Long term care insurance serves to fill the gaps in care that are not covered by health insurance, Medicare, or Medicaid. It generally covers home care, assisted living, adult daycare, respite care, hospice care, nursing home care, and Alzheimer’s facilities.
There are two types of long term care policies: tax qualified policies and non-tax qualified policies. Tax qualified policies’ benefits are non-taxable and more common. However, they require 1) that a person be expected to need care for at least 90 days and be unable to perform at least two activities of daily living without substantial assistance or 2) that a person need substantial assistance due to a severe cognitive impairment for at least 90 days. Non-tax qualified policies’ benefits can be taxed. They often include a “medical necessity trigger” that a person’s own doctor can “pull.”
The cost of a long term care policy depends largely on hold someone is when they buy the policy, the maximum amount that the policy will pay per day, the maximum number of years (or days) that the policy will pay, and any optional benefits. Health savings accounts (HSA) can be used to pay for qualified long term care insurance premiums.
Medicare only covers limited amounts of long term care. Medicare pays a capped amount for skilled care that follows hospital stays; however, it usually does not cover long term care services that assist people over a long period of time. Medicare will only cover the first 100 days of care in a nursing home per benefit period if the person is receiving skilled care and has a qualifying hospital stat of at least three days and enters the nursing home within 30 days of that hospital discharge.