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Many people are unwilling to purchase long-term care insurance (LTCI) until much later in life, in their 80s rather than in their 50s, say, but many recent articles have been showing up in everything from senior care trade publications to small local dailies, which actually touch on the subject of the LTCI industry trying to welcome the burgeoning senior baby boomer market. LTCI is an idea many do not want to entertain, and yet aging and long-term care always will be an issue. Some naysayers speculate that it’s obviously in the insurance companies’ favor to have these premium payments rolling in. But to them we would like to point out that even with that being salient, LTCI, although it is possible to be in wolf’s clothing, is still a sheep, because the consumer will pay less if insurance is purchased when they are still young and (hopefully) healthy. Looking into Your LTCI Options? In due time, a LTCI recipient actually pays less, not just incrementally, but as a whole, because the premium is not only based on the age at which you buy, it is typically locked in from the beginning. Here’s an example from an upcoming article by Gilbert Guides

CEO, Jill Gilbert, in Active over 50 magazine:  If a healthy 55-year-old woman purchases an LTCI policy at about $1,500 a year, by the time she is 85, she will have only paid $45,000 for thirty years of coverage. But for that same policy, a 65-year-old woman pays around $2,800 annually, which means that she pays $56,000 for twenty years of coverage;a marked increase. Waiting to buy an identical policy at 75 always increases the annual cost to about $7,500; this means that the oldest policyholder in this comparison ends up paying $75,000 for only ten years of coverage;a whopping 400% increase from the 55-year-old woman! Find out how long-term care insurance can help you? Get a free long-term care insurance consultation and quote.

One close family friend of mine recently called on the phone to ask me, “So I am thinking about long-term care insurance, what exactly should I be looking for and where do I start? ” And my answer was, ” Are you confused?” “Yes.” “Well, that’s how most people start.”  We both laughed, but the point remains that picking a long-term care insurance plan can be very confusing. Our other postings on the subject I have covered the benefits of buying a policy especially in the early years of retirement. But what should you be looking at when you are shopping around for an LTCI policy?, and how do the policies actually work?

1. Check out what will be covered.  LTCI policies vary and may cover home health care, homecare, adult day care (and health care), assisted living, skilled nursing care, hospice care or some combination of these, look closely and see what is covered. Your best bet is to get a policy which covers most, if not all, of these possibilities.

2. How benefits will be paid out. Most policies pay by a daily benefit. Sometimes the daily benefit is calculated using a monthly average. This is advantageous when working with homecare, nurses or aides might work sporadic hours if, for example, a family caregiver is available. Secondly, benefits are paid on either an indemnity or reimbursement plan. So benefits are either a lump sum payment regardless of what the charge is OR (in the case of reimbursement) the insurance carrier will only pay the actual charges for care even if the charge is lower than the maximum daily. There are times when the unused funds are carried over.

3. When your coverage will begin.  A lot of policies spell out how many activities of daily living (like dressing or bathing) you must need assistance with before your coverage begins. There is also a waiting period, which usually runs from 0-90 days, but sometimes is longer. So you need to consider what you can afford to cover before your benefits kick in.

4. How long will your benefits last.  How long will the benefits last? A few years? Maybe 10 years? Although this is somewhat of an unknown, you need to take into consideration if you are predisposed to a chronic illness and what kind of funds you may have at your disposal.

5. What will your benefits be “worth” once they are paid out to you. Not only should you look at how these are paid out but how exactly paid out with regards to inflation. Many policies offer some sort of inflation protection. Considering long-term health care costs only seem to be rising, this protection translates into having a financial cushion protecting your assets.

6. Which resources can help you make the best decision.  There are actually three resources that you may need to use when making the best decision: ratings companies, a reliable agent and yourself. Make certain you choose a company who has been in business and is highly rated by A.M. Best, Moody;s, Standard & Poor;s, or Weiss. Looking for professional assistance with long-term care insurance and which policy meets your needs? Get a free long-term care insurance consultation and quote. Finding an agent is tricky. Many people are “referred” by carriers or internet searches. This is just like mushroom-picking by memory, but this is not in your best interest. Look for an agent that sells a variety of products, but specializes in LTCI.

