I usually respond to this commonly asked question with “How much does a car cost?”

There are multiple options that vary the price, but the core options are explained under the “LTCI Benefits” category on this website in the excerpt from my book The ABC’s of Long-Term Care Insurance called “Your Customized Benefit Selection Process”:

• daily or monthly benefit (you want monthly for home care)
• waiting period before benefits start (one-time deductible)
• inflation protection (BUY IT)
• home health care benefit (to include or not to include or include at a lower level)
• benefit period/benefit maximum (lifetime maximum for benefits)

When I started my wonderful career in the long-term care insurance industry in 1988, I saw how little anyone knew about the subject. To get the word out, I did an educational seminar all over my city of 250,000 people.  The only qualifications I put on the audience were:

1. they were a broad mixture of ages since long-term care affects the entire family; and
2. they have assets to protect so that the purchase of long-term care insurance would be financially suitable for them.

Having said that last one, though, I have had adult children buy long-term care insurance on their parents because they want their parents to be treated like a private-pay patient when the parents need long-term care.  This means many more choices that the Medicaid program offers. Conversely – and this will make you smile a little – I’ve had parents buy long-term care insurance on those “20-somethings” because they know if that young son or daughter had a head injury due to an accident or developed a serious chronic condition, they as parents would be responsible.  That usually happens in the workplace when employees are exposed to long-term care insurance.

My seminars were generic which means they didn’t mention a particular product or insurance company – just good basic information about why people even need long-term care insurance. The second half of the seminar explained how one goes about selecting the benefits on a policy to get the most value for the least amount of premium. In other words, I just explained what I had wanted to know when I got into the field of LTCI. And the big questions I had were “How much does this insurance cost?  Can I afford it?”

So I developed a solid plan that will pay two-thirds of the cost of care in most of the country and another one that will do the same in those high-cost areas like New York, New England and parts of California. Here’s the plan:

The Long-Term Care Partnership is really what makes this work. The #1 thing that non-buyers report will cause them to consider long-term care insurance is that the government will start paying when the long-term care insurance benefits run out. (Source: LifePlans LTCI Buyer-NonBuyer Surveys, 2011) That’s exactly what happens in the Partnership states if you meet the state’s criteria for being physically or cognitively impaired. Plus, you get to keep assets equal to the benefits paid out by your long-term care insurance policy in addition to what your state allows you to keep as a Medicaid patient (see “The Partnership for Long-Term Care” and “What Your State Lets You Keep” under Laws and Regulations on this site).

So to see what that premium averages for you, please enter these factors below:

Age (actual age and know that most companies allow a 30 day grace period to get an application in after your birthday) and marital or partner status:

• single or married without a spouse or partner issued
• married or with a partner and both of you expect to be covered

You will see the average monthly and annual premium for both plans. You can pay semi-annual or quarterly as well, but this is just to give you an idea. You will also see that monthly creates a load of about 9%, which is like paying an extra monthly payment. Monthly also has to be drafted from your checking account and some people are squeamish about that. A couple of carriers accept a credit or debit card but that’s not common. If you can pay one of the other modes with annual being the least expensive, you save money.

Health: You can also save money if you qualify for a preferred health discount which ranges from 5%-15%, depending on the carrier. Generally, you must have a reasonable height/weight ratio, be a non-smoker, and take no more than one medication. The medication part is tricky – it has to be for a condition that is well under control. For example, it could be to control high blood pressure or cholesterol and there should be no dosage or frequency changes in the last six months or a change to another medication. So enter these factors here and see the average premiums:

Expensive, you say?  Please don’t leave this page until you consider – are you ready???

The LTC Insurance Value Proposition: After you see the average premium for these plans, multiply the premium by 30 years, then compare the amount of premium to what the benefits will be in 30 years.

Most of the US Plan: $600 daily benefit x 3 x 365 = $657,000
High-Cost Areas: $1000 daily benefit x 3 x 365 = $1,095,000

Note: It’s easy to do this with any plan that has the 5% compound inflation protection, because at 5% compound, the benefits double every 15 years. Here’s how it works:

• $150 x 2 = $300 in 15 years; $300 x 2 = $600 in 30 years
• $250 x 2 = $500 in 15 years; $500 x 2 = $1000 in 30 years

If you and your spouse/partner are issued a policy, the benefit amounts are double; i.e. $1,314,000 for both of you on the lower plan ($657,000 x 2) and $2,190,000 ($1,095,000 x 2) on the higher plan. If you take a benefit called “shared care”, you can have access to each other’s benefits while living and inherit unused benefits when a spouse/partner dies.

