If you're a senior, the future may present more of a concern than it once did--you may wonder what you'll do if your health deteriorates. If you must enter a nursing home, for example, how will you pay for it?
If you lack sufficient resources to pay for long-term care on your own, should you buy LTCI, rely only on government programs such as Medicare and Medigap, or use an LTCI policy to supplement government benefits?
Before you can answer this question, you'll need to know what types of long-term care are covered under each program. Figuring out where one program leaves off and another begins can be a challenge, so here's an overview.
The three types of long-term care
There are basically three types of long-term care: skilled care, intermediate care, and custodial care. You need to understand how these types of care are defined, and the extent to which you can obtain coverage for each of them.
Skilled care is continuous round-the-clock care required to treat a medical condition. It is ordered by a doctor and usually delivered by a skilled medical worker (e.g., a registered nurse or professional therapist). A treatment plan is established and supervised by a doctor.
Medicare provides 100 percent coverage for the first 20 days in each benefit period (year) that you're in a skilled care facility--as long as certain conditions are met:
- Before moving into a skilled care facility, you must have spent at least 3 consecutive days in the hospital for the same condition
- This hospital stay must be within 30 days of the time you enter the skilled care facility, and
- Skilled care must be provided in a certified facility
You are required to pay a daily co-payment for the 21st through 100th day in a skilled care facility, but Medicare covers any expenses beyond this amount. Medicare provides no coverage for expenses incurred after the 100th day.
Medigap is supplemental health insurance sold by private insurance companies (under federal guidelines) to fill in some of the gaps in Medicare's coverage. Most Medigap plans cover your daily Medicare co-payment for the 21st to 100th day of skilled care.
Long-term care insurance (LTCI) coverage
LTCI pays a selected dollar amount per day for a specified period for certain forms of care in nursing homes and other settings. You'll need LTCI if you want coverage beyond the 100th day of care in a skilled care facility. Because many people who enter such facilities stay for several years, LTCI can provide valuable financial protection.
Intermediate care is care needed on only an occasional basis (daily or a few times a week), and is less specialized than skilled care. It is provided by trained medical workers under the supervision of a doctor.
Medicare may cover certain types of intermediate care, but only under specific conditions. For example, it covers skilled nursing care, physical therapy, and speech therapy services provided in your home, but only if you are confined to your home and a doctor orders the services. Intermediate care in a nursing home is typically not covered by Medicare.
Most Medigap policies provide an additional amount per at-home visit for intermediate care, but only if a doctor orders the services as a follow-up to an injury or illness. Intermediate care received in a nursing home is typically not covered by Medigap.
Most LTCI policies provide coverage for intermediate care services provided in the home or in a facility. (Home health care and care in a facility can be purchased separately or together.) If you have the coverage for either home or facility care, LTCI will cover all three levels of care. In addition, many LTCI policies cover care received in continuing care retirement communities, assisted-living centers, and adult day-care centers.
Custodial care is provided to assist in performing the activities of daily living (e.g., bathing, eating, and dressing). It does not require a doctor's orders and can be performed by someone without professional medical skills. This type of care can be provided at home or in a facility.
Medicare and Medigap
Medicare and Medigap provide no coverage for custodial care, because these services are generally nonmedical in nature.
If you are concerned about coverage for custodial care, an LTCI policy may be appropriate. Along with coverage for personal care, many policies may also include coverage for light housekeeping, meal preparation, and laundry services, among other things. If you have the coverage for either home or facility care, it will cover all three levels of care. When you're shopping for an LTCI policy, keep in mind that most long-term care is custodial in nature.
Help is available
If you need help sorting through these issues, a financial advisor can guide you through various long-term care cost scenarios and help you choose a strategy that makes sense.
Joelle Spear is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through Canby Financial Advisors, LLC or CES Insurance Agency. She can be reached at 508.598.1082 or firstname.lastname@example.org
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances.