By Steve Schulte of
Health Advocate Solutions
(213) 999-1227
Most people understand two things about long-term care coverage.
First, this type of insurance covers custodial (non-medical) care after disability and second, there are approximately 78 million Baby Boomers, many of whom will need such care over the next decade or two.
But there are other, deeper and more complex aspects to long-term care coverage that everyone ought to understand. At least everyone who is either in their mid-forties and up or who has aging, perhaps failing, parents. This defines the population most in need of long-term care insurance (LTCi).
Let's first look at some of these more complex aspects of LTCi to deepen our understanding of the issues. Then let's see how both the market and healthcare reform might affect LTCi.
One, is long-term care affordable for the typical citizen? Since the issuance of LTCi is age and health-related the annual premium increases as one ages into the mid-fifies and on. However one does not need a full-coverage policy to get the benefits of LTCi. Policies can be adjusted to personal needs and resources.
In addition, when compared to the monthly cost of nursing home placement with disability (about $212 per day in CA) the cost of LTCi looms as a very important asset protection and coverage. The annual premium, for, say a 60 year old Californian would be about $5,800 per year. Compare that to the cost of one year in a decent facility---around $75,000.
There is no comparison in this light. A good LTCi policy would protect one's property and assets. (This cost nationally translates to about $200 billion annually out of pocket.)
Two, what does long-term care cover? LTCi is designed to pay for non-medical expenses: nursing and attendant care, bed occupancy, durable medical equipment and so on. This care---custodial care---is not paid for by health coverage or Medicare---and, except for low-income recipients, not by Medicaid. So, think of the care other than medical or hospitalization one might need after severe disability. This is what LTCi covers and it will have to be paid for in one way or another if one becomes disabled.
Three, if I have some assets---say a pension or real estate, how do I decide if I need LTCi in addition and how much should I get? If you consider yourself very wealthy and unencumbered by debt you may well be able to take care of any long-term care needs that arise. The amount will---statistically---need to represent the daily facility premium for your state X 365 days X three years or more. AND, you have to assume that your assets will not disappear or significantly shrink in value over time.
A few statistics: many Baby Boomers will live longer lives than their parents----into their mid and late eighties. One in two will need some care after old-age disability. This period of incapacitation when extended (complete disability) usually lasts two-and-a-half to three years plus prior to death.
One in eight Baby Boomers will likely have some form of dementia or Alzheimer's. More disabled and elderly people in the future will want to remain in their own homes. Retaining quality of life and independence throughout this period of life---and not being a burden on others---is key.
About 10 million Americans need long-term care today---and about 7 million have long-term care insurance. Of the first number about 80% will be cared for at home. It is common for family members to do this--without reimbursement but at very high cost.
The new healthcare law (thanks to the late Senator Kennedy among others) will bring two important changes to this field. First a new, voluntary LTCi benefit will be established through the workplace. Anyone 18 or older will be able to enroll. Second, Medicare benefits will be changed so they will be more available to those staying at home.
The average benefit under this program is predicted to be at least $50 per day. As we have seen this will not be sufficient for most people---but it is a start. The need for long-term care coverage is at least being recognized and those who participate in the program will have a floor upon which to build their coverage. Note: five years program participation will be required to become vested.
Most likely private insurers will soon offer new programs to supplement the CLASS (Community Living Services and Supports) coverage---much as they did when Medicare was started. Yet average estimates are that fewer than 10% of employees will buy CLASS coverage.
Clearly much more education will be needed to ensure adequate LTC coverage for those who need it. To the extent that private coverage becomes the norm, stress on Medicare and Medicaid programs will be reduced. It takes no speculation to see that this area will in the next several years become a huge financial burden: for individuals,for families, for communities and for the federal government.
Sources: Washington Post articles, the New York Times, Bloomberg-Business Week, Kaiser Family Foundation, course manual: California Partnership for Long-term Care
To respond to this blog, email steve6schul@yahoo.com
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