The 3 Biggest Misconceptions of Long-Term Care
We hear a lot of misconceptions about what actually is “Long-Term Care”. If you are reading this article you are most likely at the beginning of trying to figure out if you really need to be concerned about Long-Term Care. Or maybe you are curious if Long-Term Care Insurance will cover your luxury retirement center. We think the best way to understand Long-Term Care is to understand what it is, but maybe even more so, what it is not.
First, let’s start off by discussing the term “Long-Term Care”. In general, when this term is used it is typically in reference to some type of insurance. Very rarely is long-term care used to only describe the resulting services like a nursing home or home health care. So, when answering the question of what is long-term care, we are also answering questions of what long-term care insurance covers.
Let’s start with what long term care is and therefore what (and when) long term care insurance will cover. Long-term care covers a wide array of services and supports for your personal care. It is assistance with the basic personal tasks of everyday life. To standardize this definition, the industry adopted what is called the Activities of Daily Living or in short ADLs. These include the following six activities:
- Bathing
- Dressing
- Using the toilet
- Transferring to and from bed or chairs
- Incontinence
- Eating
These are deemed the six basic activities that need to be performed daily at a minimum to care for yourself. As far as long-term care insurance is concerned, once you need assistance with two of these six activities, you qualify for benefits from your insurance cover. We will discuss more about coverage in other posts. Regardless, this is the basic definition. Notice it does not include anything about a certain age or a location like a nursing home. This brings us to big misconception number one.
Misconception #1 – Long-Term Care means Nursing Home
We often hear our clients say “I don’t want to end up in a nursing home so Long-Term Care doesn’t apply to me.” However Long-Term Care covers a wide range of services and in fact most Long-Term Care is provided at home. This could be from an unpaid caregiver, like a family member, a nurse, a therapist, or a home aide. It can also mean adult daycare services and transportation services. While it certainly does include nursing homes, it may also include assisted living facilities or retirement centers. They key is whether you need assistance with two out of six of the above ADLs. So in reality when we hear people say I do not need Long-Term Care insurance because I do not want to end up in a nursing home, our response is, Long-Term Care insurance is designed to help keep you out of a nursing home.
Misconception #2 – Long-Term Care means a Retirement Center that eventually provides assisted living
You are thinking about downsizing your home and moving to a retirement center. That’s great, but does that qualify as Long-Term Care? Maybe you have heard the term “aging in place” and think this is a good idea for you. You find a retirement center where you can move in as soon as 55 and older and then move into assisted living when needed and eventually nursing and hospice care. But are these places considered Long-Term Care because they offer those services? Again, the answer goes back to the ADLs. A typical scenario for those that have Long-Term Care insurance would be entering a retirement center in normal health at full cost to them, then as they age and need assistance the Long-Term Care Insurance kicks in once they meet the two ADL rule.
Misconception #3 – Long-Term Care is covered by Medicare or my health insurance plan
We saved the biggest misconception for last. Many people believe they have some form of Long-Term Care coverage, even if at a minimum, through these services. Below we will break down what coverage they actually provide.
Medicare – This insurance will only cover a short stay in a skilled nursing facility, hospice care, or home health care and only under the following circumstances. You must have had a hospital stay of at least 3 days within the last 30 days. Also, the facility must be a Medicare-certified facility and provide skilled care like some type of therapy. If, and only if those conditions are met, Medicare will pay for a maximum of 100 days. The first 20 are 100% covered, then the remaining 80 days, the patient must pay $140 per day.
Medicaid – This insurance does cover a lot more Long-Term Care services but is even harder to qualify. Each state has different rules but generally there are extremely stringent income and asset limits. For example, in some states if you have more than $6000 to your name you are disqualified from Medicaid until you spend down that amount. And spending down your assets for the most part does not mean gifting your money away.
Health Insurance – If you have private health insurance such as through an employer, the plan mostly likely covers the same services as Medicare and if they do cover Long-Term Care it is usually only for skilled short-term care.
Overall Long-Term Care covers a wide range of personal care services regardless of when or where those services are needed. There is very little social insurance to cover these services which is why we believe it is so important to understanding what Long-Term Care is. Once you understand the scope of Long-Term Care, you can begin to develop a plan if you should ever need Long-Term Care assistance.
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Long-term care insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details. All policy guarantees are based upon the claims paying ability of the issuer.