Unit 21: Long-Term Care (LTC)

Question 1

What is Medicare’s LTC coverage?

Answer 1

Skilled care in nursing home
•requires prior 3-day hospital stay
•Medicare pays 100% for first 20 days
•beneficiary has a daily co-pay days 21-100
•no Medicare coverage after 100 days

Question 2

What is Medicaid’s LTC coverage?

Answer 2

•only for the poor
•covers the type of LTC most people need
•many people end up on Medicaid by spending themselves into poverty paying for their own LTC
•once on Medicaid, all income except for a small monthly allowance must go to help pay for their care
•after a Medicaid beneficiary dies, Medicaid has the right to recover the amount of benefits it paid on that person’s behalf form assets in the deceased beneficiary’s estate

Question 3

What is LTC insurance coverage?

Answer 3

•bought from an insurance company
•insured chooses type and amounts of coverage
•protects assets upon death

Question 4

What are the 3 levels of LTC?

Answer 4

1. Skilled nursing care (24/7)-provided round-the-clock & can be performed only by licensed nurses under a doctor’s orders
2. Intermediate care (7 only)-intermittent care performed by licensed nurses under a doctor’s orders
3. Custodial care-help performing ADLs & can be performed by someone without medical training

Question 5

What are the 4 types of care defined in LTC insurance policies?

Answer 5

1. Home health care-skilled medical & therapy services performed in the individual’s home by visiting home health aides
2. Adult day care-provides company, supervision, along with social & recreational support for people whose grown children care for them at home but need to work during the day
3. Respite care-professionals care for someone temporarily in order to give a few days’ rest to the family member or friend who usually provides the care
4. Assisted living facilities-for people who need assistance from time to time, but can live more independently than people who need custodial care
   -provide housing, meals, & help with personal care; some offer more extensive services such as social programs & medical care

Question 6

What are the benefit periods?

Answer 6

•LTC policies provide coverage for a minimum of 12 months
•usually can choose benefit periods from 2-5 years
•longer benefit period —> higher premium
•some policies offer lifetime periods with a lifetime maximum benefit amount
•benefit period ends when the limit has been reached

Question 7

Benefit amount

Answer 7

•indemnity-stated dollar amount per day
•reimbursement-lesser of actual expense or daily benefit
•home care-if covered usually 50% of facility amount
•policy may have a lifetime maximum
•higher the benefit—>higher the premium

•usually expressed as dollars per day
•most applicants choose a benefit amount that is close to the average daily cost of facility-based in their area
•for indemnity policies, the daily benefit amount is the most the policy will pay regardless of the actual cost of care
•LTC coverage can also be issued on a reimbursement basis, which pays the lesser of the cost of care or the daily benefit
•if the policy is comprehensive (provides for both facility-based & home-based care)-the home care amount is usually stated as 50% of the daily facility-based care benefit

Question 8

Elimination period

Answer 8

•insured qualifies for benefits
•benefits not paid until end of period
•time deductible
•longer elimination period—>lower premium

•insured must received care for a stated number of days before the policy begins to pay
•insureds may select a longer elimination period to make a policy more affordable
•longer elimination—>lower premium

Question 9

What are some optional benefits that can be added to LTC insurance?

Answer 9

•guaranteed insurability
•nonforfeiture benefits
•inflation protection

Question 10

What is guaranteed insurability?

Answer 10

•optional benefit
•allows the insured to buy additional coverage at specified future times using their attained age & without providing evidence of insurability

Question 11

What are nonforfeiture benefits?

Answer 11

•optional benefit
•provides for a growing cash value or for a guaranteed return of some % of the premium, minus any paid benefits if the policy is lapsed or surrendered

Question 12

What is inflation protection?

Answer 12

•optional benefit
•provides for automatic annual benefit increases based on a Cost of Living Adjustment (COLA)

Question 13

What is the period called during when an insured must receive care for a stated number of days before a LTC policy can pay benefits?

Answer 13

Elimination period

Question 14

What is an elimination period?

Answer 14

When an insured must receive care for a stated number of days before a LTC policy can pay benefits

Question 15

What are qualified LTC insurance plans?

Answer 15

•must be unable to perform 2 out of 6 ADLs
•must be certified by a health professional as having a chronic illness that will last for a minimum of 90 days
•must have a sever cognitive impairment requiring substantial supervision
•guaranteed renewability
•coverage of only LTC expenses
•no benefits for expenses reimbursable under Medicare
•no cash surrender value
•any dividends or refunds of premiums must be used to offset future premiums or increase benefits
•conforms to specified consumer protection marketing & benefit standards (these standards actually apply to all LTC insurance policies)

•benefits received income-tax free up to a specified amount that is indexed for inflation (for indemnity policies) or the actual amount of expenses incurred (for reimbursement policies)
•premiums paid by self-employed people are tax-deductible up to an age-based limit that is indexed for inflation
•employer who pay LTC insurance premiums on behalf of employees may deduct them as a business expense
•employer-paid premiums are not taxable income to the employees

Question 16

What are state LTC partnership programs?

Answer 16

•many middle-class families have to much money to qualify for Medicaid but can’t afford to self-insure the potential catastrophic costs of LTC
•created to encourage more people to purchase LTC insurance

A joint effort of:
•insurance companies (develop, market, & issue the policies & pay their benefits)
•the state’s insurance department (regulates the companies & producers who sell the policies)
•the state’s Medicaid agency (provides the policy with unique asset protection features)

Question 17

How do state LTC partnership programs work?

Answer 17

•individual purchases a LTCI partnership policy meeting the requirements for that state
•if benefits are needed the LTCI policy will pay & the state Medicaid program does not have to cover the cost
•of the policy benefits are exhausted due to a long time need for care & the insured needs to apply to Medicaid, they not obligated to spend down all their assets to qualify
•under the dollar-for-dollar approach-this person may keep assets equal in amount of the benefits received under the partnership policy & the assets are exempt from Medicaid estate recovery & preserved for their heirs

Question 18

What is the main issue for LTC underwriting?

Answer 18

Whether an individual can perform the activities of daily living (ADLs) & to what degree of proficiency

Question 19

What are the LTC marketing standards?

Answer 19

•provide applicants with a shopper’s guide & outline of coverage
•consider whether the purchase is suitable for the applicant’s needs, objectives, & circumstances
•determine whether the sale will involve replacement, & if so, have the applicant sign a “notice regarding replacement”
•provide a 30-day free-look period
•assure that advertising is not misleading
•describe the policy’s renewal conditions on its first page (guaranteed renewable)

Question 20

What are the LTC minimum benefit standards?

Answer 20

•policy must be at least guaranteed renewable
•sale must include an offer of inflation protection
•pre-existing condition may not be defined more restrictively than a condition for which medical advice or treatment was sought within 6 months before the policy’s effective date
•LTC policies cannot condition payment of benefit on a prior hospital stay
•group LTC insurance policies must give insureds the opportunities to continue benefits if membership in the group ceases or to covert to individual coverage of coverage terminates
•insureds must be protected against unintentional lapse by giving the insurer the name of another individual to whom a premium due notice will be sent if the policy enters its grace period

Question 21

What may the elimination period be thought of as?

Answer 21

A time deductible

Question 22

How are benefit amounts in a LTC policy usually expressed?

Answer 22

Dollars per day

Question 23

Nonqualified policies

Answer 23

•do not receive favorable fax treatment
•benefits are taxed as income
•premiums are not deductible
•do NOT have to meet HIPPA’s requirements & may offer more attractive benefits than qualified policies