What’s the point? The point is that everything is expensive but you have to say “compared to what?”  If you compare the premium you pay in to the benefits available, all of a sudden the premium looks small. Plus, the premium stops when you start receiving benefits and some plans offer the option to pay a little more and have it stop on both of you if you are part of a couple.

Of course you have to qualify medically for a plan, and the younger you are, the greater the chance that you will qualify and the less a plan will cost for you.

This is an extremely rare situation with LTCI.  Conseco Senior Health Insurance Company and Penn Treaty are the only ones not taken over by another carrier to my knowledge.  Conseco is in an independent trust managed by the state of Pennsylvania.  Penn Treaty’s home page addresses the issue in case they are ordered into receivership. http://www.penntreaty.com/Rehabilitation/GuarantyAssociationCoverage.aspx  There is also a link to the coverage limits for LTCI and Med supp from the Penn Treaty site.  Most states have at least $300K for LTCI.  These issues happened due to liberal underwriting, high commissions, low premium.  That formula simply doesn’t work for the LTCI market and it sure doesn’t work in a bad economy.   Companies can’t get away with that fatal combination anymore thanks to the NAIC Rate Stabilization that was passed back in 2000. It has taken a decade for states to adopt it but it has some teeth in it. However, NAIC is working on additional rate stabilization regulation. That section starts on p. 144 of my new book. You can get it here: http://www.gotltci.com/online-store/

Another book about long-term care insurance? Really?

Yes, because it’s not just another book. It’s the most honest, consumer-oriented book you will ever read on this topic. I’ve spent a quarter of a century as a national LTC insurance consultant for insurance companies, banks, credit unions, media personalities, attorneys, doctors, home care and nursing facility providers, politicians, state governments and yes, even the federal government, and over 65,000 insurance professionals have gone through my live or web-based training. Along the way, I’ve talked with thousands of consumers. (That’s my favorite thing to do, and some of them you will meet in this book.) The best part about this story is that I don’t have a boss. That’s right. I don’t work for anyone which means no one tells me what I can say or can’t say. Get it? Now you know the real reason you want to read this book…to really learn how to take care of your family by planning for long-term care with long-term care insurance.

You’re not sure LTC insurance is the best solution for you? No problem. After you read this book, you will know enough to make an informed decision and I will have done my job. However, I caution you to not procrastinate on this decision. The advice in this book has a short shelf life as the long-term care insurance market is changing rapidly. And you, dear friend, could become uninsurable with your next heartbeat. I know this after surviving an automobile accident earlier this year that totaled both cars when a 77 year old lady decided to go 10 mph on the interstate to keep from running out of gas!

And if you are worried about health care reform, just know that long-term care insurance is even more important for two reasons: 1) Americans will likely wind up spending more for acute care costs than we had planned and 2) Medicaid expansion will make state budget dollars even more scarce.

Remember, every dollar paid for long-term care by LTC insurance instead of Medicaid is a dollar left in the state budget to pay for education, public safety, jobs, and other vital services that we all need.

Got 1 minute and 39 seconds? It’s so important to me that you hear this message so watch! Why 2013 is the year to get LTC insurance

Physically – a licensed health care practitioner (physician, Registered Nurse or licensed social worker) must tell the insurance company that you are expected to need help with at least two activities of daily living for at least 90 days.  The six activities of daily living are:

• bathing, dressing, transferring from bed to chair, toileting, continence, eating
  

Note that the 90 day expectation of need is not a waiting period. You could have bought a 30 day waiting period, and if you are expected to need help at least 90 days, the benefits will begin on the 31^st day. So to be clear, however, long-term care insurance isn’t intended to pay for a broken arm or even a broken hip with today’s technology as conditions like these will not generally require someone to need help at least 90 days.

Mentally – the licensed health care practitioner must certify to the insurance company that you are impaired to the point of being a threat to yourself or someone else. For example, if you have high blood pressure and can’t remember to take your medicine, you could cause yourself to have a stroke. If you will walk out in the middle of the interstate, you could cause 20 other people to have a stroke

With either method of certification, the licensed health care practitioner must work out a 12 month plan of care for you with the insurance company and you must stick to that. For example, if you are at home and you and your family decide you can no longer be safe at home, you can’t pack your bags and move into an assisted living facility without getting the plan of care changed and approved by your health care practitioner and the insurance company.

