Traditional health insurance and Medicare do not cover the costs of many long-term care services. They do not cover services in your home, including personal care, as well as care in a variety of facility and community settings. Long-term care insurance, on the other hand, will cover the costs of long-term care services.
Long-term care insurance policies provide flexibility and allow for a great deal of choice. You can select a range of care options and benefits that allow you to get the services you need, where you need them.
The cost of your long-term care policy is based on the type and amount of services you choose to cover, how old you are when you buy the policy, and any optional benefits you choose, such as benefits that increase with inflation. If you are in poor health or already receiving long-term care services, you may not qualify for long-term care insurance. In some cases, you may be able to buy a limited amount of coverage, or coverage at a higher “non-standard” rate.
Many long-term care insurance policies have limits on how long or how much they will pay. Some policies will pay the costs of your long-term care for two to five years.
Some insurance companies offer policies that will pay your long-term care costs for as long as you live—no matter how much it costs. But there are very few companies today that offer such unlimited or lifetime policies. However, some companies do have a “high coverage option” which might offer a $1 million lifetime limit.
Most policies sold today are “comprehensive” policies. They typically cover care and services in a variety of long-term care settings including:
Adult day service centers
Assisted living facilities (also called residential care facilities or alternate care facilities)
Alzheimer’s special care facilities
In the home setting, comprehensive polices generally cover these services:
Skilled nursing care
Occupational, speech, physical, and rehabilitation therapy
Help with personal care, such as bathing and dressing
Many policies also cover some homemaker services, such as meal preparation or housekeeping as long as it is in conjunction with the personal care services you receive.
When you start receiving benefits is based on the policy’s “benefit trigger,” the length of the elimination period you choose, and sometimes when you start receiving paid care. Benefit triggers are the criteria insurance policies use to determine when your long-term care begins. Usually, the benefit triggers are defined in terms of Activities of Daily Living or cognitive impairments. For example, most policies pay benefits when you need help with two or more of six Activities of Daily Living or when you have a cognitive impairment.
The “elimination period” is the amount of time that must pass after a benefit trigger occurs but before you start receiving payment for services. An elimination period is like the deductible you have on car insurance, except it is measured in time rather than by dollar amount. Most policies allow you to choose an elimination period of 30, 60, or 90 days. During the elimination period, you must cover the cost of any services you receive. Some policies specify that in order to satisfy an elimination period, you must receive paid care or pay for services during that time.
Once your benefits begin, most policies pay your costs up to a pre-set limit. Other policies pay a pre- set cash amount for each day that you meet the benefit trigger whether you receive paid long-term care services on those days or not. These “cash disability” policies offer more flexibility but are much more expensive.
People with certain conditions may not qualify for long-term care insurance. Since standards vary between different insurance companies, if one company denies you, it is possible that another company will accept you. Common reasons why you might not be able to buy long-term care insurance include:
You had a stroke within the past year to two years or a history of strokes.
You have a progressive neurological condition such as multiple sclerosis or Parkinson’s Disease.
You have Alzheimer’s Disease or any form of dementia or cognitive dysfunction.
You have AIDS or AIDS Related Complex (ARC).
You already need help with Activities of Daily Living.
You currently use long-term care services.
You have metastatic cancer (cancer that has spread beyond its original site).
Insurance companies also consider other health conditions when determining your eligibility. If you buy your long-term care insurance before you develop one of the health conditions listed above, then your policy will cover the care you need for that condition.
Don’t buy out of fear or emotion.
Don’t buy more insurance than you think you may need. You may have enough income to pay a portion of your care costs and you may only need a small policy for the remainder. You also may have family members willing and able to supplement your care needs.
Don’t buy too little insurance. That will only delay the use of your own assets or income to pay for care. Think about how you feel about having care costs that are not covered. While you can usually decrease your coverage, it is more difficult to increase coverage, especially if your health has declined.
