ELDER CARE: Caring for California’s Aging Population : Money Problems Must Be Faced--No Matter How Tough

There are two persistent--and mistaken--myths about old age. The first is that families abandon the elderly. The second is that Medicare pays for everything the elderly need.

“Fiscal constipation is a malady that afflicts many elderly persons--and with good reason: Getting old can be a very expensive proposition,” said Mary Lou Parks, a former nurse who directs Senior Care Consultants Inc., a firm that provides assistance for frail seniors and their families in Ventura County and parts of Los Angeles County.

As the difficulties of aging can put tremendous strains on family relationships, the maladies of old age can also stretch family pocketbooks to their limits--and beyond.

“One of the reasons is that most of one’s medical expenses occur in the last years of life, the time that most people have the least income,” said Leah Buturain, who has been a staff aide on both House and Senate committees on aging in Washington.

“As everyone knows,” she added, “medical expenses can run fairly high today.”

What happens when chronic illness wipes out an elderly person’s savings? Who is eligible for government assistance? How do low-income Americans finance their old age? Where do house-rich but cash-poor people go for help?

These are questions that plague almost all elderly Americans, but they are ones that few families are eager to discuss. Some of the reluctance is a matter of pride, a basic aversion to letting anyone outside the family know how serious problems at home really are. And part of the reticence stems from fear, a fundamental dread of what the future holds.

Frances B. Schloss, a vice president of Shearson Lehman Hutton Inc., learned the hard way that, for many elderly people, some subjects are simply taboo.

A veteran of the personal finance business, Schloss was asked recently to give a talk at the Freda Mohr Multipurpose Senior Services Program, which services a largely middle-class Jewish clientele in the Fairfax District of Los Angeles.

Schloss chose for her topic long-term health insurance, one of the newest insurance products on the market. For a monthly premium, people between the ages of 50 and 79 can get insurance to cover the costs of living in a licensed nursing home, should chronic illness or disability require long-term, round-the-clock care or supervision.

“One way to think about this kind of policy is that it is like fire insurance,” Schloss told her audience. “It is something you have for protection, but you hope you never have to collect a dime from it.”

The two dozen or so men and women at the senior citizens’ center would have none of it. After innumerable interruptions, Schloss was abruptly told to end her talk.

“This is something I simply do not want to think about,” muttered one elderly woman in the audience. “I suspect a lot of people feel that way.”

In fact, experts say, planning for long-term care in old age is something most people should think about.

The vast majority of Americans will never make use of a nursing home, but there is no predicting who will be lucky and who won’t.

For those who become so frail or chronically ill that they have to be permanently institutionalized, the costs can be prohibitively high. On the low end, a nursing home runs about $50 a day in Texas. On the high end, costs can climb to more than $100 a day in California.

Even for those fortunate enough--or determined enough--to continue living on their own, there can be a cascade of practical problems in getting through even an ordinary day. The person who cannot drive still needs to go to the doctor. The person who cannot get in and out of the bathtub still needs to bathe. The person who cannot lift heavy packages still needs to buy groceries. The person who cannot hear still has to maintain contact with the world.

Unless an elderly person has a servant or a relative who is willing to act as full-time chauffeur, bather, packer, shopper, cook and telephone operator, someone will have to found--and probably paid--to take on these responsibilities.

Senior citizens’ centers, hospitals, city and county agencies and private care managers can offer referrals to nursing registries and homemaker agencies. But the help that is available can be unreliable. Home-care workers in Los Angeles, as in many large cities, are overwhelmingly female and immigrants; many are working illegally in this country and supporting families of their own.

For the families who hire them, the cost of home-care workers’ services is often high--from $4 to more than $20 an hour. For workers, however, such wages are not necessarily attractive, particularly if employers are difficult, hours are long or irregular and pensions and medical benefits are nonexistent, as is often the case.

The result has been a chronic shortage of workers. According to a recent report by the Older Women’s League and the American Federation of State, County and Municipal Employees, “The shortage of workers to feed, bathe and care for the physical and emotional needs of frail and disabled elderly Americans can be expected to worsen in coming years, jeopardizing the quality of care to our nation’s fastest-growing population, the elderly.”

No matter what services they find, families are likely to have to pick up a good portion of the tab--40% or more, according to a study by the House of Representatives Select Committee on Aging.

For the poor who qualify, there are private and government sources of help available. For the middle-class and the affluent, plans are under way in most major insurance companies to offer coverage for some of the non-medical costs of growing old. Already on the market, for example, are a number of policies for nursing home care of the sort Schloss described. And policies that cover care in the home are expected to be available eventually.

But, most experts agree, it is still too early to know if these policies work and if they are a good investment--either for the individuals who are buying the policies or for the companies that are selling them.

Some reputable analysts, including Consumer’s Union, have tried to evaluate the insurance policies, and the bottom line from the experts seems to be: Consumers beware. What you think you will need in the way of coverage and what you actually need--and get--do not always coincide.

Even if they don’t have independent insurance coverage, most elderly Americans--86%, according to a 1988 study by the American Assn. of Retired Persons--have put away a nest egg in either savings, pensions or investments. And the vast majority of Americans--nine out of 10 elderly families--qualify for Social Security benefits.

This system of payments to help replace income lost because of retirement, unemployment, disability or death has been in existence for nearly four decades and has made a tremendous difference in the lives of older Americans.

