Someone turning age 65 today has nearly a 70 percent chance of needing some type of long-term care services and supports in their lifetime, according to recent statistics from the U.S. Department of Health and Human Services. Data shows that women typically need care longer than men, an average of 3.7 years for women to 2.2 years for men. One-third of today’s 65 year-olds may never need long-term care support, but 20 percent will need it for longer than 5 years. Understanding of your long-term care plan is an important factor in evaluating memory care facilities.
As all Baby Boomers will reach 65 by 2030, how to pay for long-term care in a nursing home or memory care facility is a growing challenge faced by many individuals and families considering residential care for themselves or a loved one in the process of evaluating memory care facilities. Many people find it surprising that long-term care usually is not covered by Medicare or Medicaid. Typically, Medicare is intended for a hospital and brief rehab stay, and Medicaid only comes into play when one’s finances are nearly depleted. In the interim – which is often the bulk of one’s stay in a long-term setting – personal funds are required to pay the costs of care. In Pennsylvania, this is true of personal care or assisted living facilities where memory care is offered.
What is Long-Term Care Insurance?
Long-term care (LTC) insurance is a private insurance policy that can be purchased to help plan and pay for long-term care expenses later in life. LTC policies are almost always purchased well before care is needed as part of long-term financial planning and can help cover costs of care for routine activities of daily living that medical insurance and Medicare do not cover, such as bathing, dressing, medication management, and more.
Like life insurance, these private insurance policies carry premiums commensurate with one’s age, gender, and well being, so the earlier the purchase, the lower the policy premiums likely will be. Good health is a pre-requisite; once a pre-existing condition (such as dementia) enters the picture, it is unlikely one will be approved for a policy. LTC insurance is most beneficial for those who have a higher net worth; it’s best to seek guidance from a financial advisor or elder law attorney to determine your eligibility, potential benefits, and how a LTC policy may fit into your financial planning.
How to Choose a Long-Term Care Policy
LTC policies differ widely based on the companies that offer them and the people who buy them. Like most things in life, if you pay more for a policy, you’ll likely be purchasing more coverage. It’s wise to compare costs for the same coverage across a few companies. Some LTC policies cover only skilled nursing or only a limited number of days in skilled nursing. Some also may cover a stay in a personal/memory care or assisted living facility. In the absence of this level of coverage, some policies may allow for home care, so you or a loved one could receive care at home in familiar surroundings. There are two types of home care: medical and non-medical.
Medical home care means that a nurse and probably a physical and/or occupational therapist come to your home, often after a hospital or rehab stay. You or your loved one may qualify even without a hospital stay. Medical home care following a hospital or rehab stay is usually covered by Medicare and health insurance. There is a time limit on this level of care after which Medicare and health insurance would end, and the LTC policy may commence.
Medical home care means that a nurse and probably a physical and/or occupational therapist come to your home, often after a hospital or rehab stay. You or your loved one may qualify even without a hospital stay. Medical home care following a hospital or rehab stay is usually covered by Medicare and health insurance. There is a time limit on this level of care after which Medicare and health insurance would end, and the LTC policy may commence.
- Non-medical home care offers services that do not require a nurse or therapist, for example assistance with bathing, dressing, light housework, perhaps meal preparation, and similar tasks. Non-medical home care companies often require a minimum set of visits and minimum hours per visit; sometimes this care is covered by LTC insurance. Non-medical home care may benefit someone in the very early stages of dementia but would leave the person alone the remainder of the day. For those with memory impairment, this should be a shorter-term option. As a person progresses through stages of dementia, eventually a residential setting is most appropriate.
Non-medical home care offers services that do not require a nurse or therapist, for example assistance with bathing, dressing, light housework, perhaps meal preparation, and similar tasks. Non-medical home care companies often require a minimum set of visits and minimum hours per visit; sometimes this care is covered by LTC insurance. Non-medical home care may benefit someone in the very early stages of dementia but would leave the person alone the remainder of the day. For those with memory impairment, this should be a shorter-term option. As a person progresses through stages of dementia, eventually a residential setting is most appropriate.
How Do Long-Term Care Policies Work?
It is not necessary to determine whether your chosen facility accepts long-term care insurance. The LTC policy is a transaction between you and the insurance company from which you purchased the policy. While you are a policy holder, you are the insured party and only you are entitled to receive benefits. Benefits are not paid directly to a facility. When a loved one is placed in a memory care facility, the memory care agreement is between you and the facility. Generally speaking, the memory care facility will send you a monthly invoice; once you have paid the invoice, you then submit the billing documentation to the LTC company for reimbursement. The cycle would then continue month by month until the policy terminates.
LTC policies don’t necessarily cover long-term care stays from beginning to end; often there is a specified end to the care as defined in the LTC policy, as well as other out-of-pocket costs. For example:
- Elimination period – similar to a deductible with other types of insurances, there is a specified number of days typically ranging from 30-90+ days that would be paid for by the policyholder/person requiring the care. The LTC plan’s benefits begin after one satisfies the elimination period.
- Daily rate – memory care rates can average $250 per day and generally cover room and board and basic personal care. If the LTC plan provides an allowance of say, $200 per day, you would still be billed by the facility for the difference, in this case $50 per day, or about $1,500 per month. There often are other expenses such as incontinence products that likely would not be covered by the LTC insurance policy.
- Termination – many LTC insurance policies limit the length of stay, so may not provide coverage indefinitely.
Don’t Make These Long-Term Care Mistakes
Like all insurance policies, it is important to pay premiums on time. Not paying premiums promptly is a mistake that could have serious repercussions on care and payment. A policyholder may need to continue to pay LTC insurance premiums even while receiving care unless otherwise stated in the policy.
With dementia as a diagnosis, there is the added risk of inadvertently canceling coverage, or letting it lapse by not paying the monthly premium. After years of paying into a policy, this could be a very costly error. Your policy and/or agent can inform you of situations – if any – where you could possibly suspend payment and still keep the policy, but be careful to not make the assumption that this option applies to your policy.
Considering LTC policies, benefits, and costs can feel overwhelming. If you have a policy, or are helping a loved one or friend, a good place to start is identifying a single page within the LTC policy entitled “Summary of Benefits” in which the services are more easily discerned. Call the LTC insurance company for clarification. Consult your financial advisor or elder-care attorney for their advice. Usually a financial representative at the facility you are considering can help sort through the services that are covered, but you should always consult the insurance company for a full explanation of what to expect. As you are evaluating memory care facilities, make sure to understand which cost your policy covers and which it does not.
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