
The employer-group plan may be similar to what you could buy in an individual policy. If you are an active employess, one advantage of an employer-group plan is you may not have to meet any medical requirements to get a policy or there may be a relaxed screening progcess for active employees. Many employers also let retirees, spouses, parents, and parents-in-law apply for this coverage. Relatives must usually pass the company's medical screening to quality for coverage and must pay the premium.
Generally, insurance companies must let you keep your coverage after your employment ends or you employer cancels the group plan. In most cases, you will be able to contine u your coverage or convert it to another long-term care insurance policy. Your premiums and benefits may change, however.
If an employer offers long-term care insurance, be sure to think about it carefully. And employer-group policy may offer you options you can't find if you buy a policy on your own.
Federal Government
Federal and U.S. Postal Service employees and annuitants, members and retired members of the uniformed services, and qualified relatives are eligible to apple for long-term care insurance coverage under the Federal Long Term Care Insurance Program. Private insurance companies underwrite the insurance, and the federal government does not pay any of the premiums. The group rates under the program may or may not be lower than individual rates and the benefits may also be different.
State Government
If you or a member of your family is a state or public employee or retiree, you may be able to buy long-term care insurance under a state government program.
Association Policies
Many associations let insurance companies and agents offer long-term care insurance to their members. These policies are like other types of long-term care insuracne and typically require medical underwriting. Loke employer-group policies, association policies usually give their members a choice of benefit options. In most cases, policies sold through associations must let members keep or convert their coverage after leaving the association. Be careful about joining an association just to buy any insurance coverage. Review your rights if the policy is terminated or canceled.
Policies Sponsored by Continuing Care Retirement Communities
Many Continuing Care Retirement Communities (CCRC) offer or require you to buy long-term care insurance. A CCRC is a retirement complex that offers a broad range of sercives and levels of care. You must be a resident or on the waiting list of a CCRC and meet the insurance company's medical requirements to buy its long-term care insurance policy. The coverage will be similar to other group or individual policies.
Life Insurance Policies
Some companies let you use your life insurance death benefit to pay for specific conditions such as terminal illness or for qualified long-term care expenses such as home health care, assisted living, or nursing home care. A life insurance death benefit you use while you are alive is known as an accelerated death benefit. A life insurance policy that uses an accelerated death benefit to pay for long-term pcare expenses may also be known as a "life/long-term care" policy. It may be an individual or a group life insurance policy. The company pays you the actual charges for care when you receive long-term care services, but no more than a certain percent of the policy's death benefit per day or per month. Policies may pay part of all of the death benefit for qualified long-term care expenses. Some comapnies let you buy more long-term care coverage than the amount of your death benefit in the form of a rider.
Some policies may allow you to withdraw the cash value of your policy to pay for specific conditions and expenses. It is important to remember that if you use money from your life insurance policy to pay for long-term care, it will reduce the death benefit the beneficiary will get. For example, if you buy a policy with a $100,000 death benefit, using $60,000 for long-term care will cut the death benefit of your policy to $40,000. If may also affect the cash value of your policy. Ask your agent how this may affect other aspects of your life insurance policy. If you bought life insurance to meet a specific need after your death, your survivors may not be able to meet that need if you use your policy to pay for long-term care. If you never use the long-term care benefit, the policy will pay the full death benefit to your beneficiary.
Other Options
Some states have long-term care insurance programs designed to help people with the financial impact of spending down to meet Medicaid eligibitiliy standts. Under these programs (sometimes called "partnership programs"), when you buy a specially approved insurance policy, you will receive full or partial protection against the normal Medicaid requirement to spend down your assets to become eligible. Check with your state insurance department or counseling program to see if these policies are available in your state. Please keep in mind that these programs have specific requirements in each state in which they are offered.
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