Long-Term Care Insurance: Guide for Caregivers

How to Maximize Benefits, Navigate Claims, and Coordinate with Taxes and Care Providers

1. What Long-Term Care Insurance Covers (and Why It Matters)

Long-term care insurance (LTCI) pays for custodial care, which is help with daily functioning, not medical treatment.

This includes care for people with:

• Dementia (Alzheimer’s disease, Lewy body dementia, vascular dementia)
• Parkinson’s disease
• Stroke
• Frailty or falls
• Disability
• Functional decline with aging

Custodial care is the most expensive part of long-term care and is not covered by Medicare.

Typical monthly costs:

• Home care: $4,000–$10,000/month
• Assisted living: $5,000–$12,000/month
• Memory care: $6,000–$15,000/month
• Nursing home: $10,000–$20,000/month (Medicare only covers the first 20 days, then partially for the next 80 days).

LTC insurance helps offset these costs.

2. The Medical Eligibility Requirement (IRS 7702B(c))

Most LTC insurance policies follow federal criteria under Internal Revenue Code Section 7702B(c).

To qualify, a licensed healthcare provider must certify that the person has either:

A. Functional impairment

Needing help with at least 2 of 6 Activities of Daily Living (ADLs):

• Bathing
• Dressing
• Toileting
• Transferring
• Eating
• Continence

OR

B. Cognitive impairment

Examples:

• Dementia diagnosis
• Poor memory affecting safety
• Wandering risk
• Impaired judgment

This certification is typically completed on a form called Physician Certification Form or LTC Certification Form

This certification also allows care expenses to qualify as tax-deductible medical expenses.

3. Understanding How Benefits Are Paid

There are 3 main policy types:

Reimbursement policies (most common)

You pay first, then submit receipts, and insurance reimburses you.

Example:

• Monthly cost: $8,000
• Policy max: $6,000/month
• Insurance reimburses: $6,000
• You pay remaining: $2,000

Indemnity policies

Insurance pays a fixed amount regardless of actual cost.

Example:

• Benefit: $200/day
• Even if care costs less, you still receive $200/day
• This offers more flexibility.

Cash benefit policies

Insurance pays cash once eligibility is met.

You can use it for:

• Family caregivers
• Independent caregivers
• Any care-related expenses
• These policies are the most flexible.

4. Elimination Period

The elimination period is the number of days you must qualify before benefits begin.

Usually 30, 60, or 90 days

Important details most caregivers miss:

The elimination period starts when BOTH occur:

• The person qualifies medically, AND
• They are receiving paid care

Delaying paid care delays benefit activation.

Start care and open the claim as soon as eligibility begins.

5. Step-by-Step Claims Strategy (Best Practice Approach)

Step 1: Call the insurance company immediately

Say:

“I want to open a long-term care claim.”

Request:

• Claim packet
• Physician certification form
• Care plan form
• Ask for a claims case manager.

Step 2: Schedule physician evaluation

This can be completed by:

• Physician
• Nurse practitioner
• Physician assistant

This documentation is critical. Strong documentation improves approval speed.

Include:

• Diagnosis
• Functional limitations
• Cognitive impairment
• Safety concerns

Step 3: Choose a licensed care provider (if required)

Most policies require:

• Licensed home care agency OR
• Licensed assisted living facility OR
• Licensed memory care facility

Some policies allow independent caregivers—but many do not. Verify this with insurance.

Step 4: Submit claim and start elimination period

Insurance may also send a nurse assessor to evaluate the patient. This is normal.

Step 5: Track and submit ongoing documentation

Submit regularly:

• Care invoices
• Facility statements
• Care logs (if home care)

Benefits are typically paid monthly.

6. Using LTC Insurance for Assisted Living or Memory Care

Most assisted living and memory care facilities regularly assist families with LTC claims.

Ask the facility:

• “Do you assist with long-term care insurance claims?”

They often:

• Complete required forms
• Submit invoices directly
• Coordinate with insurance

This makes claims easier.

7. Tax Benefits and IRS Form 7702B(c)

If the patient qualifies under 7702B(c), care costs may be tax-deductible medical expenses.

You do NOT submit the 7702B(c) form to the IRS.

Instead, you keep physician certification in your records.

You may deduct:

• Home care
• Assisted living (portion related to care)
• Memory care (often 100% deductible if dementia present)
• Nursing home care

These deductions apply if total medical expenses exceed IRS thresholds, which is usually 7.5% of adjusted gross income.

Consult a CPA for proper filing.

8. Using LTC Insurance Together with an HSA

You can use HSA funds for:

• LTC insurance premiums (within IRS limits)
• Care expenses not covered by insurance

You cannot double-claim:

• If insurance reimburses you, you cannot also claim HSA reimbursement for that same expense
• But you can use HSA funds during the elimination period.
• As always, please consult a CPA for proper tax strategies

9. Coordination with Medicare

Medicare does NOT cover custodial long-term care.

Medicare only covers:

• Hospital stays
• Short-term rehab (limited)
• Skilled nursing (for 20 days, then partially for the next 80 days)

Medicare and LTC insurance serve different purposes.

Many people transition from:

Hospital → Rehab → Home or Assisted Living → LTC insurance pays ongoing care

10. Common Reasons Claims Are Delayed or Denied

Most common problems:

• Incomplete physician documentation
• Using unlicensed caregivers when policy requires licensed care
• Not meeting elimination period requirements
• Missing invoices
• Inconsistent care documentation

Many denials can be appealed.

11. Role of the Facility or Home Care Agency

Facilities and agencies often help with:

• Claim submission
• Documentation
• Care plans
• Insurance coordination

This can simplify the process significantly. Most facilities will be able to help in some way. For home care agencies, it can vary widely by the agency.

12. When to Start the Claim

Start the claim when ANY of these occur:

• Dementia diagnosis with safety concerns
• Needs help with bathing, dressing, or toileting
• Frequent falls
• Cannot live safely alone
• Moving to assisted living or memory care
• Hiring regular home care

Do not wait until finances are strained.

Earlier activation maximizes benefits.

13. Key Caregiver Checklist

Immediately:

• Locate policy
• Call insurance company
• Open claim

Within 1–2 weeks:

• Physician completes certification
• Submit claim forms

Within 1–3 months:

• Elimination period completes
• Benefits begin

Ongoing:

• Submit invoices regularly
• Maintain documentation