Retirement Planning

Chapter 17 – Long-Term Care Insurance

It may at first seem surprising to have a section on long term care products in a retirement planning course. Unfortunately, too many people overlook this area when they plan for retirement. Agents, as well as consumers, tend to concentrate on other financial areas apparently assuming that long-term care needs will never arise. History tells a different story.

Our retired Americans are lucky to have the benefits they do in our Medicare program. Despite all that may be wrong with the Medicare system, there is also much that is right with it. Both the hospitals and the doctors are basically well covered.

What many Americans and their families fail to realize, is that nursing home care or even just home care in many cases, is not covered by Medicare. It is true that there are limited benefits for the level of care called skilled care. Medicare will pay the first 20 days for skilled care only. From the 21st day through the 100th day, Medicare will pay a co-payment per day (again, for skilled care only), with the beneficiary paying the remaining amount. These limited benefits simply are not adequate when it comes to the nursing home care that elderly Americans are likely to require.

The simple truth is that, as Americans live longer and longer, increasingly more of them will end up spending some time in a nursing home. In fact, the longer one lives, the more likely it is that he or she will enter a nursing home. Since 1940, the odds of living to the age of 85 have doubled. By the year 2030, it is expected that 3 out of 5 people will live to be 85 years old. In addition, the number of persons over the age of 65 will approximately double. Over 30 percent of Americans who are 85 years old live in nursing homes. Another 20 percent require some type of home or community care. Home care can include a wide range of services including (but not limited to) regular living assistance, housekeeping, light medical services, or meal preparation and delivery.

In the past, the inability to care for oneself tended to primarily result from illness or injury. That is no longer true. Now the need for assisted care of some type results primarily from simply growing older. People live on for years with such things as Alzheimer's disease, arthritis, and other conditions that do not require hospitalization, but gradually leave people increasingly helpless.

In past years, family members usually took care of their aging members. Usually, it was children caring for parents. Now, it is more likely that strangers will provide care, typically in some type of formal setting. Few families are set up, either financially or physically, to care for their aging members. It is common for both spouses to be employed and necessary financially for each to earn an income. As a result, there is no one at home to care for an aging parent or grandparent.

Where does all of this leave our aging population? It leaves them in a position of having to look logically at the possibility of needing care in a nursing home. The next question: is it possible to pay for this care out-of-pocket, or would an insurance policy be more realistic? For most Americans, an insurance policy is, in fact, the only realistic solution.

Why Buy a Long-Term Care Policy?

The cost of providing long-term nursing care is very expensive. Costs vary depend-ing upon the state and even regions within each state, but the national average for a semi-private nursing home room in 2019 was $7,698 per month. That totals $85,776 per year as an “average” figure. In 1988, Consumer Reports magazine es-timated costs would run $55,000 for long-term care by the year 2017. Obviously, they severely underestimated the increasing long-term care costs. Nursing home fees are rising at a rate that is higher than inflation. Home care rates are also rap-idly rising with the average home health aide costing $4,099 per month. Some ar-eas are dramatically higher than the average cost we listed here. States such as California and Florida are certainly higher, for example.

Most people cannot afford these costs. Paying the average cost for just a few months could deplete the savings of many retirees. A congressional subcommittee on aging found that between 70 and 80 percent of all nursing home residents became impoverished within the first year of confinement, having spent their life savings on nursing home fees.

Medicaid, the federal program that finances medical care for poor citizens of all ages, pays more than half the cost of nursing home care. Primarily the patients and/or their families pay the remainder of care. Over half of all unmarried persons who enter a nursing home, will end up broke within four months. It is easy to see why, while people may not enter a nursing home poor, they soon become poor. It is common for adult children to pay part of the bill for their parents; certainly not a situation enjoyed by their parents who always thought they would be self-supporting. Of course, paying these bills is also a financial burden to the children.

Since Medicare does such a good job with the hospital and doctor fees, our elderly citizens pay little out-of-pocket. According to the Health Insurance Association of America (HIAA), 81 percent of out-of-pocket expenses go to nursing home fees. The balance goes to dental fees, prescription drugs, and doctors combined. In the past it was hard to convince Americans that Medicare would not also cover their fees in a nursing home (Medicare pays only about 1.4 percent of the total nursing home costs) but today most people realize they cannot count on Medicare for long-term care costs.

Some people believe that Medicare will, at some point in the future, begin to pick up some of these long-term care costs, but many are doubtful that this will ever actually happen. Such care, relatively unknown when our grandparents were raising their families, is now common. It would likely be cost prohibitive for the government to cover these fees. In fact, both Medicare and Social Security funding is constantly in trouble financially. The need for encouraging our elderly citizens to purchase long-term care insurance protection clearly exists.

Defining Policy Benefits

Multiple insurance companies market long-term care policies, although in recent years, some insurers have withdrawn from the market. These policies are commonly referred to as LTC policies. Many states have mandated specific LTC requirements. As a result, specific statutes may well vary from state to state. Even within a given state, however, there can be policy differences.

Today’s policies pay all levels of care equally, which includes skilled, intermediate and custodial care. This was not always the case, but state legislation and competition have strengthened policy benefits. In other words, if skilled care is covered at $200 per day, then both intermediate and custodial care are also covered at the same $200 per day level.

It is not unusual for an LTC policy to require that care, regardless of the level being received, be given in either a skilled or intermediate facility. This should not cause difficulty for most policyholders, although it may mean higher rates for the care received.

It is not easy to compare long-term care policies. Since company brochures may be laid out in a variety of designs, comparing apples to apples can become difficult. There are some basic points to consider:

Is the policy tax qualified or non-tax qualified? Tax qualified plans are LTC Partnership plans, covered by federal legislation. Tax qualified plans will not cover ambulating as a benefit trigger and confinement must be estimated to last at least 90 days. Tax qualified plans allow the policyowner to deduct, under specific conditions, the premiums paid from their year-end federal taxes, if they itemize. Those who do not itemize their federal taxes will not benefit from this feature.

The daily benefit is typically chosen by the policyholder at the time of application. This means that the policyholder must choose an indemnity amount or a monthly benefit for nursing home care. The amount chosen should probably be no less than $200 per day, although that is a personal choice that must be made by the applicant at the time of purchase. There is typically a minimum daily or monthly amount that can be selected.

The waiting period is a deductible expressed in time not covered. It is also referred to as an elimination period. This means that the first days of confinement would not be paid for, similar to deductions in auto and homeowner coverage. The number of days not covered depends upon the option selected by the insured at the time of application. A common waiting period or elimination period is 30 days, but it could be much longer. It is not unusual for a nursing home policy to have a 100 day wait before benefits are payable. To understand, in dollar terms what an elimination or waiting period means, simply multiply the daily benefit selected by the number of days not covered. For example, if a policyholder has a benefit of $200 per day and the elimination period (deductible) in the policy is for 90 days that would amount to:

$200 X 90 days = $18,000 policy deductible.

Obviously, this is a large deductible. On the other hand, premium rates would be significantly lower when large elimination periods (deductibles) are selected. If the insured does not mind covering such a deductible, perhaps larger waiting periods are advisable.

Each policy will have a maximum benefit period. This means that the benefits are payable for a set time period per confinement. Most professionals recommend no less than three years of coverage. The LTC brochures often list several choices. These benefit periods determine the length of time (coverage) that the insured is protected for while institutionalized in a nursing home. Since the average length of stay is 2.5 years, a three-year plan is considered a safe choice. Many policies offer lifetime benefits, but these policies are expensive. Since there are medical conditions that may disable a person but not kill them, lifetime benefits can be important to some clients. Of course, the longer the benefit period, the more expensive the policy will be.

Many policies contain two benefit periods: one is "per confinement" and another is a "lifetime benefit". Typically, this means that some portion of the "per confinement" benefit is renewable and may possibly be reused at some future date.

For example

Bertha is institutionalized in a nursing home for three months with a broken hip. When she is released from the nursing home, her benefits will renew IF she does not re-enter the facility for six months for treatment of the same condition. Six months later (past her release date), the three months that she used on her nursing home policy renews itself and may be available for future benefits. The "lifetime" benefit in her policy states that only so much time may renew itself. If Bertha has a lifetime benefit of five years, and a three-year per confinement benefit, then up to two years could renew itself and be reused.

Most nursing home patients do not come and go. While it is common for a person to have a short stay in a nursing home for such conditions as a broken hip or a knee replacement, if the confinement is for something more serious, chances are the person will enter the nursing home and then remain there.

Some policies specify which type of facility is covered under the policy: skilled, intermediate or custodial. This does not usually pose a problem for the insured as long as he or she is aware of the requirement. Of course, it is always beneficial to have all types of facilities covered by the policy. If a policy limits which facilities are covered, it will be either skilled or skilled and intermediate facilities that are specified. A custodial facility would not provide skilled or intermediate care.

As long-term care options change and expand, new forms of care are developed. One newer form of care is assisted living. Assisted living may be called residential care in some states. Assisted living offers 24-hour care, but not total care. In other words, there are staff members on duty at all times, but the resident receives "assistance" rather than total care. The cost is less than that charged by a nursing home and allows residents to remain as independent as medically possible while still receiving help in areas that are needed. Insurance companies tend to favor assisted living because it is less expensive than paying for care in a nursing home. In order for the policy to cover it, the doctor must typically stipulate that the insured would have to be in a nursing home if assisted living were not available. Assisted living may be covered anywhere from 50% to 100% of the policy’s nursing home benefit.

Some policies also offer the additional option of home care, usually for an extra premium. There are differing opinions as to the value of home care benefits added on to a nursing home policy. When home care is added, the benefit is generally half of the nursing home indemnity benefit. In other words, if the insured selected a $200 per day nursing home benefit, then the home care benefit would be $100 per day.

Whether home care is added or not is often an emotional decision, rather than a logical decision. Certainly, most people would prefer to remain in their home. The insured may feel that having a home care option allows them the option of remaining at home. In reality, whether home care is offered with the basic nursing home policy is seldom a factor when determining health care needs. Many factors determine the best location for care. One major factor has to do with living style. If the insured lives alone, home care may not be realistic unless someone is available to move in with the insured. Usually, the home care benefits attached to a nursing home policy are not adequate to pay for 24-hour care. Therefore, a family member must be available to live in.

If home care is a realistic option, there are a wide variety of services available. Although most insurance policies require that a Medicare certified agency provide the care, much more home care is given from individuals that are hired by family members. As a result, it is impossible to know how much home care is actually being received across the United States.

Part A of Medicare will pay for some home health care services. There is often much confusion regarding home health care. Part A will pay the full cost of medically necessary home health visits if the beneficiary is homebound. Coverage includes:

• Part time, not full time, skilled nursing care (note the fact that care must be skilled and cannot be intermediate or custodial)

• Physical therapy

• Speech therapy.

If the beneficiary requires any of these services, is confined to their home (homebound), and is under the care of a doctor, Part A of Medicare may also be able to provide other services which includes:

• Part time or intermittent home health aide services for skilled nursing care. (Again, note that the care must be skilled, not intermediate or custodial care.)

• Occupational therapy

• Medical social services

• Medical supplies and equipment provided by a Medicare contracted agency.

Coverage can also be provided for a portion of the cost of durable medical equipment provided under a plan of care set up and supervised by the physician.

There are gaps in Medicare's home health coverage. Items NOT covered include:

• Coverage provided for full-time nursing care in the home. Medicare covers only part time help.
• Drugs and biologicals
• Meals delivered to the home
• Homemaker services, such as cleaning or cooking
• General daily maintenance care, such as bathing or getting dressed.

The beneficiary must also pay 20 percent of the reasonable charge for durable medical equipment, unless a Medigap policy is in place to cover the co-payment.

The amount of the visits by home health personnel is unlimited as long as the patient meets all of the requirements set down by Medicare. The patient pays nothing since Medicare will cover all eligible costs. There are conditions that must be met before care will be given. Those conditions include:

1. A doctor must certify the need for home health care.

2. The treatment requires only part-time skilled (not intermediate or custodial) nursing care, physical, speech, or occupational therapy.

3. The patient is housebound, unable to do an outside normal routine of shopping or other daily routine chores.

4. Doctors set up the home health care plan, which is provided by a Medicare contracted home health care agency.

We can all certainly understand why a person would prefer to be at home as opposed to a nursing facility. This is an issue that families must cope with every day. When a parent asks a child to keep them home, that child is put in a very stressful situation. Often the child must keep their parent in their own home since it is not realistic to move into the parent's home. The caregiver’s family is pushed into second place as the parent steps into first place. It is not surprising that the entire family suffers from the situation. Eventually, the ill parent will end up in the nursing home, which is often the best place for them medically.

Millions of Americans are doing everything they can to keep chronically ill parents at home. Many succeed temporarily. Family and/or friends provide seventy percent of home care. However, many of these people desperately need some sort of help. As family members become increasingly frail and/or tired (depending upon who the family members are, their ages and their current health), the physical work of taking care of a sick or injured person becomes more than the family can bear, reported Bruce Fried, a director of a citizen coalition group seeking health care reform.

A national debate has grown over the role of paid home care in the nation's long-term care system. While many people would like to expand the availability of home care services through federal health care programs, the biggest block to such a move is the cost. There is little debate over the need of such services, but like all things, it must somehow be paid for.

Thousands of agencies nationwide are licensed to provide paid home care. There are many more people who are paid home caregivers that are not licensed. It is a rapidly growing industry. The groups provide many services ranging from high-technology care, such as kidney dialysis, to simple custodial and personal care. Homemaking services may also be provided. All types of care can be costly.

Very little private insurance is in place to pay for such care. People tend to consider the need for such coverage later than they should. Once health problems exist, obtaining nursing home or home health care coverage can be difficult or even impossible. Over the last five years, underwriting for any type of long-term care has become more stringent. Those who wait until health problems develop may either pay more for long-term care coverage, or have difficulty obtaining it at all.

We have mentioned that many long-term care policies have home care benefits as an option, usually for an extra premium cost. There are also policies that offer strictly home care benefits. It is often felt that these benefits are better when bought through a separate policy, rather than as an additional option on a long-term care policy.

