Planning for Long-Term Care
Many health care episodes include a period of time when the patient no longer needs skilled medical care but does need assistance to a degree that requires confinement in a nursing home or special help at home. This need is especially prevalent with the extremely elderly and patients with certain conditions such as Alzheimer’s disease. Such costs are not covered by HMOs, health insurance, or Medicare because the care is usually considered “not medically necessary” by these providers
Factors to assess when considering a long-term care policy include the
following:
1. The degree of impairment required for benefits to begin. Insurance companies use the inability to perform a certain number of activities of daily living (ADLs) as a criterion for deciding when the insured becomes eligible for long-term care benefits. Typically, a policy pays benefits when a person cannot perform two or three ADLs without assistance. The ADLs commonly used in this type of decision making are bathing, bladder control, dressing oneself, eating without assistance, toileting (moving on and off the toilet), and transferring (getting in and out of bed). Because bathing is often one of the first ADLs that is lost, a policy that does not list bathing as a criterion makes it more difficult to reach the threshold at which benefits become available.
2. The level of care covered. The levels of nursing home care are usually categorized three ways. Skilled nursing care is intended for people who need intensive care, meaning 24-hour-a-day supervision and treatment by a registered nurse, under the direction of a doctor. Intermediate care is ap - propriate for people who do not require around-the-clock nursing but who are not able to live alone. Custodial care is suitable for many people who do not need skilled nursing care but who nevertheless require supervision (for example, help with eating or personal hygiene). Insurance companies’ definitions of these levels of care may differ and must be considered when policies are evaluated. Although the largest expenses related to long-term care result from a stay in a nursing home, many people are able to remain in their homes with the assistance of visiting nurses, therapists, and even housekeepers. Longterm care policies can be written to cover such in-home
3. The person’s age. The younger the person when the policy is purchased, the lower the premium as the odds of needing care increase with age. The trade-off lies between buying young and paying premiums for many years versus waiting to purchase a policy, at which time it may be difficult to afford coverage because of preexisting conditions and consequently high policy costs.
4. The benefit amount. Long-term care plans are generally written to provide a specific dollar benefit per day of care. If the cost per day for nursing homes in your geographic area is typically $140, you might buy a policy for $110 per day, thereby coinsuring for a portion of the expenses.
5. The benefit period. Although it is possible to buy a policy with lifetime benefits, this option can be very expensive. The average nursing home stay is about two and one-half years. A policy with a three-year limit might cost one-third less than a policy with a lifetime benefitperiod.
6. The waiting period. Policies can pay benefits from the first day of nursing home care or they can include a waiting period. Selecting a 30-day or 90-day waiting period can significantly reduce premiums.
Many health care episodes include a period of time when the patient no longer needs skilled medical care but does need assistance to a degree that requires confinement in a nursing home or special help at home. This need is especially prevalent with the extremely elderly and patients with certain conditions such as Alzheimer’s disease. Such costs are not covered by HMOs, health insurance, or Medicare because the care is usually considered “not medically necessary” by these providers
Factors to assess when considering a long-term care policy include the
following:
1. The degree of impairment required for benefits to begin. Insurance companies use the inability to perform a certain number of activities of daily living (ADLs) as a criterion for deciding when the insured becomes eligible for long-term care benefits. Typically, a policy pays benefits when a person cannot perform two or three ADLs without assistance. The ADLs commonly used in this type of decision making are bathing, bladder control, dressing oneself, eating without assistance, toileting (moving on and off the toilet), and transferring (getting in and out of bed). Because bathing is often one of the first ADLs that is lost, a policy that does not list bathing as a criterion makes it more difficult to reach the threshold at which benefits become available.
2. The level of care covered. The levels of nursing home care are usually categorized three ways. Skilled nursing care is intended for people who need intensive care, meaning 24-hour-a-day supervision and treatment by a registered nurse, under the direction of a doctor. Intermediate care is ap - propriate for people who do not require around-the-clock nursing but who are not able to live alone. Custodial care is suitable for many people who do not need skilled nursing care but who nevertheless require supervision (for example, help with eating or personal hygiene). Insurance companies’ definitions of these levels of care may differ and must be considered when policies are evaluated. Although the largest expenses related to long-term care result from a stay in a nursing home, many people are able to remain in their homes with the assistance of visiting nurses, therapists, and even housekeepers. Longterm care policies can be written to cover such in-home
3. The person’s age. The younger the person when the policy is purchased, the lower the premium as the odds of needing care increase with age. The trade-off lies between buying young and paying premiums for many years versus waiting to purchase a policy, at which time it may be difficult to afford coverage because of preexisting conditions and consequently high policy costs.
4. The benefit amount. Long-term care plans are generally written to provide a specific dollar benefit per day of care. If the cost per day for nursing homes in your geographic area is typically $140, you might buy a policy for $110 per day, thereby coinsuring for a portion of the expenses.
5. The benefit period. Although it is possible to buy a policy with lifetime benefits, this option can be very expensive. The average nursing home stay is about two and one-half years. A policy with a three-year limit might cost one-third less than a policy with a lifetime benefitperiod.
6. The waiting period. Policies can pay benefits from the first day of nursing home care or they can include a waiting period. Selecting a 30-day or 90-day waiting period can significantly reduce premiums.
7. Inflation protection. If a policy is purchased prior to age 60, the buyer faces a significant risk in that inflation may render the daily benefit woefully inadequate when care is ultimately needed. Some policies increase the daily benefit by 4 or 5 percent per year to adjust for inflation, but this protection adds considerably to the premium. The younger your age when a policy is purchased, the more youneed inflation protection
.
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