Long-term care (LTC) insurance provides for a person's care in cases of chronic illness or disability. Policies for LTC provide insurance coverage for times when an individual cannot independently manage the essential activities of daily living (ADLs). These are universally known as feeding, dressing, bathing, toileting, and walking, as well as moving oneself from a bed to a chair (transferring). However, disabilities are not confined to these physical situations; they can be mental as well. The key element is that they limit the individual's ability to perform any of these functions.
The purpose of LTC insurance is to provide coverage for a succession of caregiving services for the elderly, the chronically ill, the disabled, or the seriously injured. This care may be provided in a skilled nursing facility (SNF); a nursing home; a mental hospital; in a per son's home with a registered nurse (RN), a licensed practical nurse (LPN), or nurse's aide; or even in an assisted living facility (ALF). It is important to note the societal changes responsible for the increased need for professional services to care for our loved ones. Although today's families are smaller and a number of women are working outside the home, the majority of LTC continues to be provided by unpaid, informal caregivers—family members and friends.
In 2003, more than 24 million households in the United States included a caregiver who was 50 years of age or older. About 73% of unpaid caregivers were women—and one-third of them are more than 65 years old. Many caregivers, especially women, balance multiple roles by providing care for both their parents and their children. Caring for a loved one full-time can overwhelm even the most devoted family member. As a result, more caregivers than ever are turning to outside resources to help with the care of a family member.
In 2030, it is anticipated that people aged 65 and over will comprise 20% of the population. The United States Census Bureau is projecting that the population aged 65 and over will be 39.7 million in 2010, 53.7 million in 2020, and 70.3 million in 2030. As of 2003, at least 6.4 million people aged 65 and over require LTC; one in two people over the age of 85 require this kind of care now, and at least half of the population who are over the age of 85 will need help with ADLs.
Although the elderly rely on LTC most frequently, younger persons who have chronic illnesses, severe disabilities, or have experienced a serious injury may also benefit from having LTC insurance.
The financial risks of illness and injury are rarely considered when one is healthy and able, but that is also when the greatest choice of products with the best flexibility in cost is available for those considering LTC insurance. Having a LTC insurance policy enables access to quality care and choice of care provider when the need is greatest. Purchasing a policy when a person does not need it gives them the opportunity to investigate the company's financial stability (whether it is solid and how it is rated), operating performance, insurance industry rating, and its claims ratio. Rates should be guaranteed renewable, and coverage shouldn't be canceled because of age or a change in a person's health nor should premiums be increased on a class-wide basis.
There are several government organizations that can be of assistance in the purchase, evaluation, and monitoring of LTC insurance. One is the state health insurance assistance program—SHIP—that can review the policy before the actual purchase. Another excellent organization is the Health Insurance Association of America (HIAA), which protects consumers from the financial risks of injury and illness by providing affordable and flexible services that represent a choice. In the United States, HIAA focuses on managed care, and, specifically, advocates on issues such as disability income and LTC insurance.
The mission of the Health Insurance Association of America is to preserve financial security, freedom of choice, and dignity in LTC insurance. Because of its mission, HIAA seeks to:
Having a LTC insurance policy cuts out-of-pocket costs and keeps the patient from having to rely on government assistance programs. Studies from the United States Department of Health and Human Services estimate that people with LTC insurance save between $60,000 and $75,000 in nursing home costs, more than $100,000 for assisted living, and actually ensure a higher quality of life for their caregiver. By having LTC at home, spouses and other family members are able to continue working or run errands while their loved one is being care for.
People of all ages usually prefer to receive LTC in their own homes, or in homelike assisted-living facilities. More than three-quarters of older Americans in need of LTC live in their communities. Most receive no paid services. The majority of LTC is provided by unpaid, informal caregivers, such as family members and friends.
Long-term care options can be uncoordinated and expensive for individuals, their families, and public programs. According to AARP (formerly known as American Association of Retired Persons) millions of Americans have no access to LTC services. They are caught in the trap of having too much money to qualify for government assistance, but not enough money to afford the types of services they need.
Recent changes in the United States federal tax law allow for a portion of a long-term insurance premium to be tax-deductible. The amount of the deduction increases with the insured person's age.
Medicare may cover a month or two of home health care after a stay in the hospital, but benefits are then usually capped. This government program, administered by the Social Security Administration, is well known for providing financial assistance to seniors 65 years of age and older and to the disabled—for medical and hospital expenses—but it does not cover LTC expenses. Medicare Supplement Insurance does not cover LTC either.
