Long term care, an unpleasant condition many like to believe is something which happens to others. This false belief allows us to easily put off planning for it. The reality is, no one can be guaranteed of not needing long term care during their life time. Anything can happen to anyone at any time making them dependent on long term care.

There are two main reasons why even the very rich can end up in nursing homes. Assets can quickly deplete as long term care is very expensive. There is a financial incentive for the heirs to your estate to put you into a nursing home so that their inheritance is saved. It is perfectly legal, though unethical, for someone to get a power of attorney and for your own good, take control of your assests. They have the right to move you into a nursing home and bear the expenses for five years and then put you on Medicaid.

With a LTCI policy in place you will have a professional planning your care at home and giving you advice about your sickness, injury or condition. In a situation where you are forced to seek long term care, you will be thankful that you had planned for it.

Years ago it was an unspoken understanding that children would take care of the mental, physical and financial needs of their aged parents. This is not always possible in today’s world. No matter how much we love our parents, good intentions alone are no longer just enough. Your spouse and children may need to consent having grandpa/grandma moving in and be willing to share responsibilities in caring for him/her.

No one person wants to or will be able to be take full responsibility of providing care round the clock. Responsibilities and chores need to be shared and not everyone will be willing to make sacrifices. Reality hits hard when questions regarding his/her condition begin to be discussed – can he/she walk to the bathroom? Will he/she need help bathing? Will he/she remember to take the right medications at the right time? Will he/she require specially prepared food? Will he/she be able to eat independently?

It becomes necessary to have all family members understand their specific chores and duties going forward. They also need to be aware that this could be a fairly long arrangement and may not end in a few days or even a few months. All the love and kindness in the world may not be enough when an adult becomes equivalent of child demanding constant attention living under the same roof.

If parents think that you or another sibling will assume full responsibility when the time comes, it’s wise to make them aware that this may not be the best option. Its time to plan ahead and make decisions regarding long term care and long term care insurance. Knowing what options exist will allow everyone to plan accordingly and have some semblance of peace of mind in a very stressful situation.

Obama’s new Health Care Law introduced a voluntary national long-term care insurance program which hoped to make Medicaid benefits readily available to those living at home. A National Long Term Care System was created by the Community Living Assistance Services and Supports Act (CLASS Act) in America for the first time. The CLASS Act hoped to make long term care services more affordable in the US.

This new Long Term Care Program was to be funded by premiums collected by the program participants. The premiums ranging in the $100 - $200 for this program was to be collected through pay roll deduction. The main idea behind collecting premiums for this program was to ensure that tax dollars would not be used to fund this Act.

Late 2011 media sources confirmed that this long term care program was shelved because authorities realised that it couldn’t be sustained without using the tax payer money. The CLASS Act, for an affordable premium, guaranteed working adults at leat $50 a day if they became disabled and needed long term care. Health and Human Services concluded that it was not possible to keep this solvent because participation was voluntary.

The main flaw in this program was because it was voluntary, few healthy people would choose to pay a premium for services thay may never need. Without the healthy people paying into the system, it would not be possible to keep premiums affordable for those who wished to participate. What this means is, people most likely needing long term care benefits would be the ones who were going to disproportionately sign up, which would result in more bad risks and not enough good risks in the insurance pool.

Though the CLASS Act failed, it yielded valuable information which will help design a better program in the future. Though it is a very noble idea to have some sort of universal long term care program coverage, the sustainability of such a program requires people to participate in this program even if they are healthy. But this assumption has been one of the most controversial aspects of the law as many feel that it is an unconstitutional use of federal power.
The failure of the CLASS Act does not change the dire need for a program which would make long term care more affordable in the US.

While just having basic coverage when building your Long Term Care Insurance policy is a good place to start, it’s worth while considering adding riders to your plan. As optional riders come with extra costs choose a policy where the following benefits are offered automatically.

The Alternate Care Benefit allows your policy to pay for additional care, services, supplies, treatment and equipment which otherwise were not covered by your LTCI policy. What this means is if your doctor and your insurance company agree that certain items such as in-home safety devices, medical alert equipment etc are necessary for your care, then your LTCI policy will pay for them.

If there is a high demand for nursing homes in the area you live, it becomes necessary to reserve a bed in the nursing home for a certain number of days if you are in the hospital. The Bed Reservation Benefit in your LTCI policy will pay to reserve your bed in a nursing home while you are in a hospital.

Once you begin to receive cash benefits from the insurance company all LTCI companies will waive your premium on all LTCI policies.The Waiver of Premium Benefit ensures that premium will continue to be waived as long as you are on claim.

