LTC Insurance Coverage Among Nursing Home Residents Rises to 12.5%

With unpredictable Medicare reimbursement rates and constricted Medicaid budgets at a state level, senior care providers are welcoming a less common, but slowly growing, form of payment: long-term care insurance.

This product allows policyholders to make claims to their insurance company to pay for their health care costs, whether it’s received at home, in a nursing home, or at some sort of senior care community.

The amount the insurer pays to the care provider depends on the coverage that has been purchased. Policyholders can draw from a certain amount of money each day to cover the cost of their care, which is paid directly from the insurer to the healthcare provider.

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Long-term care can be very costly—especially in some locations—and nursing home stays can literally ruin peoples’ finances, said a June 2012 Employee Benefits Research Institute study, as the median housing wealth of nursing home residents falls to zero within six years of entering a facility for the first time.

But older adults can avoid spending down assets—necessitating a transition to Medicaid—by purchasing long-term care insurance, says a personal finance writer in an NPR interview, and the EBRI says more are beginning to do so.

Although nursing home residents whose stays are six months or longer are more than three times as likely to be covered by Medicaid than by long-term care insurance, the EBRI study reveals that the purchase of long-term care insurance has increased steadily over the past decade.

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Nearly half of 65-plus individuals who lived in nursing homes for more than 180 days, at 47.2%, were covered by Medicaid, while just 12.5% had their stays covered by long-term care insurance.

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Private means of payment is often sought after in the senior care industry as it weathers fluctuating reimbursement levels from Medicare and Medicaid.

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While the percentage of stays covered by long-term care insurance is low compared to those covered by Medicaid, it has more than tripled since 2004, when just 3.7% of six-month-or-longer stays were covered by private insurance—and long-term care providers are grateful for the trend.

“Our providers prefer a payment structure that more accurately captures the true costs of long term care,” says Greg Crist, vice president of public affairs at nursing home trade group the American Health Care Association (AHCA). “Fortunately, long-term care is an insurable event. Unfortunately, few Americans take advantage of this option.”

Last year, the Medicaid program only reimbursed about 90 cents for each dollar of allowable cost incurred in providing long-term care for Medicaid beneficiaries, according to a December 2011 Eljay, LLC report, Shortfalls in Medicaid Funding for Nursing Home Care, commissioned by AHCA. This shortfall averaged about $20 a day per Medicaid patient in 2011, and Eljay projected unreimbursed nursing home Medicaid allowable costs to exceed $6.3 billion that year.

This content is sponsored with information provided by Genworth.

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