Glossary

Definitions

Activities of Daily Living (ADLs)

The six basic self-care tasks used to measure functional ability: bathing, dressing, eating, toileting, transferring (moving from bed to chair), and continence. Long-term care insurance policies typically pay benefits when a person cannot perform two or more ADLs without substantial assistance. Medicare and Medicaid also use ADL assessments to determine care eligibility. The specific definitions of "substantial assistance" vary by insurer and program, which is why reading the policy language carefully matters.

See also: Custodial care, Benefit trigger

Benefit Trigger

The condition that must be met before a long-term care insurance policy begins paying benefits. Most policies have two triggers: (1) inability to perform at least two of six ADLs without substantial assistance, expected to last at least 90 days; or (2) a severe cognitive impairment (such as Alzheimer's disease) requiring substantial supervision. Both triggers must be certified by a licensed healthcare practitioner. Understanding your policy's specific trigger language is essential — some policies define "substantial assistance" more narrowly than others.

See also: ADLs, Elimination period

Benefit Period

The maximum length of time a long-term care insurance policy will pay benefits. Common benefit periods are 2 years, 3 years, 5 years, and unlimited (lifetime). A longer benefit period means a higher premium. Some policies express this as a total dollar pool (e.g., $300,000) rather than a time limit — once the pool is exhausted, benefits end regardless of how long care has lasted. The median nursing home stay is approximately 2.5 years, but stays of 5 or more years are not uncommon, particularly for dementia.

See also: Benefit trigger, Inflation protection

Elimination Period

The waiting period between when you qualify for benefits and when the insurance company begins paying. It functions like a deductible measured in time rather than dollars. The most common elimination period is 90 days, meaning you pay for the first 90 days of qualifying care out of pocket before benefits begin. A longer elimination period lowers your premium but increases your out-of-pocket exposure. Important: the elimination period clock typically does not start until you file a claim — delaying a claim delays the start of the clock and delays when benefits begin.

See also: Benefit trigger, Benefit period

Inflation Protection

A policy feature that increases your benefit amount over time to keep pace with rising care costs. The two main types are: (1) compound inflation protection, which increases the benefit by a fixed percentage (typically 3% or 5%) compounded annually — the most valuable form; and (2) simple inflation protection, which adds a fixed dollar amount each year. Without inflation protection, a $5,000/month benefit purchased today may cover only half the actual cost of care in 20 years. The federal government's NAIC model requires insurers to offer inflation protection options; Partnership-qualified policies require it.

See also: Benefit period, Partnership policy

Custodial Care

Non-medical assistance with Activities of Daily Living — help with bathing, dressing, eating, and similar tasks. Custodial care is the most common type of long-term care, and it is what most people need for most of their care years. Medicare does not cover custodial care. This is the single most important thing to understand about Medicare and long-term care: Medicare covers skilled care (therapy, wound care, IV medications) but stops paying once a person's condition stabilizes and they only need help with daily activities. Medicaid covers custodial care, but only after a spend-down of assets.

See also: Skilled care, Medicare, Medicaid

Skilled Care

Medical care that requires the skills of a licensed professional — a registered nurse, physical therapist, occupational therapist, or speech therapist. Examples include wound care, IV medication administration, post-surgical rehabilitation, and speech therapy after a stroke. Medicare covers skilled care in a skilled nursing facility (SNF) for up to 100 days per benefit period, but only if the care follows a qualifying hospital stay of at least 3 days and the patient is making measurable progress. Once progress plateaus and only custodial care is needed, Medicare coverage ends.

See also: Custodial care, Medicare

Spend-Down

The process of depleting assets to meet Medicaid's financial eligibility limits. Most states require a single person to reduce countable assets to $2,000 or less before Medicaid will pay for long-term care. Countable assets include savings accounts, investments, and most property other than the primary home, one vehicle, and personal belongings. The spend-down process can take months or years depending on the person's assets and the cost of care. Some assets can be protected through advance planning — see Look-back period and Medicaid planning.

