|The Fulton County
Office for Aging prepared this page to inform seniors and their family
about the benefits of Long Term Care Insurance. There are many
companies with policies available that may protect older New Yorkers'
life savings, assets, and also serve to provide more choices and
personal control should the need for expensive long-term care arise.
The Fulton County Office for Aging wishes to promote public awareness
of these programs for that reason. The purpose of this information is
solely to inform, and not intended to promote a specific product or
- What is Long Term Care?
- What is Long Term Care Insurance?
- What does Long Term Care Cost?
- Who Pays For Long Term Care?
- Who Should Buy Long Term Care Insurance?
- Why Should People Buy Long Term Care
- Why Doesn't Everybody Get LTCI???
- Factors to Consider When Purchasing Long-Term
- What does LTCI cost?
- Tips for Shopping for Long-Term Care
- Links to Insurers
What is Long Term Care?
Long-term care is the medical and non-medical support services needed
by an individual who isunable to care for themselves because of a
prolonged illness or disability. This may range from custodial care,
which is non-medical care that includes simple help with activities of
daily living, such as bathing, dressing, eating, etc., to skilled
nursing care, which includes services such as rehabilitative therapy,
medical or drug therapy, dietary supervision, or professional
observation that can be provided only by a health care professional, a
physician, nurse, or therapist.
What is Lone Term Care Insurance?
Long term care insurance (LTCI) is similar to other insurance
in that it allows a person to pay an affordable monthly premium that
offsets the risk of much larger out-of-pocket expenses due to chronic
or disabling conditions that require nursing care or constant
supervision. LTCI has been available for over 25 years and is offered
by more than 150 companies. LTCI has been steadily gaining in
popularity as a way to have peace of mind concerning protection of
assets later in life, and it provides the security of knowing that one
will have control over what type of care one will get and where it
will be given. Long-term care can be provided in a nursing home or in
one's own home, and can include assistance with dressing, eating,
bathing, and taking medicine. There are a range of services in the
community to help meet long term care needs, including nursing homes,
assisted living facilities, home health care, home delivered meals,
adult day care services, and more.
Who Pays For Long Term Care?
Usually, the people who need the care pay the bills
out-of-pocket (self-pay), because long-term care isn't covered by
health insurance. Therefore, individuals and their families pay about
39% of all nursing home costs themselves. In 2001, the average annual
elderly family income was about $19,566, which is obviously not enough
to cover long-term care . Aside from income, self-pay options include
savings, investments, home equity/reverse mortgage, life insurance,
trusts, and long-term care insurance . Unfortunately many people
mistakenly assume that Medicare or Medicaid will pay for nursing home
care. Many people enter the nursing home using their own money first.
When they have spent down their assets to qualifying levels they
become eligible for Medicaid . Generally, Medicare does not cover
long-term care. Medicare covers only about twelve percent of
short-term care costs for seniors and disabled people after a
hospitalization, but not for the ongoing assistance that many elderly,
ill, or disabled people need. Medicare will not pay for full-time
nursing care at home, drugs, meals delivered to your home, and
homemaker services that are primarily to assist you in meeting
personal care or housekeeping needs.
What Does Long Term Care Cost?
Long-term care can be very expensive and the cost depends on
the level of services you will need and the length of time you need
it. For example, one year in a nursing home can average $90,000 at
$247 per day, and in some regions it can easily cost more than that.
Home care is less expensive, but at $20 per hour
for a health aide, three times a week for two or three hours a day, it
can easily add up to $180 a week, or $9,500 per year. Assisted Living
is another long-term care option, which costs an average of $2000 per
Medicare Skilled Nursing Coverage Eligibility
- Must follow a three-day hospital stay
- Must require skilled care
- Typically for rehabilitation and must meet
strict criteria for continued coverage
- Days 1-20 100% covered
- Days 21-100 You owe a daily coinsurance of
- No coverage after 100 days
Home Health Care Eligibility Guidelines:
- Must require skilled care on a part-time or
- Physician must certify the need and must set
up a home health care plan
- Can be combined with personal care
- Beneficiary must be confined to the home
- Must receive care from a Certified Home
Health Care Agency.
Medicaid is state health care that covers
lower income Americans. Medicaid pays almost half of all nursing home
costs in New York State. Medicaid covers costs for people who meet
federal poverty guidelines and nursing home residents who have
exhausted all of their savings and assets and therefore become
Skilled Nursing Facility Medicaid Guidelines:
- All income applied to the cost of care,
except for $50/month
- Allowed to retain the following assets:
o $4,150 in resources
o $1,500 for funeral fund or any amount in an irrevocable funeral
o Can retain car, house (with signed "intent to return home")
- Spousal Impoverishment Protection Act
protects community spouse by allowing them to keep a specific amount
of income and joint assets and still qualify the nursing home spouse
Who Should Buy Long Term Care Insurance?
