The Short Version of Long Term Care Insurance

By Judy Foreman
05/21/02

You can skip this column – and the whole messy business of long term care insurance - if you’re relatively poor, making, say, $30,000 a year or less. That’s because, if you ever need to be in a nursing home, the government, i.e. Medicaid, will pick up the cost you can’t cover. So why worry?  Have a nice walk.

You can also skip this column if you’re rich. That’s because you’re probably better off “self-insuring,” that is, paying for long term care yourself if you ever need it, than shelling out hundreds, or more likely, thousands, of dollars a year from now until forever for a service you may not ever use.

The same even goes for some people in the middle – those whose lifestyles would be seriously impaired by giving up hard-earned money for this kind of insurance.

As for everybody else? Grab a cup of tea and a pencil and read on, especially if you’re widowed or contemplating a second marriage and have a strong interest in protecting your assets. And when you’re done, if you want to know more about this ridiculously convoluted but important subject, get a copy of Ben Lipson’s extremely readable new book. Already in its second printing by John Wiley & Sons, it’s called “Choosing the Right Long-term Care Insurance,” one of the J.K. Lasser guides to financial decision making. 

In the spirit of full disclosure, Lipson has for decades been a freelance columnist for the Boston Globe and sells insurance himself. He’s refreshingly clear: “In my humble opinion, long term care insurance is a very simple product that by design the insurance industry has made complicated so that people can’t compare apples with apples.”

“Ben Lipson is one of my folk heroes,” says Al Norman, something of a folk hero himself, an expert in long term care issues and executive director of Mass Home Care, a nonprofit advocacy group for elders. The long term care issue, says Norman, is best captured by the old joke: The first guy says, “Ninety-nine percent of agents out there don’t know what they’re selling.” The second guy, an agent, responds, “That’s only fair because 99 percent of consumers don’t know what they’re buying.”

So, as they say about academics, we’re here to clarify things.

The most important thing to know about long term care insurance is that it’s a product geared to make money for the insurance industry. That means agents make money by convincing you to buy. And that, says Eric Carlson, a lawyer at the National Senior Citizens’ Law Center in Los Angeles, means agents “have an incentive to make the risk” of needing long term care in a nursing home sound “incredibly severe,” even if it’s not.

Traditionally, long term care policies were focused on nursing home coverage only. Increasingly, many policies include coverage for care in your own home, in a hospice, in assisted living facilities and in adult day care settings as well as in nursing homes.

Al Norman puts it this way: “What is your real risk of being in a nursing home? If people understood their risk, they probably wouldn’t be as nervous.” The average length of stay in a nursing home is 321 days, according to 1997 national figures, the latest available. People generally don’t need care longer than that because they either get better or they die. In fact, the chance that a man 65 or over would need to stay in a nursing home for five years or more is only 4 percent; for women, it’s 13 percent. “Most people will spend a year or less in a nursing home,” Norman says, “so don’t overbuy.” And beware of policies with a 1-year deductible because your cost for care during the first year may outweigh any savings.

Even the insurance industry itself agrees with the basic idea that the poor and the very rich don’t need long term care insurance. “If you’re in a poor economic situation, this is not something you should spend your money on,” says Joe Luchok, communications manager for the Health Insurance Association of America, a trade group. “And if you are really rich, you’re probably better off self-insuring.”

The second most important thing to realize about long term care benefits is that, although things are changing, most older policies cover nursing home care and skilled home health services but do not provide much in the way of non-skilled care in your own home.

The same often goes for Medicare, the federal program for the disabled and older people, which is limited in scope.  For instance, Medicare  will pay for nursing home care – but only for a very short time, and only following a 3-day hospital stay. Medicare also only covers part-time skilled home health care, and doesn’t pay for many of the other services you may need, such as someone to get your groceries, mow your lawn.

So, in terms of buying long term care yourself, make sure you ask whether it covers “integrated care” (nursing and non-skilled services) in all settings, including help at home with “activities of daily living” such as bathing, eating and dressing.

The third most important thing to remember is that long term care insurance is different from both health insurance and life insurance. With health insurance, notes Lipson, “the insurer wants you to stay healthy. They have a stake in that and, ideally, that was the concept of managed care.”

With life insurance, the insurer’s interest is in postponing your death. “They want you to live a long time so they can invest your premium dollars and put off paying your beneficiaries for as long as possible,” says Lipson.

