LONG TERM CARE INSURANCE

Long-term care insurance, something that wasn’t so common back when my
dad could have bought it, seems like one solution. These policies are
offered as a way to pay for a nursing home, assisted living, home
health care and other costs associated with growing older. But where
to begin? The policies are expensive, complicated and have a severely
flawed history. And let’s face it, it’s hard to shop for something I
hope I won’t need for another 30 or 40 years.

So I turned to experts, to answer some of the most pressing long-term
care insurance questions.

Q. Why should I buy this insurance? Don’t Medicare and Medicaid cover
long-term care?

A. That’s what many people think, said Russell Fox, a certified
financial planner and managing director of Apex Wealth Management, a
financial planning firm in Oxnard, Calif. But the reality is, Medicare
pays for only short-term medical care at home or for a limited stay in
a nursing home after a hospitalization.

Medicaid pays for long-term care — but not until people have already
spent the majority of their financial assets.

“You can have a situation where a married couple spends down all their
assets for the husband, which leaves the wife in a vulnerable
financial situation should she outlive her spouse,” Mr. Fox explained.

A good long-term care insurance can help protect assets, as well as
pay for expenses.

Q. I’m only in my 50s. I don’t need to worry about this insurance yet, right?

A. Actually that is a good age to start thinking about a policy,
advises Marilee Kern Driscoll, author of a newsletter on long-term
care insurance. LTC123.com If you wait until you are in your 60s and
health problems have set in, you may not qualify for any policy. And
premiums are slightly lower when you buy younger.

Typically people in their early 50s will pay $2,000 a year, depending
on the length and type of coverage, compared with an average of $2,250
a year for someone age 60 to 64. True, you’ll be making those payments
for a longer number of years. And premiums may go up as much as 10
percent a decade over the life of the policy, Ms. Driscoll notes.

Q. What should I look for in a policy?

A. Under almost all policies, coverage will kick in if you can’t
perform certain activities of daily living — like walking, eating or
bathing — because of a physical or cognitive impairment.

Verify that the coverage will start if you can’t perform any one of
the above activities — not necessarily all three. For example, someone
may well be able to eat after they are too frail to walk or bath
unassisted.

Once a policyholder meets the definition of a triggering event, the
kind of care that is covered varies widely. Make sure yours provides
for the following:

¶All types of care. That includes nursing homes, assisted living
centers and home health care attendants. Most policies do provide for
all three types of care. But it’s important to make sure your policy
does.

Claims have also been denied because insurers say a particular nursing
home or other long-term care facility doesn’t qualify for coverage,
leaving policyholders responsible for huge bills after they’ve already
become a resident. Be sure to check that the policy you are
considering doesn’t include overly narrow restrictions.

¶All types of caretakers. Some policies cover only “skilled” home
health care workers, like registered nurses. But you want to be able
to pay for home health care attendants and the person who comes in to
make meals and do light cleaning, too. Look for a policy that pays for
“skilled, intermediate and custodial care,” said Mr. Fox.

¶A wide range of illnesses and injuries. Not too long ago, policies
routinely excluded coverage for Alzheimer’s and dementia, two of what
are now the most common reasons for seeking long-term care. In
addition, several insurers came under fire a couple of years ago for
denying claims for care that were clearly covered in their policies.

Increasing state regulation and rising demand from boomers has forced
the $8 billion industry to clean up some since then, “but there are
still some policies out there that exclude far more than they cover,”
Mr. Fox said. Your best defense is this: Read your policy carefully
for any health-related exclusions or other reasons to deny coverage.

¶Inflation protection. You want coverage, at the very least, that will
increase the daily benefit amount enough to keep pace with inflation.
Without this protection, 20 years out your benefits may not cover your
expenses, and you’ll have to make up the difference.

Q. This insurance is expensive. What can I do to get more for my money?

A. Unfortunately, long-term care insurance is more costly than ever.
That’s because insurers in past years did a poor job of anticipating
how much they would be paying in nursing home and other long-term care
costs. They also overestimated the number of people who would let
their insurance lapse.

Now, the insurers are scrambling to make up for these actuarial
shortcomings by charging higher rates for new policyholders. And as it
turns out, insurers can raise rates on existing policyholders as long
as state regulators approve the increase. (The states have often done
this in the past, although some are now showing signs of resistance.)

To lessen the sting, try the following:

¶Avoid lifetime benefits. Opt instead for a policy that covers a set
amount of time, like four or five years, suggests Ms. Driscoll. The
average nursing home stay is two to three years, she points out, and
only 12 percent of patients live longer than five years once they
enter.

¶Look for a policy that pays a monthly sum. Most policies specify a
daily benefit — anywhere from $50 to $500. Recently insurers have
begun using a monthly amount so you have the flexibility to receive
more care on some days, when no family member is available, for
example, and less care on others.

¶Consider a front-loaded policy. With these, you pay the entire cost
of the premiums before you retire. You’ll pay more upfront, but
payments will end just as your income decreases.

¶Look into cash benefit policies. Once benefit payments kick in, these
policies will send you a regular cash payment, say $200 a week.
Instead of filing claims for specific care (with specific requirements
to qualify for coverage) you are free to use the payout however you
see fit.

You may still pay the nursing home or home health care attendant with
the money when the need arises. But you can also use the cash to pay a
family member for care, pay travel expenses for a visiting relative
and take care of other expenses that would not be reimbursed under a
traditional policy. You’ll pay more for these policies, but some
families find the extra flexibility is worth it.

¶Find a good agent. You’ll need someone who is experienced in
long-term care, Ms. Driscoll says. This might be the same insurance
agent who sold you your life and auto policy, or you may need to find
a specialist. Either way, make sure the person fully understands your
needs and is active enough to be selling at least a dozen policies a
year.



--
Howard McGowan