Growing Older / Liz Taylor
Focus on essential elements when shopping for long-term care insurance
DEAR READERS: On June 30, I began a six-part series on long-term care insurance that appears every other Monday through the summer. This is Part 3.
I read somewhere that long-term care insurance is the most complicated product in the insurance market. I'm sure every one of you who's tried to read a policy — much less evaluate several — agree.
Rather than compare apples to apples, it's more like comparing apples to concrete. My goal is to lay the groundwork that will turn the jargon into understandable terms and help you make an informed decision.
I don't sell insurance, and the long-term-care insurance market changes frequently, so I've relied on an expert — Ken Story of the Gjurasic/Story Group in Seattle ( which sells long-term-care insurance) — for guidance in this series.
The six essential elements of a good long-term-care insurance policy, Story says, are the "bricks and mortar." Everything else — waiver of premiums, respite care, bed-hold benefit, care coordination and others — are the "bells and whistles."
To decipher between a bad, a good and a great policy, focus on the foundation — its bricks and mortar. Once you know it's solid, then deal with the details. Here are the first three essentials. I'll cover the last three two weeks from today:
1. Comprehensiveness of coverage: What services will the policy pay for? Early policies covered just nursing homes, but today you can buy policies that pay for home care only, nursing homes only, or — better — the whole enchilada, like home care, assisted living, adult-day services, adult family homes and nursing homes.
I know you'd "rather die than live in a nursing home," but think hard before buying a policy that excludes nursing homes. The fact is, a nursing home might be the best option for you someday, and it's often the most expensive, which is why you're buying insurance. Plus, insurance enables you to pay privately, which usually means you'll have access to better facilities.
Pay attention to the fine print for home-care coverage. Some policies require you to use home "health" agencies and licensed health aides, while others allow you to hire anyone — a professional caregiver or your neighbor — to care for you. (Note: Most exclude paying your family). Here's the difference: Agencies are regulated and have more specialized, trained staff and oversight, so their prices are usually much higher than someone you hire independently. While an agency might be exactly what you need someday, a policy that requires you to use one — when you don't need it — will use up your benefits faster than hiring someone yourself.
How will long-term care change in the future — and will your policy flex with these changes? Fifteen years ago, many people — like my folks — bought nursing-home-only policies before assisted-living facilities even existed, then discovered when they moved to an assisted-living facility that their insurance didn't cover it. To prevent this (or to do something not listed, such as adding a wheelchair ramp to your home), look for language that provides flexibility. Some policies, for example, allow you access to "appropriate alternative services," agreed to by your doctor and the insurer. Or choose a policy that allows you to use any service as long as you can document the need.
2. Benefit triggers: This is a subtle but important part of your policy that describes what needs to be wrong with you — and how badly impaired you must be — before the policy pays for your care. Only three benefit triggers are allowed in Washington state:
• Inability to perform three or fewer of six Activities of Daily Living ("ADLs"), which are the activities we must do to survive — bathing, eating, dressing, toileting, continence and transferring (moving from bed to chair). Some policies list others. Hint: Look for a policy that requires you to be unable to perform the fewest ADLs, such as one or two.
Because bathing is often the first ADL that people need help with — because bathrooms are the most dangerous rooms in our homes, and help with bathing may prevent a broken hip — make sure bathing is included.
How does the company measure your inability to perform these tasks? Some policies say you must need "hands-on assistance"; others say you need to have "standby assistance" or "cueing." Choose one that calls for the least amount of oversight, such as stand-by assistance or cueing.
• A physician's certificate stating that the level of care being received is necessary and appropriate, a relatively easy trigger to meet (also called "medical necessity").
• Cognitive impairment (memory loss) resulting from a disease or injury to the brain, such as Alzheimer's disease or a stroke. If a person needs verbal cueing, he/she is considered cognitively impaired for this trigger. In Washington, this trigger is required in all policies.
In 1997, Congress introduced the "Tax-Qualified" policy, mandating that it have only two triggers (ADLs and cognitive) and that beneficiaries be projected to need care for at least 90 days. While I don't like these requirements, most companies today sell only Tax-Qualified policies. I'll talk about them in more detail next time.
3. Benefit limits: How much will your policy pay per day ("maximum daily limit")? All policies set their limits on the nursing-home payment — $50 per day, $80 per day, or up to $250 a day. Home care and other levels are often listed as a portion, such as 50 percent or 100 percent of this amount.
So you pick what coverage you want. Nursing homes in Washington (among the highest-cost facilities in the United States) average $177 a day. Assisted-living facilities are less, while home care varies, depending on how much care you need.
Before you choose, realize that you may not need insurance to cover all your costs. Depending on your savings and assets, you may choose a policy that covers a portion of the risk, thus lowering your premiums. With all companies, a policy that could pay $200/day is exactly twice as expensive as one that pays $100/day.
Two weeks from now, I'll talk about three other essential elements of a good policy, plus the pros and cons of Tax-Qualified policies.
Liz Taylor, a specialist on aging and long-term care, consults with families and teaches workshops on how to plan for one's aging — and aging parents. E-mail her at email@example.com or write to P. O. Box 11601, Bainbridge Island, WA 98110.
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