“With long term care insurance,” he says, “the insurer wants you either to die before you become disabled, or live a long life and keep on paying your premiums. What they don’t want is for you to get sick and need help – that’s the big problem with Alzheimer’s disease.”

Among other things, Lipson says,  “long-term care insurers carefully screen their applicants, often silently disqualifying them during the first phone inquiry. They try to court younger and healthier participants and discourage older, sicker patients.”

From the buyer’s point of view, you can look at it this way, suggests Stuart D. Zimring, an elder law attorney based in North Hollywood, CA.  “You look at your family tree. If your parents both lived to 105 and died while out picking apples because they fell out of a tree, you probably don’t need long term care insurance.

“On the other hand, if your parents stroked out at 60 and spent the next 25 years in persistent vegetative states in a nursing home or had early onset dementia, you should probably think about it.”  In his own case, Zimring, who is 56 and has a family history of stroke and heart attacks, has opted to buy long term care insurance at his relatively early stage of life so that his wife and children don’t face the possibility of paying for expensive nursing home care.

Or, think of it this way. If you’re 40 and healthy,  long term care insurers will try to lure you with low premiums, say $300 a year, but what you may not realize is that you’ll be paying this premium for the rest of your life, even if you never need long term care. Insurers may tell you that you won’t be singled out for an increase in premiums, and that’s technically true, but they can increase premiums for any class of policy holders at any time, and they get to say who’s in that class.

On the other hand, if you’re 65 and not so healthy, insurers will sock you with premiums that can run thousands of dollars a year. And they will reject you outright, Lipson cautions, if you have AIDS, Alzheimer’s disease, cirrhosis of the liver, mental retardation, Parkinson’s disease or any of a number of conditions for which you actually would use long term care.

In fact, by the time you really need long term care insurance, you probably won’t be able to get it. Even just taking certain medications such as Adriamycin (a cancer drug), Betaseron (for multiple sclerosis), Imuran (for arthritis and other inflammatory conditions) may be enough to disqualify you.

Across the country, many people are trying to provide better consumer protection in long term care insurance, a challenging task given the huge growth of the industry in recent years. In Massachusetts, for instance, State Senator Cheryl Jacques (D-Needham) is urging legislation to provide adequate protections for consumers, including minimum standards for such policies.

The real point, Lipson stresses, is “to live out your life independently and with dignity. Never buy a policy out of fear driven by emotional blackmail. Just do your homework and learn the true facts.”

Judy Foreman is Lecturer on Medicine at Harvard Medical School and an affiliated scholar at the Women’s Studies Research Center at Brandeis University. Her column appears every other week. Past columns are available on www.myhealthsense.com.  

SIDEBAR

TIPS ON BUYING LONG TERM CARE INSURANCE

§        Don’t buy long term care insurance from a relative – your relative’s financial interests may not be the same as yours.

§        If you’re concerned about protecting your assets, see a financial planner and if necessary, an elder law attorney as the first step. You may not need long term care insurance at all.

§        Don’t replace a policy purchased before Dec. 31, 1996. (Older policies often have better benefits than newer ones.) You can keep your old policy and supplement it with a new one.

§        Watch out for policies that only cover care in a nursing home. This may provide an incentive for your kids to put you in a home.

§        Watch out for group policies. Unlike many other states, in Massachusetts, group policies (unlike individual policies) do not have to meet any state standards, which means these policies are essentially unregulated.

§        Consider having premiums automatically deducted from a bank account. Otherwise, if you become ill or forget to make a payment, your policy may lapse.

§        Never pay an insurance agent in cash. Write a check for the premium to the insurance company whose application you sign, not to the agent.

§        Keep a record of the agent’s name, phone number and address, and tell someone where it is.

§        Ask about inflation protection. If you buy a policy today that guarantees payment of $100 a day in nursing home costs, that same care may cost $250 a day in 20 years and you may get stuck with the difference.

§        Ask about “rate stabilization.” Many states do not limit insurers’ ability to raise premiums. At the very least, ask your potential insurer for five years’ worth of history of premium increases.

For more information, read Ben Lipson’s book, “Choosing the Right Long-term Care Insurance.” All royalties from book sales go to a fund Lipson has created in memory of his daughter, the Marjorie E. Lipson Memorial Fund for Patients’ Rights and Patient Advocacy within the John D. Stoeckle Center for Primary Care at the Massachusetts General Hospital.

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