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 month.

Medicare Skilled Nursing Coverage Eligibility Guidelines:

• 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 $119/day (2006)
• No coverage after 100 days

Home Health Care Eligibility Guidelines:

• Must require skilled care on a part-time or intermittent basis
• 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 eligible.

• 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 trust
  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 for Medicaid.

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 data:

• Risk of entering a nursing home increases with age
• 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 care.
• 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 Council)
• 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 and 64.

Why Should People Buy Long Term Care Insurance?
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 advanced age
• 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 policy are
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
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.

Benefit Trigger
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.

Inflation Protection
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.

Premium Waiver
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.

Non-Forfeiture
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 York State.

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 for later.

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 long-term care.
• 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

By Phone:
Moody's Investor's Service (212) 553-1653
Standard and Poor's (212) 208-1527
Weiss Research, Inc. (800) 289-9222

By Internet:
NYS Partnership for Long-Term Care http://www.nyspltc.org
NYS Department of Insurance http://dfs.ny.gov/insurance/dfs_insurance.htm
Genworth Life Insurance Company of New York 1-800-246-0807 or http://www.genworth.com
John Hancock Life Insurance Co. 1-800-543-6415 or http://www.johnhancocklongtermcare.com
MedAmerica Insurance Co. of New York 1-800-544-0327 or http://www.MedAmericaLTC.com
Metropolitan Life Insurance Company 1-800-308-0179 or http://www.metlife.com
New York Life Insurance Company 1-800-635-8257 or http://www.newyorklife.com/products/long-term-care/
Plan Ahead New York! http://www.planaheadny.com