Chapter 6 Long Term Care Insurance
What are activities of daily livng (ADL)
Physical functions an independent person performs each day, including bathing, dressing, eating, transferring, toilet thing, and maintaining continence.
True or False. LTC insurance is payable only for either a time certain or an amount certain
True
True or False. Longevity annuities can be used to supplement income needs or to provide for long term care
True
What are the two way LTC will provide coverage?
1. Benefits are provided for a fixed period of time Time can be 1 to 10 years (lifetime coverage is increasingly rare) Average stay in a facility is 18 - 36 months Policies with only 3 year coverage: 8% exhausted the benefit 2. Fixed dollar amount is available for the payment of long-term care benefits. Careful analysis of expected costs and inflation is needed to determine an adequate dollar amount of coverage.
What is hospice care?
A type of care given to patients with PROGNOSIS OF LESSS THAN 6 MONTHS to live that focuses on alleviating physical symptoms (NOT CURING) & addressing psychological, social, and spiritual concerns (of the patient's family as well).
What is adult day-care?
- A day treatment program aimed at adults and elders with chronic physical and/or psychosocial impairments, and/or individuals who are frail but semi-independent. - Treatment occurs in a group setting. - Individual schedules vary, as flexibility allows time to address daily caregiver needs and time for rest. - Schedules of individual persons can very from one afternoon per week to 5 full days. LOS: indefinite. Services are provided to people who might otherwise be institutionalized or are frail and need ongoing support (cooked meals, socialization opportunities).
What condition must be met for Medicare to pay for a short stay in a skilled nursing facility for hospice care or for home health care?
- Has had a recent prior hospital stay of at least three days. -Is admitted to a Medicare-certified nursing facility within 30 days of the prior hospital stay. - Needs skilled care, such as skilled nursing services, physical therapy, as a result of some medical condition that caused the hospital stay. If all of these conditions are met medicare will pay for costs up to 100 days. But likely won't cover all of extended care needs.
What are the alternatives to LTC insurance?
- Life insurance with LTC rider - Annuity with LTC rider - Longevity annuity (deferred income annuity) - Viatical or life settlement - Reverse mortgage
What is Medicaid?
A health insurance assistance program for some low income people (especially children and pregnant women) sponsored by federal and state governments
What are some variables that affect the total premium of LTC?
Age and gender, benefits (Amount & Duration), health Characteristics, Geographical location, elimination periods, inflation protection, additional riders.
What are some of the maximum LTC premium tax deductions for 2020?
Age of Insured Maximum Deduction 2020 ≤ 40 $420 41 - 50 $790 51 - 60 $1,580 61 - 70 $4,220 > 70 $5,270
What is an assisted living facility?
An institution which provides the elderly with supervision or assistance with activities of daily living, coordination of services with outside healthcare providers, and overall monitoring of health, safety, and well-being
Annual nursing home costs: $60,000-$120,000?
Annual nursing home costs: $60,000-$120,000.
What are two benefits that are triggered by ADL's?
Chronically Ill - Unable to perform 2 of 6 ADL's for at least 90 days. Substantial cognitive impairment - Behavior threatens own/others health and safety.
True or False. Breathing without a respirator is an ADL
False.
True or False. Paying for LTC services out of packet is not a wise choice for anyone.
False. Depending on the amount of wealth you personally have, it may make sense to self insure rather than buying long term care insruance.
True or False. Activities of daily living include eating, bathing, dressing, transferring, toileting, continence, and exercising.
False. Exercise is not an ADL
True or False. Chronic illness is defined as having a physical or cognitive impairment that prevents the insured individual from performing at least five of the six activities of daily living for at least a 90 day period.
False. It is at least two, not five of the six activities of daily living.
True or False. Long term care insurance does not cover hospice care.
False. LTC coverage includes: nursing homes, homne health, and hospice care.
True or False. Medicaid pays for approximately 80% of the nation's nursing home expenditures.
False. Medicaid only pays for about a third of the nations nursing home expenditures.
True or False. Because everyone qualifies for Medicaid, long term care insurance is only for those who want more choices in long term care than Medicaid offers.
False. One must qualify financially for Medicaid.
