What Is Long-Term Care?
Long-term care is the
assistance or supervision you may need when you are not able to do some of the basic
"activities of daily living" (ADLs) like bathing, dressing or moving from a bed
to a chair. You might need assistance with ADLs if you suffer from an injury like a broken
hip, an illness, a stroke or from advanced age and frailty. Other people may need
long-term care because of mental deterioration, called "cognitive impairment"
that can be caused by Alzheimer’s Disease, other mental illness or brain disorders.
Long-term care is sometimes
called "custodial care" or "personal care." Formal long-term care (the
kind of care you must pay for) is most often provided by professional skilled and
unskilled workers. Unskilled workers are often supervised by skilled medical personnel
such as registered nurses. Informal long-term care is frequently provided by unpaid family
members and friends.
Long-term care services can be
provided in your own home or in a community program like an Adult Day Care Center, in an
assisted living facility licensed as a Residential Care Facility for the Elderly (RCFE),
or in a nursing home.
Long-term care is not
necessarily "long term." For instance, about half of all nursing home stays last
6 months or less. Some people only need long-term care for a few months, for example,
while recovering at home from a broken hip, while others may need care for the rest of
their life.
Will I Need Long-Term Care?
Your personal risk of needing long-term care depends on
many factors. Some of those are whether you are male or female, how long you live, your
health history and whether you have a spouse or family member who can provide some of the
care you may need.
Longevity:
The
longer you live, the more likely it is that you will need long-term care. Those who live
to be 95 years old or older are much more likely to have spent five or more years in a
nursing home than those who die in their mid-70’s. Much less is known about the use
of home care services.
Your Gender:
Women are at a much higher risk of needing to pay for formal long-term care for several
reasons. Women not only have longer life spans, they often out-live their spouses. When
they need long-term care in their older years, there is often no one to care for them at
home and they are more likely to need institutional care as a result of all these factors.
Married or Single:
If you have a spouse or other family members who can provide care you are more likely to
be able to remain in your own home when you need care. If family members are unable to
provide care, and you cannot pay someone to take care of you, then a nursing home may be
the only available option. The condition that causes you to need care, and the severity of
that condition, may determine whether you can be cared for at home or whether
institutional care is the only option. For instance, a severe stroke could be so disabling
that care at home is impossible, or an Alzheimer’s patient may need constant
supervision.
Health factors:
Certain health conditions, like Alzheimer’s or a stroke, can cause a need for
long-term care. If you know that certain health conditions run in your family, you may
have a greater risk of needing long-term care than another person of the same age and
gender. Unfortunately, it may be that this known health condition could also make you
ineligible to buy this type of insurance.
How Much Does Long-Term Care Cost?
In 2002, the cost of nursing
home care in California averages $141 a day. Costs may be lower in rural areas and higher
in suburban and urban areas. A short 30-day stay could cost $4,230 or more; a 3 month
stay, $12,690 or more; and, a year stay, $50,000 or more. The cost of care in the future
will be much higher than it is today. California nursing home rates increased at an
average rate of over 5% per year during the past twenty years¹ and are likely in the
future to continue to increase by at least 5% per year. A 5% annual increase means a year
of care that costs $50,000 today will cost twice that amount in 14 years, or $100,000 a
year!
| ¹
Issuers
Bulletin for 2002, California Partnership for Long-Term Care, based on data from the
California Office of Statewide Health Planning and Development. |
Who Usually Pays for Long-Term Care?
·
Medicare
may pay for skilled care in a nursing home for a very short period of time – but no
longer than 100 days – and only when the patient meets all the Medicare requirements
for daily skilled care. While people do get personal care services at the same time,
Medicare will not pay unless there is also a need for daily skilled services that only a
nurse or therapist can provide. Medicare may pay for some personal care services at home
but again, only if you also need skilled care on a daily basis that only a licensed person
can provide. For more details, see the Medicare benefits book available from your Social
Security office or by calling the Social Security Administration, toll-free at
800-772-1213.