Home care policies may vary widely from company to company, unless the state mandates specific coverage. Most home care policies are indemnities, which mean that they pay a set dollar amount per day for home care benefits. The insured chooses the level of the indemnity at the time of application. Just as there is underwriting for long term care nursing home policies, there is also underwriting guidelines for home care policies. Of course, that means that an insured is more likely to qualify if they apply for the coverage as early as possible when health is more likely to be good. Premiums will also be lower if application is made during younger ages.

Many things do not qualify for home care, either under Medicare or under a home care policy. General housekeeping services, such as cleaning, meal preparation, and shopping will not be covered. There are sometimes volunteer agencies that will offer help in these areas.

Medicare also offers help for those who are terminally ill. Hospice is covered under Part A of Medicare. Hospice is care for the terminally ill. Hospice care is given at home. Part A will pay for two 90-day hospice benefit periods, a subsequent period of 30 days, and a subsequent extension of unlimited duration.

When a beneficiary enrolls in a Medicare certified hospice program, he or she receives medical and support services necessary for symptom management and pain relief. It is most common for these services to be provided in the patient's home. When a Medicare certified agency provides the care, the coverage will include:

• Physician services
• Nursing care
• Medical appliances and supplies which includes drugs for symptom management and pain relief
• Short term inpatient care
• Counseling
• Therapies
• Home health aides and homemaker services.

Medicare's Part A and Part B deductibles do not apply to services and supplies that are furnished under the hospice benefit programs. There are limited charges for outpatient drugs and inpatient respite care. If care or services were needed for a medical reason, for a condition that is not related to the terminal illness, then regular Medicare benefits would apply with the deductibles and co-payments in effect.

As with all benefits under Medicare, certain requirements exist. To be eligible for hospice care under Medicare, the beneficiary must:

1. Have been diagnosed as terminally ill, having only six months or less to live, and

2. Receive the care from a Medicare contracted hospice program.

There are gaps in Medicare's hospice coverage:

1. The beneficiary is responsible for the limited charges for inpatient respite care and outpatient drugs.

2. Medicare's deductibles and co-payments do apply if treatment for conditions, other than the terminal illness, is obtained.
   

Medicare requires prior hospitalization in order to qualify for nursing home care, but policies may or may not require prior hospitalization, as an option.

This means that the insured may be required to first be in a hospital before entering the nursing home. Often this requirement depends upon the state of issue since some states prohibit a prior hospitalization requirement. There may be a requirement as to the amount of hospitalization, usually three days. The nursing home admittance may have to be within a certain time period, usually within 14 days of discharge from the hospital. There may also be the requirement that skilled care be required upon admission to the nursing home. This level of care may then be downgraded to either intermediate or custodial. There may also be a provision as to how long the skilled care must first be maintained. All of these requirements are typically referred to as gatekeepers. They "close the gate" on excess claims saving the insurance company money.

Although most companies do cover Alzheimer's disease as long as it was not present at the time of application, this is still something that should be specifically addressed by the consumer before buying a long-term care policy. In fact, the consumer (and the agent) should be aware of how all mental conditions are covered. Alzheimer's disease is not actually a mental condition; it is an organic condition. That is why most policies would cover it. It is important, however, to understand how the policy treats all types of mental disorders since they are very common in the older ages.

Inflation protection comes under a variety of names, depending upon the insurance company. This provision increases the daily indemnity amount of the policy each year to reflect increased costs in the long-term care community. Some states stipulate what term must be used to label inflation protection and the federal Partnership LTC policies stipulate the amount of protection the policy must cover. A built-in inflation adjustment in non-Partnership policies is usually a policy option which means that the insured pays extra to obtain it. Inflation adjustment options may work differently from policy to policy, so it is important to ask questions. Is the increase based upon the daily benefit amount chosen at the time of application or is it based on the compounding daily benefit? Does the inflation adjustment continue for the lifetime of the policy or for a set number of years (the first five years, for example)?

Preexisting conditions will determine not only whether or not the policy will be issued at all, but also how those conditions are treated under the policy during the first months. It is normal for a policy, of any type, to have a preexisting clause in the policy. This clause will state when and if those existing health conditions are to be covered under the policy. Some conditions in health will be totally unacceptable by the insurance company. Other conditions may be rated up in premium cost, or excluded entirely from the policy. It is becoming increasingly popular to use an "accept or deny" underwriting method. In other words, the potential client is either accepted or denied coverage, rather than excluding coverage for specific health conditions. Premium rate-ups may still be used. It should be noted that state statutes might not allow a company to exclude conditions under a long-term care policy. In those states, all physical conditions must be covered if the insurance company accepts the applicant for coverage. Be sure to check with your particular state.

If the policy is issued, there will still typically be a period of time under which preexisting health conditions will not be covered. For example, most companies will accept a person who has high blood pressure as long as it is under control. Even though they have accepted that person, however, claims that occur during the beginning months of the policy that are directly related to the high blood pressure condition, will not be covered. That preexisting period will vary from company to company, so it is necessary to read the terms of the policy on an individual basis.

The term "level premium" means that the policy premium will not increase as the insured ages. It does not mean that the premiums will never increase, because that is a possibility. This is a commonly misunderstood policy term. Even agents have interpreted it to mean that premiums will never be increased. Level Premium simply means that increases will not occur because the insured has a birthday and becomes older. There are long-term care policies that increase the premium level as the insured becomes older. It is best to avoid these policies since premium levels can become excessive.

It is always important to buy policies, of all kinds, that are guaranteed renewable. This means that the insurance company will always renew coverage each time the premium is paid. Without this protection, a company could cancel the policy if it canceled all other policies of that type in the state. Of course, if the company would like to discontinue the policy, it is probably because it has not been profitable for the company. Therefore, it is likely that premium increases would occur.

It is becoming increasingly popular to have Waiver of Premium in long term care policies. This feature allows policyholders to stop paying premiums once they have been admitted to a nursing home for a specified time period that is stated in the policy, usually 90 days. Although often overlooked, this is a valuable feature.

It is not an easy job to sort out the various policies on the market. Since brochures and policy outlines of coverage can vary in their layout, it can be confusing. The insured relies upon the insurance agent for help in this area. Therefore, it is important that the agent be well educated in the products that he or she represents.

Types of Care Facilities

Much of the confusion regarding Medicare payment of nursing home stays has to do with the level of care received. There are three types of care: skilled, intermediate, and custodial. Medicare pays only for the skilled level of care. Medicare will not pay for either intermediate or custodial care. A patient is less likely to receive skilled care and more likely to receive either intermediate or custodial care. Some insurance policies, especially the older ones, may not cover all levels of care, although most states now mandate that newer policies must cover all three levels of care.

Definitions of Levels of Care

SKILLED CARE

Skilled care is care that must be prescribed by a doctor, given by a skilled medical professional, and is available 24 hours a day. A skilled facility is licensed by the state, and daily medical records must be kept on each patient.

INTERMEDIATE CARE

Intermediate care is care that must be prescribed by a doctor and given by a skilled medical professional. However, the medical care is less frequent in nature, or on an "intermittent" basis. An intermediate facility may also be licensed to provide custodial care, but may not provide skilled care.

CUSTODIAL CARE

Custodial care is care that is often called Maintenance Care. Custodial care is non-medical in nature and may be performed by a person who has no professional training or skills. It involves help with routine, daily activities such as walking, eating, bathing or taking oral medications. Custodial care facilities may not provide skilled or intermediate care. Many states require that Custodial facilities be licensed. Many insurance policies also require that facilities be licensed in order to pay benefits.

The best LTC policies cover all three levels of care. Most states have mandated that such policies must now cover all three levels of care. Of course, there may still be old policies in existence that do not do so.

Qualifying For a Policy

All long-term care insurance policies have underwriting requirements. That means that health conditions play a vital role in obtaining this type of protection. Exactly how each company underwrites can vary from company to company. Some companies may even postpone actual underwriting until a claim occurs, called post claim underwriting. Because post claim underwriting is not good for the consumer, many states do not allow it. It is always better to know whether a policy will be issued (from a medical standpoint) before a claim arises.

Some surprising medical conditions may be accepted for an LTC policy that would never be accepted by other types of policies. Since long-term care policies underwrite from the standpoint of "Will this condition cause a nursing home confinement?” conditions that would cause claims under other types of health-related policies (such as disability coverage for example), possibly causing an application denial, may be accepted by a long-term care policy. Many LTC companies are more likely to accept an applicant with a history of cancer than they would one with mild arthritis. Underwriting has changed over the years, but companies always underwrite with the consideration of potential risk. Of course, that is true for all types of insurance.

It is not surprising that a person who is already sick is much less likely to be accepted for coverage by an insurance company. Certainly, a person who appears close to needing a nursing home will be denied benefits. Most insurance companies try to weed out those they consider high risk, or undesirable. If an agent sees that an applicant is not able to get around well and must rely on aids such as walkers or oxygen, he or she should probably not take the application. Chances are the insurance company will deny the applicant coverage.

Most professionals recommend purchasing, or at least consider purchasing, a long-term care policy around age 60. Health is likely to be acceptable and the premiums will be lower and, therefore, more affordable in the long run. At one time, most professionals thought buying prior to age 50 was not necessary, but many are reconsidering since 40 percent of those in a nursing home are younger than 50 years old.

Understanding What is Not Covered

No insurance policy covers everything. This is also true for long-term nursing home policies. Just as with other types of insurance, the consumer must pay attention to those items or benefits that are excluded.

Long-term care policies do not cover rest cures, or old-age retirement homes. These types of residences are becoming increasingly popular, but they generally do not provide medical care. Residents in these communities get private apartments, plus other services such as meals and housekeeping services. Some of these retirement communities have nursing home arrangements available. When such arrangements are included, prices are understandably higher. Some communities charge a flat fee for entrance. The amount paid will determine many other benefits, such as apartment size and maintenance costs. Even though a flat amount is paid, there is generally an additional monthly fee, as well. Again, what you pay depends upon what you get.

Retirement homes should not be confused with assisted living facilities, which are often covered by insurance policies for long-term care. Retirement homes are not designed with personal or medical care in mind, whereas assisting living facilities are. Both, however, provide private apartment settings for the comfort of the resident.

A person considering the purchase of a retirement apartment (not an assisted living apartment, which is typically not purchased) should be very careful about the community selected. It is important that it continue to operate so that benefits may be received. It is wise to check out the reputation of the community, the general appearance, and so forth.

Another indicator of performance is accreditation by the LeadingAge company, formerly called the American Association of Homes for the Aging (AAHA). It is a trade group based in Washington, D.C. Accreditation is voluntary, however, and many fine communities simply do not apply. The AAHA became known as LeadingAge in 2011. It is a not-for-profit company.

For a free listing, inquire with www.leadingage.org.

Generally, LTC policies will not cover confinement in a mental hospital, except as specified within the policy, nor will they pay for drug or alcohol rehabilitation.

Most policies limit coverage for preexisting health conditions. That limitation may vary from policy to policy so exact limitations need to be noted. A preexisting condition is an illness or disease that existed at the time the policy was applied for and issued or in the time period prior to application. This clause is a gatekeeper, which limits the insurance company's liability. In other words, it prevents a person from buying a policy specifically because he or she knows it is needed to pay for an existing condition. It could be compared to hitting a tree with an automobile, and then buying coverage to pay for the resulting damage.

How a preexisting condition is defined will vary from company to company, but usually it is defined as any health problem experienced by the insured in the six months prior to buying the policy. It must be noted that medication is treatment. Some companies will go back as far as three years to define a preexisting condition, so, again, it is important to know what basis is used.

When an insurance company accepts an individual even though a preexisting condition exists, the policy may not, depending upon state requirements, cover claims relating to that condition for a specified time period. These periods of time range from six months to two years depending, again, on state mandates. As stated, medication is treatment, so if an insured has high blood pressure, it is a preexisting condition even if it was controlled by medication. The fact that the insured's pressure was normal at the time of application does not matter since it was normal only due to medication that was taken.

Many policies specifically exclude care for mental and nervous disorders. If this is the case, pay special attention to any statements regarding Alzheimer's disease and other similar conditions. Although this disease is organic in nature (not mental), the symptoms mimic mental disorders. There is no single test that can diagnose the disease. If the policy will pay only for illnesses with “demonstrable organic disease,” how does the policy treat Alzheimer’s disease and dementia? The only way to show that an illness is Alzheimer's is by performing a biopsy or an autopsy. States have generally prohibited such wording that is intended to prevent coverage.

This vague policy language, which does not specifically state that a doctor's opinion is acceptable, gives insurance companies the ability to change claim practices. A company may be paying claims based on medical opinion one year, but the next year, due to rising claims, refuse to do so. It is important that policies clearly state that Alzheimer's disease is covered, but it is equally important that diagnosis by medical professionals be accepted.

Luckily for the consumer, current policies will be written and issued according to federal and state standards. Most states have clarified such things as coverage for Alzheimer's disease. As a result, current policies are less confusing and certainly less limiting. Even so, any type of benefit or underwriting concern should be addressed with the insurer prior to accepting the policy.

Choosing Daily Benefit Levels

Most policies allow the insured to choose the daily benefit level at the time of application. This choice is often made, at least partially, on the basis of premium cost. Certainly, it is understandable that cost must be a factor in the decision, but it should not be the only factor. Policies have a wide range available for the daily benefit amounts. It makes sense to know what local nursing homes are charging, but it must be realized that rates are rising faster than inflation. What is charged locally today may be far short of what is being charged in five years. Most professionals recommend no less than an $200 per day benefit, and that would be low. Many states have mandated minimum daily benefit rates. Some areas of the U.S. are more expensive than others, and in high cost regions, minimum daily benefit levels selected should reflect local costs.

The next decision to be made concerns the elimination or waiting period. The insured must decide how much of the front costs he or she is willing to pay. As we stated, the elimination or waiting period is a deductible expressed in days not covered. If the insured selects a 20-day elimination period that means that coverage would not begin until the 21st day of nursing home confinement. If a 100-day elimination period is chosen, then benefits under the policy would not begin until the 101st day of confinement. While it is possible that Medicare may cover some of the nursing home confinement, it must be remembered that Medicare pays only for skilled nursing care. The insured is least likely to need that level of care. The longer the elimination or waiting period, the less premium will be charged for the policy.

