Preparing for Nursing Care Costs
“We on both sides of our family have seen thousands of dollars go out for home care and nursing homes,” a worried reader says in an e-mail. “Last week I met with an insurance agent to discuss nursing care insurance for me and my husband, and it’s an expense which I am not so sure we want to face every month before retirement (we are 60), and even so when we are on Social Security with a lesser income.”
For the perplexed reader and others puzzled by the dilemma, here is the lowdown. First, realize that buying this insurance is not primarily a health issue. Rather, it is a challenge for people with some significant life savings they want to protect, money they want to leave to a spouse or children. And the insurance also offers a source of help to those who want to live at home as long as possible.
Let’s dispel some myths. Medicare covers people older than 65 and the disabled of all ages, but it pays for a nursing home only for those who are recovering from some ailment or operation and need skilled care. And it will pay for just 100 days. Medicare doesn’t pay for the nightmare known as custodial care, when your body or mind have betrayed you and you can no longer live at home.
Through Medi-Cal, the government will help pay for custodial care, but only after you have impoverished yourself. You have to wipe out all your financial assets--stocks, bonds, money market funds, certificates of deposit and savings accounts--and then the Medi-Cal program will pay for a nursing home.
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If you are married and have less than $80,000 in assets, you don’t need the long-term care insurance to protect your financial assets. If one spouse goes into a nursing facility, federal law guarantees the spouse remaining at home can keep about $80,000 in assets and an income of $1,500 a month. (The value of the house, a car and furniture don’t count.) The spouse at home, who is usually the wife, can retain the $80,000, and her husband in the nursing home will have his bills paid by Medi-Cal.
For the wealthy, let’s say a couple with more than $800,000 in stocks, bonds and cash, the insurance isn’t necessary either. This family can make enough money from their investments to pay for a nursing home for one spouse, and with money from pensions and Social Security, have enough to maintain the other person at home.
For income protection purposes, the prime candidates to buy insurance, therefore, are people with assets between $80,000 and $800,000 who want to preserve an estate.
In addition to preserving life savings, buyers also want to safeguard their independence. Remember, neither Medicare nor Medi-Cal will pay for home care, when someone comes to help you with such chores as bathing and dressing. But a good long-term care policy will provide this protection.
If you are shopping for a policy, make sure you get one with flexibility. The best policies are comprehensive ones and provide a pot of money. The cash they give you can be spent in three ways: for home care; for the monthly payments in an “assisted living” apartment, which typically offers communal dining and staff available to help with taking medication and provide assistance in bathing and dressing; and for a nursing home if you need custodial care.
The cost of long-term care coverage rises dramatically with age. A comprehensive policy is $900 a year at age 55, rising to $1,200 at 60, to $2,500 at 70, and $3,800 at 75.
The typical buyer these days is about 68. Don’t think seriously about getting it at a much younger age. Most people who buy it don’t use it until they reach the late 70s or early 80s. The only people who should get it younger are those in a very limited group: They have a health condition that would prevent them from qualifying for a policy, but coverage is offered to them on a group basis at work.
When you pick a policy, take the longest waiting period you can. This is called an elimination period, the same as a deductible with auto insurance. Get a policy under which you pay the first 90 or 100 days; that will keep down the cost.
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Be sure the policy has an inflation rider. A policy that looks good at age 60, because it pays $120 a day, is much less financially appealing at age 85, when you are going to use it. Get a policy with a 5% annual inflation adjustment in the price. The average cost of a day in a California nursing home rose from $42 in 1980, or about $15,000 a year, to $130 a day, or about $47,000, this year.
Eligibility for collecting benefits is typically linked to six basic activities of daily living, known as ADLs: feeding yourself, getting dressed, getting into and out of bed, a chair or a wheelchair, bathing yourself, getting on and off a toilet by yourself, and continence (the ability to control your bladder and bowels).
The better policies will require only two ADLs to qualify for nursing-home and assisted-living benefits. (All policies sold in California use two ADLs as a standard for home-care benefits.)
Policies sold in California must provide payment in cases of cognitive impairment, such as Alzheimer’s disease and other dementia, or mental disorders. A person qualifies if he or she needs “supervision or assistance to protect yourself or others because of mental deterioration from Alzheimer’s disease or other organic mental diseases,” according to the definition for state-approved policies in California.
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Look for policies in which the evaluation of health or mental problems must be made by an independent professional, such as a doctor, nurse or social worker, rather than personnel from the insurance company.
When people have wiped out their money, the state and federal governments share the cost of their nursing home care. Four states--California, New York, Connecticut and Indiana--are offering special deals to encourage residents to buy long-term care insurance, reducing the potential financial burden on the state.
The state’s program, called the California Partnership for Long Term Care, allows a person to shelter money that otherwise would be paid to a nursing home. The California policies start at one year, with coverage of $33,000 and are available for longer periods and larger amounts, depending on the insurance carrier. A three-year policy should be sufficient because few people are in nursing homes for longer periods.
Normally, you couldn’t qualify for Medi-Cal until you “spend down” your financial assets to $2,000. But with a Partnership-qualified policy, you can protect a dollar of assets for every dollar paid out in benefits.
You can buy a partnership policy for $200,000, for example. If you go into the nursing home and use your $200,000 in coverage, you can still protect $200,000 in stocks, bonds and cash from being counted for Medi-Cal eligibility purposes.
The California policies’ benefit can be used for home-care assisted living, and nursing home custodial care, in any combination required by the individual.
The companies participating in the California Partnership are Bankers Life and Casualty; CNA Insurance Cos.; GE Capital Assurance; New York Life Insurance Co.; Transamerica Occidental Life Insurance Co.; and the CalPERS Long Term Care Program (available to all public employees and teachers in California, active and retired, their spouses, parents and parents-in-law.)
For information about the California Partnership, call (800) 227-3445 (CARE445), or write to P.O. Box 942732, Sacramento, CA 94234-7320.
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Question: My mother is on medication for diabetes, emphysema, heart problems, high blood pressure--you name it. We have a home-care person five days a week who bathes her, helps her dress, prepares her meals . . . takes her for walks in her wheelchair and sometimes in her walker. She is becoming more and more incontinent, and we just got word from her doctor that her kidneys are failing. However, what I am interested in is whether citizenship is required for Medi-Cal. (She is Canadian.) I figure she can pay for home care for 15 months or so ($2,000 per month) but when we are financially unable to pay and I am forced to put her in a nursing home, I am very worried about the citizenship question. I would send for citizenship papers, but I understand that it now takes two to three years because of the backlog, and I don’t know if she will live that long.
Answer: If your mother is a lawful permanent resident, although she is not a citizen, she is entitled to full Medi-Cal benefits. The program covers the indigent, and your mother will have to report her income and assets to the state to see if she meets the financial rules.
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Q: I have a friend, a woman who lives on a very small income. She has just turned 65, and her HMO has canceled her. She has no Social Security and has never been married. Where do you suggest she go to obtain hospital and medical insurance?
A: She has several possibilities. She can buy into the Medicare program by paying $309 for her Part A hospital coverage and $43.80 a month for Medicare Part B, which covers doctor bills. Depending on her income, she might qualify for financial help from the government. Have her contact the county department of social services. It offers one program to help low-income individuals with their Medicare premiums. And Medi-Cal is available for those over 65 who are indigent.
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This column appears every second Monday in Health. Send your questions, worries, tips, successes or failures in living with the health insurance revolution to Benefits Bob Rosenblatt, Health, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Or e-mail: bob.rosenblatt@latimes.com.