·
Medi-Cal
(called Medicaid outside California) pays for necessary health care that is not covered by
Medicare, but only if you meet federal and state poverty guidelines. In 2002, a single
person over 65 would qualify for Medi-Cal if he/she had $2,000 or less in non-housing
assets. A married spouse, living in the community, however, can keep up to $89,280 in
non-housing assets and $2,232 in joint monthly income, when his or her spouse is in a
nursing home and applies for Medi-Cal. These guidelines and the amount of assets and
income a person may keep can change annually.
| Note: Non-housing assets are mentioned several times in this guide. In general, the value of a person’s house is not counted when applying for Medi-Cal. While the state does have estate recovery rights after the death of a Medi-Cal beneficiary, there are certain exemptions that apply, particularly for surviving spouses. There are certain rules that the state must follow if it is to be successful in recovering any amounts the program paid. You can get the most current information about Medi-Cal from your local county Department of Social Services, Legal Services Program, or an elder law attorney. |
·
Personal
Resources: Most people pay long-term care expenses
from their own income and resources. When care is provided by family members and friends
at home, necessary skilled care such as equipment, transportation and other costs not paid
by Medicare are also paid from the patient’s personal income or savings. People who
use up their assets paying for long-term care are "spending down" and may become
eligible for Medi-Cal as a result.
· Long-Term
Care Insurance
is
designed to pay a portion of long-term care costs. It is available from private insurance
companies selling in California. This type of insurance may be cost-effective for you if
you have sufficient available income to pay the premiums for the rest of your life.
What Is Long-Term Care Insurance?
Long-Term
care insurance covers any of the following:
In California, only 3 categories of long-term care insurance policies can be sold. Each
policy is labeled as:
Comprehensive Long-Term Care. These
policies pay for nursing facility care, assisted living care in an RCFE, and home and
community care. These policies must include at least 8 benefits: a nursing home benefit,
an RCFE benefit for assisted living, and the 6 home care benefits: Home Health Care, Adult
Day Care, Personal Care, Homemaker Services, Hospice Service and Respite Care.
What Services Do Insurance Policies Cover?
Insurance policies describe
where they will pay for care, what kind of care they will pay for, who can provide the
care, and conditions that have to be met before a company will pay benefits. Described
below are the services required in a long-term care insurance policy approved under
current state law. You should be aware however, that California law has changed many times
over the years, and that insurance policies sold in previous years may have different
requirements than are shown here.
Facility Coverage:
In California, most skilled, intermediate and custodial care is received in nursing homes
that are licensed as "skilled nursing facilities". All long-term care policies
except Home Care Only cover this kind of care.
Policies sold after October,
2001 (except Home Care Only policies) are required to include a benefit to cover care in
an assisted living facility licensed as a Residential Care Facility for the Elderly
(RCFE). Some insurance policies sold before October, 2001 also include this benefit.
RCFE’s are not nursing homes, but living arrangements where a person can also receive
personal care or supervision. Some RCFEs are large retirement homes, while others are
small group homes.
Home Care Coverage:
Every long-term care insurance policy called "Home Care Only" or
"Comprehensive Long-Term Care" issued after January 1, 1993 must include at
least the following 6 Home Care benefits and other consumer protections which should make
it easier to receive care at home.
Under California law, these
services may be provided by a skilled or unskilled person as long as they are required in
a Plan of Care developed by your doctor or a team of health care workers under medical
direction.
Under California law, these
services (like Personal Care) may be provided by a skilled or unskilled person so long as
they are required in a Plan of Care developed by your doctor or a team of health care
workers under medical direction.
6. Respite
Care is short-term care provided in a nursing facility, in your home or in a
community- based program, which is designed to relieve the primary care giver in your
home.
When
Will Long-Term Care Insurance Begin Paying Benefits?
All long-term care policies
require that your physical or mental abilities be limited under one of three standards
before benefits will be paid. These standards are often called Benefit Triggers.
Many policies also require that additional conditions be met before you will
receive payment. These "conditions" are events that must occur (or documents you
must submit) after you meet the "benefit triggers" and before benefits will be
paid.