The third decision has to do with the length of the benefits. Long-term nursing home policies vary in the length of time benefits will be paid. It can be as short as one year of confinement or as long as lifetime benefits. The best policies pay benefits for an unlimited number of days for each confinement in a nursing home, and an unlimited, or lifetime, number of days for all nursing home stays. The nursing home stay may be called by many terms in the policy. Some policies call them "periods of confinement" or "benefit period." Whatever term is used in the brochure or the policy, it refers to the length of benefits to be received.

Some policies approach policy limitations in a different way. Rather than state benefits to be received in terms of years or days, they are expressed in dollar maximums. When a policy uses dollar maximums, simply take the per-day benefit and divide it into the dollar maximum to find the number of benefit days. In those policies set up as dollar maximums that pay actual per day charges, rather than a daily benefit, how long the policy lasts will depend upon what actual charges are. In some ways, these policies are more advantageous as long as the dollar maximums are adequate.

When a person does receive benefits for a repeat stay in a nursing home, the policy will impose some conditions upon the subsequent confinements. Usually, the policyholder must have been out of the nursing home for at least 180 days (six months). When he or she returns, the waiting period that was selected starts all over again.

To put it in personal terms, Molly Morgan enters Sand Point Nursing Home with a broken hip on November first. She stays in the nursing home for three months, coming home on February first. All goes well for several months. Then, in July, Molly begins to experience weakness and dizzy spells. Eventually, it is determined that Molly can no longer care for herself adequately at home. As a result, her doctor readmits Molly to the Sand Point Nursing Home. Luckily, Molly had selected a nursing home policy that did not require she first be in the hospital. If her policy had this requirement, it would not have covered her confinement in the nursing home, since she did not need to be hospitalized.

When Molly was in the nursing home in November with her broken hip, she had to pay the first 30 days, because that was the waiting period she had selected when she bought her nursing home policy three years prior to the confinement. Her daily benefit, selected at the time of application, was $200 per day. Molly paid the first 30 days, plus the difference between the actual charges and the $200 per day covered by her insurance policy. The Sand Point Nursing Home charged twice her insurance benefit, so the difference was considerable. Even so, the amount paid by the policy was substantial. Even though she had to pay the first 30 days of care and the cost difference, Molly felt she had made a good choice when she bought her policy. Molly knew she could afford to pay part of the costs; she simply did not wish to pay the entire cost.

When Molly's doctor and her family decided to readmit her to the Sand Point Nursing Home in September, she again had to pay the first 30 days of confinement, since that is the waiting period in her policy. The nursing home had increased their daily rate, so Molly now had to pay an even higher amount of the nursing home costs. Although her family would have preferred that Molly have had a higher per day policy benefit, they were thankful for the $200 per day that she did have. Meeting the additional cost will take most of Molly's monthly income, but it will not wipe out her savings entirely.

Of course, her family must decide whether to maintain Molly's house or whether to sell it for her. The doctor cannot say whether Molly will improve enough to return home or not. If Molly does improve enough to be discharged from the Sand Point Nursing Home, she will certainly expect to go home to her own house. There will be many such decisions that her family will have to make.

Policy Renewability is always an important feature of any insurance policy, and long-term care policies are no exception. Policies that are Guaranteed Renewable are best. This means that the insurance company must renew the issued policy for as long as premiums are paid in a timely manner. Molly's policy was Guaranteed Renewable, so she did not have to worry about having the policy taken away from her as long as she paid her premiums on time. In Molly's state, all LTC policies are required by state mandate to be guaranteed renewable.

As you recall, Molly Morgan entered the nursing home the second time without being hospitalized. It is a common misconception that most people go from the hospital to the nursing home. That is a false impression. In fact, 61.3 percent of all nursing home admissions did not have previous hospitalization. Had Molly bought a policy that required previous hospitalization, her policy would not have paid any benefits on her second admission. Many states do not allow insurers to have a prior hospitalization requirement, although Medicare does require hospitalization to qualify for their limited skilled care benefits.

The price of long-term care policies may vary as a result of numerous factors. We have already mentioned one factor affecting premium rates: age. The older a person is at the time of application, the higher the premium will be. This is not surprising. The less time the insurance company has to collect premiums, the more expensive the policy will be. Of course, there is also the fact that older people are more likely to be institutionalized than younger people.

A major factor in determining cost has to do with the benefits selected. The more you get the higher the cost. When considering this type of insurance coverage, it is foolish to be "penny wise, and pound foolish," as the old saying goes. In other words, it is foolish to try to save a couple of hundred dollars in premium with the result being thousands more paid out of pocket when a claim occurs. It is best to get the necessary benefits at the time of application, when health conditions are least likely to prevent the availability of benefits.

Are There Alternatives to Long Term Care Policies?

Are there alternatives to long term care policies? Certainly. The bigger question is "Are those alternatives worthwhile and effective?" The answer to that question will differ depending upon whom you are asking.

There are several options when considering living and funding arrangements once a person is no longer able to care for themselves. Certainly, these options need to be considered long before the need actually arises. Waiting until arrangements MUST be made often lend themselves to poor decisions.

The basic options normally considered are:

1. Medicaid benefits (medical care for all ages);

2. Medicare benefits (for those aged 65 and older, unless on Medicare disability);

3. Medicare supplemental policies, usually referred to as Medigap policies;

4. Group plans, union plans, and company sponsored retirement plans;

5. Veteran's benefits, for those who qualify.

There are also other options, but many of the others are a derivative of those listed. For instance, home care may be an option, but payment for such would come under the listing of Medicare or Medicaid unless a policy had been purchased to specifically cover it.

When we are young adults, our parents are often our cornerstone. Young families often rely upon parents to help them get into their first home, assist with children when work schedules become hectic, and to offer advice when situations appear difficult. We often do not consider the possibility that we, as children, must someday reverse roles and take care of our parents.

Consider these questions:

• What would you do if your parent or grandparent faced increasingly severe nursing home costs, or home care costs? Could you quit your job and care for that family member in your own home?

• What would you do if your parent said to you: "I do not want to go to a nursing home; I want to stay in my own home."? Could you move into your parent's home to care for them? Could they live in your home?

• What would you do if your parent became increasingly disoriented, forgetting to pay bills, getting lost frequently, or doing dangerous things such as leaving a stove burner on? How would you find someone to watch over your parent on a day-by-day basis?

These are questions (among many) that families must cope with every day. There is no longer the traditional family where Mom stays home. The traditional care giver (Mom) is out in the work force along with Dad.

There is one estimate that perhaps as much as 10 percent of the elderly are admitted too soon, simply because there is a lack of knowledge of available alternatives. Currently, assisted living facilities are doing an excellent job of keeping some residents from entering a nursing home prematurely. Of course, specific criteria still exist to take advantage of an assisted living facility. Many people will still need the care of a nursing home. Of course, it may be easy for analysts to make assumptions based on facts and figures, especially if they are not the people trying to cope with a difficult situation. There are many "alternatives" that may be listed on paper, but acquiring these alternatives at affordable prices may be a different matter entirely.

Let's begin with Molly Morgan and the medical situation that has developed. When Molly was in the nursing home with her broken hip, all went well. It was a short-term confinement and the majority of the cost was covered between Medicare, her Medigap policy and her long-term care nursing home insurance. It should be noted that most people do not have long term care insurance even though many professionals recommend obtaining it.

Because Molly's health was good enough to maintain her independence, she handled all of the bills and claim forms herself (although most claims were handled by the medical providers). Her children, Jane, Steven and Robert, did not have to help with any of the paperwork. Jane did take a week's vacation time to stay with Molly when she returned home, but she primarily did some light housekeeping and made sure her mother was well enough to be home on her own. Within a few days, it was evident that Molly could handle things alone, so Jane returned home to her own family.

A few months later, when Molly seemed to be getting more and more forgetful, her children did not initially concern themselves. After all, Molly was 75 years old. However, when she began to have dizzy spells, the physician was consulted. He told Jane that Molly would become increasingly dependent and would eventually need to be cared for on a full-time basis. Jane told her brothers, Steven and Robert, of the situation. Unfortunately for Jane, both brothers left the decision-making up to her. Steven and Robert had full time jobs themselves and felt inadequate when it came to making health care decisions for their mother. Although both brothers were married, and their wives loved Molly, they did not feel it was their place to care for their mother-in-law. They had their own parents to look after. Steven's mother-in-law was in bad health herself and his wife spent much of her time looking after her needs. Robert's wife held a stressful job and had little time for her own family, let alone Molly's needs.

Being a responsible daughter, Jane began looking at the options at hand. Some of the decisions would reflect the financial aspects of the care. Both Steven and Robert offered immediately to help pay for whatever care was needed and this was a relief to Jane. Steven suggested that both brothers carry the financial load if Jane would handle the actual decision-making and physical burden of caring for Molly.

Jane began to realize that she needed as much help as Molly did. Few bonds are as strong as those between a parent and a child. She began to realize that the most difficult aspect of helping a parent is not the sacrifice of time or money, but rather the emotional suffering that goes along with it. For years Molly had been a cornerstone of the family, always ready to help where necessary. Now Molly was becoming increasingly dependent upon the very people she had previously helped.

In the 1980's we saw a dramatic transformation in the ratio of adult children to elderly parents. With families growing smaller, there were less family members to help with the care of elderly parents (as Jane quickly realized).

A census is taken every ten years. According to the last Census Bureau report, there were 40.3 million people age 65 and older in 2010, up 5.3 percent from 35 million in 2000 (and just 3.1 million in 1900). Our elderly population continues to make the greatest gains statistically. There are simply more elderly parents living longer lives, yet fewer children are being born to care for them in their old age. It has been traditional that the female children take on the burden of caring for their parents. As we have changed our family roles, however, those female children now are in the work force alongside of their brothers. Additionally, the nature of the family itself is changing. For every two marriages, there is one divorce, often dividing children from their parents, especially fathers. This aspect will bring even greater change to the way we deal with elderly parents in the future. Molly's doctor warned Jane against drifting into an unsatisfactory situation with her mother. He pointed out that trying to care for Molly herself was not a workable solution and recommended that she place Molly in the nursing home. Since Jane knew placing her mother in the nursing home would likely be permanent, she rejected this idea.

Initially, Jane planned to use home health care since she felt strongly that Molly would want to remain at home. Surprisingly, Molly did not seem to feel as strongly about remaining at home as Jane did. Molly had already been in a nursing home with her broken hip and knew what to expect. Her care had been excellent and the staff was friendly. Her only request was the option of choosing where to be placed if a nursing home became the best choice. Jane contacted the doctor's office hoping for some information on home care. When she spoke with the doctor, he explained that, under Medicare's guidelines, home care would not be paid for. In other words, Steven and Robert would have to bear the full cost. Since Molly's income only covered her living expenses, her income would not help in the cost of such care.

There are set "rules" involved when it comes to Medicare funded home care. Molly would have to be receiving skilled nursing care. Her medical condition did not warrant such care. Also, Molly would have to be classified as "homebound," meaning that she was unable to leave her home to do normal routines, such as shopping. Since her condition did not necessarily keep her home, she did not qualify on this point either.

Even if Medicare had covered the care, Medicare would only have provided for part time help and Jane felt that Molly needed to have someone with her all the time. Since Molly did not qualify for Medicare, a neighbor suggested that Molly see if Medicaid (Medi-Cal in California) would pay for the care. Medicaid is medical care for the poor of any age. When Jane checked into Medicaid, she found that Molly's income was too high to benefit from this federal program.

There is usually a point in time where someone such as Molly would qualify for Medicaid since it does not take long to use up all that has been saved over a lifetime. Medicaid was created in 1965 along with the sister program, Medicare. However, Medicaid is quite different from Medicare in terms of financing, administration and the people it serves.

While Medicare is very much an insurance program, Medicaid is basically a grant program. Medicare is entirely a federal government system, financed through payroll taxes, premiums paid by those covered and general tax revenues. The federal and state governments, on the other hand, jointly fund Medicaid. Although the federal government pays about 50 percent of the program, how much each state receives varies anywhere from 50 to 78 percent, depending on per capita income, the proportion of Medicaid recipients in each state, plus a few other factors.

Medicaid was designed for poor people in general; not just poor elderly. People who qualify for two of our big welfare programs, Aid to Families with Dependent Children (AFDC), which covers over 5 million parents and 9 million children, and Supplemental Security Income (SSI), which is primarily the aged, blind and disa-bled generally also qualify for Medicaid. States mostly determine who will and whom Medicaid will not cover. In fact, federal law permits states to provide Medi-caid assistance to the "medically needy" whose incomes are too high to enable them to qualify for AFDC or SSI, but too low to cover their medical bills them-selves.

Federal law requires states to provide a minimum level of services to Medicaid beneficiaries. Those services include such things as inpatient and outpatient hos-pital care, laboratory and X-ray services, skilled nursing home care and home health services for those twenty-one and older, examination and treatment for children under the age of twenty-one, family planning and rural health clinics. About half of Medicaid spending goes for federally mandated services. States have the discretion to provide additional coverage or services. States pay health care providers directly for services to patients and almost invariably require doctors to accept the state fees as full payments. In other words, the doctor or medical supplier may not charge the patient more than the amount paid by Medicaid, which is why some providers do not want to treat Medicaid patients.

Realizing how many services must be provided by Medicaid to people of all ages, it is surprising to realize that about 45 cents out of every dollar goes to pay for nursing homes for only about 7 percent of its beneficiaries. In other words, only 7 out of 100 people receive nearly half of the Medicaid funds. AFDC children and parents make up about 70 percent of Medicaid's caseload, but they only receive about 30 percent of the total funding.

Like Medicare, Medicaid has also experienced sharply rising costs. These swiftly rising costs have sent many state budgets into deficit, and imposed an increased demand for revenues. Some states have actually put a ban on building additional nursing homes in an attempt to keep those expenditures down. Since 1980, Medi-caid's share of our entire nation's health bill has been between 10 and 20 percent.