According to a 1987-88 study by the Senate Special Committee on Aging and the AARP, one in every three older Americans in 1960 was poor--a rate of poverty twice that of young and middle-aged adults. Because of tremendous growth in the Social Security system, the poverty rate for the elderly was cut in half between 1966 and 1974, from 28.5% to 14.6%, the report said. Today, the number of elderly people below the poverty line hovers around 10%.

Payments vary according to work histories and family status, but the maximum payment under this 38-year-old program never exceeds $900 a month. For many senior citizens, this will be the primary source of income for the rest of their lives.

For many, it will not enough.

Recognizing how quickly the medical costs of aging can outstrip personal savings, Congress created Medicare in 1965.

Nearly every senior citizen in the United States is eligible for this national health insurance program. But, to the chagrin of many, Medicare fails to provide enough help for those who are faced with ever-rising costs that often accompany old age.

Although Medicare goes a long way toward covering the costs of acute illness, such as a heart attack or pneumonia, it pays almost nothing to help the elderly and their families deal with the economic hardships that frailty and chronic health problems can cause.

In fact, many of the costs of growing old--ordinary living expenses as well as some medical bills--are specifically excluded from Medicare coverage.

There are deductibles in the Medicare program, as with other insurance policies, which means that patients are expected to cover at least 20% of their outpatient medical expenses before the government will pay its share. Hospital bills are mostly covered by Medicare, but only after patients have stayed--and paid for--one full day of care themselves.

In addition, Medicare sets limits on how much it will pay for medical services, so a patient whose doctor or hospital charges more--and many do--will have to pick up the difference. Moreover, there are services for which Medicare will not reimburse: routine physical examinations, vision tests, hearing aids and eyeglass, to name a few.

Worst of all, there is no comprehensive federal program to help families pay for what are considered the non-medical costs of getting old and frail: the meal preparations, the washing, the house cleaning, the driving.

Until recently, the only alternative for middle-class people who wanted to remain independent but who could no longer afford to make ends meet was to sell their houses--if they owned them.

Some older people don’t even have enough income to afford rent but, according to the Census Bureau, 45.8% of Americans over age 75 owned their homes in 1983. Of the 18.2 million households headed by older persons in 1985, 75% were owner-occupied. And 83% of those were owned free and clear.

For many, these assets were of little value if there was not enough cash coming in to cover repairs, heating bills and doctors’ charges. Now, however, there are ways to covert the equity in a house into cash.

Elderly citizens who are short of money but own their own homes can, for example, take advantage of new federal mortgage programs that allow banks to grant lines of credit and fixed monthly payments in return for a mortgage on the house. If the house later sells for less than the price of the mortgage, the government will back the bank’s investment. If it sells for more, the owner or the estate will keep the profit.

Senior citizens can also apply to some banks and housing agencies for deferred payment loans. Essentially, the terms of these loans allow the borrower to use money for home repairs and put off repayment on either principle or interest until the house is sold or the owner dies.

There are also what are know as sale-leaseback plans through which a senior citizen can sell his or her home to an investor who leases it back to the older person for life.

One way to get relief from the government and to protect spouses from undue financial hardship is to take advantage of tax laws designed to protect the elderly.

In California, for example, a married couple can legally divide their resources so that if one of them has to spend large sums on care late in life, the other will not have to spend his or her entire life savings before the family qualifies for government assistance.

Another possibility recommended by lawyers is to set up a living trust, a legal way of giving someone else rights to administer all or part of a person’s assets.

Because there are advantages and disadvantages to each of these legal maneuvers, it is important to get the best legal advice one can afford, either through a private attorney or through the services or referrals of a senior citizens’ center.

In the end, experts say, much of the reluctance to talk about money comes from confusion, from fundamental misunderstandings about what it means for children, albeit grown children, to begin making decisions for their parents.

For many, the psychological burden is the worst because children often end up doing for the their parents the very things their parents once did for them: taking charge of decisions, setting limits on activities, doling out money. “Financial services may be the most difficult area in which to find help in the entire field of aging,” said Buturain, who conducts seminars and helps organizations set up such programs in Los Angeles.

Although banks, care managers and some social service agencies are beginning to offer a variety of money management programs, elderly people often are especially reluctant to turn over their money to anyone outside the family, Buturain observed.

What’s more, she said, many professionals in the field of gerontology have been very reluctant to take on a responsibility that can be so complex and full of liabilities.

“Imagine what it can be like dealing with the financial problems of an elderly person. They may be enormously grateful, and everything may go smoothly. Or you, who need to have access to the checking account in order to make certain the bills are paid, may get accused of stealing. Either the elderly client or the family may think there should be more money than they really is. And you will be the one to get blamed. It’s often one of those awful no-win situations.

“The best advice,” she concluded, “probably is to begin talking about the issue long before it becomes an issue. But most of us don’t have that much foresight.”

‘Even upper-middle-class families find that paying for extensive chronic care . . . is burdensome. Too many families descend into poverty before the tattered government safety net breaks the fall.’--’Long-Term Care Public Policy Agenda for California,’ a 1989 report prepared by the Institute for Health and Aging at UC San Francisco.

‘There is a persistent and badly mistaken myth about aging . . . is that Medicare pays for everything. . . . It doesn’t.’--Roy S. Azarnoff, founder and director of Eldercare Management Group in Santa Monica.

‘In China, it is believed that the older a person is, the more wisdom and knowledge he or she has. When asked, ‘How old are you?’ a 55-year-old in China might cheat a bit and claim to be 59.’--Ken Dychtwald and Joe Flower, authors of ‘Age Wave: The Challenges and Opportunities of Aging in America’