Caruso Insurance, FAQs - Long Term Care

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What is long-term care?

Long-term care refers to the kind of daily assistance that you could need if you have an illness or disability that lasts a long time and leaves you unable to care for yourself. You may or may not need long-term care in a nursing home or you might need help at home with activities of daily living such as dressing, personal hygiene or household chores. There are generally four different types of long-term care:

Skilled nursing care — Daily nursing and rehabilitative care that can be performed only by, or under the supervision of, skilled medical personnel. The care received must be based on a doctor's orders.

Intermediate care — Occasional nursing and rehabilitative care that must be based on a doctor's orders and can only be performed by, or under the supervision of, skilled medical personnel.

Custodial care — Primarily for the purpose of meeting personal needs such as walking, bathing, dressing, eating or taking medicine. It can usually be provided by someone without professional medical skills or training.

Home health care — Usually received at home as part-time skilled nursing care, speech therapy, physical or occupational therapy, part-time services from home health aides or help from choreworkers.

Are Long Term Care Policies tax-deductible?

Many plans are tax qualified long term care policies. Federal law now allows individuals to deduct a portion of the premium of a tax-qualified long-term care policy from their taxes if you itemize your taxes above 7.5% adjusted gross income. In addition, benefits received from a tax qualified long-term care policy may not be taxable.

An individual must meet the new eligibility requirements for a tax-qualified long term care policy to qualify for benefits under that policy. A licensed health care practitioner must certify that an individual is "chronically ill" and prescribe a plan of care. An individual is considered chronically ill if care is expected to be needed for at least 90 days or requires substantial supervision due to severe cognitive impairment.

Long term care policies issued before January 1, 1997 are automatically considered tax-qualified. Any policy issued or modified after January 1, 1997 must meet the federal requirements to be considered tax-qualified.

You are encouraged to consult a tax advisor on how these changes could affect you.

Who pays for long-term care?

Long-term care services can be expensive. There are four main ways that long-term care expenses are paid: Medicare, Medicaid, long-term care insurance and private pay or out of pocket.

Medicare generally pays 100% of skilled nursing facility care for the first 20 days and 80% for the next 80 days, but it will not pay for skilled nursing facility care after the first 100 days. This benefit is only provided if you are admitted to a Medicare certified facility within 30 days after a minimum three-day hospital stay. A physician must certify that your admission is medically necessary. Medicare may also pay for part-time skilled home health care if you are homebound and a physician certifies the care is medically necessary. Medicare supplement or "medigap" policies generally only cover the enrollees portion of a Medicare covered benefit and generally do not cover long-term care expenses beyond the 100 day Medicare benefit.

Medicaid will pay your nursing home or home care expenses only if your income is less than a set amount and requires, if you are single, that you spend virtually all of your savings and other assets before providing coverage. If you are married, your spouse will be able to keep sufficient assets to provide for her or himself.

Long-term care (LTC) insurance is coverage you can purchase privately from insurance companies to cover the long term care nursing expenses government programs do not cover. For most this is the most cost-effective solution.

Private Pay or Out of Pocket Expenses are long-term care expenses which are not covered by one of the insurance programs previously listed and require you to use your assets, income and resources to pay for the care. In most cases you will have to exhaust all or most of your assets before Medicaid will pay for long term care.

What factors will affect my premium?

Insurance companies generally consider the following criteria when establishing premium rates:

Age - In general, the younger you are when you buy a policy, the lower the premium will be. Most companies will not sell policies to individuals over 79 years of age.

Elimination or deductible periods - These periods are the number of days you must stay in a facility, or the number of home care visits you must have received, before policy benefits begin. Usually, the longer the elimination or deductible period, the lower the premium.

Amount paid and duration of benefits - In general, the more money the policy will pay or the longer the benefit period, the more you will pay for the policy. For example, a policy that pays you $100 a day for up to five years of nursing home care will cost more than a policy that pays $50 a day for three years.

Optional Inflation Riders - Many insurers offer optional inflation riders for an additional premium. These riders usually increase the daily benefit each year by a specified amount of at least 5%. Tax qualified policies are required to offer inflation riders as an option to insureds.

Optional Return of Premium and Nonforfeiture Benefits - Some insurers offer nonforfeiture benefit or return of premium riders for an additional premium. Tax qualified policies are required to offer nonferfeiture benefits as an option to insureds. When the insured dies or stops paying premiums, a Return of Premium benefit returns a pre-defined portion of the total premiums paid for the policy. If an insured stops paying premiums, a nonforfeiture rider provides paid long-term care coverage equal to at least 30 times the daily benefit. These benefits are generally not available until the insured has been covered by the policy for three or four years.

Survivor Benefits - Some insurers offer a survivorship rider for an additional premium. When both husband and wife purchase a long-term care policy (usually identical) and one spouse dies, the surviving spouse's policy becomes paid up if both policies have remained in force for the stated number of years (usually 10 years).

Further Resources

The Pennsylvania Insurance Department and the Department of Aging have developed "An Overview of Long Term Care Insurance" as a supplement to the national publication, "A Shopper's Guide to Long Term Care Insurance." Both publications are available from the Insurance Department and the Department of Aging.

These consumer booklets have been created to help you better understand long-term care services and costs. "An Overview of Long Term Care Insurance" will give you information, which specifically applies to Pennsylvania's laws. "A Shopper's Guide to Long Term Care Insurance" will provide more in-depth descriptions. Both publications include worksheets (Adobe PDF Format) to evaluate your long-term care needs and helpful consumer tips so that you can make an "informed" decision.

If you have additional questions about long-term care insurance, contact the Department of Aging at (800) 783-7067 or one of our representatives.