Long-Term Care Calculator

The AFSA Newsletter and AFSA News have been carrying articles on the new federal long term care plan. In brief, the several coverage packages available include these components (for premiums by age, use the LTC premium calculator):

  • A maximum benefit ($400-$2,000 per week)
  • Length of policy by number of years (3 or 5 may be offered) or lifetime.
  • Waiting period (90 days is standard).
  • Inflation protection.

LTC Example: If you choose a $700 weekly benefit and a 3-year policy, you would have a pool of $109,200 ($700 x 52 x 3) available as soon as you become eligible for benefits. If you have a nursing home cost of $800 per week, the insurance in this example would pay $700 per week and last 3 years. If the cost were $525 a week, your policy would last 4 years.

There will be two benefit levels, up to 100% of the selected maximum for institutional care and 75% for home care. Benefits begin when one is unable to perform 2 of 6 activities of daily living (bathing, dressing, eating, toileting, transferring from bed to chair, and controlling bowel or bladder) and a health care professional certifies that the condition is expected to last at least 90 days; or when one has a severe cognitive impairment (Alzheimer's).

Should you apply? LTC insurance is evolving. Only a few million Americans have policies, so returns are not yet in on its value. Most experts agree that increased life expectancy means that more people, up to one out of every two, will eventually have conditions requiring LTC and that LTC costs will continue to climb. There is less agreement on whether LTC insurance makes sense in all cases. For some, the care may be too brief or the total benefits too few to recoup premiums paid over many years. Some experts think that people with few assets might be better off spending them down and qualifying for Medicaid when they need LTC instead of spending a lot on LTC insurance which they might never use.

Proponents of coverage cite the odds that at least some care will be needed. They note that, like most insurance, LTC is protection against unexpected misfortune, e.g. the insurance would cover custodial care if a serious injury affected ability to perform activities of daily living. They also caution that waiting too long, in order to save total premium costs even though starting at a higher level, may increase the chances of becoming uninsurable.

Here is one approach, summarizing expert advice, to a consideration of long term care (LTC) insurance:

  • Weigh potential LTC needs. The federal plan's Web site (www.ltcfeds.com) says that 60 percent of Americans reaching 65 will need some LTC. An individual's own health history may affect those odds. Some conditions require LTC briefly (e.g., final stage of a terminal illness), some for years (e.g. Alzheimer's). Regional costs vary: www.ltcfeds.com has information on costs for different areas of the U.S.
  • Inventory available resources. One's own assets (savings, loans, relatives, etc.) might suffice for limited LTC or until LTC insurance kicks in. With no, or limited, insurance one (drastic) option is to spend down or transfer assets and qualify for Medicaid. Other coverage is restricted. Medicare, unlike Medicaid, does not pay for LTC but can cover limited home health care in connection with skilled nursing care for up to 100 days, with a large patient copay. Some Federal Employee Health Benefit (FEHB) plans offer benefits for limited stays in skilled nursing care facilities but not for LTC. The only exception: If a patient is certified as having a terminal illness and a life expectancy of six months or less, Medicare and some FEHB plans can pay for hospice care, at home or in an institution. With a terminal condition, it is also possible to opt for a living benefit or a viatical settlement from one's federal life insurance (FEGLI) and some private policies, making cash available to the insured now rather than to the beneficiary later.
  • Compare LTC coverage and premiums. www.ltcfeds.com has a list of premiums and coverages of each of its four pre-packaged plans, and custom-tailored plans, for each year of birth. These can be used for comparing plans offered by others.
  • Scrutinize plan specifics. Use checklists to help study details such as benefit triggers, definitions of care, benefits for care at home vs. in a facility, etc. Ask if premiums have inflation factors, the plan can be downsized or premiums waived during LTC or returned if the plan is not used within a certain period.
  • Consider possible future changes. Because LTC insurance is a new field, carriers may have to adjust as they gain experience. Premiums not guaranteed could rise, companies not well established could founder, and qualitative requirements for approval of benefits by coordinators (or gatekeepers) could be tightened.