Long-term care coverage: Know your options

When faced with the difficult prospect of changing one’s normal style of living, the major factors to consider are age, interests, finances, and of course, health issues and concerns.

My elderly parents are starting to look at alternative senior living facilities. What are the major differences and options for long-term care insurance?

The aging of America has forced many senior citizens and their families to explore the myriad housing options available today. When faced with the difficult prospect of changing one’s normal style of living, the major factors to consider are age, interests, finances, and of course, health issues and concerns. Available elderly housing choices include independent living, assisted living, nursing homes, continuing care communities, and remaining at home.

Independent living housing is an attractive option for active seniors who can take care of themselves and prefer a social versus medical setting. Independent living facilities typically can accommodate a broad range of lifestyles. Often included are in-house activities and transportation to shopping and other outside events. Many also have dining rooms that serve daily meals, though most independent living facilities include a full kitchen within the resident’s apartment or living unit. Residents can enjoy daily activities without worrying about the typical maintenance and repairs of individual home ownership.

Assisted living facilities essentially are communities designed for seniors who have some level of difficulty living and managing on their own. They provide a moderate level of personal care, including assistance with bathing and administering medications. Individual living units, which are usually rented on a monthly basis, are often of the efficiency style, with very limited kitchens or no cooking facilities at all. Additional care may be available to residents at an additional cost. The assisted living option is a good choice for the elderly who can manage with some limited help from on-staff aides.

Nursing homes offer a much more intense level of medical care and attention, usually under the supervision of a medical doctor. With so many other elderly care options available today, nursing homes have become geared toward dementia patients, limited rehabilitation stays, or patients near the end of their lives. Nursing homes can provide near-hospital-quality medical care for chronic illnesses.

Continuing care communities, also known as life care communities, attempt to provide facilities for all stages of aging within the same housing complex, and include independent and assisted living, as well as nursing and rehabilitative care. Costs include substantial entry fees plus monthly payments. The major advantage to this arrangement is the ease of movement between levels of care as the resident’s condition changes. From a social standpoint, seniors may still maintain contact with friends as they move within the community.

Staying at home, with its familiar surroundings and proximity to friends and neighbors, remains the top choice for many seniors. By avoiding change, seniors can maintain an important sense of independence. Hired care can be tailored to specific situations, and the aides provide a more personal, one-on-one care environment. The difficulty comes with transportation issues relative to shopping and other errands, as well as the relatively high level of turnover of home health aides.

From a financial planning standpoint, it is critical to address long-term care issues in coordination with other risk management issues. To insure this risk, a number of insurers provide a variety of long-term care insurance products.

Next: Definitions within long-term care insurance policies

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As with disability coverage, the benefits covered in a long-term care insurance policy as well as the dollar limitations dictate the pricing of the policy. Begin by determining what levels of care you would like to insure against. Definitions within the policies may include the following:

Skilled care: Physician-ordered daily nursing and possibly rehabilitation care under the supervision of licensed skilled registered nurses and other skilled medical personnel

Intermediate care: Same skilled personnel as above, except care is required only occasionally, not daily

Custodial care: Based on doctor’s orders, assistance may be covered within the policy for help with daily activities such as bathing, eating, dressing, mobility issues, etc. The assistance generally does not need to be provided by skilled medical personnel.

Other determinants of premium pricing include maximum allowable daily dollar limitations, inflation protection, guaranteed renewability, and a waiver of premium based on a specified number of days spent in a nursing home.

What is the AMT?

The alternative minimum tax (AMT) system is designed to ensure that taxpayers pay a minimum amount of tax when they use certain tax benefits to reduce their regular tax liability. For planning purposes, the most common triggers of the AMT are large capital gains, higher-than-average number of dependency options, and large deductions for state income taxes. If your AMT is higher than your regular taxes, you pay the additional amount. The AMT rates are 26% for AMT income less than $182,500 and 28% for amounts over $182,500.UT

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