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LTC Basics
LTC Cost
LTC Options

LTC Basics

Definitions of Activities of Daily Living (ADL)

posted Nov 28, 2009 11:40 AM by Hong Lu [ updated Nov 28, 2009 11:45 AM ]

Bathing means washing oneself by sponge bath; or in shower or tub including getting in and out of the tub/shower

Continence means control of bowl/bladder function; or when unable to maintain control of bowl or bladder functions perform associated personal hygiene (including caring for a catheter or colostomy).

Dressing means putting on and taking off clothing and any necessary braces, fasteners or artificial limbs

Eating means feeding; oneself from a plate, cup or table or by feeding tube or intravenously.

Toileting means getting/off the toilet and performing necessary personal hygiene.

Transferring means moving into or out of bed, a chair or wheelchair.

Source: National Association of Insurance Commissioners Model Act Report 641, Sec.4, 1997 pp.2

90-Day Certification for Activities of Daily Living

posted Nov 28, 2009 11:31 AM by Hong Lu [ updated Nov 28, 2009 11:36 AM ]

A taxpayer who wishes to deduct qualified long-term care expenses using the ADL (Activities of Daily Living) definition, must have a licensed health care practitioner (LHP) certify that the insured is LIKELY to need substantial assistance for at least 90 days. The requirement concerns the likelihood of needing care, not the actual receipt of care.

* Substantial Assistance – both hands-on assistance and standby assistance

Tax Treatment of LTC Expenses & LTC Insurance

posted Nov 28, 2009 11:13 AM by Hong Lu [ updated Nov 28, 2009 12:05 PM ]

The 1996 Health Insurance Portability & Accountability Act (HIPAA) provides broad tax relief to individual and families that were incurring long-term care costs. HIPAA stipulates that long-term care insurance policies that use the definition of a chronically ill individual will be “qualified long-term care insurance” and that long-term care expenses incurred by a taxpayer who qualified as a chronically ill individual will be deductible as a medical expense.

Tax qualified long-term care insurance is treated the same as an accident & health insurance policy

* Benefits pass tax-free (subject to an annual cap or $220/day in 2003 (indexed annually by 5%)

* Premiums are generally deductible (individuals, sole proprietors, owners of S-corps & LLP’s)

Long-term care insurance benefits that are part of a life insurance or annuity contract may not receive the same tax favored status as benefits received from a tax qualified long-term insurance policy. If the benefits constitutes an advance payment of death benefits, then it is likely that will not be taxed as income. In no cases are the premiums paid for life insurance or annuity contracts deductible as tax qualified long-term care insurance permiums.

The money in the HSA (Health Saving Account) can also be used to pay the premiums on a tax qualified long-term care insurance policy.


Cost of nursing home in 2004 is approximately $160 a day depending on area. Nursing Home Care in urban areas like Los Angeles, San Francisco, Sacamento, and San Diege average $132, $177, $157, and $151 respectively, per day in 2004. It is projected that the cost of nursing home care goes up 5% each year. The average cost in 2009 is $204.21 or $74,534.84 per year. Average stay is 2.25 years. That will cost an individual $170,000 in total LTC expenses.

Besides the normal daily rate that a nursing home will charge you, or the hourly rate that a home care agency will charge you, there are always going to be ancillary costs you should plan for. In a nursing home, additional expenses could be diapers, laundry, medications, and other incidentals. In your home, there are additional expenses like safety devices.

If a family member decides to provide the care rather than paying a professional, there are many human costs besides financial costs to consider. When you rely on family members to take care of you, it is important to consider the financial costs they will incur. They may be more than willing to take care of you, but may be unaware there will probably be a financial loss to them due to reducing working hours or giving up job all together.

Providing long-term care is exhaustive work, especially if the caregiver is their spouse and they are both in their 80’s! If they have Alzheimer’s and require 24-hour care, it can be very exhausting for a family member to stay up all night and during the day. The emotional toll caregivers experience is another cost loved ones pay in providing care to them. Children can become clinically depressed while taking care of their elderly parents.

Luckily, you can always plan ahead so that your cost of long-term care can be minimized while dignity in seinor living is maintained.

LTC Options TOP

Medicare and Medi-Cal

posted Nov 28, 2009 12:39 PM by Hong Lu [ updated Nov 28, 2009 12:58 PM ]

Many people assume that Medicare will pay for long-term care. But neither Medicare, private Medicare Supplement policies, nor health insurance will pay for extended nursing home stays or home care services. Medicare does pay for some skilled in-home care, but only on a short-term basis. The remaining cost of long-term care in California is paid for by Medi-Cal which is a program designed to meet the health care needs of low-income families. Otherwise, they must “spend down” or deplete most of their assets to poverty levels to become eligible for Medi-Cal. However, private room or nursing home choices is usually not available with Medi-Cal.

Life Insurance with Accerelated Death Benefit

posted Nov 28, 2009 12:38 PM by Hong Lu [ updated Nov 28, 2009 1:03 PM ]

This option allows one to ask the insurance company to pay a reduced amount of value on the insurance policy before death, if one is diagnosed with terminal illness, chronic illness, or have a major organ transplant. The proceeds may be used to pay for any purpose, not just LTC.

Life Insurance Policies with LTC Riders

posted Nov 28, 2009 12:38 PM by Hong Lu [ updated Nov 28, 2009 1:05 PM ]

LTC rider allows lump sums or periodic payments through cash advances on the death benefit that can be used to pay for specified long-term care services or any other purpose. The amount of the policy’s death benefit is reduced by the amount advanced under this rider.


posted Nov 28, 2009 12:36 PM by Hong Lu [ updated Nov 28, 2009 1:10 PM ]

Annuities contract issued by some insurance companies pays an enhanced sum compared with normal annuity payment when the owner of the policy needs long-term care during their retirement. The extra sum can be used towards the cost of long-term care.

LTC Insurance

posted Nov 28, 2009 12:24 PM by Hong Lu [ updated Nov 28, 2009 1:21 PM ]

LTC Insurance offers the most comprehensive coverage for Long-Term Care expenses from insurance companies. LTC insurance covers a wide range of services from home and community-based care to institutional care. The LTC insurance policy can be purchased from many insurance companies. Factors that can influence the cost of LTC insurance are:

* Age and Health

* Deductible and Waiting Period

* Daily Benefit Amount

* Number of Benefit Years

The good news is both the premiums and benefit amount are tax-deductible or tax-free for Qualified LTC insurance.