Long-term care insurance

Medicare does not pay for this

Long-term care means help with the ordinary business of daily life — dressing, bathing, using the bathroom, meals — for someone with a chronic illness or disability. Medicare's own coverage page states that because most of that care is non-medical, Medicare and most health insurance, including Medigap, do not pay for it, in a nursing home or in the community.^{Source 1}

Long-term care is not the same as skilled nursing facility care. Medicare does cover a skilled nursing stay in limited circumstances after a qualifying hospital admission, which is exactly why families believe they are covered. The two are constantly confused, and the confusion surfaces at the point of admission when a decision has already been made.^{Source 1}

Medicare names the alternatives itself: Medicaid, if the person meets their state's eligibility requirements, or private long-term care insurance. Everything else is paid out of savings.^{Source 1}

What makes a policy start paying

A policy does not pay because care has become necessary, or expensive, or exhausting. It pays on a certification by a licensed health care practitioner, and the standard is written into federal tax law because it is what qualifies the contract for its tax treatment.^{Source 2}

• Unable to perform at least two of six activities of daily living, without substantial assistance, for at least 90 days, because of a loss of functional capacity. The six are named in the statute: eating, toileting, transferring, bathing, dressing, continence.
• Or requiring substantial supervision to protect against threats to health and safety because of severe cognitive impairment. This is a separate route in, and it is the one that matters for dementia: someone who can still dress and eat may qualify on supervision needs alone.^{Source 2}

The certification expires. Federal law excludes anyone unless a licensed health care practitioner has certified them within the preceding twelve months. Getting the first certification is a task; keeping it current is a recurring one, and it is the sort of thing that lapses while a family is occupied with the care itself.^{Source 2}

Your parent has a policy. What now?

Two different kinds of rule govern what happens next, and families lose weeks by confusing them. The benefit trigger — the practitioner's certification — comes from federal law and is the same for every qualified policy. Almost everything else that decides whether a bill gets paid comes from the contract your parent signed, which Sahvelo has not read and cannot read: how long the waiting period runs before benefits begin, which care settings qualify, how much the policy pays per day or per month, how large the total pool is, whether it grows with inflation, and whether the insurer reimburses receipts or simply pays a fixed amount.

Policies sold in different decades by different insurers differ on nearly every term that matters — including whether care at home counts at all, and whether an unlicensed family caregiver can ever be paid. Nothing on this page tells you what your parent's contract says. It tells you which questions have to be answered before anyone can plan around it.

Write down the name of everyone you speak to and the date. A long-term care claim is a paperwork process conducted over months with people who change, and the family that kept a log is the family that gets paid without arguing about what was said.

Why letting a policy lapse is not like canceling other insurance

A qualified long-term care policy has no cash surrender value. It cannot be borrowed against, cannot be pledged as collateral, and returns nothing on cancellation. Premium refunds and dividends must go toward future premiums or increased benefits, not to the policyholder.^{Source 3}

So twenty years of premiums return nothing if the policy lapses — and the classic way it lapses is a premium notice left unopened during exactly the cognitive decline the policy was bought to cover. If you are helping a parent, this is the failure to guard against before anything else.^{Source 3}

California puts this in statute, and it is worth knowing whether your state does too. A California policy cannot be issued until the applicant has been offered the right to name a second person to receive lapse notices; the insurer must re-offer that choice at least every two years; and no policy may lapse for nonpayment unless the insurer has first given advance notice to the insured and to every designated person. If it lapsed anyway, California requires the policy to allow reinstatement on proof of cognitive impairment or loss of functional capacity, if asked for within five months of termination.^{Source 4}

Florida puts it in statute too, and on one point more strongly. A Florida long-term care policy carries a grace period of at least thirty days, and after that the insurer must still mail a warning of possible lapse — to the policyholder and to any second person they named — at least thirty days before the cancellation takes effect. So a Florida policy cannot be gone in under about two months, and a family that finds the problem quickly has not missed it. Florida also requires the insurer to ask the policyholder every year whether they want to name that second person, where California re-offers every two. Naming someone imposes no liability on them for the insured's care.^{Source 5}

1. Find out whether a policy exists at all, and get a copy of the actual contract rather than a summary. Check bank statements and tax records for annual premium payments — a policy nobody remembers is not unusual.
2. Ask the insurer, in writing, to add a designated third party to receive lapse and non-payment notices. Most insurers offer this and many are required to, and it is the single cheapest protection available. Ask separately what the insurer's policy is on reinstating a lapse caused by cognitive impairment.
3. Set the premium to pay automatically from an account that is monitored by someone other than the policyholder.
4. Read the elimination period, the daily or monthly benefit, whether there is inflation protection, and the lifetime maximum. These four numbers decide what the policy is actually worth, and none of them is on the premium notice.
5. Note the certification requirement now, so that when a claim is made the family knows a doctor's certification is the thing that starts the clock — not a phone call to the insurer.

A policy is guaranteed renewable, which means the insurer cannot cancel it because of the policyholder's health or age. It does not mean the premium cannot rise: increases are applied to whole classes of policyholders and have been substantial on older policies.