What is Long Term Care Insurance (LTCi)?
Long term care insurance pays for the cost of care if you require skilled care at a facility or in the comfort of your own home.
Preparing for retirement can be difficult due to the uncertainty of costs and all of the items which must be considered.
It is important to prepare for the care you may need within your retirement and secure sufficient insurance to provide that care.
The effect of poor planning and advances in modern medicine can create a perfect storm of issues.
If you fail to plan for the care you may need during retirement you may fall victim to the high cost of that care.
If you outlive your initial longevity estimation your assets and the rising cost of living may erode your post-retirement income and savings.
Connecticut is the third most expensive state for long term care. Based on demographics, and shortages (Labor & Facilities) CT long term care costs will remain high for years to come. According to a recent study by Genworth the average cost of a private room is about $97,000 Nationally, in Connecticut that cost is over $140,000.
Those with chronic illnesses, disabilities, and other conditions may require assistance for even the most simple of living activities. (Bathing, Dressing, Eating, et al) Some ailments also require skilled professionals to provide care such as therapists, nurses, doctors, and other professionals.
In general, most major medical insurance, and even Medicare will not cover all of these services.
If private insurance or Medicare does cover some of the services required they do so under very strict criteria.
Example of Services Covered
Assisted living: These residences include apartment-style units that make personal care and other individualized services (such as meal delivery) available when needed.
When a decision is made to transition to assisted living most LTCi policies will cover the facility based on the specific terms, conditions, and exclusions within the insurance contract.
Adult Day Care: These programs provide care outside the home that provides health, social, and other support services in a supervised setting for adults who need some degree of assistance during the day.
Home Health Care: When eligible individuals may remain at home and receive care from licensed professionals to complete services, such as bathing, grooming, and help with chores and some housework.
Skilled Nursing: The dreaded “Nursing Home” which most have had mixed experiences. These facilities can provide a full range of skilled health care, personal care rehabilitation care, and other daily living activities in a 24/7 setting.
You should always confirm if the policy covers more than room and board and if so what items are excluded.
What is the Connecticut Partnership Program for Long-Term Care?
It’s a program created by the State of Connecticut that works in conjunction with private insurance companies.
The State works with private insurers so that the market offers policies that will allow you to protect assets equal to the amount of benefit that your policy has paid.
This also means that should you find yourself in need of Medicaid later in your retirement the protected assets would be disregarded when qualifying for Medicaid assistance.
Partnership policies also provide a minimum daily benefit and automatic benefit increase to account for inflation.
While you have to be a resident of Connecticut to purchase a policy through the Partnership program, it will pay a benefit if anywhere see the policy detail for location limitations.
What are the common myths and misconceptions about long-term care insurance?
- There is no need for LTCi if you have Medicare.
- While Medicare will pay for some facility care and potentially some skilled nursing under certain conditions there are many limitations.
- If your initial cover days are expended the insured may be faced with high costs at 100% responsibility unless separate private insurance exists.
- Medicare will not cover expenses if the insured does not meet the strict admission/billing status.
- LTCi only covers care in a facility.
- Long Term Care Insurance can pay for care in a multitude of settings.
- You may visit Adult Day Care, Skilled Nursing, and even receive care at home.
- The terms of your insurance contract will define where and how you receive coverage.
- Few people will need long term care.
- The population is aging. Annually over 8 million people receive care.
- Of the older population with long-term care needs in the community, about 30% (1.5 million persons) have long-term care needs where three or more ADL limitations exist.
- Of the population over age 65, over 65% will develop disabilities before they die, and over 30% will eventually enter a nursing home or some form of permanent skilled nursing care.
- Most LTCi insurers in Connecticut will require you to use services from certified home care agencies or licensed professionals for this type of policy.
- If you are looking into insurance you should make sure you buy a policy that covers the types of facilities, programs, and services you will want and that are/will be available where you live or will retire.
- When moving to another state your coverage and other types of services available to you may differ.
- The features, benefits, and triggers of LTCi policies have changed over the years and it is important to review your existing policy and any new policy in detail.
- Elimination periods are valuable if and when you have sufficient reserves for the cost of care during the elimination period.
- Cognitive impairments may not always trigger benefit eligibility and as such, you should always know how and which ADL’s (Activities of Daily Living) affect benefit eligibility.
- When purchasing LTCi and you are younger than 70 years of age it is highly recommended that you consider adding inflation protection.
- Some insurers offer a non-forfeiture option/rider which allows you to receive a reduced benefit based on the premiums already paid.
This option will allow you to recover some of the premium paid instead of allowing the policy to lapse.