SHORT TERM CARE INSURANCE
Some Short Term Health Care Frequently Asked Questions
Eleven Important Questions Answered
Copyright, Ronald J. Iverson, 2013
Let’s assume that you have found that your personal assets total somewhere around $100,000 for a married couple or $50,000 for a single person. (There is no “magic” amount, I only use these figures to illustrate the case for Short Term Care.
1) You have found that your assets would not warrant purchase of a Long Term Care Insurance policy.
2) You are living on a “fixed income,” which you do not see increasing greatly over the rest of your lifetime.
3) You do not expect a large inheritance or “windfall,” which would create the need for an LTCI policy.
4) You wish to protect what assets you do have, maintain as much of your independence as possible, and not have to depend on your family, for as long as possible.
WITH THOSE THOUGHTS IN MIND, LET US BEGIN!
Q 1— “Our assets-countable totaled $98,699. They are held mostly in Bank Certificates of Deposit, some savings, and some Cash Value Life Insurance. Would Long Term Care Insurance seem advisable? We rent, and have one “older” automobile. We are ages 72 and 70.”
A 1— Probably not. With LTC premiums (depending on the combination of coverage) approaching $2,000 to $4,000 apiece per year, you probably do not have the base of assets which requires $100,000+ in asset preservation protection. However, you are interested in protecting what you have against some nursing home needs.
Q 2— “How can we do that?”
A 2— Short Term Care policies (recovery, convalescence, or recuperation) can protect you for a shorter period of time, a period running from 180 days, 270 days or 360 days, and are considerably cheaper (obviously) than true Long Term Care Insurance policies. Some of the insurance industry has recognized this need for shorter term protection, and more companies will “come on board” as this need is recognized.
Q 3— “What are my chances of “getting by” with a Short Term policy? My recent reading says that a large number of people will need Nursing Home care or at least Home/Home Health Care.”
A 3— That’s true, the numbers are astonishing, but they also need to be evaluated a little bit. For instance, a CDC publication, “The National Nursing Home Survey” Series 13, No 152, completed in 2002 by the US Dept. of Health and Human Services, says that 68% of all nursing home patients stays are for three months or less. That study also says that 76% of nursing home patient stays are for six months or less, and 83% of stays are less than a year. So, if it’s true that most nursing home stays are less than a year, (and nobody can determine ahead of time just who that will be) it makes sense that a short term care policy could help your needs. Just as in all insurance purchasing, nobody can determine ahead of time whose needs will be different, but this important study says that up to 80% of people could use at least 360 days of protection.
Q 4— “So, you’re saying that a Short Term Policy of 180 days, 270 days, or 360 days may be sufficient to protect our $98,699?”
A 4— I’m saying that the US Dept of Health and Human Service study seems to bear this out. The problem is that for those in need of long-term care, the stays over six months have an average of about another two and a half years, according to other studies. So, while we are somewhat involved in uncharted waters, a six-month to one-year policy could seem to be the answer to about three-fourths of the people’s needs. Remember, that with a $200 per day charge, even a nine-month stay amounts to nearly $54,000. This would have an impact on your life’s “nest egg,” should either of you need even a short nursing home stay. The premium for a Short Term Care policy is much more affordable and is easier to qualify for.
Q 5— “I am single and my asset total (excluding exempt assets) amounted to $51,400. Why couldn’t I spend these assets to pay for my Nursing Home care and then just qualify for Medicaid?”
A 5— You can. Nothing wrong with that, but most people would prefer to protect what they can, while they can. My guess is that your $51,400 is as important to you as $300,000 would be to a person who has $300,000. There really seems to be no difference. Bankers tell me that for every 1,000 accounts in the bank, at least five are spending their own money to pay for Nursing Home costs. But even more importantly, my banker tells me that no matter what amount of money people retire with, they don’t want that amount to go DOWN. They want the amount to at least stay even, and most work at growing it as much as they can.
Q 6— “As you assumed at the beginning, we are living on a fixed income and we cannot afford Long Term Care Insurance. Why would a Short Term Care Insurance policy do a better job?”
A 6— It won’t do a better job, but will do a more affordable job. With a smaller asset base, a fixed income, and government figures which point out that 76% of the people can “get by” with a six month policy, and 83% will need only one year of nursing home care, all the elements add up to a limited amount that can be spent on premium. Short-term policies (depending on the term selected) can run from one-fourth to one-third the premium of Long Term Care. For you, this may make economic sense.
Q 7— What do you mean by “economic sense”?
A 7— Quite simply, if the dollars aren’t there, and if the need is not there, you should not feel that you need protection beyond your means. It is far more important to be able to “put beans on the table”, and pay your normal living expenses such as medicine, transportation, utilities, Medicare, etc., than to spend necessary personal moneys for Long Term Care Insurance policies. ABOVE ALL, YOU SHOULD NOT BE MADE TO FEEL THE NEED TO PURCHASE BEYOND YOUR MEANS BY ANY INSURANCE AGENT, RELATIVE, OR NEIGHBOR who is not aware of your personal status.