The Homemaker and Chore Services Benefit in your LTCI policy pays for some form of homemaker and chore services. This benefit pays for a home health care aid who provides services such as cooking and fixing meals, doing laundry and washing dishes, taking the trash out and house work such as mopping and light vacuuming. Such homemaker and chore services are services which will almost always be needed to some degree and it is important to ensure that your LTCI policy pays for such services.

The Equipment and Home Modification Benefit will pay for incidental home modifications such as widening doorways to accommodate a wheel chair, adding a ramp, installing a stair lift to go between levels of your home and adding grab bars or rails in the bathroom.

Many types of proposals have been made to change the long term care financing scene over the last few years. These include the regulation of the private LTCI market, tax subsidies for private insurance purchases and reforms to maintain a role for Medicaid. The last decade has seen a growth in tax subsidies for private long term care insurance.

At the federal level, HIPPA (the Health Insurance Portability and Accountability Act of 1996) maintains that the federal tax benefits for premiums on qualified long term care insurance policies and employer provided LTCI is not counted as taxable income to the employee. Tax treatment at the state level for LTCI premiums differs from state to state. Some states allow individual tax deduction, some allow tax credits while few others allow tax credits to employers who offer group policies.

The after-tax price of LTCI is not affected by state tax incentives because state tax incentives are usually low when compared to federal marginal rates. Because of this some states allow individuals to take only the federal or state tax incentive and not both. By making the Medicaid program more generous the state can influence the demand for private long term care insurance.

Setting Medicaid’s asset and income limits and making Medicaid eligibility requirements more stringent will result in Medicaid becoming a less attractive substitute for private LTCI. Given the fact that only radical reforms in Medicaid will stimulate private LTCI, some states are participating in a “Long Term Care Partnership Program.” Individuals from states participating in this program buying private LTCI will qualify for Medicaid and still be able to protect a higher amount of wealth from the asset test.

An individual from a state participating in the partnership program, buying a private LTCI policy with $150,000 coverage will be able to protect $150,000 of assets and be shielded from Medicaid’s asset test. The purpose behind this partnership program is to increase the asset limits for only those individuals buying LTCI. This makes LTCI more attractive and encourages people to buy private LTCI.

Both private and public sources offer health insurance in the US. A subsidized public insurance offers limited protection against rising long term care costs. The private market for LTCI is small when compared to the high and uncertain long term care expenses.

With rising number of aging baby boomers and increasing cost of long term care services the cost of long term care is expected to triple in the next 30 years. Only 4% of long term care costs are covered by private insurance while one-third of it is out-of-pocket expenses. 35% of all long term care expenditure is met by Medicaid which makes it the single largest public funding program for covering long term care services.

When unpaid informal expenditure for long term care is not taken into consideration, out-of-pocket payments which account for nearly 33% of total long term care costs becomes the second largest source of funding for long term care costs. Over one-third of Medicaid expenditure is already ear marked for long term care expenses and ever increasing medical and long term care costs will only add to the federal and state financial pressure. In order to take the pressure off of Medicaid and state budgets there is an increased interest to expand the private long term care market.

Many are unwilling to choose private long term care insurance even when policies are “actuarially fair” which means premiums paid into the LTCI company equal benefits paid out to the policyholder. This is because of the “implicit tax” nature from Medicaid. This means that a major portion of the premium individuals pay for private LTCI goes towards benefits that Medicaid would have paid in the absence of private insurance.

Medicaid has two sources for this “implicit tax”. First, Medicaid is not the “primary payer”. It is a “secondary payer” which means that benefits from private insurance must be paid first even if the policy holder is otherwise eligible for Medicaid. Second, Medicaid is “means tested” which means private LTCI protects individual’s assests. With Medicaid imposing the 3 to 5 year look back period it is highly unlikely that individuals will spend down enough to meet the “asset test” Medicaid demands.

Relying on incomplete coverage of long term care costs by public insurance such as Medicaid leaves people exposed to extremely high out-of-pocket expenditure. Medicaid leaves about 40% (30%) of long term care expenses for male (female) uninsured. At the same time people are unable to meet long term care expenses over a long period of time because of the eligibility rules of Medicaid.

This results in public insurance crowd-out private insurance even when public insurance itself has limited coverage and exposes one to high risk. Without the reduction or elimination of the “implicit tax’ from Medicaid a change in the Federal and State reforms will not increase the demand for private market for long term care insurance.

As 78 million baby boomers reach retirement age, this population will become a heavy financial burden to the future generations threatening to exhaust long term health care entitlement funds. This aging population will be the largest senior population is US history and will double the previous numbers for seniors. Surveys reveal that 50% of respondents are not aware of the true costs of long term care, are worried about their savings and do not have enough funds to put toward future health care needs.

Most underestimate savings needed to fund future long term care costs. The fact that many current care givers are making their own financial sacrifices is raising concerns among many health care professionals. Aging women and their care takers are faced with four basic challenges which are: lack of preparation, finances, workplace flexibility and the keen desire for independence.

Preparation must happen beyond the personal level. Federal, state and local agencies must work together to help the current care givers and future retirees to ensure that they do not exhaust finances of future generations. A vast majority of individuals participating in demographic studies desired individuals to qualify for Medicaid services without having to spend all personal assets right down to poverty levels.

This can be achieved by creating private-public partnerships which protect personal funds to a specified amount with the purchase of approved long term care insurance. The primary hands-on care givers for loved ones continue to be women. Women who are not currently care givers expect to be providing care at some point in the future.

Many long term care-giver surveys revealed that women support long term care insurance policies which allow seniors to remain in their own homes. They strongly believed seniors should be entitled to stay and receive care as long as possible in their own homes in community based settings. Holding personal assets above the poverty level but still gaining access to Medicaid Services is a tricky solution that may be possible with the purchase of approved long term care insurance in the future.

America’s New Health Care Law introduces a voluntary national long term care insurance program which makes benefits available to those receiving long term care at home. The Community Living Assistance Services and Supports Act - CLASS Act creates a new National Long Term Care Program which is funded by premiums collected from the participants. Premiums will be in the range of $100 - $200 per month paid through pay roll deduction by the program participants. Tax dollars will not be used to fund this Act.

When employers participate employees will be enrolled automatically. However, they will still have the freedom to opt out of the program. An individual will also have the option to directly enroll in the program. Premiums will be based on age and existing health problems will not make one ineligible to apply so long as they have atleast a part time job.

Cash benefits can be received only after you have paid premiums for 5 years. Benefits in the range of $50 to $75 per day can be collected as long as needed or even lifetime after a doctor or a health provider certifies that you need long term care.

For the CLASS Act program to roll out in 2012 the Department of Health and Human Services must create the rules and regulations to govern it prior to 2012. With the additional mandatory 5 year pay in period before benefits can be paid out will make 2017 the earliest date we can see any impact of this program on our nation’s LTC needs. By this time the oldest baby boomer will be well into their 70s. At this point the already overburdened long term care system will need much more than what CLASS Act will deliver.

The program’s $50 to $75 per day benefit covers barely 2 or 3 hours of home care for those receiving care at home. When the annual long term care costs are $50,000 this daily benefit does not go far. Inflation and rising cost of living have not been factored into this program making daily benefits amount insignificant.

There must be enough number of participants contributing to this program for a long enough period to make lifetime benefits available to participants. Not many in their 40s and 50s look forward to pay roll deduction of about $100 - $200 towards this program. The “I won’t need long term care” mentality and the lack of guarantees that premiums will not increase annually will not encourage people to enroll in this program.

America’s New Health Care Law aims to change the Long Term Care system in the country. Its purpose is to introduce a voluntary national long-term care insurance program. The law hopes to make Medicaid benefits readily available to those living at home.

An Overview of the CLASS Act
A National Long Term Care System is created by the The Community Living Assistance Services and Supports (CLASS) Act in America for the first time.

What does it provide?
To help pay for long term care services, this Act allows you to buy Long Term Care Insurance by 2012.  With this kind of system, you will be entitled to receive a basic lifetime cash benefit which can be used to pay for long term care services.

Who is eligible and how does one enroll?
If you have at least a part time job and over the age of 18 you are eligible to apply. If your employer participates you will be enrolled automatically but you will still have the choice to opt out of the program. If you can not be enrolled through the company you work for, you have the option to directly enroll through the government. Existing health problems will not make you ineligible to apply as long as you have at least a part time job. Premiums will be based on age.

What is the rate of premiums?
The program aims to make this kind of insurance within reach to all. $100 would probably be the average Premium through this program. But if the program begins to loose money the government reserves the right to raise the premium. If premiums become extremely high people may not buy it. But those who buy are probably those who need it making premiums go even higher. A discounted premium of only $5 is what a very poor person or a student may pay.

How does one receive benefits?
At least a $50 a day cash benefit as long needed is what this program hopes to provide. You become eligible to receive cash benefits for as long as you need when a doctor or a health provider certifies that you need care. This cash benefit you receive can be used as you desire. This cash benefit may be used to pay family members and/or friends providing you long term care. It may also be used to pay for a wheel chair or to make your home wheelchair accessible. You are eligible to receive benefits only if you have paid premiums for at least five years.

Can one still keep private long term care insurance?
Yes. Insurance companies will offer policies to supplement coverage by CLASS just as Medigap supplements basic Medicare. To compete with the CLASS Act private insurance companieswill begin to offer long term care insurance policies.

Will this program be a success?
Many believe that this program will be a success but many financial institutions believe that less than 6 percent of adults will buy the CLASS Insurance. If this occurs then this fully funded insurance system will turn into just another government entitlement program. Or it could change from a voluntary insurance to mandatory government coverage. The financial burden on Medicaid can only be reduced by a government or private long-term care insurance system.

Your choice of long term care insurance policy coverage, benefit period and ways to minimize your premiums depend on knowing the average stay at an assisted living facility and a nursing home. The average stay for residents in nursing homes is 28 months and 27 months for assisted-living residents. Many receive some kind of long term care in their own homes before or after their stay in nursing homes or assisted-living facilities.

Based on the fact that an average 65 year old today will need some kind of long term care services for at least three years, the most popular Long Term Care Insurance Policy is one with a three year coverage. When there is a family history of Alzheimer’s disease and other such long-lasting conditions a longer benefit period is suggested. More than five years of coverage is needed by 20% of 65 year olds today.

Generally lifetime benefits cost more than two times the premiums of a three year benefit period. A policy with benefits which are ‘short and fat’ rather than ‘tall and thin’ is recommended. A ‘short and fat’ policy with a $200 maximum daily benefit for three years is actually worth $219,000 of long term care. If you use less than the maximum daily value of $200, the coverage gets extended for more than three years.

A 6 year benefit period with a daily maximum benefit of $100 is an example of a ‘tall and thin policy’. You will have to pay $50 out of pocket for every day of long term care if your daily care expense is $150 when you have a policy with only a $100 daily maximum benefit. Benefit periods strongly influence your cost of premiums for Long Term Care Insurance.

Since it is most common to receive care in your own home first, look for a policy with a zero day waiting period for home care but has a longer waiting period for nursing home care. As premiums can increase significantly when you consider lowering the waiting period for all types of care, pay a little extra for a rider to eliminate the waiting period for home care.

Premiums can reduce for a married couple with a shared three year benefit policy when each can use from the other’s benefit period if one needs a longer period than the other. For example, if one needs 4 years of coverage the spouse can use the remaining two years. Keep in mind your unique financial situation, family history of medical illness and your preferences of what kind of care and where you want to receive it when you choose your benefit period.

The ‘waiting period’ in Long Term Care Insurance is the number of days a policy holder must pay for long term care expenses out of his or her own pocket before the insurance policy takes over. This duration of time before the long term care insurance coverage begins to pay out benefits is commonly called the ‘Elimination Period’ or the ‘deductible’. The Elimination Period or deductible works in a similar way as in major medical insurance policies. The main difference is that in a medical insurance policy you will pay a total dollar amount for the initial expenses while in a Long Term Care Insurance policy you are required to bear your own expenses for a specified number of days before coverage begins.

What are the common Elimination Periods?
Elimination Periods vary from company to company and from state to state. The Elimination Period is one of the riders that a policy holder must clearly understand before he buys a policy. Not many companies offer a ‘zero-day elimination period’.

30, 60, 90, 180 and 365 days are some common elimination periods offered today. Policy holders with significant assets of their own choose a 180 or 365 days elimination period. Longer the elimination period, lower will be the cost of Long Term Care Insurance.

How do I choose a reasonable and cost effective Elimination Period?
Elimination Period influences the premium rate for Long Term Care Insurance Policy. Few choose a shorter elimination period while still fewer choose a zero period. With a shorter elimination period a policy holder will have lesser expenses before his/her long term care insurance policy begings to pay benefits.

Shorter elimination periods affect the total premiums you are going to pay in the long run. Those choosing longer elimination periods can save more on insurance premiums. While choosing an Elimination Period it is important not to compromise the cost with the benefits it will give in the long run.

What is the best Elimination Period?
Each individual’s situation is unique. What works for others or many may not work best for you. Consider your own financial situation, your own needs, and your own family medical history before you choose an elimination period. Consider the costs of care and the cost of the facility that you will have to pay out of pocket before policy pays any benefits.

Find out the cost of services and the daily facility care in the institution of your choice. Multiply this number by the different elimination periods. Once you have these numbers, choose the one which is affordable to you.

When you know the best elimination period, begin to secure funds for your out of pocket expenses and for the rest of your care. Allocate savings for your care and make sure they increase in value keeping up with inflation. Check with your agent if your long term care insurance policy will count your stay in a rehabilitation facility and/or Medicare/Medicaid licensed homes counts towards your elimination period.