The 3 Benefit Triggers
permitted in long-term care insurance policies in California are:
"Activities of Daily
Living" (ADLs) are used to measure your physical abilities to determine if you
qualify for benefits. The law requires tax-qualified policies to pay benefits if you are
impaired in 2 out of the following 6 ADLs: bathing, dressing, transferring, eating,
toileting and continence. For non-tax qualified policies, the requirement is for 2 out of
the following 7 ADLs: ambulating, bathing, dressing, transferring, eating, toileting and
continence. Note that the additional ADL for non-tax qualified policies is ambulating,
which means walking or moving around inside or outside the home regardless of the use of a
cane, crutches, or braces.
Only two ADLs can be required
before benefits will be paid for nursing home care, RCFE care, or home care in policies
sold after October 1, 2001.
"Impairment" means
that you need human assistance or continual supervision to perform an Activity of Daily
Living. Policies that trigger benefits when you only have to meet one of the ADLs may
begin paying benefits earlier in your disability than if you have to meet two. However,
your premiums will be higher and the policy will not be tax qualified.
"Impairment in
Cognitive Ability" means that you need supervision or assistance to protect yourself
or others because of mental deterioration caused by Alzheimer’s disease or any other
mental disease. A doctor diagnoses cognitive impairment based on clinical evidence and by
the use of standardized tests.
"Medical Necessity"
usually means your doctor has certified that your medical condition will deteriorate if
you do not receive the care recommended. However, under California law, an insurer is not
allowed to require that your benefits also be "medically necessary" before the
company will pay. Federal law prohibits the use of a medical necessity trigger in
tax-qualified long-term care insurance policies.
Conditions to the Payment of Benefits
All policies will require you to meet certain
"conditions" after the "benefit triggers" have been met and before
benefits will be paid.
Elimination Periods:
The Elimination Period (sometimes called a "Waiting Period" or "Deductible
Period") is the period of time you must wait after you qualify for care, and are
eligible to receive benefits before the company will begin paying for your care. You
choose the length of the Elimination Period when you buy the policy. The most common
options are 0 days, 30 days, 60 days, 90 days or 100 days. Some policies only make you
meet the Elimination Period once during the life of the policy, others apply it again
after you have gone for a certain period of time without needing care. In most situations
the elimination period will be satisfied by a day of either in home care or institutional
care. The premiums are usually more for short elimination periods and less for a longer
one. Be sure to ask your qualified agent to explain these differences.
The elimination or deductible period is the length of time
that the insurer pays no benefits. If you select a 0-day Elimination Period, the policy
will begin paying on the first day you qualify for care. If you choose one of the other
periods you will be responsible for paying the full cost of your care for these days.
| Example: If you choose an
Elimination Period of 60 days, you will be responsible for the cost of the first 60 days
of your care. If you are in a nursing home that charges you $100 per day, you will pay
approximately $6,000, before the policy starts paying. If you leave the nursing home
before the 60 days expires and the policy only pays for institutional care, it would pay
nothing for that period of care. |
If you qualify for benefits in
a home care setting most long-term care insurance policies apply a day towards your
Elimination Period for any day you actually receive care (or a home care visit).
Therefore, if your plan of care only calls for 3 visits per week you will only satisfy 3
days towards your Elimination Period. Some companies offer a more liberal interpretation
of this definition. For example, the policy might say that if you have one home care visit
per calendar week that you’ve satisfied 7 days towards your Elimination Period. In
this example, you would satisfy your Elimination Period more quickly.
Several companies now utilize
a "calendar day" definition for the elimination period. Once the insured has
been certified as being chronically ill each calendar day counts towards the elimination
period, regardless of whether formal long-term care services are received. This allows the
insured person to get informal care from family or friends during the elimination period.
After the elimination period has been satisfied formal paid care can begin.
The premium cost is usually
higher if you choose the shorter Elimination Periods and is lower if you choose a longer
period. In addition a premium might be higher when the company uses a more liberal
"counting" of home care Elimination Period days. Also, make sure that the
Elimination Period days that are accumulated either in a home care or institutional care
setting are combined to satisfy your overall elimination period. Be sure to ask your
qualified agent to explain this.