Both the federal government and the state governments have been trying to con-trol the rise of the Medicaid expenditures. In 1981, federal legislation reduced the amount of federal Medicaid payments to the states by an increasing percentage in each of the three following years. These cuts could be minimized by the states if they had qualified cost-review programs, or if their unemployment rate was 150 percent or more of the national average, or if its recoveries from fraud and abuse equaled 1 percent of its federal payment.

There have been many other attempts to curb Medicaid costs. How hospitals were paid has been reviewed bringing in more stringent standards. Since 1982, Congress has allowed states to impose copayments on patients for mandatory as well as discretionary benefits and has further tightened eligibility standards.

It is very difficult to control Medicare costs. The magnitude of the program means even simple cutbacks affect huge quantities of people. We are seeing Medicare move towards a “managed care” concept with early statistics showing positive results. Since each state administers their Medicaid program, each juris-diction sets its own income level for determining eligible individuals or families. Each state also patrols for fraud and abuse within that system. The millions of daily transactions are prone not only to fraud and abuse, but simple error as well. Much of the waste is due simply to Medicaid's inherent complexity. Most of the states do have some form of fraud and abuse units, which try to determine where it is occurring. Each year these units prosecute hundreds of offenders and collect millions of dollars in fines, overpayments and restitution. However, the cost of do-ing all this sometimes eats up any savings realized.

Jane's next step was to find a person that would come to the home and care for Molly at a rate that was affordable. Although Steven and Robert planned to pay for the care, they had families also, so the cost had to be within their budget. Molly did have some savings, but they knew it was not enough to last for any lengthy period.

After many, many newspaper ads, Jane did finally settle on a woman who would come to Molly's home for eight hours per day. Jane did not find anyone suitable that was willing to move in and take care of Molly around the clock. The next step was to organize family members to take turns staying with Molly during the night. Several of Molly's grandchildren were old enough to take turns along with the adults. After a month of doing this, however, the routine began to fall apart as family members began to find it a chore. It also became clear that the woman they hired was tiring of her seven day a week job. She was requesting that her workweek be cut down to five days, which meant that someone in the family would have to give up weekends to stay with Molly.

Finally, Jane gave in to the doctor's original suggestion. Molly would be admitted to the nursing home. Molly accepted this idea well, much to Jane's relief. Molly knew she was becoming a burden to her family and she felt depressed that she was causing so much trouble. As a result, Molly felt going to a nursing home was the least she could do to lessen Jane's stress. Jane knew she was lucky that Molly was so accommodating. Others at work told stories of elderly parents who adamantly resisted institutionalization. Jane could well imagine how difficult that would have been.

Once Jane told Molly's doctor, Doctor Aimes, that she would begin looking at admitting her mother to a nursing home, he also warned her about becoming too involved personally. Understanding the stress that comes with an ill parent, Doctor Aimes knows that over-involved children may not make sound decisions regarding their parent's care. He knows that Jane may feel guilty, or sometimes even angry, about her mother's situation. In fact, he realizes from past experience that if Jane becomes less involved, both Steven and Robert are likely to become more involved. If all children become involved, decision-making is more likely to be sound and carry less guilt.

Having decided to admit Molly to Sand Point Nursing Home, Jane began to look at the finances that would be involved. First, she turned to Molly's Medigap policy. A Medigap policy is an insurance policy that is designed to fill in the "gaps" (thus the name) left by Medicare benefits. Medigap policies cover only skilled nursing care.

Molly had taken out a new policy when standardization came in. Her agent had recommended that she do so. Jane called her mother's agent to find out just what benefits Molly had in her policy. The agent, Don Demmit, explained that Molly had Plan G which is one of the more common forms selected. Under Plan G, Molly had full coverage for all of her hospital deductibles, as well as full coverage for all approved charges under Part B of Medicare. For the nursing home, her Medigap policy would pay according to Medicare's benefit guidelines. In the nursing home, Medicare will pay the first 20 days at 100 percent, as long as the charges are approved and there was prior hospitalization. Then Medicare will pay all but the copayment from the 21st to the 100th day, as long as the charges are approved.

The "approved" statement bothered Jane. What does that mean? The insurance agent explained that this is something many people misinterpret in their Medigap policies. He had recommended that Molly buy her long-term care policy because he knew her Medigap benefits would not help in the nursing home.

The nursing home portion of Medicare comes under the Part A benefits. Medicare covers only skilled nursing care. However, most people require either intermediate or custodial care, which is not covered under Medicare.

To qualify for Medicare benefits for skilled nursing care, the facility must be licensed to give such care. Many facilities are licensed to give skilled care, as well as intermediate and custodial care. In a skilled nursing facility, Medicare will cover skilled (and only skilled) care from the first day through the 100th day to some degree. After the 100th day, there is no coverage or benefits under Medicare at all.

To qualify for nursing home care under Medicare, the following conditions must be met:

1. The doctor must certify that the care is necessary.

2. Skilled nursing or skilled rehabilitation services must be received on a daily basis.

3. The facility must be Medicare approved or certified.

4. The stay may not be denied by the facility's Utilization Review Committee, or a Medicare designated Peer Review Organization commonly referred to as a PRO.

5. The care must be "rehabilitative" in nature. In other words, the care must be designed to improve the patient's physical condition.

Medicare is not a reliable source of long-term nursing home care cost reimbursement. In fact, only two percent of the time will Medicare actually pay a portion of the nursing home charges. This is due to the fact that only skilled care is covered, and prior hospitalization must occur. A beneficiary is much more likely to require either intermediate or custodial care and often does not receive prior hospitalization.

According to the United States Department of Health and Human Services, the average length of stay in a nursing home is 456 days. Some sources may state as long as 2.5 years, and this is understandable. Fifty percent of all nursing home stays are for just three months or less, which pulls down the "average" figure used by the Department of Health and Human Services.

Long-term care, while a very real financial threat, is still something many people have just begun to consider within the last ten years. In fact, Molly is among a minority of people who have actually purchased protection for such care. The policies offered for long term care have changed rapidly over the last few years, and are expected to continue doing so. Some of the changes have come about simply due to competition, but many of the changes have been mandated by the individual states. Many of the major companies are trying to keep the industry out of the state's hands by requiring strict agent codes. There is no way to know how effective this actually is.

Since runaway costs are a concern to the families of our senior Americans, as well as to the elderly themselves, we are seeing some new variations in other types of policies. Some of the more recent market trends have been life insurance policies with long term care riders.

For example, for a two to ten percent higher premium, the insurer will pay part of the death benefit to the policyholder each month until the benefit is exhausted or a preset maximum is reached. If the policyowner dies before the maximum benefit is exhausted, the remainder of the benefits will go to the beneficiaries named in the life insurance policy.

Many companies are joining this concept in marketing their life insurance products. These riders, however, often do not take effect immediately upon the onset of illness, and sometimes put a limit on how much can be collected. One product requires premiums to be paid in for at least three years first and then only delivers 48 percent of the death benefit. Some insurers require hospitalization first or even three to six months in a nursing home before the policyholder can begin collecting benefits.

The fatal fault, however, of these riders, according to James Hunt of the National Insurance Consumer Organization in Alexandria, Virginia, is that they are very overpriced. As an alternative, he suggests coupling a straight universal life policy with a separate nursing home insurance policy. “The problem with these riders," says Hunt, "is that anything added on to a life insurance policy is usually a gimmick."

Long-term care insurance is now becoming one of the fastest growing insurance markets. The coverage offered, however, can be very confusing. Most states have set minimum standards for nursing home products, but many states have not yet done so. There are many bills currently up for discussion in our Congress, which would set national standards, and we may expect to see one or more of these bills put into effect in some form. Most politicians feel that it is politically safe to go financially after insurance companies.

Since Medicaid budgets are becoming so stressed and will only get more so as the baby boom generation hits retirement, the federal government is attempting to shift at least part of the nursing home costs (funded through Medicaid). Passage of the Deficit Reduction Act of 2005 permitted individual states to pass legislation allowing asset protection even if the individual applies for Medicaid benefits. Those who purchase long-term care Partnership Plan policies will be able to have dollar-for-dollar asset protection based on the amount of long-term care benefits purchased. For example, if Molly had bought a Partnership policy that gave her $50,000 in nursing home benefits, the same amount would be protected from Medicaid spend-down requirements. Income is never protected by Partnership policies.

It was now clear to Jane that her mother's Medigap policy could only be relied upon to pay for costs connected to hospital and doctor bills. If Molly was lucky enough to get some skilled nursing care benefits from Medicare and her Medigap policy, they would be few.

Jane knew that her major medical policy that she carried through her work would not pay for any nursing home costs either. Of course, Jane did not have Molly covered under her own policy, but the situation did make her realize that it could someday be herself in this position. Jane realized that long-term care was something that would one day face all of them.

Molly did not qualify for any veteran's benefits. Even if she had, the chance that there would be space for her was questionable.

Molly already knew she liked Sand Point Nursing Home, so there was no "shopping" for Jane to do. Usually, this is not the case. Many families spend weeks hunting for a facility that is both convenient and of high quality. It is common for nursing facilities to be less than desired by the patient's family.

Finding a good nursing home is mostly a matter of taking the time to inspect the facilities personally. Although there are many ways to check on the quality of care, simply going to the institutions and observing first hand is still the most effective.

Different facilities will focus primarily on different aspects of nursing care. Therefore, it is important to know what type of care the patient needs. There are homes that specialize in personal care (custodial care), while others focus on intermediate and skilled care.

Ask to see the facility's licenses and certificates. Once presented, be sure to examine the dates. You want to be sure that the licenses and certificates are current.

Check for approval of the facility by the Joint Commission on Accreditation of Hospitals. That is a non-governmental group that inspects hospitals and nursing homes. The JCAH certification is an indicator of quality, although personal visits are still advised.

By all means, check with others who have used various facilities. First hand experiences are an important indicator of quality care.

Lastly, no matter how clean or new a facility may be, the personnel they hire is of extreme importance. As an outstanding nursing home administrator once said, "You can't teach people to be kind. It has to be there to begin with." The type of personal care given is probably more important than anything else when it comes to the patient's happiness. The job of caring for numerous elderly patients, many of whom are disoriented and uncooperative, is a difficult and backbreaking job. Unfortunately, few nursing homes pay their staffs well, so turnover is often high. That is why it is so important that the location of the home chosen be close enough for frequent visitations by friends and relatives. The more often people stop by unannounced, the more likely it is that those individuals will see the actual care and tenderness given.

As we mentioned, both Jane and Molly were lucky to have a facility that they liked that was also near to Molly's children. That meant that all three could stop by often and visit with Molly while also keeping an eye on the care given. So many families are spread out across our nation that simple distance may make it difficult for children to be of much help to their aging parents. People born in America today are more likely to move or change households about once every seven years. While it is more likely that the adult children will be the ones to move about, retired Americans are also on the move. Some estimate that about one million retired Americans have moved to places such as Florida, Texas, and other Sun Belt states.

Although there were times when Jane felt that she was carrying the burden of her mother alone, she was actually lucky to have two siblings nearby to talk with. Although her brothers felt inadequate when it came to Molly's physical care, they were handy when decisions or options needed to be discussed. They were also willing and able to help financially, something that is often missing when a parent needs to enter a nursing home.

Many adult children do not know how to handle the aging of their parents. Since they do not have the ability to handle the situation, they may withdraw, either physically, mentally, or both. They may pretend that everything is all right and actually distance themselves rather than step in to help. These children may begin to visit and call less. This situation usually forces more of the burden onto another relative who has forthrightly dealt with the role of caretaker.

Having admitted Molly to Sand Point Nursing Home, she now had to deal with the so-called "fine print" in Molly's nursing home policy (actually, the size of policy print is generally mandated). For the most part, Molly had bought a fairly good product. The daily benefit Molly selected was too low, being only $200 per day, but it was certainly better than no benefit at all. Also, Jane would have preferred her mother to have taken a smaller (shorter) elimination period than the 30-day period she chose. Despite both of these factors, Jane was very glad that her mother had been wise enough to plan for such a circumstance by buying a policy. Jane realized that, had her mother asked for her advice, she would probably have told her not to buy any policy at all for the nursing home. Jane simply assumed that this would not have been necessary since her mother had Medicare and a good Medigap policy. Also, in the back of Jane's mind, she never really thought that her mother would ever need to be in a nursing home. Molly had always been so very healthy! Jane did not express these thoughts to her brothers or the insurance agent, but if she had, it would not have surprised Molly's insurance agent. He had often heard children and other family members tell his elderly clients that it cost too much to buy long term care insurance. There was always the hint that the insurance companies and their agents were somehow "taking advantage" by trying to push these policies onto people.

Molly's policy gave benefits for three years. At that point, the benefits would run out. At this point, Jane was not looking that far ahead. Simply handling each day as it came was enough of a burden. Chances are if Molly falls within the averages, her length of benefits will probably be adequate.

Molly's policy also had a 90-day waiver of premium, which meant that once she had been in the nursing home for 120 days, she would no longer have to pay premiums. Why does it not take effect after 90 days of confinement? Because the waiver pertains to confinement days that are covered by policy benefits. Since the first 30 days did not receive any benefits under the policy, they would not count towards the waiver of premium provision in the policy. Long-term policies may vary on this point; some waivers will take into consideration total time confined, while others, like Molly's policy, consider only benefit confinement days.

Molly's policy also covered all levels of care equally. This is very important in any policy. Molly was luckier, however, on another point. Molly was not admitted under skilled nursing care. Rather she was put on intermediate care from the first day of confinement. Many policies would have denied her benefits if she did not FIRST receive some amount of skilled care BEFORE being downgraded to either intermediate or custodial nursing care. This requirement specifying that skilled care must first be received is a very dangerous gatekeeper in any policy. It is dangerous because it is so often overlooked by both the consumer and the insurance agent. Even policies that cover all three levels (skilled, intermediate and custodial) of care equally may contain this dangerous provision. Very often, the brochure is so vague on this point that it would be difficult for the consumer to know it existed.

