LTC 101:  Understanding Long-Term Care and How to Pay for It

LTC 101: Understanding Long-Term Care and How to Pay for It

Long-term care (sometimes referred to as LTC) can be confusing and there are lots of misconceptions regarding what it actually is and who pays for it. While it is impossible to cover everything about LTC in these few words, we can get a good start.

What is Long-term Care (LTC)?

Simply put, LTC is services and assistance to an individual who has severe limitations in his/her ability to function independently and will require assistance and care over an extended period of time.
Long-term Care is not medical care and is not provided by medical professionals such as nurses and therapists or their assistants. Long-term care is custodial in nature and can be provided at home or in a facility (there are several types) licensed to provide such care.

The above term “ability to function independently” is measured by a person’s ability to do the “activities of daily living.” These activities, frequently called ADLs, are eating, bathing, dressing, continence (inability to control one’s bowel or bladder), transferring (getting in or out of a bed or a chair), and toileting. This is a universally accepted list, which is used to determine when a person is qualified to receive LTC coverage benefits.

One additional measure of qualification for LTC Coverage benefits is “severe cognitive impairment.” This is defined as an individual needing supervision and/or assistance to protect himself/herself or others because of mental deterioration caused by Alzheimer’s disease or other organic mental diseases.

What does long-term care cost?

According to the California Department of Health Services, the 2014 average daily private pay rate for a nursing facility in California is $260 per day. Further the average annual increase in this rate for the most recent 5-year period has been 3.2% per year. Other studies indicate that Orange County’s costs are somewhat less that the statewide average (currently in a range of approximately $190 to $220 per day). Generally speaking, less is spent on care delivered at home, depending on the quantity of care needed and how much of the care can be handled by friends and relatives with no “out-of-pocket” costs.

How is LTC paid for?

There are typically three ways that LTC is paid for: First, self-funding, the individual spends his or her assets and/or has financial assistance from children or other relatives and friends. Second, purchased LTC coverage (traditional LTC insurance and California Partnership-certified LTC insurance, or one of the newer, more innovative “hybrid” LTC policies). This transfers all or part of the risk of a person needing long-term care to the insurance carrier. Third, qualify for MediCal LTC benefits by spending down personal assets for LTC services first and when the MediCal level is reached, apply and move into a facility that accepts MediCal reimbursement (MediCal is California’s version of the Federal Medicaid safety-net program). Please note that neither Medicare nor private health insurance pay for LTC services.

Long-term care is custodial in nature and can be provided at home or in a facility (there are several types) licensed to provide such care.

What are the LTC coverage options?

Today’s options are far better than they ever have been: First, traditional LTC insurance. This coverage is much like other forms of insurance, the customer pays a premium and, if LTC is needed, a specific list of benefits, limitations, and exclusions apply. Second, California Partnership (State Certified) LTC insurance which is traditional LTC insurance with mandated benefits. This coverage protects certain assets from “spend-down” in order to qualify for MediCal.

Third is what is known as “asset-based” or “hybrid” LTC coverage. This is a combination of either Life Insurance and LTC Coverage or an Annuity and LTC Coverage. These options can be paid for with premiums over time, a single investment, trading an obsolete life insurance policy, or using “qualified” money such as within an IRA. The advantage is that the “death benefit” can be used for LTC (much like traditional coverage) but any of it not needed for LTC transfers to beneficiaries upon the passing of the insured.

This is, of course the “tip of the iceberg.” For additional questions, please call. There is never a charge for providing information and consultation.

C. Lawrence “Larry” Thomas

C. Lawrence “Larry” Thomas began working with long-term care and Medicare programs in the mid- 1980s. He is currently associated with Insurance 101 Services to provide long- term care solutions to seniors and those approaching. Larry can be reached at (949) 374-3316 or ltinsurance@me.com.
CA Insurance License # 0C79256.