Long-Term Care Insurance: Not Always a Good Buy
Long-term care has been in the spotlight this week, with a Government Accountability Office report just out, a congressional hearing today, and new survey results on the subject. But all the concerned commentary about how we're going to meet the need for long-term care as baby boomers age really only highlights how elusive solutions are.
Today, Medicaid and other government programs pay for most long-term care, whether it's in a nursing home or for assisted-living services at home. Only about 10 percent of long-term care costs are covered by private insurance. But as many as two thirds of people over 65 eventually may need some sort of long-term care, according to some estimates. Many policy experts, estate planners, and others advocate long-term care insurance as a good way to provide financial security and stability for people against this unknown as well as to relieve the burden on an already stretched Medicaid program.
But as the GAO report released this week found, these private policies aren't necessarily a good buy. Even though more than half of states have adopted standards that help keep premiums stable, many consumers are at risk for crippling increases, either because their state hasn't yet adopted rate-setting standards or because they bought policies before the standards went into effect. Since policyholders may pay premiums for decades before they actually need long-term care services, steep premium increases can be especially painful. Do you drop the policy you've been paying into for 20 years and lose your entire investment, or do you suck it up and pay the increase?
The report also found that claims settlement could be problematic. For example, while nine of the 10 states reviewed had a requirement that companies pay claims in a timely fashion, the definition of "timely" ranged from five to 45 days, and two states didn't define timely at all.
These findings are not particularly surprising; advocates for seniors and others have been chronicling problems with this type of insurance for some time. I wrote about potential pitfalls and how to avoid them not long ago.
The Commonwealth Fund and the publication Modern Healthcare also took a look at long-term care this week. Their survey of 196 healthcare opinion leaders found that 79 percent were in favor of adding a long-term care benefit to Medicare, which could be financed by a premium paid by some combination of individuals, the government, and/or employers.
For Bonnie Burns, a training and policy specialist with California Health Advocates who has long followed the twists and turns of the long-term care debate, it's déjà vu all over again. When I talked with her, Burns was on her way to Washington to testify about long-term care at a congressional hearing today. She recalled giving similar testimony before Congress on another occasion—nearly 20 years ago. Proposals circulating at that time would have created a federal long-term care insurance program that would have given people an opportunity to join at various ages, with premiums being higher for those joining later in life. The plans didn't fly then, and she doubts a proposal to add long-term care to Medicare would pass now. "How would we finance it?" she asks. "We'd be talking about a huge increase in costs to a program that is already strained today."
There are no easy answers. But a presidential campaign offers an excellent opportunity to share ideas, don't you think? To date, however, the candidates haven't been overeager to discuss long-term care. In fact, I don't think they've brought it up at all. What do you think could be done to address our long-term care needs for the long haul?
Tags: GAO | health insurance | insurance | Medicaid
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Reader Comments
it's just not fair to working Americans
Although most of the candidates for president have been promoting some type of “universal coverage” for medical care, none of the candidates have proposed “universal long term care” coverage. In fact, they have all been strongly behind measures that would increase the effectiveness of private long term care insurance (especially through the LTC Partnership programs created by the Deficit Reduction Act of 2005).
The problem with having a “universal long term care program” is that the federal and state governments already pay for long term care services for the poor and for much of the middle class. .
A new federal program covering long term care would mostly benefit the rich and the upper middle class who can’t qualify for government-funded long term care because they have too much income and/or assets.
Why should a new tax take more money from the lower classes in order to primarily benefit the richest Americans? It’s just not fair to working Americans.
Long-Term Care Insurance: Not Always a Good Buy
Your writer of this article is way off base. Medicare does not pay for long term care beyond 100 days in a Nursing Home provided the patient is eligible and needs other than just custodial services. Home care services are also very limited and again nothing for only Custodial Needs. Medicaid is for the poor!!!! Medicaid has stringent rules and proof of indigence is required. The Deficit Reduction Act made Medicaid eligibility even more complicated and the transfer of assets to become poor must take place 5 years prior to the application of Medicaid benefits.
Long Term Care insurance provides money to pay for care need as long as the patient meets eligibility standards. Not all illnesses require long term help. A broken leg, a hip replacement, a case of the flu are not long term needs. Most companies require the need for assistance to be diagnosed as needed for at least 90 days.
Also, not every insurance company blatantly raises premiums on Long Term Care Policies. Regular policy rate increases usually come from the New Comers to the insurance field, the companies that accepted everyone regardless of health and those whose actuaries really misjudged the amount of claims and policies lapses. The Major insurance companies Have Rarely if ever raised premiums to existing policy holders.
I take offense to people like the writer of this article who rely on only 1 or 2 sources to gain information and those who supply this slanted opinion of Long Term Care hardly know anything about Long Term Care insurance.
As a professional in this field for over 12 years representing major insurance companies, having educated 1000's of people, and helping to insure 100's of clients, I have yet to receive a complaint that the Policy did not do for the patient or family exactly what it promised to do. It provided money to help cover the expenses of Home Care, Ass'ted Living, or Nursing Home service, up to the limits of the coverage selected by the insured.
What more can an insurance buyer ask for?
Why is long term care insurance so hard to believe in?
Let me start by saying that I'm biased. I sell long term care insurance. Here's my point...
Premium increases are a responsible, but unpleasant, part of insurance. The recent increases from major carriers like John Hancock and Genworth are mainly the result of increases in persistency or how many people keep their policies each year. Higher than anticipated persistency means higher potential utilization. Utilization means claims paid. That's a good thing, right?
If you're really concerned about "crippling" or even minor rate increases, there are policies that offer options of guaranteed, limited, level premiums. You simply need to know where to look.
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