Look carefully at each policy. There is no “one-size-fits-all” policy.
If you choose a policy that only pays for room and board in a facility, plan for other expenses, such as supplies, medications, linens, and other items and services that your policy may not cover.
It costs less to buy coverage when you are younger. The average age of people buying long-term care insurance today is about 60. The average age of those purchasing policies offered at work is about 50.
Make sure that you can afford the long-term care insurance policy.
Research and consider different options and talk with a professional before finalizing your decision.
Most people buy long-term care insurance directly from an insurance agent, financial planner, or broker. States regulate which companies can sell long-term care insurance and the products that they can sell. There are more than 100 companies offering long-term care insurance nationally, but 15 to 20 insurers sell most policies. The best way to find out which insurance companies offer long-term care coverage in your state is to contact your state’s Department of Insurance.
Many private and public employers, including the federal government and a growing number of state governments, offer group long-term care programs as a voluntary benefit. Employers do not typically contribute to the premium cost (as they do with health insurance), but they often negotiate a favorable group rate.
If you are currently employed, it may be easier to qualify for long-term care insurance through your employer than it is to purchase a policy on your own. Check with your benefit or pensions office to see if your employer offers long-term care insurance.
The U.S. Office of Personnel Management has additional information about the Federal Long Term Care Insurance Program.
State Partnership Programs
A Partnership Program brings together a state government, private insurance companies that sell long- term care insurance, and residents who want to buy long-term care partnership policies. The purpose of the Partnership Program is to help people purchase meaningful, shorter term, more complete long-term care insurance. The partnership links special long-term care policies, called Partnership-qualified (PQ) policies, with Medicaid for those who continue to require care.
Partnership-qualified policies must meet special requirements that vary from state to state. Most states require partnership policies to:
offer comprehensive benefits (that is to cover both in-home and in-facility services);
be Tax Qualified;
provide certain specific consumer protections; and include certain kinds of inflation protection.
Often the only difference between a partnership-qualified policy and other long-term care insurance policies is the amount and type of inflation protection that the state requires. A Partnership-qualified policy allows you to apply for Medicaid under modified eligibility rules that include a special feature called an “asset disregard.” This allows you to keep assets (generally your savings) that you otherwise would not be allowed to keep in order to qualify for Medicaid if you need additional help to pay for long-term care services. The amount of assets Medicaid will disregard is equal to the amount of the benefits you actually receive under your long-term care Partnership- qualified policy.
Since Partnership-qualified policies must include inflation protection, the amount of the benefits you receive can be higher than the amount of insurance protection you purchased. For example, if you have a Partnership-qualified long-term care insurance policy and receive $100,000 in benefits from it, you can apply for Medicaid and, if eligible, retain $100,000 worth of assets over and above the state’s Medicaid asset threshold. In most states the asset limit is $2,000 for a single person. Asset limits for married couples are often higher.
The following is an example of how a Partnership-qualified policy works:
John, a single man, purchases a Partnership policy with a value of $100,000.
Some years later he receives benefits under that policy up to the policy’s lifetime maximum coverage (adjusted for inflation) equaling $150,000.
John eventually requires more long-term care services, and applies for Medicaid. If John’s policy was not a Partnership-qualified policy, in order to qualify for Medicaid, he would be entitled to keep only $2,000 in assets. He would have to spend down any assets over and above this amount.
But because John bought a Partnership-qualified policy, he can keep $152,000 in assets and the state will not recover those funds after his death. John would only have to spend down his assets over and above the $152,000 in order to be eligible for Medicaid.
States must certify that partnership policies meet the specific requirements for their partnership program, including that those who sell partnership policies are trained and understand how these policies relate to public and private coverage options. The map below shows which states have implemented partnership programs and are offering long-term care partnership policies. To find out more about your state’s program, including which insurance agents are selling partnership policies, or to find out if your state offers a partnership program, contact your state’s Department of Insurance.