Government VS Private Coverage

Most elderly Americans are worried about outliving their income. More frightening is the realistic concern of losing all their assets as a result of trying to pay for nursing home or home healthcare expenses. Instead of buying long-term-care (LTC) insurance, many people who need and can afford it reason that Medicaid will take care of their care.

There are many problems with relying on publicly-financed LTC (Medicaid), in addition to "spending down" personal assets in order to qualify for benefits. Congressional budgeters have also drastically reduced home healthcare payments for long-term-care patients. States continue to confirm the "shortfall" in Medicaid reimbursements from the federal government. The public programs are not covering the true costs of LTC and (to tell it like it is) poor quality is the standard for publicly-financed LTC in many cases. The number one risk consumers' face in not being privately insured for LTC is the likelihood of not obtaining the quality of health care they have come to expect.

Evidence of a trend

Some members of Congress continue to raise red flags that demonstrate they want to get out of the LTC market. A new law does not require nursing homes to accept Medicaid patients. Further, nursing homes that do not accept Medicaid payments must now notify new, private-paying residents at entry that they might have to move out if they run out of money and need to rely on Medicaid.

Alternatively, Congress now offers tax incentives to consumers who purchase private LTC insurance. Consequently, the traditional Medicaid nursing home is on the way out, being replaced by privately funded, assisted-living facilities that emphasize high-quality care for those who can pay for it.

Home healthcare is now a major competitor to nursing home care. Whenever possible, people in need prefer to be cared for in their homes rather than a nursing home or assisted-living residence. However, home care agencies are also turning away from the Medicaid and Medicare dollars toward the private dollar, because this means more money for the agency and sometimes higher quality care for patients.

No matter how bad the LTC may be through Medicaid, the government will never admit to permitting or funding second- and third-rate coverage. For many Americans, there is no affordable alternative. So, Medicaid continues to be the 800-pound gorilla. Congress is trying to convince the public that the only way to ensure high-quality LTC is through individual savings or LTC insurance policies.

Plan ahead

Americans who want to ensure that they will receive high-quality care and alleviate the financial and psychological burdens of care giving for their spouse and children must plan now to insure for their LTC. After reviewing this series of LTC articles, if you determine that your income and assets justify the purchase of a long-term-care policy, consider these strategies for lowering premiums:

Strategy: Choose the appropriate "Daily Benefit Amount."

The "Facility Daily Benefit Amount" is the maximum daily amount of expense covered by your policy for nursing home or assisted-living facility costs. (Most policies reimburse for actual costs.) The national average cost for nursing home coverage is approximately $120 per day, but you should purchase a policy for local actual costs, which could be $80 in your area, and add an inflation rider. The Daily Benefit will be increased annually by 5% of the previous year's dollar amount.

Strategy: Choose a longer elimination period.

All LTC policies have an "Elimination Period," the number of days (0, 30, or 90) you must have received care in a facility or qualified home healthcare before the insurance company will start paying benefits. The shorter the elimination period, the higher the premium. Medicare currently pays 100% for the first 20 days, so there is no need to choose a 0-day period. Choose a 90-day period if you can afford to "self-insure" for that period; otherwise, choose the 30-day option.

Strategy: Weigh the difference between purchasing a "Lifetime Benefit" vs. "Five-Year Benefit."

The "Benefit Period" is the amount of time that the insurance company will continue to pay long-term-care benefits from one year to lifetime. The shorter the benefit period, the lower the premium. (The average stay in a nursing home is between two and three years.)

If cost for the policy is a factor, a three-year or five-year benefit period reduces a lifetime benefit premium substantially. You can purchase a "Five-Year Benefit Period" policy and use the home healthcare portion of the policy for the first five years and then enter a nursing home for an additional five years of paid coverage. In that way, the five-year benefit actually has paid for 10 years of coverage.

If you choose a benefit period other than lifetime, get a "Restoration of Benefit" feature: your benefit period starts over every time there are at least 180 consecutive days when you are not in need of benefits.

Strategy: Purchase a plan that includes "Waiver of Premium."

If you (or your spouse under a joint plan) enter a nursing home or utilize a home healthcare service (typically for 90 days), the premiums on your policy would stop. Premiums that have been paid, but no longer due, will be refunded on a pro-rata basis. This won't save you money on your policy costs initially, but it could save you years of premium payments if you need care for that long.

-Lois Younger is a Chartered Life Underwriter (CLU), a Financial Consultant and President of Younger's Life Insurance Clearinghouse, a recommended expert alliance of http://www.TheMoneyExpert.com.

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