Understanding Home and Community Care Daily Benefit Amounts
All recent surveys indicate people would prefer to receive care at home rather than in an institution. In fact, 78% of all long term care is in the community. Ironically, most group plans tend to limit home care to 50%, 75% or 80% of the amount paid for facilities. A $120 per day policy for example might only pay $60 per day for home care, adult day care or hospice, and if it's really a poorly designed policy, $60 per day for assisted living. The insurance companies claim that home care costs less. It may and it may not. It is true that government statistics show spending on home care to be a small fraction of that for nursing homes. This is because the 78% of home long term care in this country is provided mostly by loving family who receive no compensation for their services. Thus the low numbers reflected in statistics. When home care gets to a point where the paid services of professionals or aides are required, the tendency is to institutionalize the person in need. This is because family physicians and long-term care professional counselors know that to qualify for Medicaid, the primary source of long-term care funding, a pay down period of assets has to begin. In many states, Medicaid is biased towards using nursing homes for care. (Some state Medicaid programs such as North Carolina prefer to use home care programs) Because of this bias, advisors urge caregivers to put loved-ones in institutions in order to start the clock on asset spend-down. As insurance grows to become a major source of funding, advisors and providers will tend to favor home care. Thus, the current insurance company attitude to providing less home care will have to change.
More insurance funding for home health care will reverse the current trend towards institutionalization. I know from personal experience that had home care insurance been available to my parents, they would have used every dime of it for home care services. No one wants to die in a nursing home. Adequate home care coverage keeps people out of nursing homes. This is why I recommend choosing a plan that covers 100% home and community care.
Home care typically covers the services of licensed nurses, aides and therapists. Some companies will cover certain activities of non-licensed providers and even your own children as providers as well. Also it is important to remember that home care is usually limited to the five or six activities of daily living defined in the policy or for supervision required for someone with cognitive impairment. Additional services such as so-called homemaker services are not covered unless specifically mentioned in the policy.
The options of what is covered and under what circumstances, vary so much from policy to policy that I could take up 5 pages of type trying to describe it. The only way to address this complicated but very important area of coverage is to go over each policy and compare it with the next.
Selecting a Benefit Period
For older buyers of LTCi, the primary determinant of how long benefits should last is the size of their pocketbook. Most buy the benefit for what they can afford in premiums. Those with high incomes pay what they think is a reasonable premium. Still, this could be an outlay of $8,000 per year, just because they think the insurance is a better alternative than paying dollar for dollar out of pocket for care. Fortunately, the insurance cost for people under age 60 is more reasonable and they have more flexibility in choosing the benefit period that fits their needs.
It perplexes me that literature and sales material recommend using nursing home stay statistics to determine the length of time a policy should last. Nowhere do I find statistics using the homecare stay or assisted living stay as the basis for buying a policy. And nursing homes and home care are not mutually exclusive. A home care stay could progress to assisted living and then to a nursing home. Almost without exception, literature and sales material cite a 2 1/2 year nursing home stay as an example of the length of time one would need long term care. But yet a combination of home care, assisted living and nursing home could easily add up to a five or six year period of time.
You should never use a nursing home stay as the basis for how long your policy should last.
Here's the way I approach it...Many people have the assets and a healthy spouse usually has the stamina to survive 1 to 2 years of long term care. It's the long term care that drags on forever that's devastating not only to assets but also to the well being and health of loved ones. I recommend that even if there's only a 10% chance that long term care will last more than 5 years, you should buy the longest benefit period you can afford-but definitely 5 years as a minimum.
The chart below shows that 22% of the population over age 65 is receiving long term care either at home, in a community living arrangement such as assisted living or in a nursing home. Note that the nursing home stay is the shortest period of time for care. Also note that only 20% of all long term care is in a nursing home.
Why then, if it is the most unlikely place for care and has the shortest length of stay , would anyone use the nursing home as a basis for determining the length of benefit?
Understand Long-Term Care Insurance Benefits - Part I
Understand Long-Term Care Insurance Benefits - Part II
Understand Long-Term Care Insurance Benefits - Part III
Understand Long-Term Care Insurance Benefits - Part IV
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