Long-Term Care Insurance - Introduction to Long Term Care


This year, about nine million men and women over the age of 65 will need long-term care. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family and friends are the sole caregivers for 70 percent of the elderly. A study by the U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more. (www.medicare.gov, updated January 22, 2007)

Long-term care refers to the many services beyond medical care and nursing care used by people who have disabilities or chronic (long-lasting) illnesses. Long-term care insurance helps you pay for these services, which can be very expensive. A policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them.

Life expectancies are continuing to rise due to improved medical techniques, more healthy living, and simply dropping bad habits just to name a few. However, as some people progress through the senior living aging process they may start to need a hand with everyday activities. This type of long-term care can come suddenly and unexpectedly. And, let's not forget to mention that the cost of extended long-term professional care can cost as much as $60,000 per year or more.

While Medicare and Medicare supplemental insurance are protective for the elderly in helping them with the costs of medical care, neither of these programs covers long-term custodial or nursing home care. The only available solutions other than Medicare will be to self-insure or seek out long-term care insurance.

ELIGIBILITY
Policies are required to pay benefits based upon the inability to perform, without substantial assistance from another person, certain Activities of Daily Living (ADLs). An individual would be considered "Chronically Ill" if they are unable to perform at least two of the six ADLs for a period of at least 90 days.

The six "Activities of Daily Living" (ADLs) are:

  • Bathing- Washing oneself by sponge bath, or in either a tub or shower, including the task of getting into or out of the shower.
  • Continence- The ability to maintain control of bowel and bladder functions.
  • Dressing- Putting on and taking off all articles of clothing and any necessary braces, fasteners, and artificial limbs.
  • Eating- Feeding oneself by getting food into the body from a receptacle such as a plate or cup.
  • Toileting- Getting to and from the toilet and performing required acts of hygiene.
  • Transferring- Moving into or out of a bed, chair, or wheelchair.


All policies must pay benefits if you are unable to perform three of the six ADLs, however; many policies will pay benefits if you are unable to perform two of the required ADLs. As a result of HIPAA (The Health Insurance Portability and Accountability Act of 1996), prior hospitalization can no longer be used as a benefit trigger for individual LTC policies; instead, the individual must be diagnosed as chronically ill.

Practice Question:
All of the following are activities of daily living (ADLs) as provided under the Health Insurance Portability and Accountability Act (HIPAA), EXCEPT:

A. Walking
B. Bathing
C. Transferring from bed to chair
D. Dressing

Answer: A
The six activities of daily living (ADLs) under HIPAA include: eating, dressing, bathing, using the toilet, transferring from bed to chair, and maintaining continence. If an individual cannot perform two of the activities of daily living for at least 90 days, they would be considered chronically ill.

Long-Term Insurance Coverages
Related Articles
  1. Investing

    Build a Retirement Portfolio for a Different World

    When it comes to retirement rules of thumb, the financial industry is experiencing new guidelines and the new rules for navigating retirement.
  2. Trading Strategies

    Only Take a Trade If It Passes This 5-Step Test

    Not every moment is a good trading opportunity. Put each trade through this five-step test, so you're trading only at the best profit potential times.
  3. Mutual Funds & ETFs

    ETF Analysis: United States 12 Month Oil

    Find out more information about the United States 12 Month Oil ETF, and explore detailed analysis of the characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Nasdaq Biotechnology

    Find out information about the ProShares Ultra Nasdaq Biotechnology exchange-traded fund, and learn detailed analysis of its characteristics and suitability.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Floating Rate Bond

    Explore detailed analysis and information of the iShares Floating Rate Bond ETF, and learn how to use this ETF as a defense against rising interest rates.
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB Commodity Tracking

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  8. Options & Futures

    Use Options to Hedge Against Iron Ore Downslide

    Using iron ore options is a way to take advantage of a current downslide in iron ore prices, whether for producers or traders.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Value

    Find out about the Vanguard Small-Cap Value ETF, and explore detailed analysis of its characteristics, suitability, recommendations and historical statistics.
  10. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Corp Bd

    Learn about the Vanguard Intermediate-Term Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics.
RELATED TERMS
  1. Net Line

    The amount of risk that an insurance company retains after subtracting ...
  2. Political Risk Insurance

    Coverage that provides financial protection to investors, financial ...
  3. Maximum Drawdown (MDD)

    The maximum loss from a peak to a trough of a portfolio, before ...
  4. Gross Exposure

    The absolute level of a fund's investments.
  5. Priori Loss Estimates

    A technique used by insurance companies to calculate loss reserves.
  6. Value Of Risk (VOR)

    The financial benefit that a risk-taking activity will bring ...
RELATED FAQS
  1. Is my IRA/Roth IRA FDIC-Insured?

    The Federal Deposit Insurance Corporation, or FDIC, is a government-run agency that provides protection against losses if ... Read Full Answer >>
  2. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  3. What are common delta hedging strategies?

    The term delta refers to the change in price of an underlying stock or exchange-traded fund (ETF) as compared to the corresponding ... Read Full Answer >>
  4. How does being overweight in a particular sector increase risk to a portfolio?

    An investor who is overweight in a particular sector risks a loss in value for the portfolio if there is a downturn in that ... Read Full Answer >>
  5. What are the primary risks an investor should consider when investing in the retail ...

    The retail sector consists of companies operating in multiple industries such as specialty retail, general retail, food and ... Read Full Answer >>
  6. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!