Molly's policy did not require that skilled care be given first before other levels of care could be received under the terms of the policy. Molly did not know to ask about this and she did not check on it when she bought her policy. She simply trusted her insurance agent to do what was best for her. Luckily, he was aware of this catch in many policies, so he made a point to represent policies that did not have this provision in them.

When Molly applied for her policy, there were health-underwriting standards. The policy that Molly applied for completed underwriting prior to issuing the policy. That way, no surprises come up later. If Molly had applied to a company that underwrites at the time of a claim (post claim underwriting), her agent would have requested (in writing) that the company underwrite the policy before issuing it. The company would not necessarily have done so. If it is their policy to underwrite when a claim occurs, the fact that the agent requested it be done sooner may not have been acted upon. Since Molly's policy had already been underwritten, her claims came through quickly. States have mostly prohibited post-claim underwriting for LTC policies.

Companies with lower loss ratios tend to have steadier premium rates. Remember that long-term care policies can have rate increases. Even companies that do not increase premium rates due to rising age may still increase the premium if they do so for all policyholders in the same class. A policy that does not increase its rates due to increasing age is called a "level premium" policy. A level premium policy, while not charging increases due to birthdays, may still increase premium rates on all the policyholders for other reasons. If the company is experiencing a high claim loss, it is likely that the company will choose to increase premiums at some point.

Availability of Nursing Facilities

Back in 1966, the National Commission on Community Health Services characterized the lack of sufficient places to meet the long-term illness requirements of our nation's elderly as "the widest gap in health-care facilities in most parts of the United States." That report listed the construction of additional facilities as a top priority.

America now has many types of care facilities available, although not necessarily affordable for many elderly citizens. There are senior complexes that cater to the healthier retired population by offering golf courses, activity centers and club houses. There are assisted living complexes that offer home-like apartments and around-the-clock personnel to assist in the activities of daily living. There are also high-quality care nursing homes that attempt to provide as much dignity as possible during the final years of their resident’s lives.

Many wish hospitals would take a more direct role in the type of care given by nursing facilities since many feel that hospitals could easily provide this care. In fact some hospitals do have what is commonly referred to as "swing-bed care." Such care is basically the type of care given in a nursing home. Eventually, this may become more common but so far most hospitals have elected not to give long-term nursing care for a variety of reasons.

The size of the hospital seemed to make little difference in their desire to offer extended care units. Hospitals with less than 50 beds were the only ones to express size as a reason for not offering extended care because their resources did not allow them to do so. Even some of the hospitals with less than 50 beds did offer some amount of extended care, however.

Location did seem to have some effect in this area. Hospitals in Hawaii are most likely to offer extended care benefits with nearly 40 percent doing so at the time these statistics were gathered. Some states did not report any hospitals at all offering extended care.

It is unfortunate that more hospitals have not shown an interest in offering long-term care benefits. Hospitals have manpower, supplies, and equipment at their disposal that nursing homes do not have. The need for alternatives certainly exists. It would be ideal if partial hospitalization with flexible hospital admissions, extended-care and home-care services could be available and accessible for appropriate individuals who are victims of chronic illnesses. Usually, a skilled or intermediate facility is the only option available.

Long-term care is not usually hospital associated. Community general hospitals and our teaching hospitals are geared and relate primarily to the acutely ill or those who are undergoing elective surgical procedures. The chronically ill who are admitted to such facilities as nursing homes (skilled, intermediate or custodial), psychiatric facilities, and rehabilitation facilities are typically kept out of the mainstream.

Even if hospitals did become more actively involved in the care of our chronically ill, or our very old citizens, many of the problems would still not be solved. The issues involving our nursing home population are multifaceted, highly complex and broadly inclusive of medical, social, economic, political, and attitudinal elements. Of course, hospital involvement would lessen some of the difficulties.

As we mentioned, there are many reasons why the majority of hospitals have chosen not to become involved in extended care, or long-term care. Hospitals are strongly influenced by their own medical staffs, whose practices tend to be individualized and highly varied. Few practices deal primarily with the type of patients found in nursing homes. Most emphasis is placed upon the acutely ill patients and the often striking successes achieved in coping with crises occurring at the hospital. Caring for the very aged is often a matter of simple maintenance care, with little opportunities for dramatic successes. Dealing with the acutely ill have given many hospitals and medical personnel rewarding experiences in the development of recovery rooms, coronary care, intensive care, respiratory, dialysis, and other special units and services. In fact, hospitals are now reaching outside of their major care facilities, developing mobile units and rural clinics and facilities. Most of this dramatic activity is crisis intervention; all of it for the short term.

Chronically ill patients (whose needs and problems are different and ongoing) are outside of the typical hospital emphasis. Admitted to a nursing home, the patient (most often female) is apt to be quite old. She will have multiple diagnoses, impairments, and a variety of social problems that are connected to her illness and aging situation. She is most apt to be widowed, living alone, and may even have outlived one or more of her own children. Her other children often live miles away and work outside of the home. The typical patient is often not able to walk without assistance and may have some type of mental impairment. She will be on multiple medications, taking four or more prescription drugs per day. It is not unusual for her to be forgetting to take some of her medications. She will probably have some degree of cardiovascular disease, past or present bone fractures, and arthritis. In addition, she will probably be at the poverty level within a very short period after institutionalization. She may already be at or very near the poverty level upon admission to the nursing home. This general patient profile is well known to the medical profession. Given the limited resources, there is not much interest in the medical field to make this typical patient a priority, either in a hospital setting or in a general field of practice.

Every so often, a new political pressure will bring these problems into view. Usually, there is widespread sympathy for those in this situation and a desire to solve the many problems experienced. However, it always comes down to the same major block to doing very much to improve the individual's situation: funding. Long-term care is very expensive and government funding is likely to bring existing costs even higher. If government funding ever does become a reality, those who are currently handling the situation on their own (usually at home), will come forward to take advantage of that available funding. While these people may certainly be deserving, it still comes down to the same thing: is the taxpayer willing to take on one more financial load?

A clear national policy is needed, if only to give direction and bring about cohesion to the uncoordinated, uncommunicated and highly proliferated efforts and expenditures of billions of dollars in behalf of the chronically ill. In many areas, the government has tried to bring about reform and improve the conditions of care in the many facilities that take on the task of giving day-in, day-out care for the growing elderly population. It is felt by many that hospital involvement would actually upgrade much of the care given, since the standards imposed by hospitals would flow over into the nursing home environment. Our nation's hospitals are more aware than ever before of the situation faced by our elderly and more and more involvement has been seen. The future will likely see more hospitals looking at providing extended benefits as they experience less patients for other reasons.

Limiting Health Care: Is It An Option?

In 1986 a book published by Random House written by Joseph A. Califano, Jr. titled "America's Health Care Revolution, Who Lives? Who Pays?" raised many questions. Mr. Califano probably did not reflect the majority of Americans in his views, but he certainly hit some important aspects that troubled our society at the time, many of which still exist today. When the majority of our taxes pay for the care of the elderly, who suffers? Often it means our nation’s children have less so that the elderly can be cared for.

Joseph Califano pointed out that our science in the medical field has been making some dramatic breakthroughs. People who, only a few years ago, would have died are now living. The quality of life may be questionable, but they are living. He pointed out that, as we are experiencing the "graying of America" more and more people are in the retirement segment of our population. This segment consumes the largest portion of the most expensive high-tech medicine and procedures. Recently, court cases have even had to attempt to decide when life begins and when life ends.

With all of the new technology in the medical field, we cannot overlook one major factor: such technology is extremely expensive. Of course, it is not simply the technology that has driven our health care costs up so dramatically. Waste, in many areas, is also a major factor in our rising health care costs. If we Americans had open access to good health care as a nation, perhaps we would not mind the increasing costs so much. The truth is, however, that fewer and fewer Americans actually have access to good health care. As Secretary of Health, Education, and Welfare, Joseph Califano found, for example, that more than 30 percent of Medicare's multi-billion-dollar budget was spent on patients with less than a year to live. This 30 percent segment usually received high-tech, life-extending care in hospital's intensive care units.

There are numerous examples that could be given of waste and duplication in our medical system. Much of the fraud and abuse is directly in the Medicare and Medicaid system. It has been very easy for medical providers to participate in that fraud and abuse, since the system initially did little to prevent it. Today there is an active division tracking fraud and abuse, but while some are caught many more are not.

It would be easy to blame all the problems on fraud and abuse. However, that is only a part of the overall problem. Fraud, abuse, and waste are really symptoms of the health care system in general. Eliminating them is certainly necessary, and doing so will save some money. Disciplining abusers will probably temporarily curb future abusers, although fraud and abuse will always exist in some form.

The real problem lies in how Americans view health care as a whole. The American way has traditionally been "more, more, and still more." Throwing additional money into the system has not resulted in better care or even in a larger quantity of care for the currently uninsured. The debate on how to best provide health care for all Americans continues. The Affordable Care Act, often referred to as Obamacare, promised health care for everyone, but it was not well received by all. Under the Trump Administration, portions of the Affordable Care Act appear ready to topple.

We have gotten to this point as a result of multiple factors. Doctors placed a broad monopoly over the practice of medicine. As a whole, the public accepted the thought that only doctors could decide how to treat us. Americans basically quit taking responsibility for their own health. Hospitals became the first choice for treating even minor ailments, especially if the cost was covered by someone else. Corporations and unions allowed expensive health care without questioning the costs. Their workers often did not even know what their health care did cost the companies they worked for. As long as the workers did not receive a bill most simply sought medical care. Even when it came to programs paid for by the government, such as Medicare and Medicaid, the cost system was tailored to the desires of the hospitals and doctors. There were virtually no incentives for efficiency.

On top of all this, our elderly population expanded far beyond expectancies. That placed unanticipated financial demands on Medicare to provide the high-tech services. Unfortunately for the taxpayers, our government reacted by simply shifting budgetary problems around, without ever really addressing the health system itself. The cost-plus system that Medicare worked under eventually had to be addressed, but by that time, the damage was complete. There is still much work to be done, but at least the problem is now being recognized by the government.

All of us must take at least part of the blame for where we are today. If we had health care covered by our company, we seldom worried about the size of the bill. As long as we did not pay for it, we considered it someone else's concern. Companies and unions themselves did little, if anything, to discourage overuse. Health care benefits were (and still are) a bargaining tool during union contract negotiations. Few of us were truly concerned about those who had no company paid health care plans, as long as we had it for ourselves.

This attitude was not born overnight, of course. At the beginning of the twentieth century, (which is not all that long ago) the leading causes of death in the United States were tuberculosis, diphtheria, influenza, pneumonia, cholera, and gastrointestinal infections. Longevity (or the lack of it) was seldom a concern. Over the past decades, due to several factors, America has nearly eliminated these types of deaths. Wonder drugs, such as sulfa drugs, penicillin, streptomycin, and many others, certainly contributed to many our successes in the health care field. New techniques were found in the treatment of a variety of diseases and injuries. All of these factors began the change in our health care system.

Until the twentieth century, hospitals were places where people died. No one looked forward to checking in. In fact, an 1870 English study concluded that the death rate from surgery was higher in a hospital than for surgery done at home. At that time, what medicines were available could be purchased without a prescription, so it was not even necessary to see a doctor. At that time, a doctor's main role was to console the afflicted and help find the priest to give last rites.

Towards the end of the nineteenth century and accelerating into the twentieth century, the role of doctors changed as our perception of them changed. Primarily, this change came about due to their increased knowledge. As medicines were found and the importance of sanitation became known, Americans began to view doctors as healers. As their profession became one of importance, doctors began to enjoy new found economic and social status.

Doctors organized state medical societies and created the American Medical Association in 1845. The AMA had little influence initially, since their newfound status had not yet occurred. Initially, few doctors even bothered to join the association. By 1910, however, the AMA claimed 70,000 members which was about half of the doctors in America. By this point, the AMA was beginning to create political action groups. They quickly became a potent force in the legislative and regulatory process, both locally and nationally.

As quacks began selling often dangerous remedies to the public, the AMA began to lobby for restrictive prescription drug laws. Eventually, state and national governments made the doctor's prescription the indispensable key to patient access. With the amount of drugs on the market today, there is no argument that such restrictions are necessary. It would be impossible for the layperson to understand all the drugs available, although it has been argued that many prescriptions could be just as well prescribed by pharmacists, eliminating costly doctor visits.

Health care is, as we know, a financial industry. It is the nation's second-largest employer, coming in only after education. It is the third-largest industry in consumer spending with food and housing coming in first and second. The health care industry consumes over 15 percent of our gross national product (GNP) with over $387-billion in spending. In 1984, Americans broke the billion dollars per day mark in health care spending. We continue to spend, yet many Americans are still uninsured or under-insured. With current changes, we are told that loss of coverage under the Affordable Care Act will add more uninsured to these figures.

Because health care figures are so large, people tend to lose sight of what they potentially mean to us individually. We pay for health care in nearly everything we purchase. More than one cent of every first-class postage stamp goes to pay for the health care of postal workers and their dependents, for example. This is true for most of the products that we buy. For years, government health programs, not defense or Social Security, has been the fastest rising segment of the federal budget.

Sadly, Americans who have no health care coverage themselves are supporting those who do. They support other's programs through the products they buy and through the taxes they pay. The fastest rising cost of doing business has been health care and health insurance premiums rather than labor or raw materials. Obviously, these costs are passed along to the consumer. Health benefits for active and retired employees are a large part of the reason why American steel can't compete with foreign steel. We pay far more for our health care than other nations, yet we do not equal other nations in the quality of our care.

All of this may seem remote from the dilemma of long term nursing care, but we cannot solve the problems of one segment of our health care system without looking at the system as a whole. We want our government to solve many health care problems, but the financing to do so may be prohibitive.