Regardless of your current age, LTCI should be considered as
necessary as medical or auto insurance, as it lowers out-of-pocket
expenses and protects assets. While it is impossible to predict
whether or not you will need long-term care, consider the following
- Risk of entering a nursing home increases
- Risk depends on a number of factors including
age, marital status, gender, lifestyle, health, and family history.
- According to a study by the U.S. Department
of Health and Human Services, people age 65 and over face at least a
40% lifetime risk of entering a nursing home or requiring long-term
- 22% of people aged 85 years or older are in a
nursing home or receiving long-term care elsewhere.
- Because women outlive men on average, they
are 50% more likely to require long-term care after age 65.
- In 1994, 7.3 million Americans needed
long-term care services at an average cost of nearly $43,800 per
year. By 2000, this number will rise to nine million Americans at
nearly $55,750 per year. By 2060, inflation will drive costs even
higher; 24 million Americans will pay more than $250,000 per year to
receive long-term care. (Long Term Care Insurance National Advisory
- Within a year after admission as
private-pay residents, more than 90% of nursing home residents are
impoverished. (Life Savings by Harley Gordon, 1994)
Also, it is important to note that LTC1 is not
only for people age 65 or older. In fact, the U.S. Government
Accountability Office estimates that 40 percent of the 13 million
people receiving long term care services are between the ages of 18
Why Should People Buy Long Term Care
Long-term care insurance is easily available at an affordable
monthly premium, and can make a drastic difference in the amount of
out-of-pocket medical costs. In addition to protecting resources, LTCI
policyholders can expand their care options, and maintain independence
and financial control. As mentioned before, most people cannot count
on health insurance, disability insurance, or Medicare to pay their
long-term care costs. With Medicaid, many people must meet a
spend-down, which means they must spend the difference between what
their income is and what the state income guideline is for Medicaid
eligibility on medical related items or services. This means that in
the case of an accident or unplanned medical problem, the cost of long
term care must be paid out of pocket, with the money that was earned
and saved over a lifetime, rather than to be used for enjoyment in old
age or to be passed on to children. Nursing home residents often lose
their homes to pay for their care, and deplete their savings. In the
case that property and assets have been transferred out of the
resident's name to that of a family member to avoid losing the home,
there is a "look-back" period with Medicaid where the state can go
back five years to count the property as an asset. The state can also
recover funds such as life insurance benefits after the resident has
passed on by taking the amount that they paid for the person's care
from the estate.
Why Doesn't Everybody Get LTCI???
There are several reasons that people don't choose to purchase long
term care insurance including:
- Premiums are substantial, especially at
- Denial of aging, don't think they really need
to worry about being old until they are old
- Misconception of Medicare, think they will be
covered for anything and everything health wise once they turn 65,
which is absolutely not the case. Medicare covers very little
short-term care (only after hospitalization), and no long-term care.
- A misunderstanding of the impact of
longevity. People are living better longer with preventative
medicine, technology, and continual medical advancements. Although
that seems like a good thing, most people over 65 will be on a fixed
income, and will need their savings to live through retirement. Even
the best planners aren't likely to have savings or assets left over
for unexpected health problems and the need for skilled nursing care
and long term care without LTCI. That means that more people will
need skilled health care with little money available to pay for it
if they don't plan financially to live and take care of themselves
into their 80s or 90s.
Factors to Consider When Purchasing
Long-Term Care Insurance
The Partnership Program
In 1993, New York State initiated the partnership for Long Term Care.
Under the program, if you purchase a Partnership-approved long-term
care policy and meet other certain requirements, you will be able to
obtain Medicaid coverage, after the benefits under the long-term care
exhausted. Qualification will be based on your income only,
disregarding your assets.
Daily Benefit Amount
The daily benefit amount is the fixed amount per day for skilled
nursing care that the policy will pay. The current daily rate for
skilled nursing care is around $250. The home care daily benefit is
usually between 50% and 100% of the nursing home daily benefit, and
this includes care at home, adult day care, and assisted residential
settings. Figure out how much of that cost you could comfortably
afford then choose a policy that covers the rest.
Elimination period is the amount of time an individual must pay
out of pocket before the policy begins to pay the daily benefit,
similar to a co-payment with regular health insurance, or a deductible
with auto insurance. Most plans offer elimination periods ranging from
zero to 150 days. This is important because the premium will be lower
monthly with a longer elimination period, but the out of pocket cost
will be much higher once the care is needed. For example, a 100day
elimination period at about $250 per day of skilled nursing care would
amount to a $25,000 cost out of pocket before the insurance would pay.
