Monday, November 5, 2007

Retirement Planning and Long Term Care: Eighteen Questions

As we continue to look at the possibility that retirement may not be what we envision, the conversation takes a turn to caring for that unforeseen need. Over the next three posted offerings, we will look at some important question to ask your potential insurer before you sign yourself or a loved one up for a long-term care policy of LTC.

Please note that I do discuss, at length in the book, what Medicare and Medicaid will and will not pay for and what kind of assets (or lack thereof) those programs will allow. That said, Short-term care as spelled out by Medicare requires that the following conditions must be met:

    You must have been in a hospital for at least three days immediately prior to entering the nursing facility. Because the onset of most Alzheimer's and Parkinson's cases takes time to manifest themselves and generally are done without the involvement of a hospital stay, they are excluded from Medicare coverage.

    You must go into the facility for the same condition for which you were previously hospitalized, and it must be within thirty days of discharge.
    You must be getting better each day. Once you level off, Medicare stops paying.

The search for LTC policies can be long and confusing. I’ve put together a small checklist of things to ask your potential agent or the one you already have. LTC policies should be compared against each other with a minimum of three side-by-side evaluations.

Here are the first of eighteen questions on the subject of Long-Term care Insurance. Additional information can be found in the book and at

1. Does your policy cover the following:
* Nursing home care
* Home health care
* Adult day care
* Alternate care
* Respite care
* Other

2. Each policy differs on a pay per day basis that can make it difficult to choose. Primarily we are concerning ourselves with nursing home care. There may be other opportunities to finance some aspects of in-home care that we have yet to discuss or have only briefly touched upon (HSAs).

The policy should clearly state how much each item is paid for and whether these numbers are indexed for inflation. For the inflation number, a modest percentage of inflationary risk would be 3% year-over-year. That is however not guaranteed so, in a worst-case scenario, expect inflation to be higher, not lower twenty-years or more from now.

How much does you potential insurer pay for the following services:
For nursing home care? $ _________
For home health care? $ _________
For adult day care? $ _________
For alternate care? $ _________
For respite care? $ _________
Other? $ _________

3. How long the benefits last is an important question indeed. Medicare, as we discussed earlier, does not pay for long-term care expenses. It does cover some limited convalescent skilled nursing care and some limited home health care under restrictive, short-term conditions (see the previous chapter). One hundred days is considered the limit for this social insurance program.

The Long Term Care Insurance industry breaks down the level of care into three distinct categories. So in fact, does Medicare.

It covers only skilled nursing care. This leaves those in need of coverage for intermediate or custodial care at risk to pay out-of-pocket. This is also the most financially draining aspect of recovery for the family members, many of whom must take time off from work to take care of the recuperative patient who may not be able to complete many daily activities or ADLs.

Although there is no limit to the amount of one hundred day stays you may have at a skilled nursing facility, you must meet the criteria set forth by the Health Care and Financial Administration or HCFA, now known by its fuzzier name, The Centers for Medicare and Medicaid Services or CMS. In the fine print, you will find the exclusion of Alzheimer's or Parkinson's and the fact that Medicare, HMO's, Major Medical and Medigap insurance policies do not pay for long-term nursing home care stays.

Generally, these LTC policies last for three years. Keep in mind the “look back” period and see if your policy offering jived with the new rules of five years.