LTC Exam

What federal law defined tax-qualified long-term care insurance policies

Health Insurance Portability and Accountability Act of 1996 That's correct! HIPAA's creation of the tax-qualified long-term care insurance (QLTCI) policy laid the foundation for partnership-qualified policies today.

Medicare covers the cost of long-term custodial care in the home when it is delivered by a Medicare-certified agency.

. False That's correct! Medicare does not cover the cost of long-term custodial care, regardless of where it is delivered or who delivers the care.

Which of the following only covers inpatient hospital care and hospice?

. Medicare Part A That's correct! Part A helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care, and hospice care.

Gerald purchased a partnership-qualified LTCI policy that provides coverage for both nursing facility care and home and community-based care. The daily nursing facility care benefit is $150. The total benefit available for home and community care under this policy must be at least what amount?

$27,375 That's correct! The total benefit under a qualified LTC partnership policy for home and community-based care must be equal to at least half of the benefit payable for skilled nursing facility care for one year. In this case, because the benefit for nursing facility care for one year would be $54,750 ($150 a day × 365 days), the home and community-based care benefit must be at least $27,375.

1. Under current Medicaid rules, what is the look-back period for the transfer of assets?

60 months That's correct! For purposes of determining Medicaid eligibility, the look-back period is 60 months. This period was extended from 36 months to 60 months under the Deficit Reduction Act of 2005.

Which of the following most precisely defines the fundamentals of self-care and the basic tasks of everyday life?

Activities of Daily Living

After being effectively frozen in place for a number of years, state LTC partnership programs were allowed to expand as a result of what legislation?

DRA 2005 That's correct! DRA 2005 lifted the estate recovery rules imposed by OBRA that had hindered the expansion of the partnership program for a dozen years.

Which of the following is a correct statement about Medicare Part D Prescription Drug coverage?

Enrollment in Part D is voluntary. That's correct! Medicare Part D provides coverage for prescription drugs, but it does not cover all prescription drug costs. The cost of a stand-alone Part D plan requires a premium payment. (Those who enroll in a Medicare Part C plan may have prescription drug coverage as part of the plan, and the plan's premium would likely include this coverage.) Enrollment in Part D is voluntary.

Long-term care insurance policies are easy to compare and contrast.

False That's correct! Although some standardization of policies has occurred, especially with respect to state LTC partnership policies, the ability of consumers to compare among LTCI policies is hindered by the complexity of the product.

Because taking a withdrawal from the cash value of a life insurance policy is always a taxable event, this technique should not be used to fund long-term care needs

False That's correct! As long as the insurance policy meets the definition of an insurance policy and not a MEC, policy withdrawals are not taxable unless and until the withdrawn amount exceeds premiums paid.

Group LTCI policies are contracts between the insurance company and each individual member of the group.

False That's correct! Group long-term care insurance is a contract between an insurer and a group sponsor, such as an employer on behalf of its employees. Members in a group plan do not receive insurance policies; they receive certificates of insurance as evidence of their coverage.

An insurance company can increase the premiums on its LTCI policies after policy inception if the insured's health declines.

False That's correct! However, while companies cannot increase premiums because of individual circumstances such as age or health, they can increase premiums for an entire class of insureds.

Misrepresenting a long-term care policy pertains only to statements the producer makes or literature he or she delivers

False That's correct! Misrepresentation can also occur by failing to disclose information necessary to prevent a reasonable expectation or belief from being misleading.

A disadvantage to using a conventional deferred annuity to fund late-life long-term care needs is that the contract must be annuitized and payments must be made over a stated number of years or for life.

False That's correct! a deferred annuity does not have to be annuitized. Owners can access all or a portion of the contract's funds through lump-sum or partial withdrawals. However, withdrawals do not receive the same tax-advantaged treatment that annuitization is given.

Medicaid is available to pay for LTC expenses for anyone without LTC insurance. I. assets II. income III. transfers of assets

I, II, and III That's correct! Primary factors that are used to determine Medicaid eligibility are exempt and nonexempt assets, level of income, and the proper or improper transfer of assets.

All of the following statements regarding minimum standards for partnership-qualified long-term care insurance policies are correct EXCEPT:

Inflation protection is optional for all applicants. That's correct! DRA requires inflation protection for all applicants under the age of 76.

