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A Primer on LTC Insurance Author: Editors note: This column has been adapted from Chapter 9, Long-Term Care Insurance, CPA ElderCare/PrimePlus Services: A Practitioners Resource Guide (AICPA, 2d ed., 2004). For more information about this column, contact Ms. Grant at rgrant@bdpb.com. When communicating to clients about long-term care (LTC), the information usually includes care for an individual who is physically or mentally disabled (i.e., unable to function or live without assistance from others). LTC planning refers to the process of preparing to meet the financial, medical, housing and personal needs of a person who can no longer function independently; typically, such care is not provided in a hospital. The plan must address the level of care needed and determine the location in which it can best be provided and how it will be financed.
Care Options Care needed by an individual unable to function independently usually falls into one of the following categories:
Payment Alternatives Usually, LTC is paid from one of three sources: private pay; Medicaid, Medicare and Medigap; or LTC insurance. Some limited services may be initially covered by Medicare or the Veterans Administration; however, these programs should not be considered long-term funding sources.
Understanding Long-Term Healthcare Insurance LTC refers to the many services used by people with disabilities or chronic illnesses. LTC insurance helps pay for these services, which can be very expensive. A policy should also ensure that individuals can make their own choices about the LTC services they receive and where they receive them. Ordinary health insurance policies and Medicare usually do not pay for LTC expenses. Medicaid, a Federal/ state health insurance program, will pay for LTC only when an individual has already spent most of his or her savings or other assets. LTC insurance should cover the cost of: 1. Help in the home with daily activities, such as bathing and dressing. 2. Community programs, such as adult day care. 3. Assisted living services (e.g., meals, health monitoring and help with daily activities) provided in a special residential setting other than a personal residence. 4. Nursing home care.
Deciding Whether to Buy a Policy LTC insurance is not for everyone. Clients should learn as much as they can about the various policy options before buying one. CPAs should encourage clients to keep the following in mind: 1. Is there a good reason to buy LTC insurance? Clients goals may be to protect assets, minimize their dependence on other family members and control where and how they receive LTC services. 2. What is the cost? LTC insurance is expensive. An individual who is 65 years old and in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing home care and home care; those premiums are adjusted for inflation. Clients should be wary of buying LTC insurance if the cost of premiums will lower their standard of living or force them to give up other things they need. Clients should make sure they will be able to afford the premiums if their income declines.
When to Buy Middle age may be the best time to consider whether to buy LTC insurance, as (1) an individual is most likely to be eligible for a policy and (2) premium costs will be lowest. Many people do not think about LTC until they get into their 70s and 80s and their health begins to fail; at that age, it may be too late to purchase insurance. Some LTC insurance policies restrict the age and health status of potential buyers. Even if an individual can obtain LTC insurance in old age, it will be more expensive than if purchased at a younger age.
Resources The State Health Insurance Assistance Program (SHIP) is a free program that counsels older adults about health insurance-related topics. SHIP counselors can help individuals (1) decide if they need LTC insurance and (2) understand an insurance policy they are thinking about purchasing. For the nearest SHIP program, call the Eldercare Locator, at (800) 677-1116. The National Center on Women and Aging, located at Brandeis University, focuses attention on the special concerns of aging women. The Center published a guide to LTC insurance in its Women and Aging newsletter, available at http://heller.brandeis.edu/national/ltc.html. The Administration on Agings (AoAs) Website contains information about the agency, its mission, budget and organizational structure. It also discusses the Older Americans Act, the Federal legislation establishing the AoA and authorizing a range of programs that offer services and opportunities to older Americans and their caregivers; see www.aoa.gov. The American Association of Retired Persons (AARP) is a nonprofit membership organization dedicated to addressing the needs and interests of persons age 50 and older. Through information and education, advocacy and service, AARP seeks to enhance the quality of life for all, by promoting independence, dignity and purpose; see www.aarp.org/bulletin/longterm/.
Insurance Calculators The Internet abounds with personal insurance calculators. The following have been identified for work with LTC insurance issues, premiums and benefits:
Conclusion CPAs should take the time to understand the different issues involved in the purchase of LTC insurance, to better assist clients. |
