How much does long-term insurance (LTC) cost?

Skilled nursing home cost can be very expensive.  In our local area, it approaches $50,000 per year, and in other states that figure can be almost twice as much.  In-home care is less unless you are talking about round-the-clock home care.

What are the chances that you will need long-term care?

Nationally, about 40% of those over 65 need long-term care.  This year, that amounts to about seven million people.  By 2005, that is predicted to rise to nine million.  Currently, over 75% are cared for at home by family and friends.

If you have to go to a nursing home or assisted-living facility, what is the average length of stay?

According to Health and Human Services, the average length of stay in a nursing home is two-and-one-half years.  About 10% of those residents remain for more than five years.  In an assisted-living facility, the average is about 18 months.

Who pays for long-term care?

According to the Health Care Financing Administration (HCFA), about 40% are paid by Medicaid, but only after you have spent down your resources to the poverty level.  About 18% are paid by Medicare.  The rest, nearly one-third, are paid by individuals and their families out of their own pocket.

How do LTC insurance policies work?

The insurance company charges you a premium based on your age and health situation.  You are buying a pool of funds which is available to you to spend on your long-term needs in the future should you need care.  You will purchase a daily benefit for a specific period of time.  The daily benefit will be for assisted-living or nursing home care.  Additionally there will be a lower daily benefit to cover in-home care and adult day care centers.

What about inflation?

Most companies offer an inflation protection option that will increase your daily maximum benefit over time to help keep up with inflation.

What payment options are available?

Companies offer a variety of options, from single-premium, annually, 10-year pay, to age 65, and life.

Do you have to keep paying premiums if you start receiving long-term care?

Your policy should have a waiver of premium in the event you require covered care, but you should make sure that it waives the premium for all types of care, not just if you go into a facility.

What about deductibles?

Long-term care insurance companies call their deductibles elimination periods.  Based on how long you think you can pay for the cost of care out of your own pocket, you choose an elimination period, such as 30, 60, or 90 days.  The longer elimination period you choose, the lower your premium, and sometimes this may be 20% or more lower.  You only have to meet this elimination period one time.

Can you deduct the cost of LTC insurance from your income taxes?

Most polices are tax-qualified, but you need to make sure.  Then you will be able to deduct the cost of the policy from your income taxes, provided you meet the 7.5% minimum on Schedule A, form 1040.  You need to consult with your tax preparer for a final determination of whether you can deduct these costs.

Do you have to pay income taxes on the benefits received from a LTC policy?

No, not as long as the policy is tax-qualified.

Who determines when benefits are paid?

Your doctor must certify that you have met the requirements of the policy and prescribe a plan of care.  Most policies are triggered in one of two ways: (1) you need substantial assistance with at least two out of six activities of daily living (eating, bathing, dressing,  toileting, transferring, and continence), for a period of at least 90 days; or (2) you need substantial custodial care to protect your health and safety due to severe cognitive impairment.

How are the benefits paid?

Once you have met your elimination period, they will pay for incurred expenses up to the daily benefit.  You have to provide copies of the costs and then you will be reimbursed, and most policies will not cover expenses to friends, neighbors, or family members.  There are policies that contain an indemnity clause (for an additional premium) that will pay the full daily benefit regardless of actual expenses.

Will your premiums go up if your health deteriorates?

Most policies are guaranteed renewable as long as you continue to pay your premiums.  Premiums can only be raised for the entire class, not on an individual basis.

Are AlzheimerÕs, ParkinsonÕs, and other dementias covered?

Yes, as long as it is diagnosed after the policy is in force.