Period of Care:
A Period of Care usually begins on the first day you are eligible for benefits, and ends
after a treatment-free interval during which you do not need any benefits. If you need
care later, you may have to meet another Elimination Period.
| Example: If your policy uses a 180-day
treatment-free interval to measure the end of the Period of Care, and you leave the
nursing home on June 1 and require no further care for 180 days, the Period of Care will
end in 180 days on November 30. If you return to the nursing home before November 30, you
will be in the same Period of Care and there will be no new Elimination Period. If you
return to the nursing home again after November 30, you will have to pay your own expenses
during a new Elimination Period. |
Selecting the
Elimination Period: Multiply the current cost of one day of care by the number of
elimination days you plan to use. (Example: $141 X 30 = $4,230)². Then estimate the
number of days you could afford to pay for your own care without liquidating any assets.
That is the maximum number of days you should select as an Elimination Period. Although
choosing a short Elimination Period increases your premium, the amount you will pay for
your own care during an Elimination Period is likely to be much more expensive. Another
factor to take into account is that the daily cost of care doubles about every 14 years.
Your out of pocket cost for the Elimination Period you choose will increase as well.
Remember that short nursing home stays are more common than long stays and many people may
need long-term care services more than once during their lifetime.
² The average daily cost in California
in 2002. |
Plan of Care:
This is a plan written by your doctor or a medical team (such as a home health
Agency’s health care team) that establishes your need for care, and describes the
kind of care you need, and the frequency of the required services. The Plan of Care is a
familiar document to your doctor, hospital discharge planners, home health agencies and
other health care providers who know about long-term care services. Many policies also
require that the Plan of care be updated periodically to reflect any change in your need
for care.
Care Management:
Some policies include Care Management features. A Care Manager may assess your condition,
consult with your doctor, establish a Plan of Care, follow your progress, and recommend
care providers.
How Much Do Insurance Policies Pay for Long-Term Care?
Selecting the Daily Maximum
Because you will be responsible for all expenses not paid by your insurance policy,
you need to decide how much of the daily cost of care you can pay yourself. Estimate the
daily cost of long-term care in your community and subtract the amount you can afford to
pay for each day of your care. For instance if the cost in your community is $150 a day
and you can afford to pay a co-payment of $50 a day, you will need the insurance company
to pay $100 a day, or $3,000 each month.
To help the benefits of your
policy keep up with the annual increase in the cost of care due to inflation, every
insurer is required to offer you Inflation Protection. Although Inflation Protection will
increase your premium costs, without it you may not be able to afford to pay the
difference between the cost of care when you need the long-term care services in the
future and the amount of benefits your policy will pay. Remember that long-term care costs
are likely to increase in the future. Unless you choose to add inflation protection, your
benefits will remain static and you will have to pay out-of-pocket for the future
increases in the cost of care.
| Example: The average statewide cost of nursing home
care in California in 2002 is $141 a day or $51,465 a year. A policy that pays $141 a day
would pay 100% of the daily charges for care in an average cost nursing home today.
However, in approximately fourteen years, the average cost of care is estimated to double
– a day of care will cost $282 and a year of care $102,930. Without inflation
protection, the difference between the cost of care and the benefit will grow each year.
In less than 14 years a $141 daily benefit may cover as little as 50 percent of the cost
of care. |
While everyone would like to
buy Lifetime coverage or Unlimited benefits, not everyone can afford to do so. A policy
that pays for a few years can provide valuable coverage, and for some people that will be
all they will need. Don’t pass up long-term care insurance just because you
can’t afford lifetime coverage.
Selecting the Maximum
Lifetime Benefit
No one can predict how many days or years of long-term care a person will need, or the
reason they will require care. Some people can afford lifetime coverage, others have so
little money they would quickly qualify for Medi-Cal. Choosing the right amount of benefit
depends on the premium you can afford, and the assets you would otherwise have to spend.
Since the premium for Lifetime coverage is not affordable for many people, here is one
method of selecting the Maximum Lifetime Benefit. Choose the period that is roughly
proportional to your current non-housing assets that you might otherwise have to use to
pay for your care. (Remember that the value of your house is not counted when applying for
Medi-Cal.)
