Seniors, You’re on Your Own

One of the myths about growing old in America is that retiree health insurance from your old job, or the government’s Medicare program, will pay the bill for nursing home care, which can run $50,000 a year. Forget about it. The reality is that you are on your own when it comes to paying for a prolonged stay in a nursing home or hiring someone to come to your house to help you get bathed and dressed.

This issue, which has social and emotional aspects too, is growing more pressing with the graying of the baby boom generation. Today, there are about 5 million Americans over 65 who need some help with the basic activities of daily living. That number will probably double, to 10 million, by 2030, when the eldest boomers hit 65.

The federal government will pay for nursing home care, but only if you become a pauper. If you go into a nursing home and gradually erase your life savings, down to the last $2,000, then you qualify for federal help. The program is called Medicaid (Medi-Cal in California). This becomes real to most people only when they must place a parent or grandparent in a nursing home and are shocked to learn that Medicare, the federal health program for those over 65, won’t cover the costs.

Many people are misinformed or confused about how Medicare works. The federal health program will help pay for fixing a broken arm, removing an inflamed appendix or repairing a damaged heart through coronary bypass surgery. But it won’t pay a dime for ordinary care in a nursing home, for the routine daily maintenance and feeding of somebody with Alzheimer’s disease or for someone permanently incapacitated by a stroke.

Adding to the confusion is that Medicare will pay for some nursing home stays, said Elinor Ginzler, director of assisted living and long-term care for AARP. For example, Medicare will pay when a patient has hip surgery and goes from the hospital to a nursing home for a brief period to recover and needs some physical therapy. The Medicare benefit provides up to 100 days in a skilled-nursing facility, with the first 20 days free. Unless a person is recovering from a specific illness or injury, Medicare will not pay for routine care, such as bathing, feeding and dressing.

Congress, worried about the future financial solvency of Medicare, isn’t going to bust the budget by expanding benefits to include nursing home care. Instead, the legislators want to encourage Americans to take responsibility themselves by buying insurance against the risk of needing some type of nursing home care.

The insurance enables people to pay for nursing home care without depleting their financial assets. They can retain their savings accounts, stocks and bonds to pay for living costs as they age, or to preserve as an inheritance for heirs.

This coverage is called long-term care insurance, and only about 6 million people have such policies. To help encourage this type of coverage, the federal government is offering the insurance to federal workers and members of the military and their spouses and parents.

“The federal government wants to be a role model for other employers that might be interested in offering this insurance--there is no question that it is cheaper when you buy it in a group,” said the AARP’s Ginzler.

Starting in July, the government will allow current federal workers, members of the armed forces and retirees from federal agencies and the military to purchase long-term care policies. Also eligible will be their children over the age of 18, their spouses, and their parents and parents-in-law.

The policies must be purchased by Dec. 31. After that, the government will decide whether to provide another opportunity for people to buy the policies.

The coverage will be about 15% to 20% cheaper, on average, than policies available on the market for people in average health.

“We think the policy will be an important part of the compensation package, and we have to remain contemporary in the coverage,” said Frank Titus, who is directing the program for the federal Office of Personnel Management.

Benefits will range from $50 a day to $300 a day. The money for benefits is provided in a pool of coverage, with the funds available to be used in several different ways: to pay for someone hired to provide care at home; for use in an assisted-living facility, typically apartment-type settings; or for nursing homes, where custodial care is required.

To qualify, an individual must need help with at least two of six basic activities of daily living: bathing, dressing, toileting (getting to the bathroom and using the toilet), continence (control of bladder and bowels), eating and transferring (getting in and out of bed or chairs).

The policy also will pay benefits to someone with severe cognitive impairment, a loss of memory or reasoning ability that “places you in jeopardy of harming yourself or others and therefore in need of substantial supervision by another person,” the OPM said in its policy material. Alzheimer’s disease is the most common cognitive disorder that would trigger benefit payments.

Federal officials hope to change the normal buying pattern in the industry, to encourage people to purchase the policy at a younger age, when they can lock in lower premiums. Typically, long-term care policies are now being purchased by people in their early 60s, and used 20 years later. The average person who goes into a nursing home for an extended stay is usually older than 80.

A special innovation of the federal policy is that benefits can be paid to family members who act as caregivers. This does not apply to spouses or others living with the person needing care.

But suppose an adult daughter visits her father and provides care. She can receive up to 75% of the daily benefit rate for taking care of her father. She can get paid for a total of 365 days over the term of the insurance coverage.

For those of us who don’t qualify for the government program, here are some tips to keep in mind when considering long-term care insurance:

* Get a policy with a pool of money that can be used at your discretion at home or in a nursing home.

* Take the longest waiting period you can afford to keep down the cost of the policy. If you can pay without financial hardship for the first 90 days of care in a nursing home, get a policy with a 90-day waiting period before benefits begin. This will lower your premium.

* Purchase a policy that offers protection against inflation, a policy that automatically increases the value of the benefit each year to keep pace with rising costs. A 21/2-year stay in a nursing home costs $130,000, on average, now, but is expected to climb to $495,000 by 2030, according to an insurance industry study.

California and three other states--New York, Indiana and Connecticut--have special programs enabling people to keep their own money and still qualify for government help.

California has a Partnership for Long Term Care program allowing people to shelter more of their financial assets and still be eligible for Medi-Cal, which pays for nursing home care for the poor.

A Shopper’s Guide to Long-Term Care Insurance is available from the National Assn. of Insurance Commissioners, 2301 McGee St., Suite 800, Kansas City, MO 64108. Contact the group at (816) 842-3600 or at www.naic.org. Information on the government’s new product, called the Federal Long-Term Care Insurance Program, is available at (800) 582-3337 or www.ltcfeds.com.

Information on the California Partnership for Long Term Care is available from the statewide health insurance counseling hotline at (800) 434-0222.

Bob Rosenblatt welcomes your questions, suggestions and tips about coping with the changing world of health care. He can be reached by e-mail at bobblatt@aol.com. Dollars & Sense runs the fourth Monday of each month.