‘Sleazy’ Agents Bilking Elderly With Long-Term Care Policies : Nursing Home Insurance Probed

Fern Hansen’s mother abhorred the idea of going to a nursing home but thought the $5,000 in insurance premiums she had paid over eight years would guarantee that she would not be a financial burden to anyone. She was wrong.

Even with two separate policies, the 85-year-old woman, with no significant life savings, was not covered because she needed only custodial care, not the skilled care--doctors’ or nurses’ services--that the insurance policy specified in small print.

“Mom’s eyes were so bad she couldn’t have read the fine print if she wanted to,” Hansen, of Lake Oswego, Ore., Thursday told two congressional subcommittees investigating fraud in insurance for long-term nursing home care. “And, even if she did, she wouldn’t have understood it. All she knew was that the agent who sold her the policy said she would be covered if she ever had to go in a nursing home.”

Not Covered by Medicare

Americans spend $46 billion annually supporting the 1.5 million elderly who live in nursing homes, an expense not covered by Medicare. Because neither the Reagan Administration’s proposal on catastrophic health care coverage nor rival Democratic proposals would pay for nursing home care, the potential for bilking those seeking insurance for long-term health care is significant.

“This area is already a magnet for sleazy characters with high-pressure sales tactics,” Rep. Ron Wyden (D-Ore.) declared at the hearing.

Victims of such tactics described their experiences Thursday to the House subcommittees--experiences much like that of Hansen’s mother.

One woman, Lillian Simmons, 69, of Arlington, Va., was “planted” by congressional investigators. Insurance agents told Simmons that she would be covered should she need to enter a nursing home but danced around questions on custodial care and treatment for Alzheimer’s disease, which insurance plans frequently do not cover.

“The double talk I encountered would have left the average uninformed consumer’s head spinning,” Simmons told the investigators.

Fears of Cat Food

John Gillmore, an independent insurance agent from Naples, Fla., confirmed that many of his colleagues are eager to take advantage of nursing home insurance, which he called “the hottest and most lucrative new line of insurance sold to the elderly.” He told of an agent who pounded away on the fears of an elderly couple by describing a visit to another couple without insurance who became so destitute they had to live off cat food.

“How would you like to spend the rest of your life eating Kal-Kan?” the agent asked. The couple gave him a check for $2,500.

The General Accounting Office released to the subcommittees a report that surveyed 33 nursing home insurance policies, about 75% of such insurance offered to the American public. Almost all of the policies required a prior stay in a hospital before they would pay for nursing home care. Many allowed the companies to reduce benefits as the level of patient treatment declined, even though low-level treatment is all that most patients require.

Policies to Aid Few

Chairman Claude Pepper (D-Fla.) of the Select Aging subcommittee on health and long-term care declared:

“As currently designed, nursing home policies offer seniors a false sense of security. Unless corrected, of the thousands of elderly who will buy the insurance, few may ever see any return on their investment.”

Several states, notably Wisconsin and Washington, have imposed regulations to prevent fraud by agents selling long-term nursing home insurance, trying to force the agents to disclose the terms of coverage. In some instances, the states have established minimum standards for the coverage offered.

The GAO recommends a similar approach at the federal level.