What Other Policy Features Are Available?
Inflation Protection
Most people buy long-term care many years in advance of when they may need care. The
long-term care insurance you buy today must cover the costs of care 10, 20 or more years
in the future. Inflation Protection is intended to help maintain the value of the benefits
you purchase today so they will keep up with future increases in the cost of care. In the
past, long-term care costs in California have increased at an annual rate of more than 5%
- a faster rate than the general increase in the cost of living for items such as food.
Experts estimate the cost of long-term care will continue to increase by 5% annually. If
costs do increase by 5 % annually, the cost of care will double every 14 years. A day in a
nursing home that costs $141 today, will cost $282 a day in 14 years; a year's stay in a
nursing home that costs about $51,465 today will cost $102,930.
Protecting against the rising
costs of care is one of the most important choices you will make. Inflation protection
increases the Daily Maximum, the Maximum Lifetime Benefit, and other benefit amounts. If
you purchase individual long-term care insurance, your insurer must offer you at the time
you purchase the policy the option to purchase an inflation protection feature. You will
be given a choice between two ways of protecting the value of your benefits against
inflation: (1) a Built-in Inflation Protection feature that automatically increases the
value of all the policy benefits annually (using either compound or simple interest
increases) or; (2) a Benefit Increase Option.
1. Built-In
Inflation Protection.
The insurer is required by California law to offer
you the option of a built-in 5% annual compound inflation protection feature
that automatically increases your previous year's Daily Maximum and Lifetime
Maximum Benefit amounts by 5%. If you decide not to purchase the built-in 5% compound
annual inflation protection feature, you will be asked to sign a rejection of the offer.
Some insurers may also offer you the option of a built-in 5% annual simple inflation
protection that automatically increases each year the Daily and Lifetime Maximum
Benefits by a fixed 5% of the amounts in your original policy.
2. Benefit Increase Option.
The other
inflation protection option is called a Benefit Increase Option. This option allows you to
pay an additional premium to increase the benefit coverage amounts at stated intervals
during the life of the policy (often referred to as guaranteed insurability or future
purchase options). There is usually a limited number of increase options offered to you
over the life of the policy. If you decide not to exercise this option one or more times
when it is offered, you will lose any chance to increase your benefits in the future.
With built-in inflation
protection, the premiums are designed to remain level and not increase even though your
benefit coverage amounts increase each year. The increases in your benefits will continue
as long as you keep the coverage, even while you are receiving benefits. Policies with
built-in inflation protection cost considerably more initially, since they automatically
include the annual increases in benefits you need to keep pace with inflation.
Agents must show you an
illustration of the effect of inflation on the cost of care, and how the benefits of a
policy with and without inflation protection compare to the cost of care over time.
| Example:
If
you choose a policy without inflation protection with a $100 Daily Maximum and a Maximum
Lifetime Benefit of $36,500, your policy will only pay $100 a day even if the daily cost
of care has increased to $200 and the cost of one year of long-term care has increased to
$73,000 in fourteen years. If you choose Built-in 5% Compound Inflation Protection,
the Daily Benefit will be $200 a day and the Maximum Lifetime Benefit will be $73,000 in
fourteen years. If you choose Built-in 5% Simple Inflation Protection, the Daily
Maximum Benefit will be $170 and the Maximum Lifetime Benefit will be $62,050 after
fourteen years. Remember: the cost of long-term care will double every 14 years if
inflation continues at the current rate of 5% and your income is unlikely to keep up with
inflation after retirement. |
In most cases, you will be
better off purchasing a policy with a lower Daily Maximum Benefit plus 5% compound
inflation protection than selecting a policy with a higher Daily Maximum Benefit with no
built-in annual inflation increases in benefits. This is because you are paying a higher
premium in the early years for a higher daily benefit than you need, and as the years go
by the benefit continues to decrease in relation to the cost of care. However, before you
make a decision, you might want to consult with a financial planner, an attorney, a HICAP
counselor or a family member.