Also, if the agent’s commission rates are standardized, then it is not financially gainful for him or her to up-sell you. And although most of these decisions can and should be aided by professionals, it is your job to be vigilant. Use common sense along with the help of professionals. It can be hard to determine what your long term care needs are. A good place to start is by looking at what many consider the baseline;that is, what the federal government offers to its employees via the Federal Long-Term Care Insurance Program.

Long-term care insurance is a good financial protection vehicle for anyone who has enough assets to protect and can comfortably afford the premiums. It can help ensure that all of the time and effort you have spent on acquiring a sufficient retirement income is not lost due to the rising costs of long-term care. There are several specific advantages for couples purchasing long-term care insurance. Consider this: most often, the healthier spouse acts as the primary caregiver. Without long-term care insurance, the healthy spouse often takes on the bulk of caregiving duties, to try to simply avoid paying the high costs associated with either in-home care or institutional care. Eventually, this can leave the caregiver almost as ill as his or her spouse. Long-term care insurance helps provide the necessary funds so that the healthy spouse can make sure that quality care is provided for the ill spouse while not endangering his or her own wealth even further.

Couples can even save more money on the purchase of long-term care insurance, as all major carriers will discount the cost of a policy by thirty to forty percent when both spouses are on the same policy. This can result in significant cost savings for married couples. The good news is that even those who may not be married but have lived with someone else with whom they are in a committed relationship for more than a year may also receive the same discount for long-term care insurance.  If one spouse is approved for a policy but the partner may have health issues that may preclude him or her from qualifying for long-term care insurance, this does not mean that the couple should decline coverage for the healthy spouse. Long-term care insurance is still an advantage for this couple because no one knows which spouse will need long-term care first.

Once there is a major health reversal for the previously healthy spouse, the one who had health issues originally would be in an even more disadvantaged position as a caregiver. In this case, long-term care insurance would provide the funds needed for quality care without further damaging the health of the spouse who was declined for the long-term care insurance policy. It is actually unreasonable to forget health insurance for one spouse simply because the other cannot qualify for a major medical plan. The same is true for long-term care insurance. It may indeed be disappointing that both cannot be covered, but the financial risks for each of them are still prevalent and should not be ignored.

There are several reasons why consumers may choose not to buy long-term care insurance. Some of those reasons may be based on very sound decisions. For instance, if you have made a good research into the cost of premiums from several of the financially sound major carriers and have realized that the cost if much more than you can bear, then long-term care insurance is not for you. But if you are like most people, the real reason that you are hesitant to prepare for possible future long-term care costs has very little to do with reasoning or sound decisions. Your hesitation is most likely based on feelings and emotions.  Many people live in a state of denial about their possible need for assisted care services in the future. This is always because they have been healthy; therefore, they find it hard to even picture themselves in a state where they may need assistance with activities of daily living.

Or maybe their parents have died suddenly with or within a short period of time, so they figure that most likely, the same will happen to them. Or maybe the feeling of denial is too strong that very little thought has gone into the matter at all. If that is the case, this subject is probably so depressing to most of these people that they have consciously chosen to delay any decision about purchasing long-term care insurance until later. And that time will never come. Why?  None all of these thought processes are based on fact. We all know that good health can change overnight. And also, I knew someone whose health situation changed greatly within a short period of time. This risk obviously increases with age, so the chances of it happening to any individual, including you and me, are very real.  Due to the advances in medical science in recent years, using the health history of your parents as an exact guide for your own future home health care doesn’t work.