See also: Look-back period, Estate recovery, Medicaid

Look-Back Period

The 60-month (5-year) window before a Medicaid application during which the state reviews all asset transfers. If assets were given away or transferred for less than fair market value during this period, Medicaid imposes a penalty period — a length of time during which Medicaid will not pay for care, calculated by dividing the transferred amount by the average monthly cost of nursing home care in the state. The look-back period is why Medicaid planning must begin well in advance. Transfers made more than 5 years before the application are outside the look-back window and do not trigger penalties.

See also: Spend-down, Estate recovery

Estate Recovery (MERP)

Federal law requires states to seek reimbursement from the estates of Medicaid recipients for the cost of long-term care services paid on their behalf. This is called the Medicaid Estate Recovery Program (MERP). After a Medicaid recipient dies, the state can file a claim against their estate — most commonly against the value of their home, which was not counted as an asset during the eligibility determination but is subject to recovery after death. The rules vary significantly by state: some states pursue recovery aggressively, others minimally. An elder law attorney can advise on your state's specific rules.

See also: Spend-down, Look-back period

Partnership Policy (LTC Partnership Program)

A long-term care insurance policy that qualifies under a state's Partnership Program, established under the Deficit Reduction Act of 2005. The key benefit: for every dollar the policy pays in benefits, the policyholder can protect an equal dollar amount of assets from Medicaid spend-down. For example, if a Partnership policy pays $200,000 in benefits, the policyholder can keep $200,000 in assets above the normal Medicaid limit and still qualify for Medicaid. Partnership policies must include inflation protection and meet other state requirements. Most states participate; check your state's insurance department for details.

See also: Inflation protection, Spend-down, Medicaid

Section 7702B (IRC §7702B)

The section of the Internal Revenue Code that defines tax-qualified long-term care insurance contracts. A policy that meets §7702B requirements offers two tax advantages: (1) premiums are deductible as a medical expense (subject to age-based limits and the 7.5%-of-AGI floor); and (2) benefits received are generally excluded from taxable income, up to a per-diem limit set by the IRS each year. Most LTC insurance policies sold today are tax-qualified under §7702B. Non-tax-qualified policies exist but are rare. The tax deduction for premiums is most valuable to self-employed individuals, who can deduct 100% of the age-based limit.

See also: Hybrid life/LTC policy, HSA

Hybrid Life/LTC Policy

A life insurance or annuity policy with a long-term care rider that allows the death benefit or annuity value to be used to pay for long-term care. If care is never needed, the death benefit passes to heirs. If care is needed, the LTC benefit is drawn from the policy's value. Hybrid policies address the "use it or lose it" objection to traditional LTC insurance. They are typically funded with a single lump-sum premium or a limited number of annual payments. The LTC benefit is usually a multiple of the premium paid (e.g., 2× or 3×). Most hybrid policies do not include automatic inflation protection, which means the fixed benefit covers less of the actual cost of care over time.

See also: Section 7702B, Inflation protection

HECM (Home Equity Conversion Mortgage)

The federally insured reverse mortgage program administered by HUD/FHA. A HECM allows homeowners age 62 or older to convert home equity into cash — as a lump sum, monthly payments, or a line of credit — without selling the home or making monthly mortgage payments. The loan becomes due when the borrower sells the home, moves out permanently, or dies. The HECM line of credit is particularly useful for long-term care planning: the unused portion grows over time at the loan's interest rate, providing more borrowing capacity the longer it goes untapped. HECM borrowers must continue paying property taxes, homeowner's insurance, and maintenance.

See also: Estate recovery

Continuing Care Retirement Community (CCRC)

A residential community that offers a continuum of care — independent living, assisted living, and skilled nursing — on a single campus. Residents typically pay a substantial entrance fee (ranging from $100,000 to over $1,000,000) plus monthly fees, in exchange for guaranteed access to higher levels of care as needs increase. CCRCs offer three contract types: Type A (life care) covers all levels of care at little or no additional cost; Type B (modified) covers some care; Type C (fee-for-service) charges market rates for each level. CCRCs can provide significant peace of mind but require careful financial due diligence — the entrance fee is largely non-refundable if the community closes.

See also: Custodial care, Skilled care