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Use Long-Term Care Insurance as Intended

Mary slammed the cordless phone onto the receiver.

Her husband, Tom, peered at her over the top of his newspaper, his eyebrows cocked in concern. “Now what was that about?” he asked.

“That was Beth Willis. She says we can’t use Dad’s long-term care insurance for his home health care because he doesn’t meet the criteria of the policy.”

Tom frowned. “Now that makes no sense. The whole reason he bought that policy was to ensure he could manage any healthcare costs not covered by Medicare or his supplemental insurance.”

Mary shook her head. “She says the policy only pays for assistance with something called activities of daily living. She calls them ADLs. According to Beth, unless he needs help with two ADLs, the insurance doesn’t kick in. She gave me the list. He doesn’t qualify.”

“Oh, for God’s sake, the man has dementia. He should already be supervised around the clock. He’s not going to get better, but worse. What are these ADLs, anyway?”

Mary looked at the pad she had taken notes on. “She said things like bathing and cooking.”

Tom set down his newspaper. “Mary, he has dementia. It’s not safe for him to be living alone. We may not know his specific needs, but I’m guessing he’s not entirely safe when he showers without assistance, cooks dinner, or anything else. He already has balance issues and gets easily confused. What if he falls or wanders away? Call the insurer and ask about coverage for people diagnosed with dementia. I have to believe that kind of care gets priority.”

Mary scrunched her nose. “I don’t know. This long-term care insurance sounds like more trouble than it’s worth. Maybe we should just use Dad’s retirement savings to pay for his care and hope that gets him through.”

Tom rolled his eyes. “I think Dad purchased that policy so he wouldn’t have to use up his retirement funds or sell his home. It’s silly not to use it as intended. Your sisters are always talking about their inheritance. Believe me, if you use it up paying for care that should have been covered by that policy, there will be hell to pay.”

“I suppose you’re right,” Mary said. “I’ll call Beth back and ask what rules apply to dementia. It makes sense for that to be included in the coverage.”

Almost half of those who are 65 today will eventually require long-term care, according to a 2016 joint study by the Urban Institute and the U.S. Department of Health and Human Services. Most will utilize those services for less than two years, but about 14 percent will require long-term care for more than five years.

Unfortunately, most health insurance policies don’t cover long-term care and neither does Medicare. Medicare pays only for short nursing home stays or home care for a limited period of time if skilled nursing care or rehabilitation is required. That’s why, when purchased, it is important to use long-term care insurance as intended.

Generally, long-term care insurance covers services not paid for by Medicare, traditional health insurance, or supplemental insurance policies. While not all policies are the same, most cover activities of daily living, as well as costs associated with chronic medical conditions, disabilities, cognitive impairments, or neurological disorders, such as dementia or Alzheimer’s disease. A policy may pay for care in your home, a nursing home, assisted living facility, or at adult day care.

Activities of daily living include:

  • Bathing
  • Dressing
  • Eating
  • Transferring (getting in and out of a bed or chair)
  • Toileting
  • Incontinence (care for)

Claims made under long-term care policies require a review of medical records submitted by a doctor. Some companies will also send a nurse to do an evaluation. Most companies also require approval of a “plan of care.” Payment is made to facilities or organizations providing the long-term care, rather than the individual receiving it.

Without long-term care insurance, you will be responsible for all expenses related to long-term care. Assistance may be available through Medicaid (Medi-Cal) for low-income individuals, but only under certain circumstances and after your savings have been exhausted. Some assistance may also be available through state and local programs. However, individuals tend to buy long-term care to protect savings and to access a better quality of care. Not all facilities or homecare agencies accept Medi-Cal.

Unfortunately, long-term care insurance can be expensive. Your premium depends on your age and health, gender, marital status, amount of coverage, and the company selling the policy. While it is advantageous to purchase long-term care insurance when you are young and in good health, there is no guarantee that premiums will not escalate over time. Longer life spans have resulted in higher claim costs and some states have granted insurers permission to raise premiums so that they can continue to pay claims, rather than go out of business

Policies typically cap the amount paid out per day and during an insured’s lifetime. In addition, most policies contain an elimination period—a specified amount of time (usually 30 to 90 days) an individual must pay for long-term care out-of-pocket before claims will be paid.

Under the new tax laws, tax qualified long-term care insurance premiums may be deducted as a medical expense. The amount that can be deducted increases with age. For more information, consult with your tax preparer.

Once purchased, long-term care insurance can provide an important financial security net for seniors. That’s why it’s important to use it when needed and as intended.

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