Long-Term Care Coverage, Benefits with Many Shades
“Long-term care” ( LTC ) is a wide-ranging term that encompasses a variety of different types of care. LTC coverage provides financial protection for long-term care medical services and personal care, including:
The cost of long-term care differs from state to state, and the annual cost ranges from $20,000 to over $100,000, depending on the services and level of care received. Considering the high cost of long-term care, policyholders and their loved ones have the assurance of financial security and the added security of knowing that someone will be there to provide care if they cannot.
Long-term care benefits usually cover the following types of personal care:
It is commonly believed that health insurance, Medicare specifically, provides long-term care services. In reality, Medicare only covers the first 100 days in a skilled nursing facility. Medicare covers long-term care costs for the first 20 days. After 20 days, you must pay coinsurance, and after 100 days, you are required to pay for all LTC services.
A Medicare supplemental policy covers coinsurance in a skilled nursing facility, but not beyond the 100-day Medicare benefit period. Medicaid offers lengthened nursing home costs but is the “provider of the last choice,” and to qualify, your personal assets must be near poverty levels.
Typically, long-term care services are necessary when a person cannot perform independently due to a mental or physical condition. For the policy to pay out, the policyholder must meet the benefit trigger that was agreed upon in the contract.
Benefit triggers usually include the inability to perform two or more activities of daily living, loss of cognitive ability that hinders your ability to take care of yourself without supervision, and medical necessity recommended by a doctor. There are six activities of daily living, or ADLs, observed by long-term care insurance:
There are three levels of long-term care covered by LTC benefits. Skilled nursing care, intermediate care, and custodial care. Skilled nursing care is usually delivered in a nursing home and is continuous 24-hour care by licensed medical professionals under the direction of a physician.
Intermediate care is extended care that addresses your condition but not for 24 hours a day. Care is given by registered nurses, licensed practical nurses, and nurse aides under a doctor’s supervision. Intermediate care can be delivered in a nursing home, at your home, in an assisted-living facility, or in a residential community living center.
Custodial care is provided to help people meet daily living requirements or ADLs. Custodial care does not have to be given by a medical professional, but it must be monitored by a physician. Care can be delivered in nursing homes, assisted living facilities, respite centers, or adult day-care centers or as home care.
Long-term care costs are repaid to beneficiaries in two ways, depending on your contract. A long-term care indemnity contract is a valued contract, where the stated amount is paid even if the cost of care is less. These types of contracts may be subject to income tax.
More commonly, insurers offer reimbursement contracts. Reimbursement contracts restrict benefits to your actual long-term care expenses. They also do not exceed the maximum benefit amount stated in the contract.
Long-term care indemnity and reimbursement contract benefit amounts are expressed as monthly benefits or flat daily amounts, such as $100 or $200 per day, for the length of the benefit period.
Long-term care plans have an elimination period or waiting period. The longer the elimination period, the less expensive your premium payments will be. Most insurance companies offer elimination periods of 0 to 90 days. After the benefit trigger is met, your policy’s elimination period is counted by service days or calendar days.
If your LTC insurance plan has an elimination period set by service days, your policy will pay out benefits after you’ve received care for the amount of time specified in your contract. If your elimination period is counted by calendar days, a predetermined number of days must pass after the benefit trigger before the policy pays out.
As with other forms of life insurance, LTC insurance contains exclusions for things that are not covered. These exclusions include alcohol and drug dependency, suicide and self-inflicted injuries, conditions that result from war, conditions due to criminal activity, and any type of injury or illness that can be covered by workers’ compensation.