That’s how you become certified to receive benefits. Please refer to Your Customized Benefit Selection Process to learn more about the waiting period (deductible) before you receive the first benefit check. While you’re there, you can also learn about the different ways to receive the money (cash, indemnity or reimbursement). If you choose the reimbursement or indemnity method, you will need to use approved care providers. If you choose cash or a plan that provides at least part of the benefit in cash, you will have the flexibility to pay informal caregivers no questions asked or use the money any other way you need it.

*LIMRA

The table below gives the minimum assets and income each state allows nursing-home residents and their spouses to keep. The federal government sets new minimum and maximum amounts each year, but states can set their own minimum requirements at any level between the federal limits.

* These are “income cap” states. If your income is higher than $2,130 a month, you cannot qualify for Medicaid even after spending down all assets, unless you set up a Miller trust.

This landmark legislation made it possible for other states to participate in The Partnership for Long-Term Care. Forty states have chosen to participate as of December, 2012:

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, Nebraska, Nevada,New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

The idea of the partnership is to provide a way for the Medicaid program to work together with private long-term care insurance to help those people who are caught in the middle: they can’t afford to pay the cost of the care or even the cost of a long-term care insurance policy with unlimited benefits, yet their assets are too high to qualify for Medicaid to pay their long-term care expenses. Many middle-income workers and retirees find themselves in this position.

Participating insurance companies in the Partnership recognize the needs of these middle-income Americans by providing LTC insurance policies that have built-in consumer protection benefit standards, and participating states cooperate by allowing these policyholders to access Medicaid without spending down their assets almost to poverty level if the insurance benefits run out.

Without the Partnership, people have three choices to pay for long-term care:

1. Pay for care out of assets and income, which can lead to financial ruin if long-term care costs wipe out savings.
2. Transfer assets to qualify for Medicaid either to children or other family members or to a trust—either way means losing control of the money and losing financial independence.
3. Buy a standard long-term care insurance policy which works—unless the policy runs out of benefits or the benefit isn’t enough to cover the cost of care. This can happen because you bought what you could afford, and it turns out not to be enough when you need it. (For example, you couldn’t afford the premium for inflation coverage, you could only afford a one- or two-year benefit period, or you bought a daily or monthly benefit significantly lower than the cost of care in your area and you couldn’t make up the difference at claim time.)

A fourth option is available with the Partnership for Long-Term Care. Now consumers can purchase a state-approved LTCI policy that provides asset protection after the benefits run out. Here’s how it works in Connecticut, Indiana and California with a dollar-for-dollar asset protection model:

• A special Partnership policy must be purchased from an insurance professional. For every dollar in benefits paid by the policy, a dollar in assets will be sheltered. For example, if a policy pays $100,000 in benefits, and if the Medicaid asset eligibility in your state requires the insured to spend down to $2,000, in this example the insured would be able to qualify for Medicaid when his or her assets reach $102,000, not $2,000. In other words, he or she would get to keep, or “shelter” $100,000 of assets and still qualify for Medicaid to begin paying long-term care expenses if policy benefits are not enough.

New York has two types of Partnership plans.

1. Dollar-for-Dollar – the same concept as above except the applicant chooses one of two plans: 1.5 years of nursing home benefits and three years of home care benefits paid at 50 percent of the nursing home daily benefit OR two years of nursing home benefits and two years of home care benefits paid at 100 percent of the nursing home daily benefit.
2. Total Asset Protection – These Partnership plans provide that once benefits are exhausted, the policyholder can qualify for Medicaid regardless of the amount of assets. There are two plans to choose from for this type as well: three years of nursing home benefits and six years of home care benefits paid at 50 percent of the nursing home daily benefit OR four years of nursing home benefits and four years of home care benefits paid at 100 percent of the nursing home benefit. While New York offers two unlimited asset protection plans, this desirable feature only happens after the benefits of the policy have been used up. A danger is that if a daily benefit is chosen which is inadequate for the policyholder’s needs, he or she could exhaust most or all assets paying the difference between the policy’s benefit and the cost of care before the benefits are used up.