The federal/state Medicaid program is available, but the criteria to qualify for assistance is strict. Those who meet the guidelines for Medicaid must demonstrate financial need to receive assistance; most individuals must deplete most or all of their savings and assets before becoming eligible for any benefits. Still, in 2003, approximately two-thirds of nursing home residents were dependent on Medicaid to finance at least some of their care. For the majority of residents, LTC insurance is cost-prohibitive. To make matters worse, preexisting conditions often prevent them from obtaining coverage for which they might qualify.
Long-term care insurance policies are often complex. People who purchase them may not read the fine print and are later forced to cancel their policies because they do not fit their needs. Increasing rates factored into some long-term policies, known as climbing premiums, may also become prohibitively expensive. However, long-term care insurance can benefit consumers, provided that such items as affordability, coverage gaps, and timing of purchase are carefully considered.
It is advisable to check the financial stability and the claims ratio of an insurance company. Long-term insurance is a serious financial investment and should be considered a part of estate planning. A qualified, independent professional should be consulted to review the policy before purchase. The state health insurance assistance program (SHIP) is also available to answer questions.
The type of care that an individual seeks or requires is an important consideration before purchasing a policy. Currently, there is no universal standard for defining long-term care facilities. A placement that is covered under one company's policy may not be covered by another. Physicians can also play a part in denial of a placement by stating that the facility of choice is either not adequate or too advanced for an individual's needs.
When to purchase a policy is another important consideration. Individuals with a preexisting diagnosis for a debilitating condition or illness may not be eligible for coverage. This clause is common in most insurance policies of any type. However, purchasing a policy too far in advance of an anticipated need can work against a buyer. The health care industry is currently in a state of flux, and technological advances are rapid. The benefits provided in a policy that is purchased at one point in time may not match the care available in the distant future, giving the company reason to deny benefits.
Generally, LTC insurance operates as an indemnity program for potential nursing home and home health care costs. Additionally, many policies provide coverage for adult daycare, for care delivered in an assisted living facility, and for hospice care. Rarely are all costs covered. Some LTC policies are pure indemnity programs, which pay the insured a daily benefit contracted for by the insured. The pure indemnity program pays the full daily benefit regardless of the amount of care that the insured receives each day.
Other LTC policies pay for covered losses, or the cost of care actually received each day, up to the selected daily benefit level. This type of policy is referred to as a pool-of-money contract.
Insurance for LTC is available either as part of a group or as individual coverage, although most policies are currently purchased by individuals. Most policies cover skilled, custodial, and intermediate LTC services. A purchaser would be wise to consider a contract that covers all of these levels.
Benefits under a LTC contract are triggered in a tax-qualified policy when an insured person becomes unable to perform a number of activities associated with normal daily living or develops a cognitive impairment that requires supervision. Non–tax-qualified policies usually offer more liberal eligibility criteria. This includes long-term benefits required due to medical necessity.
Long-term care insurance policies can be expensive and may be restrictive in what they provide. Before purchasing the policy, persons should be certain that the cost is within their means and that the plan will meet their anticipated needs. Some policies allow policy holders to use survivor death benefits for health care needs. It is advisable for several different policies to be compared in detail. Policies that seem too inexpensive when compared against the competition should be carefully evaluated. There may be hidden clauses in the contracts that limit coverage.
The Health Insurance Association of America (HIAA) protects consumers from the financial risks of illness and injury by providing flexible and affordable products and services that embody freedom of choice, and advocates on a number of issues—including LTC insurance.
The United States Department of Health and Human Services oversees the Administration on Aging's Ombudsmen Program. Established in 1972 by the Older Americans Act, the Program operates throughout the country on behalf of aging residents. Its purpose is to investigate over 260,000 complaints annually regarding various topics, including selection and payment of LTC insurance policies. The ombudsmen advocate for residents of nursing homes , LTC homes, assisted living facilities, and similar adult care facilities, they have made dramatic differences in the lives of LTC residents. On behalf of individuals and groups of residents, they provide information to residents and their families about the LTC system and work to improve local, state and national level programs. Ombudsmen also provide an ongoing presence in LTC facilities, monitoring care and conditions and providing a voice for those who are unable to speak for themselves.
The only alternative to LTC insurance for individuals is to pay for all expenses themselves when the need for LTC arises.
See also Private insurance plans .
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L. Fleming Fallon, Jr., MD, DrPH
Randi B. Jenkins, BA