Nursing-Home Insurance Might Become Standard Financial Plan
The bills for nursing-home care may be $250,000 a year or more in a couple of decades. If one man’s dream comes true, millions of Americans will pay these staggering bills with the help of long-term-care insurance. These policies, now held by only 6 million Americans, could become a standard part of the financial planning of every individual and family.
Frank Titus is the man in charge of designing a long-term care insurance benefit for federal workers and retirees, members of the armed forces, plus all their spouses, parents and siblings. The potential pool is huge, 20 million people, and if Titus, deputy director at the federal Office of Personnel Management (OPM), can make it work, the long-term-care insurance business will be transformed into a true mass market.
The government rules for policies, including protections for consumers, would set a gold standard for an industry that is now chaotic and confusing to prospective buyers of the policies.
These new protections, plus the example of federal workers and members of the military buying the policies, could create the publicity and the example that could motivate millions of other Americans to seek this product.
Congress also is likely to give a boost to long-term-care coverage by creating a new tax break, a special full deduction for the cost of buying such insurance.
Insurance companies will submit their proposals next month to OPM, and the federal government plans to roll out the new benefit in October 2002, during the open enrollment season when workers pick their health plan.
The full cost will be paid by employees. But Titus hopes that because of the massive pool of potential buyers, the price will be 15% to 20% less than current charges for long-term-care policies.
He wants the insurance coverage written with an open-ended clause to cover future changes in care delivery and technology. For instance, “robots will be delivering a lot of the personal care in the future,” he said in an interview.
Meanwhile, long-term-care insurance is a product that many more people should be paying attention to, for their aging parents and for themselves.
Every day, people faced with care-giving decisions are staggered to learn that Medicare won’t pay for custodial care in a nursing home. A year in a decent nursing home currently costs $50,000 or more.
“You mean the government won’t help?” is the plaintive, disbelieving cry from family members who learn that Mom and Dad must impoverish themselves before they can get assistance with nursing home bills. When a nursing home resident has “spent down” his or her savings to $2,000, the nursing home will have all its bills paid by Medi-Cal, the combined federal-state program for the poor. (In other states, the program is called Medicaid.)
There is some financial protection for couples when one spouse goes into a nursing facility, and the other remains in the family home. The spouse at home is allowed to keep $87,000 in financial assets.
Long-term-care insurance is a special product, unlike other health insurance. It can pay for personal care, such as help with bathing and dressing. Or it can pay for a full-scale nursing home care, where an individual is treated by doctors, nurses and physical therapists, as well as personal care attendants. And policies are now paying for care in assisted-living facilities, typically apartment-type communities in which residents can get some modest degree of personal-care assistance.
Before deciding to buy, consumers should ask themselves several key questions:
* Can I afford to pay for personal and nursing care from my own financial assets?
* How much of my assets do I want to leave to my heirs?
* Can I afford the insurance premiums, and will I be able to afford the premiums 20 or 30 years from now when I may need the services?
The most useful policies offer a “pool” of money approach, according to a guidebook by AARP (formerly the American Assn. of Retired Persons).
Under the pool concept, “you choose how much money each day you want to spend and for how long you want coverage,” AARP said in its guide.
“For example, $125 a day for four years would be $182,500. You could use this amount to pay for the type of services you need (such as home care, a nursing home or assisted living). Flexibility can be a valuable feature because you may purchase a policy long before you need to use it,” the AARP guide said.
It’s cheaper to buy when you are in your 40s or 50s as opposed to your 60s or 70s, when the inevitable health problems that come with aging have begun to appear. But a policy purchased at age 40 probably won’t be used for 35 or 40 years or more. Most impartial experts think people should begin to think about buying the policy in their early 60s.
There is tremendous variation in price, so consumers must be alert. Take a hypothetical 60-year-old Californian who wants a policy covering in-home care, a nursing home and assisted living, with a $100 daily benefit. Let’s assume a 60-day deductible: The individual pays for the first two months of care before benefits begin.
Annual premiums for policies with virtually identical benefits range from $279 to $966, according to a special study prepared for The Times by Weiss Ratings Inc., an insurance research and ratings firm based in Palm Beach Gardens, Fla. If you include a 5% inflation factor to allow for rising prices, policy costs will vary from $523 a year to $2,259 a year.
At age 65, a Californian buying the policy with inflation protection could pay as little as $725 a year, and as much as $2,340. At age 70, the range would be $1,031 to $4,244. And at age 75, the customer would face annual premium bills ranging from $1,632 to $5,726, according to the Weiss report.
A high-quality policy should always have the inflation protection, and a benefit of at least $100 a day, said Sandra Pierce Miller, director of the California Partnership for Long-Term Care, a special state program that enables consumers to keep significant amounts of their financial assets and yet still qualify for Medi-Cal to pay their nursing home bills.
Usually, an individual can qualify for Medi-Cal only after “spending down” to $2,000. But someone who bought a policy certified by the partnership system can use the insurance benefits, and then shield an equal amount of financial assets and still qualify for Medi-Cal. Assume Jane Smith, for example, bought a certified policy, entered a nursing home, and used $100,000 from the insurance policy to pay the nursing home bills.
She can keep $100,000 in financial assets--stocks, bonds and savings accounts--and still be eligible for Medi-Cal to pay for her future stay in the nursing home.
Consumers can get information on the policies certified by the California Partnership for Long-Term Care by calling (800) 227-3445. The Web site is https://www.dhs.ca.gov/cpltc.
A brochure, “Long-Term Care Insurance: To Buy or Not to Buy” is available from the AARP. Ask for publication D17186 (600). Write to AARP Fulfillment, 601 E St. NW, Washington, D.C. 20049.
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Medicare is expanding its coverage of preventive services. Starting July 1, Medicare began paying for a Pap test and pelvic exam every two years for women, to help detect uterine or vaginal cancers. The old standard was an exam every three years. (Women considered at high risk, including those with a history of cancer in the family, already are eligible for annual testing.)
Screening colonoscopies to detect colorectal cancer now will be covered every 10 years by Medicare. (High-risk individuals already were covered for testing every two years.)
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Bob Rosenblatt welcomes your questions, suggestions and tips about coping with the changing world of health care. You can contact him by writing Bob Rosenblatt, Health, Los Angeles Times, 202 W. 1st St, Los Angeles, CA 90012, or by e-mailing bob.rosenblatt@latimes.com. Health Dollars & Sense runs the second Monday of each month.