For example, in 2013 New York requires new Partnership policy purchasers to purchase a minimum of $265 for the daily nursing home benefit. Long Island averages $390 for a semi-private room. If only the minimum is purchased, the policyholder could easily wind up paying $125 per day or more out of pocket, which amounts to almost $140,000 over the three-year benefit period for nursing home care. Based on the map below provided by The New York State Long-Term Care Partnership, it’s easy to guess that the cost of care, while lower in some regions of New York can easily run as high as $400 per day.

Indiana provides a combination of these two models. The combo plan provides the dollar-for-dollar asset protection, but if the policyholder purchases a benefit maximum that will pay about four years of benefits, the policy will provide total asset protection like the New York option. Since $291,050 represents about four years of benefits at current costs, purchasing a policy that would pay out that much in benefits would qualify for the total asset protection feature in Indiana. (The $291,050 is the 2013 amount and will increase each year to account for inflation.) Here are three possible scenarios to meet the 2013 requirement:

• a daily benefit of $200 with a four year benefit period, as $200 x 365 x 4 = $292,000;
• a daily benefit of $270 with a three year benefit period as $270 x 365 x 3 = $295,650; or
• a daily benefit of $400 with a two year benefit period as $400 x 365 x 2 = $292,000.

The Indiana Partnership maintains a list of agents who have had special Partnership training and publishes the names in a directory for consumers. Call the Indiana Partnership telephone number or access the website listed at the end of this chapter for information on how to be listed in the directory of approved agents.

Massachusetts offers another variation: Medicaid guidelines have to be met as usual so there is no up-front asset protection, but the house is not subject to estate recovery if the policyholder enters a nursing home with a long-term care insurance policy with a minimum daily benefit of $130 and a minimum two-year benefit period. The caution here is to be sure that much in benefits is available at the date of nursing home admission – if a portion of the benefits have been used on other services such as home care, adult day care or assisted living, the protection would not be available. Also, the state could up the minimum and not grandfather policies already purchased, so applicants are well advised to purchase a much higher minimum – $250+, for example.

In all states, your income goes to pay for the cost of care once you qualify for Medicaid. So the Partnership program protects assets, not income. But income is important for three reasons:

1. If your income is greater than your long-term care costs, you won’t qualify for Medicaid and wouldn’t benefit from a Partnership policy. People in this situation can consider a standard long-term care insurance policy—perhaps with an unlimited benefit maximum.
2. Income can guide you to a benefit selection. For example, if care averages $200 per day in your area, and you can afford to pay $30 a day from your income, you might purchase a policy for $170 a day for a lower premium than a $200/day policy. (In higher cost areas like New York, Connecticut or California, you would probably be purchasing policies in the $250-300+/day range – the average cost of care in Connecticut, for example, is $370, according to the 2012 MetLife Market Survey of Long-Term Care Costs. Just be careful—if your care costs more than the insurance policy pays in benefits, you will be responsible for paying the additional costs, and don’t forget that drugs and medical supplies are usually billed on top of the room and board charge for facility care. Consider carefully how much you can afford to pay out of your income and insure yourself adequately. The Partnership policies include an inflation benefit for appropriate ages so that inflation doesn’t erode your benefit.
3. Since you are responsible for paying your premiums, your discretionary income must be sufficient to pay your long-term care premiums and keep your policy in force, although there is a premium waiver if you have a claim. Individuals with income less than $20,000 or couples with incomes less than $40,000 may not have enough discretionary income to purchase long-term care insurance as premium payments may significantly impact their standard of living. If you fall into these income categories, and if you have assets less than $50,000, not counting your house and car, you probably will qualify for Medicaid in a short period of time, and LTC insurance of any type—standard or Partnership—may not be an appropriate purchase for you.

For many people, however, the Partnership LTCI policies offer a wonderful alternative to transferring assets and relying on the government (Medicaid) to pay for their long-term care expenses.

A few points you may be wondering about with the Partnership policies:

Benefit Choices—Benefit choices are the same as for non-Partnership policies, in that there is a daily or monthly benefit, an elimination (waiting) period, a home health care/adult day care benefit level, an inflation feature, and a benefit period/lifetime maximum. You may be surprised to learn that many California and Connecticut Partnership policyholders purchase a lifetime (unlimited) benefit period. They do this because they really don’t intend to access Medicaid, but if for any reason their assets are lowered for reasons beyond their control; i.e. a stock market plunge, they have asset protection provided by their Partnership policy. This is true because at any time benefits paid out equal your assets plus the amount Medicaid (MediCal in California) allows the healthy spouse to keep, the policyholder is allowed to access Medicaid and shelter their assets. For example, if a policy had paid out $250,000, the person receiving care could apply for Medicaid when the couple’s assets are spent down to $367,920, which is equal to the $250,000 in benefits plus $115,920 (the 2013 asset maximum for the healthy spouse) plus $2,000 (the asset maximum for the person needing care). (Indiana and New York have total asset protection after benefits paid equal $291,050 for Indiana for 2013 purchasers and after the three or four-year benefit period for New York is exhausted.)