Which of the following best describes the elimination period in an LTCI policy

It is a waiting period before benefits begin. That's correct! The elimination period begins when LTC services are first necessary and lasts for the time specified in the policy, such as 30, 60, 90, or 120 days. During this time, the policy will not pay benefits. Benefits begin once the elimination period has expired.

Who (or what) pays the largest share of total long-term care expenses in the U.S.?

Medicaid That's correct! Medicaid pays about half of the cost of long-term care in the U.S. Medicare accounts for 24 percent, consumers pay 20 percent, and private LTC insurance pays 7 percent.

Which of the following is a correct statement about Medicare

Medicare does not cover long-term care. That's correct! Medicare helps with the cost of health care, but it does not cover all medical expenses or the cost of long-term care.

All the following statements regarding the benefits of state LTC partnership programs are generally correct EXCEPT:

The federal Medicare program benefits by reducing demand for acute long-term care among seniors. That's correct! LTC partnership programs are concerned only with who bears the expense of LTC and can do nothing about the demand for acute long-term care among seniors, which continues to rise.

As required by DRA, all long-term care insurance policies used in any new state partnership programs must be tax qualified as defined by HIPAA.

True That's correct! DRA mandates that all policies issued under the new state partnership programs must be tax-qualified policies.

A guaranteed renewable LTCI policy provides that coverage must be continued as long as premiums are paid.

True That's correct! Guaranteed renewable means that the insured has the right to continue the policy as long as the premiums are paid on time. If premiums are not paid, the policy will lapse and is not renewable.

A burial plot is exempt when determining Medicaid eligibility

True That's correct! The burial plot exemption is available for the applicant and immediate family members.

In a reverse mortgage, a homeowner receives money from the lender.

True That's correct! The homeowner receives money from the lender based on the home's appraised value. Collateral has already been established by the equity in the home.

A health savings account (HSA) is used in conjunction with which of the following?

a high-deductible health insurance plan. That's correct! An HSA is used in conjunction with a high-deductible health insurance plan.

A hybrid annuity combines a fixed deferred annuity product with which of the following?

a long-term care rider That's correct! A hybrid annuity combines a tax-deferred fixed annuity with a long-term care rider.

A long-term care ombudsman represents people in a given geographical area who live in assisted living residences or skilled nursing facilities.

a. True That's correct! A long-term care ombudsman, as a local representative for those in assisted living facilities or SNFs, can be a valuable source of information about various local facilities for those seeking housing for the elderly.

Which level of care has as its chief characteristic assistance with ADLs?

a. custodial That's correct! Custodial care, the primary characteristic of which is to provide assistance with the activities of daily living, helps meet personal rather than medical needs.

Which of the following is not an example of home or community-based long-term care?

b. CCRCs That's correct! Continuing care retirement communities, or CCRCs, are large, campus-like facilities that house residents and provide a complete range of long-term care.

Long-term care occurs only in nursing facilities.

b. False That's correct! Long-term care can occur in a variety of places, including in an individual's home, at community sites and centers, and in care facilities.

With regard to Medicare and long-term care, which of the following statements is true?

c. Medicare covers care in a skilled nursing facility for a limited time, but only if the care follows an admitted hospital stay and is ordered by a physician. That's correct! Medicare covers care in a skilled nursing facility if it is preceded by a hospital stay of at least three days and if the care is ordered by a physician. This benefit extends for only 100 days.

On what basis are benefits payable under a long-term care insurance policy typically triggered?

c. the inability to perform defined ADLs That's correct! Benefits payable under a long-term care policy are typically based on (or "triggered" by) the inability to perform a certain number of activities of daily living (ADLs) as specified in the policy. Another common benefit trigger is cognitive impairment.

All of the following are services commonly offered by assisted living residences EXCEPT:

d. continuous post-operative monitoring That's correct! Assisted living residences generally provide most personal and health care services except for skilled nursing care, such as continuous post-operative monitoring, which can only be offered by a skilled nursing facility.

All of the following are examples of formal caregiving EXCEPT:

d. daily transportation to a senior center provided by a neighbor That's correct! Formal caregiving is paid or volunteer care provided through a service system. Informal care is delivered by family or friends.