It is indeed obvious that more and more people are living longer and often need more in the last years of their life. And long-term care is extremely expensive. If ever you are one who refuse to think about their future health care needs, ask yourself this: who will be left to make this decision for you?  Refusing to think about the subject does not make the possibility of needing long-term care any less real. It simply defers the decision to those you love the most. They will often have to make decisions about your care at the last minute,  when the choices are extremely limited, unpleasant and expensive. Our families will be well served if we all decide now to take responsibility for our own future health care needs and make sound decisions based on facts instead of unreasonable emotions.

It’s always pleasing to highlight good news! Recently, the New Jersey legislature passed a law that will offer seniors on Medicaid more long-term care options. By the year 2008, all senior citizens living in New Jersey will have a choice in the type of long-term care they receive through Medicaid, under a law made by Governor Jon S. Corzine. The law provides “an extraordinary change in direction and policy in a way that makes sure our seniors have a choice,” said Corzine at a recent AARP summit on long-term care. Currently, New Jersey spends $1.68 billion of its Medicaid long-term care budget on nursing home care, compared with $162 million on community-based care like assisted living facilities, home health care and adult day care. That’s a whole lot of money going to skilled nursing facilities. The law will now help bridge the gap between money going to nursing homes versus money going to people in the community.”Rather than requiring that nursing homes be the first stop, now nursing homes will be the appropriate stop, if necessary,” said Dr. Fred Jacobs, state health commissioner for New Jersey.

Skilled nursing facilities are the right choice for many seniors who require this type of specialized care, however, seniors should never be placed in a nursing home simply because there are no other options. On a more personal level, the law always provide for appropriate changes in a person’s home including the installation of bathroom handrails and other safety features. Home health aides and even respite care are now under the Medicaid umbrella of covered services. There are already so many choices to make regarding long-term care, the passing of this law will enable you to make better and smarter choices that will really suit your needs! Most funding for adult day services is generated from participant fees, city government agencies and charitable sources.

Long-term care insurance (LTCI) policies are very different from most other kinds of insurance. As a result, even the foundational features of these policies require taking some time to understand before making your final decision. However, what about all the other choices and features which are not built into the policy and requires you to pay extra to get them? In my opinion, LTCI policies are best kept simple. If you have already done researching on setting up the foundational features of the policy, you have already done 90% of the work in most cases. Remember that it is always a good idea to find out more about those other options once you feel that you can afford to spend more on your care, but you should also examine whether they are truly going to be cost-effective in your case. One good way to do this is to narrow down your selection to the two to three carriers that you feel most comfortable with and get quotes on a straightforward policy setup with no extras or options added.

Next, add on the options that you may be interested in one at a time and get a new quote. This will tell you exactly how much extra you can expect to pay for these options. If you have all those figures, then it is much easier to decide if the choices you are considering are really worth pursuing further. Here is a list of some of the most popular options in LTCI or Long Term Care insurance policies:

1. Return of Premium – This option allows you to receive back some or all of the premiums that you pay into the policy if you either decide to cancel the policy or if you die without using all of your benefits. Be careful as this option is very expensive.

2. Survivorship – The benefits of this option can vary from carrier to carrier, but typically it says that if the policy premiums have been paid for a specified period of time, often ten years, and one spouse dies, the surviving spouse’s policy is considered paid up with no further premiums required.

3. Restoration of Benefits – This provision restores all of the benefits paid out for care if a policyholder fully recovers and does not suffer a relapse for a specified period of time (usually six months).

4. Waiver of Home Health Care Elimination Period – For this option, it reduces the elimination period (the amount of days that you pay for your own care before the insurance company starts to pay) to zero. This only means that it starts to pay from the very first day of services made if the care is recieved at home. There are other options that can be considered when shopping for LTCI too, but in my experience the most common danger is getting bogged down in these extra features that do not really impact the quality of your future care nearly as much as the foundational features.

This is one reason why getting an experienced and knowledgable agent help you with the process can often reduce much of the confusion surrounding these options so that you can select the policy and features that suit you best.

