Many individuals do not understand long-term care (LTC). LTC includes a range of services for individuals who have functional limitations or chronic health conditions. These limitations may be the result of an illness such as cancer, or a disability from an accident or a stroke. In simple terms, LTC is care that focuses on supportive functions that provide assistance with daily activities required by individuals to compensate for a loss caused by a disability or cognitive impairment. Note that the key word for assessing one’s needs is support. LTC can include assistance required for:
- Basic functions: Bathing, dressing, toileting, transferring and eating.
- Household chores: Cleaning, maintenance and meal preparation.
- Life management: Shopping, money management and taking medications.
To best understand LTC, it is important for individuals to know the distinctions between acute care, subacute care and LTC:
- Acute care. Acute care involves a finite episode of care. The purpose of this care is to cure the patient as well as to restore the patient to previous levels of functioning to the greatest extent possible. Acute care is usually delivered in a hospital, skilled nursing facility or doctor’s office, or in a health clinic. In short, acute care is intended to help an individual get better and usually lasts for only a brief time.
- Subacute care. Subacute care is designed for patients who have complex medical needs but who require skilled care in a setting other than a hospital. For example, a skilled nursing facility provides care for patients who are recuperating from major surgery.
- Long-term care. LTC refers to a comprehensive range of services including nursing care, home care and community health care that meets the physical, social and emotional needs of individuals of all ages. These individuals have disabilities or illnesses that are chronic (long lasting). It is important for individual to understand that because most of these supportive services are considered “non-skilled” in nature, most health insurance policies (including the Federal Employees Health Benefits program health insurance plans) do not pay for the majority of LTC expenses. Today most LTC expenses are currently paid out-of-pocket by individuals with Medicaid (a federal program for individuals with few assets and low income) paying for some nursing home care and occasionally LTC services at home.
What is long-term care insurance?
LTC insurance provides benefits that may cover the basic needs or activities of daily living while providing the LTC insurance policyowner with a choice of remaining in his or her home or having a say in what type of setting where they will receive care. The purchase of an LTC insurance policy can help protect the policyowner’s financial assets from being depleted and allows the policyowner to avoid putting both financial and caregiver pressure on family members.
An individual must apply for an LTC insurance policy and be approved by the insurance company offering the policy. In other words, the individual has to go through underwriting and prove that they are insurable.
Upon being approved for an LTC insurance policy, the policyowner will pay premiums over a period of years. Policy benefits will be triggered when the policyowner needs assistance with at least two of the six activities of daily living (ADLs) or when the policyowner has cognitive impairment. The six ADLs are:
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- Bathing. Includes washing one’s body and hair as well as getting in or out of a tub or shower.
- Dressing. Putting on or taking off clothing or braces.
- Transferring. The ability to move about such as getting in and out of a chair or bed.
- Toileting. Getting on and off the toilet and cleaning oneself.
- Continence. Maintaining control of bowel and bladder functions; and
- Eating. Consuming food and drink without assistance.
About half of the individuals for LTC insurance have cognitive impairment, which has caused it to become the major issue facing the LTC insurance industry.
Some common misconceptions that Individuals have about LTC insurance
One of the biggest misconceptions that individuals have concerning LTC is that Medicare pays for LTC. Medicare does not pay for LTC because Medicare pays only for acute care and subacute care in which a patient is under the care of a doctor or a nurse, or the patient is in the hospital, in a skilled nursing facility or in a rehabilitation center. LTC is classified as custodial care which Medicare and Medicare Supplemental/Medigap insurance plans do not pay for.
For the most part, it is safe to say that traditional Medicare and Medicare Advantage plans do not pay for LTC. That has confused individuals for decades and it continues to do so.
Medicaid is a federal health care program that was set up for poor individuals. Medicaid will pay for LTC; however, an individual has to be poor and extremely sick in order to qualify for Medicaid assistance. Middle-income individuals will unlikely have any type of Medicare Supplement/Medigap plan that will pay for LTC. The FEHB program, like other group-sponsored programs, and individual health insurance policies do not pay or reimburse for LTC expenses.
Some of the hurdles in obtaining LTC insurance
LTC insurance companies will in fact sell LTC insurance policies to individuals who are terminally ill. The reason: A terminally ill individual is unlikely to live exceedingly long. This means that the individual will likely not need LTC, or if so, for a limited amount of time. This is different from health insurance. For example, if an individual has Stage 4 cancer, an insurance company will be happy to sell that individual a LTC insurance policy because it is highly unlikely that the individual will live long enough to claim the LTC policy benefits.
When it comes to selling LTC insurance policies, insurance companies are hesitant to sell LTC insurance policies to individual who may develop Alzheimer’s disease or any other king of dementia, Parkinson’s disease and severe arthritis. These companies will often ask about family medical history to find out if there is a family history of the above conditions.
Buying an LTC insurance policy in one’s late thirties or early forties will increase an individual’s chances of qualifying for the insurance. The problem with buying LTC insurance in one’s late thirties/early forties is that the policyowner will be paying premiums for as many as thirty to forty years before incurring a need for the policy’s benefits.
Another problem associated with buying LTC insurance in one’s later thirties or early forties is that the person is likely paying back student loans. They probably have children and saving for their college education. They have a home mortgage payment and paying for life insurance premiums. They have all of these more immediate needs and expenses that are consuming their discretionary income.
The insurance industry will advise individuals that the ideal age to apply for LTC insurance is between 50 and 55 years. In reality, the best age for an individual to purchase LTC insurance is when they no longer have some of those major expenses mentioned above. For many individuals, that age is mid-to-late 50’s.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
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Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert
A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.
He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.