Facing Up to the Facts

During the coming years, it is estimated that one out of every 180 people living in the United States will come to terms with living in a nursing home. While it certainly affects the individual actually in the nursing home, it also severely impacts their families, and, in some cases, even their friends. If you took a random poll, it is likely that very few, if any, of the people you talked with would have any idea how to go about handling the numerous questions, paperwork, and costs that come with entering a nursing home. Most simply do not want to know about it, but even if they did, finding the answers would not be an easy task.

Anyone can end up in a nursing home for a variety of health or age reasons. Even young people sometimes end up in a nursing home. Nursing home residents are a cross section of our society that includes all ethnic, religious, and racial segments. The need for nursing home care is on the rise due to such things as Alzheimer's disease, and other illnesses related to growing older. Many of these people would simply have died in the past. With our advancing medical technology, living longer often means no longer being able to care for oneself adequately.

Since any person could end up being involved with a nursing facility, either as a patient or as a family member of a patient, the need for knowledge in this field belongs to everyone, not just insurance agents. Having general knowledge may mean saving hundreds of thousands of dollars in nursing home fees.

Agents have likely heard some people say: "I will never go to a nursing home. I will stay at home until I die." We realize that such a statement is based on desire, but has little to do with reality. No one can say for certain that neither they, nor their spouse will end up in a nursing home. We know that a certain percentage of people will end up living in a nursing home; we simply cannot pinpoint exactly who those people will be.

Contrary to popular belief, Medicare does not handle the costs of long-term nursing home care. An AARP study revealed that fully 70 percent of those they polled thought Medicare would cover such expenses. Medicare does a good job with hospital and doctor bills, but simply will not cover long term care costs, such as a nursing home.

In addition, with few (if any) exceptions, private insurance also does not cover long-term nursing home care. Only policies specifically designed to cover such expenses will do so. The general type of medical policies carried for major medical coverage exclude long-term care benefits in a nursing home. Many state insurance departments are encouraging the use of nursing home policies because other coverages do not provide these benefits.

The majority of people who enter a nursing home end up poor even if they were not so when first admitted to the facility. That is not surprising considering the cost of such care. Medicaid, according to a government pamphlet on it, is "a program that pays bills for low income people who cannot afford the cost of health care."

While that statement is over simplified, it does basically define the program, although it is said by some to be misleading. Medicaid is a federal program, also known as Title XIX of the Social Security Act enacted into law in the year 1966. You and I fund Medicaid through the taxes we pay. Taxes are used on both the federal and state level to fund Medicaid, since it is a joint venture between the federal and state governments. Each state individually administers Medicaid, so there can be differences from state to state.

Unfortunately, due to the prohibitive costs of long-term care, Medicaid is not really health care for just the poor any longer. People who were never poor prior to needing a nursing home are now quickly qualifying for Medicaid. Medicaid is quickly becoming an option for the middle class segment of our society. For many people, who prided themselves on "paying their own way," this is a depressing circumstance; one which may cause additional problems as that depression sets in.

Although Medicaid is a federal program, each state interprets the regulations according to its own needs and may administer its funding differently. As a result, what worked for Great Aunt Bess in Iowa may not be the same for Uncle Charlie in New York. The basic format of Medicaid is the same for each state, however.

Many people have said they felt that the agencies working with Medicaid preferred that consumers stay ignorant of the Medicaid process. In some cases, this may be true since many of our states are becoming burdened with the weight of the claims against the Medicaid system. If the system can keep a portion of those who would like to draw Medicaid out the system, it saves the state that much money.

We have seen Molly go through the options that were available to her. While Molly (from our example) was likely to eventually end up on Medicaid, she did not initially qualify since she did have some savings and monthly income. What would happen if the situation involved a married couple with assets? Sometimes, the results can be surprising.

Let's look at Clyde and Connie Rose, a married couple. When Clyde began to experience mounting health problems, Connie at first tried to care for him at home. Initially, it looked like she might be able to handle the situation. It was not until her own health began to fail that the family realized that someone else would need to care for Clyde.

Clyde's family never entertained the idea of stepping in to care for him. Both of his sons worked, and his daughters-in-law were not able to cope with an invalid along with their own family responsibilities. Connie's health, while failing, was still good enough for her to stay in her own home as long as she did not try to carry the burden of Clyde's care.

On the advice of their attorney, the boys, Joe and Darren, sat down with their mother, Connie, and looked over the finances. Clyde and Connie had been disciplined savers during their working years, and Clyde had always worked steadily in his roofing trade. He received about $18,000 per year in Social Security benefits, but did not have a pension since he had always been self-employed. Clyde and Connie had always considered their savings as their pension. They had managed to save $250,000. Since their home was paid for, as was their car, they had no bills other than the normal monthly living expenses.

The savings was in a jointly held account, which allowed either Clyde or Connie to withdraw money. Under Medicaid, these funds would be considered totally available to Clyde, which made him ineligible for Medicaid assistance until he "spent down" these assets to the acceptable Medicaid level. If the monthly income of Connie were high enough, she would also be responsible, should Clyde get on Medicaid, for paying a portion of the monthly nursing home costs.

Molly did not qualify because she did have a good monthly income. At some point, as costs continue to rise, Molly might eventually become eligible. For Clyde and Connie, their monthly income was not great, even with the additional amount that Connie received from Social Security.

Joe and Darren knew that the first priority was to protect Connie. She was likely to live for many more years, and it was essential that the couple's savings be available to her during her life. If Clyde's nursing home confinement totally wiped out their savings, Connie could not possibly live on the small amount she received per month (which was based on Clyde’s earning years). Since they lived in a state that allowed the spouse to take possession of the savings account, Connie was able to move the savings into her name entirely (removing Clyde's name from the account). This is not necessarily possible in all states. There is a time period that allows the spouse to move assets entirely in order to protect them from Medicaid spend-down requirements. When transferring assets, the illness must be handled at home for a long enough period of time to allow completion of the transfers and still qualify for Medicaid. The Deficit Reduction Act of 2005 increased the allotted time to transfer assets from three to five years.

Sometimes, types of trusts may be used in the attempt to shelter funds, allowing Medicaid qualification. For the most part, this no longer works. There are laws against transferring assets to others, including a trust, for the purpose of qualifying for Medicaid long-term care benefits, while preserving assets.

There are some differences among the states when it comes to Medicaid. However, there are some basic elements of Medicaid that tend to hold true in all states. To apply for Medicaid, a person must:

1. Be aged,
2. Reside in the state in which he or she is applying,
3. Be a legal citizen, or a legal alien, and
4. Be medically in need of a nursing home facility.

Let's look at these requirements a little closer. The term aged means 65 years or older. Although Medicaid is medical care for a person of any age, qualifying for benefits in a nursing home does have age requirements.

The residency requirement is usually immediate. That means the legal domicile, or residence, at the time that the nursing home confinement is required. Durational residence is not required. Durational residency means having to reside in a state for a specified period of time, in order to qualify as a resident. The simple legal residence at the time of Medicaid application is sufficient.

The citizenship requirement is either United States citizenship or a legal alien status. Some states are also working on including people who are eligible under the new Amnesty regulations, and may apply in those states. These people may be referred to as Legal Permanent Residents.

It is not surprising that Medicaid requires the beneficiary be in need of medical care. We have seen cases where individuals are seeking a place to live more than needing medical care. If Medicaid would pay for residency in a nursing home for any reason, it may be assumed that it would surely be abused.

There is one last requirement not previously mentioned that is certainly important. An available bed in a facility willing to admit the person must be found. If the beneficiary is being discharged from a hospital, this is not likely to be a problem. Typically, hospitals must find an available bed in order to discharge the patient. If, however, hospitalization was not a factor, it will be up to the family to find an appropriate facility willing to take on a Medicaid patient.

Getting into financial qualifications for Medicaid is tricky. Requirements vary from state to state and, as they change how they look at the program, may change from time to time within any given state. It is necessary to understand that this program is massive. It would take an extremely large manual to fully cover the financial aspects of Medicaid. Once done, it is unlikely that anyone (with a sane mind) would even want to read it. However, there are some generalities that we will mention.

As we stated, different states will treat the income of the non-institutionalized spouse in various ways. Some states set a specific level of income that the non-institutionalized spouse may receive without affecting the institutionalized spouse's qualifications. If the non-institutionalized spouse receives over that amount, the portion that is above the line may be used to either offset what Medicaid will pay (with the well spouse perhaps having to chip in) or will affect the actual qualification.

If the non-institutionalized spouse makes less than a specified amount, the spouse who is in the nursing home may actually have some of his or her income diverted to that non-institutionalized spouse. Such could be the case for Connie Rose. Since her income was only $500 per month, some of Clyde's income could be diverted to Rose for her living expenses even though Clyde is in the nursing home.

In September 1989, there were changes in how individuals qualified for Medicaid. The Medicare Catastrophic Coverage Act of 1988 was originally a lengthy bill, which was repealed on December 13th, 1989. Only a small section of this bill was left in effect with that portion affecting Medicaid for the aged (not all Medicaid beneficiaries) in long-term health care facilities. This section had been written specifically in an effort to aid the spouse who was not institutionalized. It was hoped it would protect the income and resources of the couples in order to guard against impoverishing the community spouse along with the one in the nursing home.

In simple terms;

1. All states are required to exempt the home from being included in the countable resources provided the community spouse, or dependent child, in some cases, who had been living in the residence prior to institutionalization of the ill person. All personal property and household goods were also exempt.

2. The transfer of assets for the purpose of meeting eligibility requirements for Medicaid must be completed five years prior to application. Previously, the time limit was three years.

3. Each state will determine the amount of liquid assets the community spouse is permitted to retain, thus the variations from state to state. No resources of the community spouse will be considered available to the institutionalized spouse after he or she has been declared eligible for Medicaid.

4. In applicable situations, the monthly income that can be retained by the community spouse will gradually be raised.

Applying to Medicaid

When applying to Medicaid, there will be some basic information that will be required. There may be more information required than what we have listed, depending upon the state of application, and the specific case in question.

1. A birth certificate, or other proof of age.

2. The applicant's Social Security number. This is an absolute must in any state.

3. Any proof of earnings, if applicable.

4. Letters or forms with amounts of income from Social Security, SSI, VA, or pensions that are being received. In fact, any monthly income must be reported.

5. Life insurance and medical insurance policies. It is best to simply bring in the policies when applying.

6. Savings account or banking statements.

7. Information on ownership of real property and motor vehicles.

Processing the application for Medicaid usually takes between 30 and 45 days, but may take as long as 60 days. When an applicant is approved for Medicaid that status will usually be reviewed annually. Any significant changes in that person's financial standing could cause him or her to become ineligible for future Medicaid benefits.

Judging the Quality of Nursing Facilities

Most people have no interest in looking at nursing home facilities. That is certainly not surprising since few of us enjoy such settings. However, having the knowledge in advance is a definite advantage when the need arises. Typically, when a member of one's family suddenly needs to enter a nursing home, there are many emotional factors involved. Just as Jane discovered, the emotional roller coaster that evolves is a difficult ride. It would have been much easier on Jane had she been better prepared. Remember that Jane already had a facility that she knew she could depend on. Had she also had to find a place to put her mother, it would have been much more difficult.

In many cases, simply having available knowledge will prevent the loss of funds that could have otherwise been protected. Knowing the laws and regulations within your given state can be very important in the future. Certainly, we are not advocating that you make a second career out of studying nursing homes and the admitting requirements, but some simple, basic knowledge is well worth having.

Many families plan to keep their elderly parents at home, avoiding the nursing home entirely. Their intentions are good, but their reasoning is faulty. While they may succeed for a period of time, eventually the weight of caring for someone around the clock makes it impractical. All the family, including young children, must be willing to sacrifice in order for the home care to succeed. When the stress of providing around-the-clock care becomes difficult, perhaps even impossible, priorities may need to be reconsidered for the good of all.

Consider these situations:

1. A parent has a sound mind but, due to age, is not able to be left alone.

2. A widowed parent would like to remain in his or her own home, but due to medical or mental conditions, is not safe to leave alone.

3. A parent has lost their mental ability, but is otherwise healthy. Since their physical health is good, they are prone to wandering, if left unguarded.

4. A parent, with failing health, has no relatives or children close by.

All of these situations make the use of a nursing home a possibility. A forgetful parent who constantly forgets to turn off the stove burner, a parent who is no longer able to drive even to a doctor's appointment, a parent who does not remember to take important medication, or a parent who is simply very, very old often cannot live alone.

There are some general questions children can ask themselves regarding the need (or lack of need) to consider a nursing facility:

1. Is the parent(s) still able to carry on the everyday routines necessary in daily living? That would include such things as shopping, getting to appointments on time, caring for their home, cleaning and cooking. Of course, some of these duties may be assigned to hired help, such as cleaning and minor home repairs.

2. Does the aging parent have friends, or some type of social contact? It is very important for a person of any age to have some type of social interaction. If just coping with a daily routine of being alone is the problem that may be able to be solved through local agencies and programs. The church is often a good starting point.

3. Are your parents physically near or in touch with someone who can arrive at their home quickly if the need should arise? Is your parent(s) able to use a medical support system? This may be something as simple as calling 911 in an emergency.

These simple questions may be able to help in evaluating the situation. Of course, there are times when your parents will not let you make decisions concerning their place of residence. If your parents are able to make their own decisions (they are sound of mind), then all you can do is suggest. Even if you do not agree with how they live, the final choice will still be theirs.

Many older Americans are choosing to live in retirement communities. Generally, these are apartment buildings designed specifically for older people. Often meals are provided in a common dining room, which relieves the older person from having to cook (and frees their children from worrying about such things as stove burners left on). There is usually ample staff on duty to keep tabs on each resident. Often these retirement communities can keep an elderly person out of the nursing home. Some of these communities even offer such things as assisted care. Assisted care may include help in bathing, dressing and taking medications. Such living arrangements may keep some elderly people out of the nursing home.

When a nursing home is the only realistic solution, there are some positive points to the decision, which should not be overlooked.

1. The person is no longer isolated as is often the case for individuals who live alone.

2. The daily chores are no longer a burden for the individual. Such things as cooking, cleaning, shopping and home maintenance can become a burden for a person whose health is not good.