Q 8— “My Medicare Supplement salesman told me that I didn’t need to worry about the first 100 days of Nursing Home Care because between Medicare and his policy the first 100 days would be covered!
A 8— Oh, Oh!!! Oh, Oh!!! Naughty, Naughty, Naughty!!!
BE REALLY CAREFUL WITH THAT INTERPRETATION. It is a shame that so many people have been lead to believe this “quasi”, not even “semi” truthful statement. The statement is SOMEWHAT true, BUT ONLY FOR SKILLED CARE!!! I cannot repeat this enough, but unfortunately, far too many people are left with a false sense of security for a variety of reasons.
1) The insurance agent does not properly make a point of saying that Medicare
pays for the first 20 days of SKILLED care, and skilled care ONLY.
2) The agent does not properly make a point of saying that days 21-100 of
SKILLED CARE HAVE A $144.50 PER DAY DEDUCTIBLE, in 2012. In other
words, if for some MEDICALLY NECESSARY reason (this excludes
intermediate or custodial care) you need SKILLED CARE, the policy (in some
cases, and then, only with certain “standardized” forms of Medicare
Supplements), will pay the $144.50 PER DAY deductible. THIS IS A
VITALLY IMPORTANT POINT if retirees are to understand the proper way
this coverage is interpreted.
3) The client simply refused to hear “the fine print” and just assumed enough
to be dangerously “comfortable.” “My agent (or some mail order outfit)
will take care of me,” seems to be a part of this misunderstanding.
4) The Federal Government through Medicare plays an important role in this
misunderstanding because of the way it prints its “standardized plan”
presentations. The “Guide to Health Insurance for People with Medicare” for
2011, and the illustrations, which Medicare Supplement companies must follow,
refer to this coverage as: “Medicare pays all but $144.50 per day.”
Well, big deal! If the cost is $180.00 per day, Medicare pays $35.50! The next
column says “You Pay (or your policy pays) Up to $144.50 per day” BUT
AGAIN, REMEMBER, ONLY FOR SKILLED CARE.
The Guide and illustrations SHOULD say what the benefit is—a $144.50
per day DEDUCTIBLE! All if which then, leads to a need for at least Short
Term Care Insurance. Think about the realities of this item.
Q 9— What do “Recovery,” Convalescence,” and “Rehabilitation,” mean?
A 9— Simply stated—Recovery, Convalescence, and Rehabilitation are similar to Custodial and Intermediate care in a facility, or maybe at home if the care is qualified. If, according to the Department of Health and Human Services, 83% of Nursing Home stays are for less than one year, we should be talking about the reasons MOST people go to the nursing home—recovery, convalescence, and rehabilitation!!! But some Short Term Care Insurance policies include a trigger that Tax-Qualified Long Term Care Insurance policies do not include—that of a Medical Necessity being a trigger for obtaining benefits—an advantage to the policyholder.
With all the emphasis for the last fifteen years being on Long Term Care, which is used to prevent asset erosion, then we have ignored the reason that MOST people go to nursing homes—again, recovery, convalescence, and rehabilitation.
But no longer! Short Term Care, or by any other name such as Nursing Home Insurance, Nursing Facility Insurance, Convalescent Care, or Recovery Care, we now have the products, which appeal to many potential clients.
If potential clients do not have the need for asset protection, cannot afford, or cannot qualify for LTCI, then we have overlooked the needs of the majority of America’s people—that being Short Term Care Insurance. Think about the following phrase, and how it can affect you:
“For the past few years, people have really become aware of the expense connected with confinement to nursing home facilities. The cost of the average nursing facility can wipe out the bulk of most retirees’ savings in just ninety to one hundred and eighty days.”
Q 10— Do Short Term Care Insurance policies just cover nursing home stays? What about
Assisted Living and Home Health Care?
A 10— Most Short Term Care policies also cover care in an Assisted Living Facility, and some can include Home Health Care by rider. Be aware however, that coverage for Home Health Care must be obtained by a professional health care practitioner—a doctor, registered nurse, licensed practical nurse; or physical, speech, or occupational therapist. Short Term Care policies will not provide Home Care—the services of a personal care giver. Only professional caregivers will be covered.
Q 11— Is Short Term Care Insurance only available to Medicare age people?
A 11— Absolutely not! As is the case with Long Term Care Insurance, or Life Insurance, the younger the applicant, the more favorable the premium rate is. Most purchasers of Short Term Care Insurance begin thinking about retirement in their late forties, and by their fifties, they are concerned about how to protect the assets they do have, and recognize the value of purchasing at a younger age.
Thus, some companies accommodate the age forty to seventy-nine demographic, while others will write the product to as low an age as eighteen.
In conclusion then:
Please Remember, that RECOVERY, CONVALESCENCE, AND REHABILITATION are the key to most short-term nursing home patient stays.
Also remember, the cost is far less, and the underwriting easier.