It is clear that no one likes to pay insurance premiums of any kind and long-term care insurance is no exception. We pay these premiums because the alternative leaves our investment assets and retirement income exposed to high risk if long-term care becomes necessary and, of course, we have to pay for the care ourselves. It is no secret that the cost of nursing facility care can quickly drain a retirement nest egg and force a retiree into financial ruin. By getting a long term care insurance or LTCI, a policyholder is accepting a small loss each year in the form of premiums paid. This relatively small loss helps ensure that he or she will not be wiped out financially by unmanageable long-term care costs in the future. People who are unfamiliar with long-term care insurance often wonder how long the premiums will need to be paid. The answer is that there are three choices for the premium payment period usually offered by insurance carriers.

The most popular choice by far is a “lifetime” payment period that requires the payment of premiums until death or until the policy is activated. Some object to paying these premiums for such a long period of time. In response to that objection I usually ask prospective clients to consider other forms of insurance that they most likely own. Lets say for instance, would they expect to only pay premiums for health or major medical insurance for a short time, or do they plan on paying those premiums for life? Would not they expect to pay auto insurance premiums for as long as they drive?  Isn’t it reasonable to pay homeowners insurance premiums for as long as they own a home? As long as the financial risk is present, the payment of insurance premiums is prudent. Since the risk of needing long-term care is present for as long as we live, the premiums for long-term care insurance can be expected for the remainder of our life.

The second and third choices for payment of long-term care premiums allow the policyholder to condense all of those expected premium payments into a shorter time period. For those under fifty-five years of age, a “pay to age sixty-five” option may make sense. For others a “ten-year pay” option may be a good choice. Because the expected premium payments over a lifetime are simply condensed into a shorter timeframe, the cost of these premiums is much higher. So therefore, these choices usually makes sense for policy holders who can take advantage of tax deductions that help them reduce the overall cost of their long-term care insurance.

More and more companies are beginning to offer long-term care insurance (LTCI) to their employees as part of an overall health care benefits package. And since buying group medical insurance is usually a way to get lower insurance rates, most people automatically assume that the same is true with LTCI policies. But in most cases, individual LTCI policies will be able to offer not only lower premiums, but it can also give better benefits if they are examined in a true “apples to apples”  comparison. Group LTCI can be a good answer for those who have severe health problems, as they may be able to qualify under the “simplified”  underwriting procedures. The same lenient qualifications also drive up the cost of coverage for everyone else in the group.

This is one reason why individual LTCI policies actually cost less for relatively healthy applicants, the underwriting procedures in use effectively screen out most of those costly severe health cases. One of the ways that group LTCI companies can mask or hide the increased cost of their policies is by not including an automatic inflation benefit as part of the premium. Sometimes they tell you that they are giving a 5% compound inflation protection, but they do it as something called a “Future Purchase Option.”  This actually means that they will come again every three years or so to make an offer based on an additional 5% compound increase in benefits. This is the least expensive way to buy LTCI initially because inflation protection is not built into the premium. The problem is that it is the most expensive way to buy LTCI over the life of the policy because you are buying additional protection every three years at a later age. Moreover, you are paying for that additional protection at that later age instead of the age when you originally purchased the policy. So these kind of policies often wind up costing the policyholder twice as much or more over the life of the policy, as if they have just brought the automatic inflation protection built into the policy then. Another method that group policies use to lower premiums by providing less coverage is reducing the home care benefit to 50 to 75% of the daily benefit.

This may indeed lower costs, but it is not helping policyholders accomplish what they usually want most: to stay at homecare and remain as independent as possible for as long as they can. Of course, some group policies can be a very good value, but it always pays to compare them to individual policies using identical benefit features to make the comparison fair for long term care.

People often confuse Medicaid for Medicare, another popular government-sponsored program. However, these programs are very different in what they are designed to do. Medicare is actually the national health care assistance program given by the federal government. Its function is to make sure that affordable home health care is available to all seniors and disabled people younger than 65. On the other hand, Medicaid is a program run by the individual states, along with some federal assistance, and it varies considerably from one state to another. Medicaid’s main function is to provide assistance to those who have very few assets. One of those areas that many people need assistance with is health care, and so Medicaid picks up the tab for assisted care costs that many seniors simply cannot pay for on their own. Medicaid is a wonderful provision to make sure that those with few means receive the care they need even when they cannot afford to pay for it themselves.

