The layperson who is shopping for insurance is at a serious handicap in reading policies and discussing proposals with agents. This can be complicated when one is considering the possibility of a loved family member requiring long-term care. Before reading brochures or having discussions with institutions or agents, it would be well to review the following terms.

Activities of Daily Living (ADL)

Most LTC policies require that a doctor or other professional certify that nursing home care is medically necessary because the patient is unable to perform one or more of the following ADLs: taking medications, walking, eating, dressing, bathing, getting in and out of bed and using the toilet.

Benefit Amount

Measured in dollars, this refers to the maximum daily or monthly dollar amount that the policy will pay for nursing home care,for example, $80 a day or $2,000 a month.

Categorically Needy

The individuals who are automatically eligible for Medicaid coverage in each state. The categorically needy include the aged, blind or disabled who are eligible to receive Supplemental Social Security Income (SSI) cash payments or state SSI cash supplements. It also includes members of families eligible to receive payments under Aid to Families with Dependent Children (AFDC) program.

Chronic Illness

An illness marked by long duration or frequent reoccurrence such as arthritis, diabetes, heart disease, asthma and hypertension

Conditionally Renewable

An agreement by the insurance company to continue to insure a policyholder as long as it continues to insure people in the state with the same kind of policy.

Co-Insurance

A percent of covered expenses that an insured person is required to pay. Policies usually pay up to 80 percent of “reasonable” charges, and the individual must pay the other 20 percent, plus any amount more than the “reasonable” rate.

Deductible

The total initial amount that must be paid for services covered under an insurance plan before benefits are paid by the insurer.

Elimination Period

The first days of a confinement which are not covered by the policy. Also called a “waiting period,” this is analogous to the deductible in auto or health insurance policies, but instead of being measured in dollars, it is measured in terms of days. Basically, it is the time that the patient must pay nursing home costs out of pocket before the policy will begin payments. Many states require the elimination period to be under 200 days; 100 is generally considered the maximum. Of course, the higher the elimination period, the lower the premium.

Exclusion

An expense or condition that the policy does not cover and toward which it will not pay.

Gatekeepers

These are requirements that must be satisfied before a policy will pay benefits. In some older policies, for example, policyholders had to spend three days in a hospital before the insurer would pay for nursing home costs.

Guaranteed Renewable

An agreement to continue insuring a policyholder up to a certain age or for life as long as the premium is paid and to maintain the same premium rate unless rates are increased for a particular class (such as everyone in the same geographical area with the same kind of policy).

Home Health Care Benefits

Often offered as a rider to the LTC policy, this provision covers the common situation when an elderly person has trouble handling daily activities but can manage with some assistance in the home

Inflation Rider

As the name suggests, this is a provision that will increase the benefit amount each year. Many companies will offer a choice between a 5% annual compounded increase in benefits, or a simple annual increase based on movements in the consumer price index. Some policies also offer the option, at the time of annual renewal, of increasing the benefit amount by a specified percentage up to age 85.

Maximum Benefit Period

The amount of time (usually expressed in years) that a policy will pay nursing home costs. Two years is the minimum; 3 years is more typical. Many companies offer lifetime coverage as well. Once again, the longer the benefit period, the higher the premiums

Medicaid

A federal/state cooperatively funded and state-operated program of health benefits to eligible low income people, established under Title XIX of the Social Security Act. States determine program benefits, eligibility requirements, rates of payment for agencies and institutions that provide services and methods of administering the program under broad federal guidelines. Medicaid operates in every state except Arizona, which has a comparable program.

Medically Needy

People who qualify for some Medicaid services because their incomes are substantially diminished by medical expenses placing them below a state established standard. This is a way for individuals to be eligible for Medicaid without having to be “categorically needy.” (see above)

Medicare

A federal health insurance program for people aged 65 and over who are eligible for Social Security or Railroad Retirement benefits and for some people under age 65 who are disabled. Medicare was established under Title XVII of the Social Security Act. There are two parts:

• Hospital Insurance (Part A) which is automatic
• Supplementary medical insurance (Part B)

Part B covers physicians and other services and is voluntary, requiring the payment of a monthly premium.

Nursing Home Levels Of Care

Skilled Nursing Care - for people who need intensive care -- 24 hour-a-day supervision and treatment by a registered nurse under the direction of a doctor. This is the highest level of nursing home care, where a patient requires constant attendance by a nurse, doctor or other medical professional. Medicaid will cover up to 100 days of this type of coverage under certain circumstances - generally after a hospital stay. This makes up less than 2% of all nursing home care

Intermediate Care - This is suitable for people who do not require round-the-clock nursing, but who are not able to live alone. The nursing home will provide only care that requires limited medical attention or supervision, but not constant attendance.

Custodial Care - Custodial care is suitable for many people who do not need skilled nursing care but require supervision (help with meals, personal hygiene and the like). This represents the level of care required by the majority of all nursing home residents; it provides assistance in the normal activities of daily living. Although custodial care doesn’t necessarily require a nurse or other trained professional, many LTC policies will only reimburse a facility with a doctor on-call, a nurse on staff at all times, and some type of clinical records for all patients. In general, these are what distinguish a nursing home from a rest home.

Older Americans Act

Federal legislation enacted in 1965 and since amended to set up a network of state and area agencies on aging, which plan, coordinate and fund local programs of services for people aged 60 or older

Out-Of-Pocket Payments

Costs paid directly by an individual that are exclusive of insurance benefits

Personal Care

Assistance given to people who need help with dressing, bathing, personal hygiene, grooming or eating.

Pre-Existing Condition Limitation

A limit on benefits allowed for a health condition that a policyholder has before becoming insured

Respite Care

This service will temporarily relieve family caregivers from the responsibilities of care to an impaired relative. It may be offered as part of home health care or as a separate service in some LTC policies.

Social Services Block Grant

A federal program established under Title XX of the Social Security Act to fund non-medical services for low-income people

Supplemental Security Income

(SSI) A federal program of support for low-income blind, disabled, and older people authorized under Title XVI of the Social Security Act.

SUMMARY
Unfortunately, insurance policies are not easy to read. While a verbal explanation of the contract by an agent is helpful, the precise language of the policy will determine benefits. Because the impact of long term care is so financially significant, and because the remedy of insurance can be critical, it is essential that you receive competent advice from a highly qualified financial planner or insurance agent.