3. If a medical emergency or crisis should arise, the person is in an atmosphere that is geared to meet it.

4. The mental comfort of having staff personnel around can be great. This is especially true when the staff members are warm, caring, and skilled.

5. Many of the nursing facilities go to great lengths to establish a "social" aspect to the living arrangements. In other words, they try to facilitate friendships and associations with peers on a fairly frequent basis, perhaps even daily. For a person who had been previously isolated to some degree, this can mean a great deal.

Of course, these advantages do not mean that a nursing home is the best solution in all situations. In fact, most people would probably prefer to remain at home when possible. Even so, these advantages should bring some degree of comfort to the family members who did not want their loved ones in a nursing home at all, although it was appropriate.

We previously discussed the types of nursing homes, such as skilled, intermediate and custodial. However, there is certainly more to choosing a facility than the type of care they are licensed to provide. Sometimes the facility chosen will depend to some degree on how the bill is to be paid. If the patient, or the patient's family, is paying the bill (perhaps with the aid of a nursing home policy), choosing the facility will likely be based upon the location of the facility in relation to the children, the daily cost, the cleanliness of the institution, and a general "gut" feeling for the place. Often the location is a primary factor since the children or other close family members must be able to come and go with ease. If the facility is too distant, this may not be possible. It is very important that family members come and go often, and at different, unpredictable times. When the staff knows that family members and friends will be checking in often, the care is more likely to be good. The staff would be less likely to leave such a patient without needed care for long periods of time if there is the possibility that a member of the family or a family friend may easily discover the situation.

When Medicaid is paying the bill, there may be less choice in the facility used. Each facility has allotted a "set" amount of beds to Medicaid patients. In many areas of the country, these beds are difficult to come by. As a result, a patient may end up farther away than the family would have liked. There are two important basic federal regulations (Federal Regulations 42 CFR 435.403(j)(1), 42 CFR 430.0 (b)(2)(ii)(residency) and (financial) 45 CFR 80 and 84) that govern all nursing homes participating in the Medicaid program that are often violated by the nursing homes themselves.

The first one states that no nursing home, participating in Medicaid, can require that a person seeking entrance into a nursing home must have lived in a specified area for any specific length of time. In other words, a durational residency requirement is illegal. Even so, many people find that some nursing homes do try to use a durational residency requirement to prevent admittance of patients.

The second one states that no nursing home, participating in the Medicaid program, can discriminate in any manner when it comes to patients whose bill will be paid by Medicaid. In other words, they may not be given inferior accommodations, care, locations and so forth. The care given a Medicaid patient must be the same as the care given private pay patients. In fact, a nursing facility may not designate a specific area as "Medicaid." This means that, even though a designated number of beds are assigned to be Medicaid beds, those beds may not be located in a specific wing of the facility, for example. The designated number of beds simply means that a percentage of the total capacity is assigned to Medicaid patients, but they are not "specific beds," per say. Bed number 20 may hold a private pay patient one month and a Medicaid patient the next, since the capacity simply states a percentage of the whole to be Medicaid.

There are those families who have felt that their family members in a nursing home under Medicaid were given less care than a private pay person. It is hard to know if this has actually happened, or if the family members were simply feeling the stress of the situation as a whole. If, however, a family does feel that this is the case, they should report it to the proper authorities.

Molly was very lucky, as we previously stated, because she had already had an experience with a nursing home, and knew which one she would be happy with. In addition, the facility was located conveniently for the children, and the staff knew Molly.

For most people, this would not be the case. Few families know where to go when a nursing home or facility is needed. There are some groups that may help, or a doctor or hospital staff may have some suggestions. The family may call or write to senior citizen groups, or church volunteer groups (who work with the elderly). The Department of Health in the given state may be able to advise the family, since they license all nursing homes. However, this does not always produce results as quickly as needed by the family. Usually, the family ends up simply consulting the yellow pages of their local phone directory. Once calls are made (to see if a bed is available under the funding being used), the family must go from facility to facility until they are satisfied with the accommodations available at a particular facility.

There are several things to look for when selecting a facility. Some of the items are simply a matter of using your eyes and nose. Such things as cleanliness are very important to the well-being of the patient. There should be a general appearance of order throughout the facility. Watch for odors, but also realize that you are in a nursing home. There will be occasional odors. There should not be long lasting odors. The residents should be clean in dress and person. The men should be clean-shaven; the women should have clean, managed hair.

Do not overlook the furniture. While it should be clean and presentable, the furniture should also be sturdy without sharp corners or obvious safety hazards. The hallways should be clean and uncluttered. The hallways should be well lighted, as should the entire facility. There should be grip railings along the hallways. In fact, the entire facility should give an air of light and vitality.

The dining room and meals should be of particular importance. Often, the meals are the highlight of the patient's day. It is a time of group gathering and conversation. The dining room needs to be clean, pleasant and well organized. The tables and chairs should be positioned to allow easy passage between and around them to prevent accidents. Certainly, there needs to be at least one hot meal per day; two per day would be better. Since some of the residents will need assistance in eating, it is important that meals be supervised and that personnel be available to assist those who need it.

The food itself should be well balanced. The family is wise to make a practice of joining the patient when meals are served. If the family finds the taste or texture of the meals to be poor, then it is likely that the patient will feel the same way. If the patient does not eat properly, for whatever reason, their health will surely suffer.

The family will want to make a point, when looking for a nursing facility, to inspect the kitchen at the facility. It should be clean and well lighted. The Board of Health or the Department of Health should also approve it. The kitchen should be set up so that it can respond to special dietary needs since there will surely be those patients that must have special diets. If the kitchen does not appear to be clean and organized, it is likely that other areas of the facility will be lacking also, since the kitchen should be a major focus for the management staff.

Inspect the toilet facilities when looking for a nursing home. They should be designed to specifically accommodate wheelchair residents, including a handrail near the toilet and in the shower or tub. The showers need to have seats in them. This is not only for convenience, but for safety as well. Of course, there must be plenty of hot water also.

The better facilities will have recreation rooms. It is important that the residents have a place to socialize and make friends, as well as receive recreation. The room(s) should be pleasant, bright and cheerful. These rooms make visiting with the patients more homelike which adds to the comfort of both the patient and the family. Look for designated smoking and nonsmoking rooms, especially if the patient is a nonsmoker. Ask the administrator what recreational activities are provided for the residents. Some of the activities should include physical activities that give mild exertion for those residents who are able to participate. The types of activities offered should have variation and be geared to the age group involved.

We often do not think of the patient's room as a "bedroom", but to the patient, that is exactly what it is. Even if the patient shares the room with another, it still needs to be personalized to the individual's tastes. Ask if personal items, such as wall hangings, may be brought in and displayed. The rooms themselves should be light, airy and cheerful. Each room should have windows and open into the corridors. Each room should also have easy access to a nurse-call device (check it personally to be sure it actually works), fresh drinking water, a privacy screen, if two or more persons share the same room, a good, working reading light, and a separate closet and drawers for personal belongings.

It is ideal if the facility also has additional benefits, such as an on-grounds hairdresser and barber, a library and transportation to doctor appointments and nearby community affairs.

It is also ideal if the facility has an outside area on the grounds that allow the residents to enjoy good weather. An outside recreational area might be simply a shaded area with chairs and tables. The walking area needs to be safe, with the use of walkers and canes kept in mind. Usually, such areas are paved. The outdoor area should also probably be fenced, since many of the residents may be confused and apt to walk away if left unsupervised.

Certainly, safety must always be a concern. Look for accessible exits in the event of a fire. All exits should be clearly marked, and furniture or other items should never block them. Nor should an exit ever be locked. This means that the facility will need to have enough staff to be able to watch the residents in case one should decide to leave the building unsupervised by way of the fire exit.

Safety features in general should be noted. Are rugs secured in a safe manner? Is the general building in good repair? Does the plumbing seem modern and well cared for? Does the facility have a general air of good upkeep?

Once the facility is decided upon, most families will also need to inquire as to the cost of the care. If Medicaid is paying, the rate is probably already set, but private pay families will need to understand what costs they will be facing.

Do not be shy about asking financial questions. It is most important to fully understand all charges beforehand. Here are some basic questions that need to be asked:

1. What is the rate per day for each level of care (skilled, intermediate and custodial)? Even if you know which level of care you are seeking, that level may not remain constant as health conditions change. Therefore, it is wise to know the costs for each level of care.

2. Which items or services are not covered under the basic rate? Usually, there is an extra charge for such things as laundry services for personal clothing, personal items such as a toothbrush, special mattresses or even the use of a wheelchair. Any therapy services will also probably be extra.

3. Even if your family member is entering as a private pay patient, it is best to ask if the facility accepts Medicaid patients. Most people use all their life savings up within a short time period. If the family has gone to the trouble of finding a facility they like, chances are they will not want to have to move the patient when the money runs out. Also, the patient will be settled and probably not want to be moved either.

4. Along this line, ask about the procedures for making the transition from private payment to Medicaid. Will the facility offer assistance or counseling should the transition need to be made?

Once the family has selected the facility, they will also want to advise the patient's doctor of their choice. Ask the doctor if he makes emergency calls to the facility. Find out if the doctor works with the hospital used by the nursing facility. Often a nursing facility has made arrangements with a nearby hospital to handle emergency situations. If the patient's regular doctor does not work with that hospital, you may wish to have him or her suggest an alternative doctor, in case the need arises.

There are some basic facts about nursing homes that tend to be fairly constant within any given state although variations may exist from state to state. The following list is not meant to be inclusive, but it does give some basic information that you will want to gather:

1. Nursing homes generally must be licensed by the Department of Health in the state where located.

2. All reputable nursing homes who participate in Medicaid, must apply for a certificate to do so. The state makes the determination to grant this certificate based on demonstrable need, such as statistical information on the relation of the aged population to the number of beds currently available. Part of the process determines how many beds may be allotted to Medicaid patients.
   Generally speaking, Medicaid works according to a set formula. For example, perhaps 40 out of 100 beds would be considered normal to allot to Medicaid. Whichever formula is used in any given area, it is basically consistent within that given state.

3. The percentage, as a whole, of the nursing homes that participate in Medicaid. Again, while the patient may enter the facility as a private pay patient, that situation may rapidly change. Knowing how likely it is to find an available Medicaid bed can be very important and may alter the choices made.

4. The cost of a facility can vary, even within the same state. For the most part, however, the same kind of care brings basically the same price. In other words, the cost for custodial care may vary depending upon some of the factors in the nursing facility (the luxury provided, the demand in the area, etc.), but the basic cost will be close around the state, in most cases.

5. It is very important to learn how your state handles evictions. Does the nursing home have the power to evict a patient for inability to pay? Many states protect the residents from such actions, but not all states.

Financial Considerations

We have touched upon the financial considerations of receiving long term nursing home care earlier in this text. There are, of course, numerous books available on personal finance, but very often they are not particular to how it relates to long-term care. Usually, the person entering the nursing home is past the point of financial planning, having already done so in his or her younger years. Their "financial planning" now involves hanging on to what they already have while still enjoying life. Typically, the person has some sort of nest egg put away; a nest egg, which the nursing home confinement will eat up quickly.

When we look at the financial considerations, as they relate to the nursing home admission, we will be assuming that there is adequate protection for the other areas of their life, such as a sound Medigap policy. This text also will not be addressing other complications that might arise, such as counseling for depression that a non-institutionalized spouse might require.

The financial devastation brought on by a nursing home confinement can be minimized to some degree. In some situations, it may even be avoided.

Certain steps should be taken immediately:

An inventory of the person, or couple's, net worth should be made. It should include:

Monetary Investments:

• Cash on hand
• Checking accounts
• Savings accounts
• CDs (certificates of deposit)
• Treasury notes
• Bonds (corporate, Treasury, municipal, or convertible)
• Mutual funds
• Stocks
• IRAs

Business & Real Estate:

• Business partnerships including limited partnerships
• Real estate property, including investment-types

Retirement Funds & Pensions:

• Civil Service
• Foreign service
• Military service
• Railroad retirement
• Corporate pension plans
• Retirement plans of the corporate type
• Keogh profit sharing plans
• Corporate profit sharing plans

Insurance Products:

• Annuities
• Cash value life insurance
• Term life insurance
• Medical policies, such as Medigap plans
• Any other insurance that is carried

Personal Possessions:

• The personal home
• Vehicles
• Paintings and other artwork
• Antiques
• Rare books
• Jewelry
• Silverware, china or crystal, and
• Any other valuables

The previous lists are the person or couple's assets. Against this list must go the person or couple's liabilities and debts. This might include, but would not be limited to:

• Any outstanding mortgages, whether it was on the personal home or on business real estate, such as rentals,
• Auto loans, including recreational vehicles,
• Credit card balances,
• Private or personal loans, and
• Any other debts.

Do not overlook any loans for which the person or couple has acted as a cosigner.

When the resulting figure is known (assets minus liabilities) you will have the person's or couple's net worth.

Assets minus Liabilities = Net Worth

This resulting figure must be considered in terms of whether we are dealing with a single person or with a married couple. Some of the assets may be joint while others may belong exclusively to one spouse. The assets will also have to be viewed according to how the resident state views assets.

If the patient will be a private pay (at least initially), "spending down" may occur. That means that the patient, in paying privately for his or her care, begins to diminish his or her personal assets. This is likely to occur where qualifications for Medicaid are not immediately met by the institutionalized person. At some point, it is likely that the beneficiary will qualify for Medicaid, since this is normally what eventually happens.

It may be wise to seek some type of professional advice in trying to protect some portion of the acquired assets. There are many possibilities, some of which may be applicable and some of which may not be, depending upon the individual circumstances.

A Power of Attorney should be obtained by the non-institutionalized spouse. This is a legal document granting another person the ability to act in behalf of another specified person. Typically, it states certain conditions under which this may take place, and tends to end should the person become mentally incompetent. A Durable Power of Attorney tends to begin when a person becomes mentally incompetent.

A trust of some type may be applicable. There are many types of trusts and many people willing to sell them. A trust document basically creates another "entity", which holds the title to the property rather than the person. There are many, many misconceptions when it comes to living trusts. If a revocable living trust is used, it is very unlikely that any assets will be protected in any capacity. It has become common for salespeople to say that a revocable living trust will protect the person from such things as creditors, lawsuits, and even taxes. Any asset that may be removed and used for the benefit of the grantor carries NO special protections. As we know, a revocable trust does allow for assets to be used in any way desired. Therefore, a revocable living trust WILL NOT protect assets from a long-term care nursing home confinement.

A trust may, however, aid in other ways. Some types of trusts, such as the irrevocable trust may especially be beneficial. Only a professional in this field, preferably an attorney, should be consulted. Many banks have trust professionals that may be consulted and they often tend to give better advice than the mainstream counsel.

Certainly, a will needs to be in place. In fact, a will is one of the very first documents that every person of legal age should have in force. Many professionals advise that the will be registered at the local government office.

There are other documents that may also be used, depending upon the circumstances. A Living Will is a tool used in some states to avoid prolonging life by artificial means. A living will says that the use of extraordinary means of life support systems may not be used to extend their life.

Guardianships are often used to protect minors or handicapped individuals. Sometimes the individual being protected is the institutionalized spouse. This is especially true if the person's mental ability has diminished.

Transfer of Assets was previously mentioned in the text. The ability to legally do this may vary to some extent from state to state. Usually this applies when Medicaid application will be made. It is legal to transfer any or all assets of any person applying for Medicaid, providing that the transfer has been completed at least five years prior to applying for Medicaid benefits.

Often, people feel tempted to handle the preservation of assets themselves, either because they feel knowledgeable enough personally, or because some type of salesperson, friend or relative gives the family false or grossly limited information. This is seldom wise. So many details go into finances that it really does usually take professionals to cover all aspects of financial protection. A mistake in this area can be extremely costly to all involved.

Finding a Qualified Professional Advisor

It is easy to tell your client that they need a qualified professional to direct them, but it is not always so easy to find such a professional. Certainly, there are plenty of people willing to step in and "act" like a professional. In many states, a person may label themselves in almost any manner they choose. In other words, a salesperson's card may declare "financial advisor" when, in fact, they have had little or no actual training in that field. It is now common for salespeople to declare themselves to be "estate specialists" when there is no formal training to back up that assertion. An agent who gives themselves such titles, without education or experience to back up the claim, will be inviting lawsuits.

Generally speaking, most actual specialists would recommend that an estate-planning attorney be consulted. Again, there are many attorneys who are willing to attempt the job, but only a limited number that are actually specialists.

The first thing to realize is that the family attorney, while trusted and competent in many areas, may not be the best person to handle the financial considerations of someone facing institutionalization. Even if a family member is an attorney, it is not necessarily wise to allow him or her to handle the situation. There is simply too much at stake, if the estate will be a sizable one, to turn over the decisions to someone who is not completely qualified by either training or experience to handle it. Handling your own, or a close family member's, finances and determining what is best for all concerned, is a deadly serious matter, and a responsibility that should only be shared with someone well qualified to do a superior job.

It is seldom possible to find such a person (typically an attorney) by just looking in the yellow pages. Ads almost never reveal actual ability. A starting point would be your state's Bar Association. Ask for an attorney specializing, by way of training as well as experience, in the financial considerations of nursing home residents. You may also find help by inquiring at a local university in the law school division. The professors there often know multiple attorneys and have an insight into their ability. Organizations and/or associations in the field of financial planning may be able to make referrals, as well. Your local bank may also be able to give some suggestions.

After the names of several attorneys have been obtained, you will want to interview them. Many people feel awkward interviewing attorneys, but it is more common than you may realize. Since there may be a fee for the initial consultation, be sure to ask about fees beforehand.

Once you have decided upon an attorney, you will need to provide some information so that he or she may do the job you desire.

1. Let the attorney know that you plan to participate to whatever extent necessary by providing needed information, such as family documents, so that the procedures may be expedited.

2. Let the attorney know that you wish to be kept advised at all times of the progress being made, as well as any developments that might occur. Be sure the attorney understands that you are concerned about the financial aspect of a nursing home confinement for yourself, your spouse, or your parents, as the case may be.

3. Do strongly reaffirm your trust in their ability to do a good job for you. Any person performs their job better when they know they are trusted. At the same time, emphasize your need to be respected by being furnished with information, and by being listened to when you feel strongly about taking or not taking certain actions. After all, it is you and your family that must ultimately live with the results.

What Will The Future Bring?

Partnership Plans

Many states are hoping the Partnership Program will result in reduced Medicaid spending. While the May 2007 GAO report raised some questions as to the potential success of the program, time was needed to know how it would affect Medicaid budgets. It should be an incentive for larger numbers of people to purchase long-term care policies. Partnership plans are sold by private insurers, but due to state and federal legislation they provide asset protection from Medicaid spend-down requirements.

Program Benefits

Partnership plans, while preserving assets also have many other components. Just like a non-partnership policy, the applicant must make decisions regarding the type and quantity of benefits they wish to purchase. Just like traditional LTC policies the applicant must medically qualify for the Partnership plans. Since insurers underwrite the policies, even asset protection models must be an acceptable risk.

Not every person will feel they need the same policy benefits in their long-term care insurance policy. While most states mandate some types of coverage, such as equality among the levels of care, there are other options that may be purchased or declined. A trained and caring agent can help the consumer understand those options and make wise choices.

Making Benefit Choices

Some choices are made for consumers by the insurers, such as the minimum daily benefit available. Other choices fall on the applicant, such as whether to purchase a $300 per day benefit or a $350 per day nursing home benefit. Regardless of the choices consumers make, all policies must follow federal and state guidelines. In fact, insurers will not offer a policy that does not meet minimum state and federal standards. For example, in some states insurers must offer no less than a specified dollar amount of benefits per day nursing home benefit and all three levels of care must be covered equally (skilled, intermediate and custodial, also called personal care). Policies following federal guidelines will be tax-qualified. Non-partnership polices following state guidelines might be non-tax qualified plans. Many states mandate specific agent education prior to being able to market or sell non-partnership LTC policies. Agents selling Partnership policies must certainly acquire additional education in order to market partnership plans. In both cases, the goal is to have educated field staff relaying correct information to consumers.

All policies offer some options, which may be purchased for additional premium. Of course, consumers may also refuse the optional coverage. When refusing some types of options, a rejection form must be signed and dated by the applicant. In some states, an existing policy may be modified; in others an entirely new policy would be required when changes are desired.

When a consumer decides to purchase an LTC policy, several buying decisions must be made. These could include:

1. Daily benefit amounts: this is the daily benefit that will be paid by the insurer if confinement in a nursing home occurs.

2. The length of time the policy will pay benefits: this could range from one year to the insured’s lifetime. Of course, the longer the length of policy benefits, the more expensive the policy will be.

3. Inclusion of an inflation guard: Non-partnership plans will not require this, while Partnership plans have inflation protection guidelines that must be followed. An inflation protection guards against the rising costs of long-term care by providing an increasing benefit according to contract terms. Partnership plans have two types: an increase based on a predetermined percentage and an offer at specific intervals allowing the insured to increase benefits without proof of insurability.

4. The waiting period, also called an elimination period, must be selected. This is the period of time that must pass while receiving care before the policy will pay for anything. It is a deductible expressed as days not covered. The option can range from zero days to 100 days. A few policies may have a choice of a longer time period.

5. Partnership or non-Partnership LTC plan, if both are available in the state of purchase. Traditional or non-Partnership plans are state approved long-term care products. While Partnership plans must also be state approved, they will follow federal guidelines. In states offering Partnership plans, the state had to alter state laws to allow for asset protection, since most state laws would attach assets if their Medicaid program paid for nursing home or other types of benefits.

As every field agent knows, clients often prefer to have the agent make selections for them, but this is not wise. Although the agent will be valued for the advice he or she gives, the actual benefit decisions need to be made by the consumer. This means the agent must fully explain each option so that the consumer can make informed choices. In a way, it is similar to the cafeteria insurance plans where employees have an array of choices in benefits. The difference is that the long-term care policies have no limits on the choices that the consumer can make. If he or she is willing to pay the price, absolutely everything available can be selected. Typically an agent will go from available benefit to available benefit, explaining each option, and getting a decision from the applicant before moving on to the next decision.

Benefit choices are primarily the same as for non-Partnership policies in that there is a daily or monthly benefit, elimination or waiting periods, a home health care and adult day care benefit level, an inflation feature, and a benefit period with a lifetime maximum generally offered. Those who choose the lifetime Partnership benefit have apparently decided that they never want to use Medicaid funding. This is not surprising since people often believe Medicaid funding leads to inferior care, although statistically that has not been validated.

There is something else about Partnership policies that mirror non-partnership contracts: underwriting. Just as insurers underwrite traditional long-term care policies, they also underwrite Partnership contracts. Therefore, the applicant must medically qualify in order to purchase such a plan. Perhaps that explains the younger ages that seem to be applying for and buying Partnership long-term care plans.

Daily Benefit Options

While there are many policy options, the daily benefit amount is usually the first policy decision, with the second one being the length of time the benefits will continue. Both of these strongly affect the cost of the policy, but they also affect something else that is very important: the amount of assets that will be protected from Medicaid spend-down requirements. The total benefit amount (daily benefit multiplied by the length of benefit payouts) determines the amount of assets protected in dollar-for-dollar Partnership plans.

The type of policy being purchased will affect how the daily benefit works; for example a non-partnership policy may be purchased that covers home health care only (not institutionalized care). The daily benefit is based upon the type of policy selected. Policies that cover institutional care in a nursing home will have options that may vary from policies that cover only home care benefits. Integrated policies will vary from those that pay a daily indemnity amount. Many states have mandatory minimum limitations ($200 per day benefits for example). Insurance companies will determine the upper possibilities. Obviously, the consumer cannot select a figure higher than that offered by the issuing company. Nor can an insurer offer a daily indemnity amount that is lower than those set by the state where issued. At one time, insurers offered as low as a $40 per day benefit in the nursing home. By today’s standards, that would be extremely inadequate for nursing home care.

This daily benefit can have variations. Some policies will specify an amount (not to exceed actual cost) for each nursing home confinement day. Other policies (called integrated plans) offer a more relaxed benefit formula. These policies have a "pool" of money, which may be used however the policyholder sees fit, within the terms of the contract. As a result, this pool of money could be spent for home care rather than a nursing home confinement, as long as the care met the contract requirements. Benefits will be paid as long as this maximum amount lasts regardless of the time period. The danger in having a pool of money, however, is that the funds may be used up by the time a nursing home confinement actually occurs. If the funds have been previously used up, there will be no more benefits payable. Since people prefer to stay at home, this may work out well, but it can also quickly deplete funds in a wasteful manner.

The amounts paid will usually vary depending upon whether they are going towards a nursing home confinement, home health care, adult day care, and so forth. The "pool of money" type is gaining popularity where offered, since consumers see it as a way to make health care choices more freely. Integrated policies are generally more expensive than indemnity contracts. As in all policy contacts, integrated plans have benefit qualification requirements, exclusions, and limitations; they do not simply hand the insured money to be used in any manner desired.

Expense-Incurred and Indemnity Methods of Payment

When benefits are paid from a specific dollar schedule for a specific time period, they are generally paid in one of two ways:

1. The expense-incurred method in which the insured submits claims that the insurance company then pays to either the insured or to the institution up to the limit set down in the policy.

2. The indemnity method in which the insurance company pays benefits directly to the insured in the amount specified in the policy without regard to the specific service that was received.

Of course, both methods require that eligibility for benefits first be met.

Determining Benefit Length

While the daily benefit is typically the first choice made, the second choice is just as important to the policyholder: the length of time for which benefits will be paid. This may apply to a single confinement or it can apply to the total amount of time spent in an institution. An indemnity contract offers benefits payable for a specified number of days, months or years (depending upon policy language). An integrated plan pays whatever the daily cost happens to be unless the contract specifies a maximum daily payout amount. When funds are depleted, the policy ends.

While statistics vary depending upon the source, most professionals feel a policy should provide benefits for no less than three years of continuous confinement. Some people will only be in a nursing home for three months while others may remain there for five years. While it does not make sense to over-insure, it is also important to have adequate coverage. Since the majority of consumers will not be willing to pay the price for a life-time benefit, three or four-year policies are likely to do a good job for them and still be affordable.

Asset Protection in Partnership Policies

A primary reason for purchasing a Partnership long-term care policy is the asset protection it provides. There were initially two asset protection models, although a third variety developed:

1. Dollar-for-Dollar: Assets are protected up to the amount of the private insurance benefit purchased. If policy benefits equal $100,000, then $100,000 of private assets are protected from the required Medicaid spend-down once policy benefits are exhausted and Medicaid assistance is requested.

2. Total Asset Protection: All assets are protected when a state-defined minimum benefit package is purchased by the consumer. In this case, as long as the individual buys the minimum required benefits under the state plan, all his or her assets are protected from Medicaid spend-down requirements even if the assets exceed the total policy benefits purchased. Only New York and Indiana have this option. Total asset protection will not be offered in any of the new Partnership plans.

3. Hybrid: This Partnership program offers both dollar-for-dollar and total asset protection. The type of asset protection depends on the initial amount of coverage purchased. Total asset protection is available for policies with initial coverage amounts greater than or equal to a coverage level defined by the state.

Indiana introduced a hybrid model in 1998. Consumers have purchased more long-term care insurance coverage to get total asset protection than they have the less expensive coverage for the dollar-to-dollar program. This would indicate that consumers are willing to pay a higher premium for the better asset protection offered by the Total Asset model. Prior to 1998, only 29 percent of the policies purchased had total coverage amounts large enough to trigger total asset protection.

As you know, under the Partnership program the state will disregard the policyholder’s personal assets equal to amounts paid out under a qualifying dollar-for-dollar model insurance policy or it will disregard all assets under the Total Asset Model.

While it is too soon to tell if the Partnership Program will meet the desired goals (reduction in Medicaid spending), there is little doubt that it will benefit those consumers who take advantage of it.

End of Chapter 17

United Insurance Educators, Inc.