Navigating the LTC Minefield

Friday - 5/15/2009, 4:00am EDT

The average civil servant is middle-aged and does not have a million dollars in the bank to take care of unplanned (and uncovered) medical or physical emergencies.

If that description fits you, then you are definitely a candidate for Long Term Care insurance. Having it, if you have an accident or illness that means you need help to eat, dress, bath, etc., means you can get by with some dignity and without bankrupting your spouse, kids or siblings. So who needs it?

Most federal and postal workers don't have the LTC coverage which has been offered for the last seven years. During the life of that contract, premiums did not (as promised) go up. Despite lots of regular and even worse medical inflation during that period. But now a new contract has been written and, for some people, premiums could go up anywhere from five to 25 percent.

There will be an time frame (to be announced) when people can make adjustments in their current LTC insurance, or sign up. Here's what we know so far:

If you have LTC, or plan to get it in or out of government, there are some important things to be aware of. In this week's Federal Employees News Digest, columnist Ed Zurndorfer talks about how LTC works, why premiums are going up (and why feds have a pretty good deal), and some pitfalls you should avoid when shopping for insurance.

Part of that column is reprinted here with the permission of FEND. For the rest you can go to: http://www.federaldaily.com/fend/causey.htm until May 31.

    Applicants for LTC insurance will have to make some individual policy choices when they apply. Here are some guidelines:

  • Elimination or waiting period. Most policies require a policyholder to pay for the 30, 60 90 days or longer of care before the policy pays. The shorter the elimination period, the higher the premiums.

  • Daily benefits. This represents how much the policy will reimburse the insured for daily LTC expenses. Individual LTC purchasers will want to know what nursing home, assisted-living and home health care rate are in the specific area of the country in which they plan to retire. According to the Met Life Mature Market Institute, the average nursing home stay in the U.S. during 2008 cost $212 per day. Many states had higher costs.

  • Benefit period. "Lifetime benefits" coverage is increasingly not offered in most new policies. Three or five year benefit periods are more typical. Only a small percentage of people require nursing home stays of five years or more.

  • Inflation protection. Annual costs of LTC have greatly outpaced inflation since 1990. Some LTC insurance companies offer inflation protection that raises the daily benefit amount each year based on the consumer price index (CPI). The problem is that the CPI has risen less than LTC costs. A better choice for inflation protection is a fixed five percent compound inflation rate that is applied each year to the policyholder's daily benefit.

  • Expense-incurred benefits. These are insurance company reimbursements paid directly to the insurance policyholder or to the LTC care provider for eligible costs, up to the daily benefit maximum.

  • Indemnity benefits. These are daily cash benefits paid to the LTC insurance policyholder to cover LTC expenses which do not always have to be eligible expenses. This type of benefit is generally more expensive.

To read his full column, click here: www.federaldaily.com/fend/causey.htm, but again, only until May 31, 2009.

Nearly Useless Factoid
by Suzanne Kubota

Finally! There may be an explanation why curve balls are so hard to hit. In one of the "three best visual illusions in the world" chosen by a gathering of neuroscientists and psychologists at the Naples Philharmonic Center for the Arts in Florida, Arthur Shapiro of Bucknell University in Pennsylvania shows how a spinning ball that, when watched directly, moves in a straight line. When seen out of the corner of the eye, however, the spin of the ball fools the brain into thinking that the ball is curving. Now if they can just figure out how to make it easier to step off a curb with new bifocals, we can play ball!

To reach me: mcausey@federalnewsradio.com