Questions: 4-10: Retirement Planning and Long Term Care: Eighteen Questions

As we continue our discussion about LTC coverage and what it covers, comparisons become more difficult. The next six questions will help you compare the types of coverage available

Compare how long your policy will cover the following:

A stay in a nursing home
If you need care at home

4. To determine what you maximum lifetime benefit is, simply multiply your daily benefit times the number of days you are covered. For instance, in the chart below, a policy with a daily benefit of $100 payable for three years will pay out $109,500 in benefits ($100 x 3years=$109,500 – this lifetime benefit is not reflective of inflation increases). Once again, the length of time you choose for your policy and the waiting period have an effect on your maximum lifetime benefit.

What does your policy offer?
For nursing home care $ _________
For home health care $ _________

5. Does the policy have a maximum length of coverage for each period
of confinement?
For nursing home care
For home health care



6. Like many policies that have a wide swath of unknown territory to deal with, such as LTC policies, there is generally a waiting period before the policy kicks in. Because Medicare covers the first one hundred days, many LTC policies do not begin before 90 days. You can request a shorter waiting period but the monthly premium is often prohibitively higher. Ask your agent how long you must wait before a preexisting condition is covered?

7. How long must I wait before benefits begin?
For nursing home care
For home health care

8. In almost all standard policies, Alzheimer's disease and other organic mental and nervous disorders are not covered. That’s not to say you cannot get these coverages added. One of the most difficult aspects of comparing any type of insurance is gathering all of the information about what you require and allowing each policy to stand side-by-side.

Some policies have ingredients that met most but not all of your requirements while some are basic shells that can be added to based on your needs. The later types of policy type additions are called riders. Riders, in insurance parlance, add benefits at an additional cost. Among the most important aspect in an LTC policy is coverage for home health care.

When comparing policies, this should be a standard item unless of course, you live in an area where home health care may not be readily available. In such instances, a home health care option would be the standard by which to judge policies. It can be added later if your circumstances change.

Some policies will offer non-forfeiture benefits – decline them. This type of benefit is costly and unnecessary. It is offered as a rider and will be sold as something that should have been included in the policy. The non-forfeiture rider usually pays some or all of your benefits even if you no longer make premium payments. A certain amount of time must have elapsed first.

Another type of non-forfeiture rider is disguised as a return of premium. This allows you to cancel your policy and receive some of your premium payments back. Disregard such a rider or offers to add it after you have had the policy for a number of years. Often this seems enticing when estate planning is taken into consideration. You may reason that your heirs would get a return on your policy if you never used it or canceled it after a certain amount of time. The unfortunate aspect of this rider is the temptation to cancel the policy at exactly the time in your life when you are most likely to use it.




The last and probably the best rider accounts for inflation. Because the value of today’s dollars will be vastly different than dollars calculated in the future, getting some sort of inflation protection is always a good option. Try to choose an option where this protection is imbedded in the policy. If not, add it.

The question here should be, does your policy cover things like Alzheimer’s or other organic mental diseases?
* Yes
* No

9. Does your policy include inflation protection?
* Yes
* No

10. When you do your side-by-side comparison, have you included all of the possible riders and their cost to the policy?
* Yes
* No

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 BlueCollarDollar.com

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.