Millions of baby boomers are about to become a part of the Medicare system. Many new folks as well as folks already in the system remain uninformed about the things Medicare actually does NOT cover. Of course, most people know that Medicare does not cover vision, hearing aids or dental care. Because of the limited coverage for skilled care, however, many people do not realize that Medicare does not cover “extended” care, also known as Long Term Care. Others make the mistake of assuming that Long Term Care insurance costs too much.
When you are ready to purchase a long term care insurance policy, you will want to speak to a licensed agent, perhaps two or three of them. Do some homework on the company first, remembering that prices are probably the least important factor. You can information on almost any company on the internet. The ratings tell you how quickly a company pays its claims and how stable the company is financially. There are several rating agencies, but Weiss is by far the best as they do not accept payment from the companies in return for good ratings. They are paid by the investors, so an A or A+ from Weiss actually carries a lot more weight than an A from A.B. Best or Moody’s, for instance. You can also Google a company and find out what the complaints are, if any. Having some information in advance will help you present questions to your agent.
An agent will help you determine if you are eligible for, and if you need LTCi. If you are very low income, or if you have limited assets, you probably don’t need it as you would be eligible to apply for Medicaid to pay the bill. Medicaid does not pay for home care in most states, so if you want protection but know that you will want to remain at home, you might consider a less expensive homecare only plan. If you qualify financially, you then need to determine if you qualify physically. If you are already on disability, you won’t qualify. Also, certain chronic ailments will prevent you from qualifying, although each company has its own underwriting rules and some are stricter than others.
Once preliminary eligibility has been determined, the agent should carefully go over the things that are covered by his or her company. The company brochure will provide details, and is worth reading completely, if not with the agent, then after he leaves. With complete LTCi, homecare, assisted living, and nursing home will all be included, but other features are included with some companies and added as riders with others. Also, if you live in a partnership state, it’s important to know what the requirements are so you get the partnership advantages.
(The partnership program was approved about 15 years ago by the federal government. Under a partnership LTCi policy, your assets are protected to the level that your insurance will pay. Thus you can protect your home and retirement but still be eligible to apply for Medicaid if you should outlive your policy.)
Three important aspects you need to understand about LTCi are the premium, the benefit and its duration, and the elimination period. Regarding the premium, ask for a chart showing the company’s historic rate increases. Some companies automatically raise the rates every few years while others make every attempt to keep rates level for existing clients.
The benefit is simply the amount that will be paid if you need care. The two significant numbers are the monthly benefit and the maximum benefit. The monthly benefit is the amount that can be paid monthly for a specific number of years—which you choose. More years of coverage will mean a higher premium. The maximum benefit is simply the total “pool” of money that you have purchased. Thus if you don’t use the full month’s allowance, your pool will last longer and the benefit period will be extended.
The elimination period is extremely important, but because people do not need their policy for many years into the future, the elimination period is often overlooked or forgotten about. It is simply a “time” deductible that can range from 0 to 180 days. During that period, the insurance will not pay, so the longer the elimination period, the lower your premium. A lower premium may be attractive, but depending on how it is worded in the policy, it can seem interminable at the time the policy is needed. The companies require that needed care be paid for in another way—either by you and your family, or in some cases, by Medicare before they will pay. Some, in the case of home care, give you a full week’s credit against the elimination if you receive only 3 days of care in that week. Others operate strictly by the calendar, so 90 days is 90 days. Most companies do not begin counting off the elimination period until payment by someone else has been started. However, at least one company counts the elimination period from the day the doctor says you need care. In that case, a spouse or other family member could provide the care during the elimination period.
When buying LTCi, take your time and read everything the agent gives you. A program this important is worthy of two visits by your agent to answer questions and set up a program that fits your needs. However, don’t fall into the “procrastination” trap where you ask to “think about it,” but then pile it on your junk mail table where it remains unheeded for another year or two. At any point, the doctor could add something to your record—and you may not even know about it—that would disqualify you. Make your second appointment no more than a week or two after your first one and get this important issue resolved.