California State University Emeritus & Retired Faculty & Staff Association

 
 

 

 
 
 
 
 

Long Term Care Information

 

[Please note that the following is intended only to provide general background information about long-term care options.  While the information is believed to be reasonably accurate, you are cautioned and encouraged to discuss the purchase of any long-term care insurance policy or other type of long-term care program with a qualified, licensed financial advisor who is aware of your individual situation.  CSU-ERFSA is not responsible for the content of linked web pages, and cannot guarantee the accuracy of those pages.]

Introduction:

The need for long-term care insurance depends greatly on individual circumstances.  For that reason, CSU-ERFSA can't make specific individual recommendations regarding LTC insurance, but we can provide some general information.

There are several risk factors that need to be taken into account when considering the purchase of LTC insurance.  Life expectancy is a major consideration.  The longer that you live, the greater the likelihood that you will need long-term care.  Unfortunately, the premiums for LTC insurance also depend on your age when you purchase the insurance.  Gender is a major factor in the need for long-term care.  Women, in general, live longer than men and thus are more likely to need long-term care.  Marital status also is an important factor.  A married person with adult children is less likely to need formal long-term care than a single person.

The federal government estimates that there is about a 70% chance that someone who is 65 years old today will need some form of long-term care. On average women will need long-term care for about 3.7 years, while on average men will need long-term care for 2.2 years. The current estimate is that about 20% of people who are 65 years old today will need long-term care for longer than five years.

The costs of long-term care are high.  Recent data (2017), indicate that nursing home care in California averages about $300 per day, but varies widely in different parts of the state.  Some people would prefer to remain in their own residence rather than to move into a nursing home.  The CalPERS long-term care program and some private LTC insurance policies provide options for in-home care as well as nursing home care.  However, the benefits offered for in-home care may differ from those offered for care in a licensed facility.  You should read and understand fully the provisions of any LTC policy that you are considering.  In particular, most LTC policies have a "deductible period" during which you must cover the expenses of long-term care from your own resources.  The most common deductable period is 90 days.  The reason for this is that about 30% of patients who enter a nursing home will either recover sufficiently within 90 days to no longer need LTC, or will die within the 90 day period.

Many CSU-ERFSA members are enrolled in the CalPERS Long-Term Care Program. However the program has suffered from significant shortfalls in funding in recent years and was closed to new enrollment on June 1, 2020. In addition, policyholders in the program have experienced steep premium increases in recent years.

A number of policyholders joined a class-action suit against the program in response to the premium increases. Recently, a tentative settlement was reached between CalPERS and the plaintiffs in the case, which would permit certain policyholders to leave the program with a full or partial refund of their premiums. A final resolution of the case is expected some time in mid-2022.

In recent years new options for long-term care have been developed. In addition to traditional, stand-alone long-term care insurance policies, many insurers now offer whole-life policies with long-term riders. Generally, these policies allow the policyholder to use up to 80% of the face value of the policy to meet long-term care options. Another option is the purchase of an annuity, the proceeds from which can be used to cover long-term care needs.

CSU-ERFSA has partnered with AMBA to offer a variety of benefits to our members. These include several different supplemental insurance offerings, including several different long-term care options frome highly-rated companies licensed in California.

Whether you are a newly retired California State University system employee just beginning to think about long-term care coverage, or someone who is considering leaving the CalPERS LTC Program under the proposed settlement, and you are a current or prospective member of CSU-ERFSA, we invite you to talk with a licensed [Lic. CA#0196562] AMBA agent about your long-term care needs. The AMBA agents can discuss with you your individual financial and personal situation, and recommend to you the best way forward for long-term care coverage.

To set up an appointment to speak with a licensed AMBA agent, call 1-877-698-2710 M-F between 8 am and 5 pm central time.

 
 

Self-Insurance:  Those with substantial financial resources may choose to simply set aside sufficient assets to cover the potential costs of LTC, realizing that the majority of those who purchase LTC policies never use them. 

Medicare: In general Medicare does not cover long-term care; however, there are some exceptions where Medicare can provide some assistance.  The eligibility rules for those services that Medicare does cover in this area are discussed in detail in an article that appeared in the September 2014 issue of the Reporter.  A copy of the article is available here

Reverse Mortgages:  Those who have substantial equity and who want to remain in their home might consider using a reverse mortgage to provide extra cash to pay for in-home care.  While this choice will reduce the equity in the home, it will help to protect other assets.  A reverse mortgage can be used in combination with some LTC insurance coverage to provide a higher level of in-home care, or to allow a spouse to remain in the home following the death of the covered individual.