True or False. One way to qualify as chronically ill is the inability to perform one of the six activities of daily living
False. One way to qualify as being chronically ill is the inability to perform 2/6 of the ADLs (activities of daily living).
True or False. the most common method of paying benefits is referred to as the indemnity method.
False. The most common way is the incurred cost method (reimbursement)
True or False. The proceeds from viatical settlements are taxable to the extent the proceeds exceed the basis.
False. They are not subject to income tax.
True or False. Men are more likely to need long term care insurance than women
False. Woman tend to live longer on average so they are more likely to need LTC
What are some features/riders that must be offered in a LTC policy?
Inflation protection: 5% annual compound, 3% annual compound, or 5% annual level (not compounded) Non-forfeiture Benefit: Will be the greater of premiums paid or 30x daily skilled nursing home benefit at the time the policy lapsed. Contingent: if premiums rise to a stated level Choose reduced benefit or Paid up policy with shortened coverage period
What are some tax benefits of LTC contracts?
LTC contracts are considered tax qualified contracts, which means they are treated as health insurance and able to be an above the line income tax deductions.
What are some general requirements for Medicaid?
Level of benefits vary across states Limited income & assets to qualify (5 year look back) General requirements 65 or older Permanent disability per Social Security Blind Child, pregnant or a caretaker of child
What is long term Care insurance?
Long-term care insurance provides medical and custodial care for individuals whose health has deteriorated to the point where they cannot perform some basic functions of daily living without assistance.
What is a home health care benefit?
Most LTC policies will pay benefits for the insured to live in their home and receive care. This includes all sorts of medical services and equipment.
What are some services excluded by Long term care?
Pre-existing coverage: A LTC policy may delay coverage for up to 6 months after the policy's effective date for coverage. mental & Nervous disorders: The policy must cover serious biological illnesses and other diseases such as Alzheimer's, schizophrenia, or major depression. Care provided by family members: Paying family members through the policy to watch and take care of the insured. Some states allow exclusion of: Alcohol and drug addition Suicide (attempted)
What is custodial care?
Refers to non skilled personal care and help with ADLs. This could be done by an adult child or friend.
What are some common features of long term care insurance policies?
Renewability - Guaranteed renewability Non forfeitures Benefits - Return of premium or shortened Benefit Period. Waiver of premium while receiving benefits.
What are the seven type of coverage provided under a LTC policy?
Skilled Nursing: Traditional nursing home, physician ordered Intermediate Nursing: Occasional nursing care, physician ordered Custodial Care: Assistance with eating, dressing, bathing, etc (primary issue for LTC because Medicare doesn't cover) Home Health Care: In-home nursing or necessary assistance Assisted Living: Apartment style living with healthcare services Adult Day Care: Daily assistance while spouse or family member works Hospice Care: For terminally ill, at home, hospital or nursing facility
What is a skilled care and intermediate care nursing facility?
This provides the highest level of service combining both daily medical and custodial care. Typically provides custodial care along with intermittent, as opposed to daily medical care.
What terms must be met in order for a LTC contract to be considered tax qualified?
To be considered a qualified policy: there is no surrender value, it is limited to qualified long-term care services, dividends are used to reduce future premiums or increase benefits, the policy meets consumer protection laws, it does not pay for expenses covered under Medicare.
How does long-term care differ from traditional medical care?
Traditional care attempts to treat or cure illnesses, while long-term care attempts to maintain the individuals life style
True or False. A 5% equal and 3% compound inflation adjustment are relatively similar
True
True or False. An alternative to LTC insurance is a reverse mortgage
True
True or False. An alternative to LTC is a viatical settlement contract
True
True or False. Having an inflation adjustment as part of a LTC policy is especially important if the policy is purchased at a young age
True
True or False. In order to activate LTC insurance an insured generally must not be able to perform 2/6 ADLs
True.
True or False. More than 40 million people in the US are over the age of 65
True.
True or False. important factors in deterring a need for long term care insurance include the health of the person, the life expectancy and the person's financial situation.
True.
True or False. transferring from a bed to a chair is an ADL
True.
What is Medicare?
federal insurance program for elderly persons or persons with permanent disabilities
True or False. If Bob had a home worth $300k, it is possible he could qualify for Medicaid.
true. Your primary residence will not count against you for Medicaid purposes if the FMV is under $517k.