Understanding Long-Term Care Insurance

Long-term care can make all the difference in improving a patient's quality of life, but it can also be a huge financial burden to them and their families. Long-term care insurance is a tool that can be used to ease that burden.

What is long-term care?
Long-term care is a general name for any type of care, both medical and nonmedical, required by individuals suffering from illness or disability. Help with meal preparation, bathing and dressing are types of nonmedical long-term care, while dressing wounds, administering medications and inpatient physical rehabilitation are examples of medical long-term care.

The term is somewhat misleading because long-term care may be required for only a few weeks. For example, a patient who breaks their leg may need long-term care for only a short period of time, just until they get back on their own two feet again. But make no mistake-even a stay of a few weeks in a hospital or nursing home can rack up tens of thousands of dollars in bills.

Some seniors assume that Medicare will cover these expenses, but this isn't always the case. Medicare Part A will only pay for qualified hospital or nursing home expenses for 100 days. Expenses for the first 20 days are paid in full, but expenses for the next 80 days require a copay ($128.00 per day in 2008, or $10,240 for the full 80 days). After the 100 days are up, you're on your own, and you don't qualify for the benefits again unless you stay out of the hospital for 60 days. Simply put, Medicare isn't enough, so seniors should consider long-term care insurance as well.

What types of long-term care insurance policies are there?
There are two main types of long-term care policies:

Tax qualified: The benefits from this type of policy are not taxable and the premiums are tax deductible. However, the benefits on this type of policy are heavily regulated and it's difficult to qualify for them. In order to qualify for benefits, the patient must be fairly disabled (unable to eat, bathe and dress), be expected to need care for at least 90 days and have a detailed plan of care written out by a doctor.

Non-tax qualified: The benefits from this type of policy are taxable, but it's relatively simple to qualify for them. The insured patient can collect benefits for almost any medical reason, as long as a doctor states that the care is needed and the insurance company agrees that the claim is legitimate and reasonable. This type of policy is becoming less commonly available.

Both types of policies may be purchased as individual policies or through group policies. Be cautious when purchasing your policy, especially through a group policy: make sure that your policy is renewable and that the premiums can't be adjusted at the insurer's whim.

Who is eligible for long-term care insurance?
Generally, middle-aged individuals who are in good health and who don't currently require long-term care will be eligible for long-term care insurance. People who are in their 70s, 80s or 90s or who are currently ill or disabled will not be eligible for most long-term care insurance policies and, if they are able to get any long-term care insurance at all, the premiums will be very expensive.

Unfortunately, many people only consider buying long-term care insurance once they become ill or disabled. By then it's too late to get good, affordable coverage. Both the young and the old should consider buying a policy. Depending on the current state of their health and their likelihood of becoming ill or disabled, people in their 20s, 30s and 40s may decide that buying long-term care insurance is a good investment. The younger someone is when they buy their policy, the lower their premiums will be.

Individuals in their 50s and 60s should strongly consider buying a long-term care insurance policy before any age-related conditions strike them.

Keep in mind that benefits usually can't be collected from your policy immediately. Most policies have a waiting period of between 20 days and one year before the insured party can collect benefits. Generally, policies with long waiting periods have lower premiums than policies with short waiting periods.

Seniors who use Medicare should consider Medicare Supplemental Insurance, also known as Medigap insurance. This insurance is regulated by the US Government and available in several benefit plans with letter names from A to L. Once you choose the level of coverage you want, comparison shopping is easy, because all providers must offer the same set of core benefits, as determined by the government. That means that a Medicare Supplemental Insurance A plan will give you the same benefits, regardless of who issues the policy.

Although Medigap insurance can seem expensive, the monthly premiums are far less each year than you'd pay out for a full 100 days in the hospital or a long-term care facility. Medigap may also be a cost-effective alternative for those whose age disqualifies them or subjects them to higher premiums for long-term care insurance.