Continuing Care Retirement Communities:  As generally defined by the State of California, a CCRC is an age restricted residential community, usually requiring an entrance fee, plus monthly maintenance fees, in exchange for a living unit, meals, and health care coverage, including assisted living and skilled nursing.  Certain other services and amenities, like regular housekeeping, scheduled transportation, swimming and exercise facilities, and 24 hour security are often included. This 'continuum of care', consisting of independent living, assisted living, and skilled nursing, essentially allows residents to age in place with security and peace of mind in knowing they have planned for their future.

Some CCRC's offer Life Care Contracts.  In California a Life Care Contract includes the following promises: (1) To provide all levels of care, including acute care and physicians' and surgeons' services; (2) To provide that care for the resident's life; (3) To provide a comprehensive continuum of care, including skilled nursing, under the ownership and supervision of the provider on, or adjacent to, the premises; (4) That no change will be made in the monthly fee based on level of care or service; and, (5) To subsidize residents who become financially unable to pay their monthly care fees.  Those CCRC's that are not Life Care Communities may offer some, but not all of these promises in their contracts.  If you are considering a CCRC that is not a Life Care facility, be sure to read and understand the contract you are offered.  The choice of a CCRC may be attractive to those who have a comfortable level of secure income to pay the monthly maintenance fee and a source of funds to pay the entrance fee.

Viatical and Senior Settlements: People who own life insurance policies may have the option to sell them to raise cash to pay for medical expenses and LTC expenses.  Viatical settlements are available to those who are terminally ill and have a life expectancy of less than five years.  Senior settlements are available to those over 65 who have a reduced life expectancy, but who are not terminally ill.  Regulations vary from state to state, so you should consult your financial advisor about this option.

Medi-Cal:  While Medicare provides only very limited nursing home benefits [4], Medi-Cal provides LTC benefits indefinitely for California residents.  However, Medi-Cal eligibility is restricted to those who are essentially indigent.  This means that one's assets will have to be spent down first to qualify for Medi-Cal (there are certain exemptions that apply to spousal assets.)  A greater level of asset protection can be obtained by purchasing a "Partnership" policy from a private insurer.  Under the "Partnership Program" LTC costs first are covered by the insurer up to the limit of the policy, then Medi-Cal takes over.  The insured receives a dollar of Medi-Cal asset protection (in addition to the spousal exemption) for each dollar of benefits paid by the insurer.  Partnership policies are particularly attractive for those who have or will have limited retirement income.  (Note that generally one is not permitted to transfer assets to others to qualify for Medi-Cal long-term care benefits.)

 
 

Discuss LTC with your family members and financial advisor.  Make sure that your family understands your wishes regarding long-term care and how you intend to finance it if it becomes necessary.  An independent financial advisor can help you determine how much LTC insurance you will need, and can help you evaluate various LTC options for suitability to your individual situation. 

Buy at an early age.  There are two reasons to purchase LTC insurance well before you think you will need it.  First, you are much less likely to be turned down for coverage on account of preexisting conditions.  Second, your premiums will be much lower.

Include inflation protection.  The cost of LTC rises at about 5% per year.  Thus, you should give strong consideration to policies that include inflation protection.  These policies provide increased benefits over time with no increase in premium for the increased benefit (except for general premium increases needed to maintain solvency). 

Carefully consider the level of protection that you need.  Many LTC plans allow the purchaser to choose the level of daily benefit that will be paid.  Currently (2013) daily costs for nursing home care in California average approximately $330.  However if you have a secure source of retirement income, you may opt to purchase insurance that provides a lower daily benefit and to cover the remaining cost from your income.  If your income is low, it may be advantageous to consider a "Partnership" plan that combines long-term care insurance with Medi-Cal long-term care benefits.

Be aware that premiums can increase over time.  Insurers are allowed to increase premiums in order to maintain the solvency of their LTC programs though this usually requires approval from state regulators.

Be aware that LTC polices have a deductible period.  Deductible periods for private LTC policies range from 20 days to 120 days.  The deductible period for the CalPERS LTC Comprehensive Plan and the CalPERS LTC Facilities Only Plan is 90 days, while the deductible period for the CalPERS LTC Partnership Plan is 30 days.  Maintain sufficient financial reserves to cover care during the deductible period. 

Consider carefully benefit duration.  Relatively few people use LTC for more than six years; however, the premiums for unlimited duration benefits typically are about 25% higher than for a policy that provides six years of benefits.

Have an advocate who can work on your behalf.  At the time you need LTC benefits you may not be in a position to deal with the complexities of the claims procedure.  It's very helpful to have a family member or other advocate who can assist you both to obtain benefits and to help ensure that the long-term care you receive meets your wishes.