All of the following may deduct the full cost of their qualified LTCI premiums, subject to the age-based limits, EXCEPT:

employees whose premiums are paid by their employers That's correct! Sole proprietors, partners, and LLC owners can deduct all of the premiums for their qualified LTCI policies, subject to the age-based limits. Employees who are insured under a group plan and whose premiums are paid by the employer cannot deduct the premiums; however, the premiums paid on their behalf are not included in their incomes.

All of the following are steps in the needs-based selling approach EXCEPT:

engaging in fair competition That's correct! The steps to the needs-based selling approach include fact finding (identifying information about the customer's long-term care needs, wants, wishes, and expectations); needs analysis (reviewing the data collected); product recommendation (offering the most appropriate product based on reasonable grounds); and customer understanding (ensuring the customer understands the features, provisions, and restrictions of the proposed coverage).

All of the following are sound reasons for purchasing life insurance EXCEPT:

funding anticipated LTC expenses That's correct! An LTCI policy is more appropriate for meeting long-term care expenses than purchasing a life insurance policy, which is better suited for providing financial security for surviving family members.

The federal government:

gives states flexibility in administering their Medicaid programs That's correct! States have flexibility to design and implement their own programs, but funding is not shared equally by the federal and state governments. Annually, a determination is made comparing states' average per capita income to the national average. States with higher per capita incomes receive less federal funding; states with lower per capita incomes receive more federal funding.

At a minimum, what must partnership-qualified long-term care insurance policies be?

guaranteed renewable That's correct! Regarding renewability, the minimum requirement is that partnership policies must be guaranteed renewable. Alternatively, they may be issued as noncancelable, which would prevent the insurer from raising premiums for any reason.

Marcus purchases a long-term care insurance policy at age 45. Which of the following will give him the most protection against the rising cost of long-term care?

inflation protection That's correct! Inflation protection increases the benefit amount over time to help keep pace with inflation and increased expenses.

In defining the terms and conditions for a qualified state long-term care insurance partnership program, DRA outlines basic requirements for partnership-qualified LTCI policies in all the following respects EXCEPT:

maximum allowable premiums That's correct! DRA mandates minimum policy provision standards, mandatory inflation protection, and producer training requirements, but not maximum allowed premiums.

How much of a community spouse's own income must be spent on care for an institutionalized spouse who is receiving Medicaid assistance?

none of it That's correct! None of the income that a community spouse receives in his or her name, such as wages or Social Security or a pension, must be diverted to the cost of care for the institutionalized spouse.

Under the NAIC Long-Term Care Model Act as well as many state insurance regulations, who is primarily responsible for instituting good suitability practices?

producers and insurance companies equally That's correct! The NAIC addresses suitability in Section 24 of its Long-Term Care Insurance Model Act and Regulation, where it places responsibility on both the producer and the insurer to ensure sales of LTCI adhere to suitability principles.

Which of the following sets forth the length of time an LTCI policy will pay benefits?

the benefit period That's correct! The benefit period is the length of time, usually measured in years, over which a policy will pay for LTC services.

As defined by the Deficit Reduction Act of 2005, an insured who participates in a new state partnership program may be eligible for an exemption to Medicaid's asset spend-down rule equal to what amount?

the total lifetime benefits payable through the LTC partnership policy That's correct! DRA 2005 defines a "qualified state LTC partnership" as ". . . an approved State plan amendment [to the state's Medicaid laws] . . . that provides for the disregard of any assets or resources in an amount equal to the insurance benefit payments that are made to or on behalf of an individual who is a beneficiary under a long-term care insurance policy. . .

What is the basic purpose of a suitability letter sent from an insurance company to a long-term care policy applicant?

to inform the applicant that the insurer is questioning the suitability of the applied-for policy, briefly explaining why, and asking the applicant to advise the insurer on whether it should proceed with the underwriting and issue process That's correct! If a review of the facts suggests that the policy being applied for is not suited to the applicant's needs or goals, the insurer should send a suitability letter to applicants explaining its findings and stating that it will suspend review until the applicants inform the insurer that they are sure they want the policy.

What is a primary goal of long-term care?

to maintain functionality

Which of the following refers to the sale of an in-force life insurance policy by a terminally ill insured to a third party for an amount less than the policy's death benefit?

viatical settlement That's correct! A viatical involves the sale of an existing insurance policy by a terminally ill insured to a third-party viatical settlement company. The amount paid for the policy is more than the cash surrender value but less than the policy's death benefit.