On the other hand, with a shorter elimination period, the monthly
premium will be higher. The buyer needs to consider which option would
be best for them financially currently, and down the road when
deciding on the length of the elimination period.
Policies require a "trigger" before the elimination period begins.
This is usually tied to requiring help with performing ADLs (dressing,
eating, bathing, mobility, etc.), or the onset of severe cognitive
impairment. Some policies may require medical necessity. Beware of
policies with very strict triggers.
Length of Benefit
The length of benefit pertains to the number of years of coverage
the policy will pay out, which starts at the end of the elimination
period. New York State Insurance law regulates policy coverage period,
and requires that LTCI policies must cover at least 24 consecutive
months of nursing home coverage.
New York State insurers must offer inflation protection.
Inflation protection is an optional benefit to a policy which provides
a percentage or dollar amount increase in benefit levels to adjust for
inflation. This increases benefit levels by 5% annually, or in
proportion to the consumer price index. This will usually increase the
policy premium substantially, but is a very valuable and cost
effective benefit. A policyholder may not use the long-term care
benefit they buy today until 20 to 30 years from now. By then, that
$100 per day benefit will cover very little of their cost for nursing
home care. A policy with 5% annual inflation protection will increase
the $100 per day benefit to $265 per day in less than 20 years.
A premium waiver permits the insured to stop making premium payments
when the insured starts receiving benefits, and no further premiums
will be due until they leave the nursing home. The typical waiver of
premium takes effect after benefits have been paid for 90 consecutive
days of a nursing home staff.
A non-forfeiture benefit allows options for the insured to eventually
reduce or cease payment of premiums and retain reduced benefits of the
policy. Their money will not be completely lost if at some time they
are unable to keep up with their premium. As with other features, this
option may raise premium costs considerably.
Tax Advantages for LTCI
Like health insurance, LTCI offers numerous tax advantages.
Benefits are tax-free, and for most types of corporations,
employer-paid premiums are 100% deductible. Group coverage is
portable, which means when an employee leaves or retires, they can
take their coverage with them. Up to 20% of an LTCI premium can be
claimed by an individual as a tax-deductible medical expense in New
What is Not Covered?
All policies contain limits and exclusions to keep premiums
reasonable and affordable. Be sure you understand exactly what is and
is not covered under a particular policy. -Preexisting conditions are
health problems you had when you became insured, and may not be
covered until a certain amount of time passes. Companies do not
generally exclude coverage for preexisting conditions for more than
six months. Some mental and nervous disorders are not covered.
Alcoholism and drug abuse are usually not covered. Care needed after
an intentionally self-inflicted injury is also usually not covered.
What Does LTCI Cost?
The actual premium you will pay depends on many factors, including
your age, the level of benefits you choose, and the length of time you
are willing to wait for benefits to begin. A licensed long-term care
insurance agent can help in balancing policy needs and premium cost.
The younger you are when you first buy a policy, the lower your
annual premium will be. Examples: a policy offering a $150 per day
long term care benefit for four years, with a 90-day elimination
period (the insured pays for the first 90 days of care), would cost a
50-year-old $564 per year, while the same plan would cost a
65-year-old $1,337 per year, and a 79-year-old $5,330 per year.
Shop around for the best deal, and consider
different ways to organize your plan to tailor to your needs now and
TIPS FOR SHOPPING FOR LONG-TERM CARE INSURANCE:
- Never let a salesperson sell you on the
product. Make sure you are purchasing what you need.
- Learn about Medicaid's role in paying for
- Learn about the protection of spouses.
- Find out about the types of long-term care
services that are available in your community.
- Determine exactly what you need and can
afford. a Compare long-term care insurance policies
- Ask questions
Remember that while a policy can protect against
a devastating financial blow, unfortunately there are no policies that
guarantee to cover all expenses fully.
Disclaimer: The information
herein is intended solely for the purpose of educating the consumer in
regard to their choices for financing long-term care needs, with
particular emphasis on long-term care insurance. Nothing herein is
intended nor should it be construed as an endorsement by the state of
New York of any specific insurance product or of any insurer.
Links to Insurers
Moody's Investor's Service (212) 553-1653
Standard and Poor's (212) 208-1527
Weiss Research, Inc. (800) 289-9222
NYS Partnership for Long-Term Care
NYS Department of Insurance
Genworth Life Insurance Company of New York 1-800-246-0807 or
John Hancock Life Insurance Co. 1-800-543-6415 or
MedAmerica Insurance Co. of New York 1-800-544-0327 or
Metropolitan Life Insurance Company 1-800-308-0179 or
New York Life Insurance Company 1-800-635-8257 or
Plan Ahead New York!