Thinking About Health: Long-term care insurance may provide little assurance
March 8, 2015
The U.S. has no national policy to pay for long-term care — no payment system for nursing home, home care or dozens of other services many people need as they age. And almost as bad, there has been little public discussion about this looming crisis in American healthcare. You'd think it might surface as an election issue in the coming presidential campaign, but it hasn't so far.
Last Dec. 31, the youngest of the 76 million Baby Boomers turned 50, and the time when many will start needing long-term care services is only two decades away. The need is already here for older Boomers who are moving into their 70s when the infirmities that come with growing older often show up.
When a loved one needs care many families eventually turn to Medicaid, the jointly funded federal and state program that pays the medical bills for the poor. But it also pays for nursing home stays for middle class families. Medicaid pays for nearly half of all long-term care, and families who have no resources or run out of money turn to it as a last resort. Medicaid pays after someone needing care first spends all of his or her their income and almost all assets on care. They must make themselves "poor" to qualify, a demeaning and frustrating process. This often leaves the spouse at home with very little to live on.
Often they have no choice. The annual cost of a nursing home private room averages about $84,000 in Nebraska, South Dakota, Colorado, Wyoming, California, Indiana and Illinois, the seven states participating in the Rural Health News Service partnership. Home care can also cost $40,000 to $50,000 a year depending on how much and what type of care is needed.
Despite a tax deduction for premiums and lots of media hype, long-term care insurance has yet to catch on. Policies are expensive. It's not uncommon for a couple to pay $10,000 to $12,000 a year for two policies. Those buying at younger ages may pay less, but unless they've purchased inflation protection — a costly add-on — an individual or couple can still be unprotected. As nursing home costs escalate — they averaged $40,000 a year in the 1990s — the benefit bought years ago covers much less.
Insurance companies also carefully check an applicant's health. If you have conditions like Parkinson's disease or diabetes, you may not get a policy even if you can pay for it. Insurers don't want people with illnesses that will land them in a nursing home or require lots of home care. This kind of insurance doesn't work like Obamacare plans, which must cover everyone whether they are sick or well.
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Policies have also been around long enough now to gauge how well companies pay claims. Trying to snag customers, many insurers priced their policies too low when they first offered them. Now they are raising prices as consumers file costly claims. Some companies have tried not to pay claims at all, leaving policyholders stranded.
Because of the large out-of-pocket costs for policies and uncertainties about paying claims 20 or 30 years later, long-term care insurance has never gone mainstream, and while some people are glad they were covered when they needed care, it's not the solution for financing long-term care for everyone who will eventually need it.
Last week, another one of those over-simplified advice stories showed up in the New York Times with financial advisers telling people to shop around for rates and consider buying a policy with fewer benefits to make coverage more affordable, a move that kind of defeats the purpose of having the insurance in the first place.
Journalist Jane Gross, a former Times reporter and author of "A Bittersweet Sweet Season: Caring for Our Aging Parents — and Ourselves," shot back in a letter to the editor summing up the problem this way: "When it comes to long-term care, the elderly, and families struggling to care for them, are being ignored by the government and by the private sector."
Paul Kleyman who directs the Ethnic Elders Newsbeat at New America Media is as fierce an advocate for better long-term care financing as anyone I know. He told me even though families have been hit hard nationally by the lack of long-term care protection, it's been difficult to fight politically for better ways to finance care.
This is something that affects the middle class, a voting block politicians covet. But unless there's a collective voice raising the cry about the hardships aging people face, long-term care won't even be a whisper in next year's election.
We'd like to hear about your experiences paying for long-term care. Write to Trudy at email@example.com.
Editor’s note: The Rural Health News Service is funded by a grant from The Commonwealth Fund and is distributed through the Nebraska Press Association Foundation, Colorado Press Association, South Dakota Newspaper Association, Hoosier (IN) State Press Association., Illinois Press Association, Wyoming Press Association and California Newspaper Publishers Association.