Cautioning Caregivers About Long-Term Care Insurance

When my wife, Clare, and I retired in the year 2000, we made sure to update our end-of-life documents—our wills, living wills, health care proxies, and power of attorney. And, even though only in our mid-50s, we also decided to purchase long-term care (LTC) insurance policies.

Sadly, only six or seven years into our wonderful retirement, I began noticing that something was wrong with Clare. A few years later, in 2009, Clare was diagnosed with probable early onset Alzheimer’s disease. In the fall of 2013, her Alzheimer’s advanced to where I could no longer properly care for her needs by myself at home, so she entered into an assisted living facility (ALF).

I activated her LTC policy to cover those expenses, and, after the initial deductible period, all of Clare’s expenses at that facility were covered in full. By the winter of 2016, however, even after hiring 24/7 personal aides at my own expense, it was clear that she would receive better care in a nursing home (NH). The daily NH charges would be significantly higher than those in her ALF, but that didn’t matter to me because I knew they would be covered in full by my excellent LTC policy. 

Or so I thought. It turned out that I was wrong, and here is why.

While waiting for a NH room to open, Clare woke up one morning in her ALF unable to stand up. She was admitted to our local hospital’s emergency room for diagnostic testing. After a few days, and with the use of a walker, she was able to walk again, albeit unsteadily. The social worker indicated that the hospital would not release Clare back to her ALF because she needed rehabilitation services in a skilled nursing facility. I told the social worker that was fine because I had planned to move her to such a facility anyway. After a hospital stay of five days, she was transferred by ambulance to the NH of my choice. 

Thirty-one days after Clare’s admission to the NH, she passed away quietly in her sleep. My feelings of overwhelming sadness were, to a degree, comforted by knowing that Clare was in a “better place” now. A loved one slowly dying of Alzheimer’s disease is a horrible experience, not just for the loved one with the disease, but also for the loved one’s caregiver.

What I had not realized at the time of her NH admission, however, was that Clare’s intervening hospital stay of five days had triggered a clause in her LTC policy that I had known nothing about—and didn’t learn about until many months later—that ended up costing me money I did not expect to have to pay.

Several months after Clare’s death, I received a bill from the NH for several thousands of dollars. It seemed that Medicare fully reimbursed the NH for Clare’s first 20 days there but then only paid a portion of the charges for her remaining days. I called the NH and told them to please forward that bill to the LTC insurance company. However, the NH called me back several weeks later to say that the insurance company refused to pay, saying that I was responsible for paying those outstanding charges. 

When I spoke with the insurance representative handling Clare’s case, I was told about the “Tax Qualification Endorsement” policy addendum clause in Clare’s policy that, apparently, everyone with LTC insurance policies should know about; that clause reads: “It is intended that the Policy be a qualified long-term care insurance contract under section 7702B(b) of the Internal Revenue Code of 1986”—this cryptic clause meant that, since Clare had been hospitalized for more than 3 days immediately preceding admittance into the NH, Medicare rules applied to all NH costs.

Basically, had Clare been discharged from the hospital back to the ALF within 3 days, or had she been discharged from the hospital to the NH within 3 days, her insurance policy would have picked up all costs at either facility. Similarly, had Clare gone directly from the ALF to the NH without an intervening hospital stay of 3 or more days, her insurance policy would have covered all daily NH charges for her entire stay. 

Had I known about the existence and significance of this provision in Clare’s policy, I would have made different placement decisions concerning her care. Since I had already made the decision to move her to a NH, and even discussed this with personnel at her ALF, I would have transferred her sooner, well before her hospitalization.

I activated our LTC insurance policy when Clare was admitted to her assisted living facility in 2013. She was discharged from that facility in 2015. During that time—at those admissions or transfers—had any administrator, social worker, or nurse ever mentioned that I should check to see if I had that clause in my contract, or had the hospital social worker, NH administrator, or NH social worker mentioned something to me before Clare was admitted to the NH, I would have made a different decision that would have saved me thousands of dollars.

Whenever an ALC resident is hospitalized and officially withdrawn from an ALF for placement in a NH, a cautionary reminder from ALF administrators to check one’s LTC policy would always be very helpful. However, based upon my experience, the primary responsibility for this cautionary LTC policy reminder rests with hospital social workers. Once social workers indicate that a hospitalized loved one will not be discharged back to the ALF and must be discharged to a NH, a decision often made within 24 hours of admission, social workers should tell caregivers to carefully check to see if their LTC policies have that tax qualification clause. 

Indeed it may be beneficial for all appropriate personnel at ALFs and NHs—administrators, social workers, head nurses—to become more knowledgeable about this clause and similar clauses in LTC insurance policies, so they can advise caregivers properly. These kinds of life events are not routine for anyone except those who work in this field, and stressed caregivers and family members need as much guidance as they can get in these emotionally, medically, and legally complex situations.

Since many people in ALFs eventually are discharged to NHs, it would be fair to expect assisted living personnel to at least know about the difference between tax qualified vs non-qualified LTC insurance policies. Especially in the instances of care transfers, it would be fair to expect that this caution be given to caregivers by NH personnel advising on and arranging placement.

It may be inevitable to avoid these kinds of clauses in some instances, for example, if a caregiver’s loved one needs to remain hospitalized beyond 3 days due to medical reasons, NH room availability, caregiver preferences, or a variety of other reasons. However, if caregivers are told to check their LTC policy, at least there will be no billing surprises after NH placement begins.

Assisted living and NH personnel who do not provide this caution may end up leaving unsuspecting caregivers with bills for thousands of dollars that may have easily been avoided. I found the following to be a helpful resource and well worth sharing with others who are or could soon be dealing with these types of situations: http://www.uscare.com/taxed.html.
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Dr Vann is a frequent writer in caregiver magazines, medical journals, and in major newspapers, including The Huffington Post. After his wife, Clare, was diagnosed with early onset Alzheimer’s disease, Dr Vann made it a point to increase public awareness of Alzheimer’s and to help fellow caregivers. You can read his other pieces at www.allansvann.blogspot.com. If you would like Dr Vann to respond to questions or comments about this article, please email him directly at acvann@optonline.net.  

Annals of Long -Term Care.  March 1, 2017.  Access online only at:
http://www.managedhealthcareconnect.com/blog/cautioning-caregivers-about-long-term-care-insurance
or at: http://www.managedhealthcareconnect.com/blogger/allan-s-vann-edd