Long-Term Care Basics: Part 2

By Barbara O’Neill, Ph.D., CFP®, boneill@njaes.rutgers.edu

Long-Term Care Basics-Part 1 described guidelines for considering the purchase of long-term care (LTC) insurance, basic LTC insurance terms such as inflation riders and elimination period, and tips for purchasing a LTC policy.

Below is some additional background information and expert recommendations to consider:

    • Long-term care can be defined as daily, ongoing, care necessary to perform essential life functions such as walking, bathing, toileting, eating, dressing and grooming, and transferring (e.g., moving from a bed to a chair). These activities are called “activities of daily living” or ADLs. In addition to nursing home care, long-term care may include care at home and respite periods for caregivers.
    • A person’s health is a significant factor when applying for a LTC policy. Insurance underwriters want to know the types and amounts of medication that people take. Some pre-existing conditions may automatically disqualify an applicant. For other health situations, such as cancer, insurance companies will review an applicant on a case-by-case basis. Those who have been disease-free for 5 or 10 years may be insurable.

A side view of an elderly man's face.

  • Someone turning 65 in 2019 has almost a 70% chance of needing some type of long-term care and 20% of older adults will need it for more than five years. The average nursing home stay is 835 days (almost 2.5 years) according to the National Center for Assisted Living. Thus, it is prudent to purchase a LTC policy with benefits for at least 3 years. Factors to consider are family longevity, personal health, and financial assets.
  • Medicaid is a welfare program for people with limited resources that can help pay some LTC expenses. There is generally also a five-year “look-back” period for assets transferred among individuals prior to application for Medicaid. This rule is designed to prevent people from giving away their assets to meet Medicaid asset tests. Asset transfers made within the look-back period are reviewed by program officials.
  • Elder law attorneys and financial planners often recommend the purchase of LTC insurance for five years as part of a coordinated long-term care planning strategy. The insurance is used to pay bills during the look- back period, after which time benefits run out. If people need care beyond five years, they can apply for Medicaid in the 61st month after making prior gifts and not be disqualified for benefits.
  • It is not wise to artificially “impoverish” yourself to qualify for Medicaid. Not only are there ethical concerns, but having Medicaid coverage limits your care options. Nursing home beds are much more available to people who begin care as private pay patients using personal savings and/or benefits from a LTC policy.
  • Check the “fine print” to see if LTC insurance coverage can transfer to another state if you buy a policy in one state and later move. The policy will spell out where care can be given. LTC policies generally cover care anywhere in the U.S., but not outside the U.S.
  • Another LTC policy feature to check is the “bed reservation period.” This is how long a nursing home will keep a bed open if a patient has to leave temporarily to go elsewhere (e.g., a hospital).
  • Openly discuss long-term care issues with family members. To decide whether or not to purchase LTC insurance, answer the question “Who am I protecting assets for?”  It could be for yourself, to have resources to provide quality care, or it could be to leave money as an inheritance for children.  If it is the latter, consider asking adult children to help share the cost of the premium.

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