Only problem is that Medicaid does have its limitations, and one area that is draining Medicaid of its precious resources is long-term care. In fact, based to the Centers for Medicare and Medicaid Services, in 2001, Medicaid paid for almost 40% of the annual long-term care bill in this country. So what exactly is long term care according to its definition placed by Medicaid? It is generally custodial care that is provided when a person needs assistance for activities of daily living, which include eating, bathing, dressing, continence, toileting, and transferring. Skilled care on the other hand, which is paid for to some extent by Medicare, is for situations in which you are expected to get better as a result of the care. It is often referred to as short-term rehab, and includes changing dressings, IVs administering medications, and physical and speech therapies. Once a patient’s progress stops, the skilled care reverts to custodial care. Medicare will not pay for long-term care if it is not accompanied by the need for skilled care, and so the problem falls on Medicaid to pay for the ongoing costs of custodial care. Although Medicaid will pay for long-term care, there are severe restrictions on the qualifications for assistance.

First and foremost, Medicaid is a program designed to help those who are impoverished. In order to qualify for long-term care assistance through Medicaid, a person must spend practically all of his own assets before Medicaid will begin to pick up the tab.  Medicaid, in general, is not set up to provide care in a home setting. Usually the care must be provided within a residential facility, meaning that a person has to give up much of his independence in order to qualify. Much of the individual’s ability to control the kind of care received is also lost, because the state will determine where and how the care is administered since it is paying for the care. The rising expenses of getting long term care are placing many state Medicaid programs under pressure, and much needs to be done to help make sure that this vital program for those who have few means will be able to continue to serve those who need it most. As a result, both state and federal governments are encouraging most Americans to take the responsibility for their own future long-term care needs. Getting more information on the important issues surrounding long-term care and how it affects us all is a good place to start.

In previous blog articles I have discussed the long-term care insurance partnership program that almost two thirds of the states is in the process of getting approved and put into place. This program is designed to encourage the purchase of LTCI by consumers so that the state can reduce its liability for paying for long term care costs in the near future. This is vital if current state Medicaid programs are going to remain solvent. The advantage to customers is that the state acts as the safety net for all of them in case their care exceeds the benefits of their LTCI policy, and they are guaranteed that long-term care costs will not be allowed to completely wipe out all of their assets.  The question is what identifies a policy as being partnership qualified? There are several qualifications that were outlined in the federal Deficit Reduction Act of 2005, including the need to be federally tax-qualified and to contain the consumer protection provisions of the NAIC LTC Model Act and Model Regulation.

Majority of the policies sold today already have those provisions.  However, there is one requirement that contributes more than almost any other to qualifying a LTCI policy for the partnership program. It needs to have the age-appropriate inflation protection benefit. These requirements are as follows:  Those age 60 or younger must have ” compound annual inflation protection. ” Those at least 61 but younger than 76 must have ” some level of inflation protection. ” Those age 76 or older must be offered an inflation protection option, but they are not required to purchase that option. Now why is inflation protection given to such prominence in partnership-qualified policies? The answer is that if partnership-qualified policies don’t have inflation protection, the purpose of a partnership program may be defeated. This is because the whole point of the partnership program is to help relieve the financial burden of long-term care costs from the state Medicaid systems.

If a consumer buys a LTCI policy but does not allow it to keep pace with the rising costs of assisted care, the insufficient benefits will be more likely to force the policyholder to turn to Medicaid anyway. With very few assets left, the state will then have to pick up the rest of the bill for this individual and the original intent of the program is defeated.  A very important lesson that can be learned is that inflation protection is a vital component of any LTCI policy;whether partnership-qualified or not.