Portability—If you move to another state, the Partnership policy will pay, and the benefits will accumulate toward your asset protection threshold. All states except California practice reciprocity with the asset protection feature of owning a Partnership policy. You are subject to the functional or cognitive eligibility requirements in the state in which you apply for Medicaid. You can see a Partnership reciprocity map here.

Underwriting—You still must qualify for the Partnership policy medically just as you would for a standard long-term care insurance policy. The younger you are, the better the chance to qualify for a policy, and the lower the premiums. Pre-retirement ages (40′s and 50′s) are strongly encouraged to apply. In fact, the Connecticut Partnership reports that 95% of purchasers in 2011 were under age seventy, and 58% under age 60. The single largest age group of purchasers was 50-59 with 46% of purchasers falling in that age range. The average age for all Partnership purchasers was 57 with an age range of 20-88!

Arbitration—In some states, the Partnership policies have stronger mechanisms for claims appeals than standard long-term care policies. In those states, a rigorous consumer protection appeal process is in place for any Partnership policyholder who disagrees with a benefit determination.

Policy Continuance—If for any reason the Partnership program is discontinued either nationally or in its particular state, all policies will be honored and appropriate benefits paid by the insurance company that issued the policy.

The History of the Original Four Partnership States

The original Partnership states were grandfathered, but the Partnership was halted by the 1993 budget bill (“OBRA” – Omnibus Reconciliation Act of 1993), which said that new states could offer asset protection only during the policyholder’s lifetime. At death, the state was required to seek estate recovery for Medicaid’s payment. This happened because of concern that the Partnership would cause Medicaid utilization to increase, when in fact, the opposite is true. Since the Partnership for Long-Term Care was implemented in the early 90s, only about 535 policyholders out of almost 350,000 policies sold in all four operational Partnership states as of 12/31/11 have had to turn to Medicaid for help after using their long-term care insurance benefits first! (Info available on original Partnership states’ websites.)

The Partnership Expansion Post-Deficit Reduction Act

Partnership policies offered by new states are required to:

• be tax-qualified
• Include specific consumer protection requirements of the 2000 National Association of Insurance Commissioners (NAIC) LTC Insurance Model Act and Regulation.
• provide the inflation benefit as follows:
  • compound inflation is required under age 61
  • some type of inflation benefit must be offered between ages 61 – 76
  • inflation may be offered past age 76 but is not required
• provide asset protection according to the dollar-for-dollar model, not the total asset protection models like the New York and Indiana Partnerships have. This means the insured may still be subject to estate recovery but only for assets that exceed the amount of benefits received from the Partnership long-term care insurance policy.

The above inflation requirements are just the boiler plate template for states that wish to participate in the Partnership for Long-Term Care. The appropriate inflation protection based on purchase age is an integral part of the whole Partnership concept, which is to expand the LTCI market to middle-income Americans. Without adequate inflation protection, middle-income Americans simply won’t be able to make up a really large gap between the daily or monthly benefit at claim time and the cost of care at that time.

Your financial professional can tell you which inflation options meet your state’s Partnership inflation requirement. Plus, when you get your policy, it will state clearly that it is intended to be a Long-Term Care Partnership policy.  Do not accept a policy without that language if it is your intention to buy a Long-Term Care Partnership policy.

Original Partnership States:

California (916) 552-8990 www.dhs.ca.gov/cpltc
Connecticut (860) 418-6318 www.Ctpartnership.org
Indiana (800) 452-4800 ; (317) 233-1470 www.in.gov/fssa/iltcp
New York (518)-474-0662 www.nyspltc.org
Other States http://www.dehpg.net/ltcpartnership/map.aspx

The above information is an excerpt from my new book, Protecting Your Family with Long-Term Care Insurance, which is due out in January, 2013.  You can also track specific state activity at www.dehpg.net/ltcpartnership