To buy a policy or not to buy? Five years ago LTC coverage was so full of holes that no sensible person could recommend it. But today anyone with a lot of assets to protect should definitely take a look. Here are the answers to some of your questions about LTC:
What are the odds of needing nursing-home care? One in four of everyone over 65 will enter a nursing home for at least a year, and one in 10 for five years or more. Singles are especially at risk because they’re usually not living with someone who can take care of them. The same is true for wives, who tend to outlast their husbands.
What do nursing homes cost? Plenty. Average cost in 1990: $86 a day, or $31,000 a year-more than double the price in 1980. That ranges from around $20,000 in rural areas to $60,000 for red-carpet care in the major cities.
Who needs protection? People with assets worth between $100,000 and $1 million (not counting your home) who want to preserve it for their heirs. If you have more than $1 million, pay out of pocket. Under $100,000, look to Medicaid, which picks up the tab when your money runs out.
What types of coverage do I need the most? Protection against catastrophic costs, starting with the ones you’re most likely to face. If there’s cancer in your family, buy good major-medical insurance. If your relatives are long-lived and subject to old-age frailty, go for LTC. It’s a waste of money to insure small bills you could pay yourself, like the $100 deductible in Part B of Medicare. Buy bare-bones Medigap coverage instead, and use your savings for LTC.
Many seniors are drawn toward home-health-care coverage in hopes it will keep them out of nursing homes. But if you become disabled enough to trigger home-health payments-bedbound, wandering, too frail to dress-you’re not likely to stay at home very long. Buy LTC first, then add a home-health rider if you can.
What basics belong in a good policy? According to Stephen Moses, director of research for LTC, Inc., in Kirkland, Wash., you need: (1) The amount of the daily nursing-home cost that exceeds your discretionary income from pension, social security and so on. If your income is $30 a day and the nursing home costs $100, insure for $70.(2) Inflation protection that adds 5 percent of your original benefit each year (for 5 percent compounded you have to pay more). (3) Waiver of premium, which continues your coverage at no further cost while you’re collecting benefits. (4) Coverage for any level of care, from custodial to highly skilled. (5) No requirement that you be hospitalized before collecting LTC benefits. (6) Coverage for mental disorders like Alzheimer’s and for frailty that keeps you from walking, dressing, bathing, eating or going to the bathroom without help. (7) A 100-day wait before coverage begins. The longer the wait, the lower your premium. (8) Guaranteed renewable, so the company can’t cancel the policy.
Gilt-edged coverage might add care at home or in adult day care; shorten the waiting period for benefits; raise daily payments; or add “nonforfeiture values,” so that if your policy lapses you’ll get part of your money back. Home-health coverage could add 45 to 90 percent to the policy price. Nonforfeiture values might cost an extra 30 to 40 percent. For help in evaluating policies, send $10 for Susan Polniaszek’s " Long Term Care," United Seniors Health Cooperative, 1331 H Street N.W., Suite 500, Washington, D.C. 20005. Some insurers to consider, say LTC experts: Amex, Aetna, CNA, Mutual of Omaha and UNUM.
What does coverage cost? More when you’re older, less when you’re younger. But because the coverage is improving so fast, you might want to wait until you’re 60 or older to commit yourself For the basic policy outlined above, a 55-year-old might pay $231 a year, a 68-year-old, $889, and a 75-year-old, $1,652, Moses says. The premiums can be paid automatically from your bank account, so the policy won’t lapse if you fall ill or grow forgetful.
What are the risks? (1) That your company will go broke-so stick with those rated A + and up by A.M. Best. You’re often covered by your state’s guarantee fund, but it may pay smaller benefits than you wanted. (2) That your annual premium, which is supposed to stay level during your lifetime, may unexpectedly soar-perhaps pricing you out. Premiums may be raised on any group of policies whose claims are higher than planned. (3) Rotten insurance salespeople, who misrepresent the policies they sell. In a random test of 14 LTC agents done last year for the House of Representatives’ Subcommittee on Health and Long Term Care, not one agent told the whole truth about the coverage to the person posing as a client. The National Association of Insurance Commissioners is backing better consumer protection, but its program is weak.
Why bother with LTC insurance when I can shift my assets to trusts or my kids and get my bills paid by Medicaid? Why indeed? The huge loopholes in the Medicaid law-all slyly exploited by well-to-do seniors-are creating a legion of false poor, collecting public money they don’t deserve. Often, they’re pushed to it by their kids, who treat Medicaid as if it were their personal inheritance insurance.
Morality aside, there are practical problems with deliberately putting yourself on welfare, Moses says. The Medicaid program is being squeezed, so the quality of your treatment may drop. The loopholes used by the middle class will eventually be closed, so you may have planned for naught. Even if you qualify, Medicaid patients may get poorer care, in poorer facilities, than those who can afford to pay. You may even have trouble getting a bed.
You saved all your life to buy yourself red-carpet treatment in your old age. Why get greedy and throw it away?
