Change text size: A A
Long-term care insurance a necessary gamble for Baby Boomers
BY VINCENT J. SCHODOLSKI Chicago Tribune
LOS ANGELES - KRT NEWSFEATURES
(KRT) - Spurred on by experiences looking after their parents, members of the Baby Boom generation are increasingly considering long-term care insurance to cover the cost of assistance they may need in the future.
Although such policies have been available for years, industry figures estimate that only about 7 percent of Americans older than 65 have such insurance. But that is changing, carriers say, as middle-age individuals have begun to understand the costs - both physical and financial - involved in caring for an elderly relative.
Many people believe that Medicare covers the cost of inhome or nursing home care, something that is not the case. While Medicare covers short-term care of that sort, it does not pay for the kind of long-term care many elderly people require unless they are destitute.
And in the mobile times people live in, expecting a relative to provide care is not something to count on, experts said. Even if there is a relative living nearby, the task of offering care can be daunting.
"If you are working during the day and caring for an elderly relative after work, you are burning the candle at both ends," said Don Parker, founder of Integrity Long Term Care, Inc., a company in north suburban Glenview, Ill., that consults on the issue.
The alternative - hiring someone to look after the relative - can be costly. The median price for care in a nursing home is $156 a day and can cost $200 or more, according to industry statistics. And that pays only for basic care. Experts say that a year in a nursing home can easily cost $120,000, or more.
"The government is saying quite clearly that they are not going to be there for us," said Stella Henry, co-founder of the Vista Del Sol Care Center in Culver City, Calif. "Long-term care is going to be up to us."
The Bush administration has offered long-term care insurance to federal employees and their families as well as active and retired members of the military. Such individuals have until Dec. 31 to sign up.
While policies cover care in a nursing facility, the money is also available for care in the person's home. "The goal is to keep people at home for as long as possible," said Henry, but the Health Insurance Association of America estimates that 60 percent of people older than 65 will spend some time in a nursing home.
Henry's advice is to choose a large, well-funded insurance company. "The company is going to have to be there when you need it," she said.
"People are going to need care and it is going to be expensive," said Jay Kearns, an attorney and a consultant to General Electric's Center for Financial Learning. "That is expensive today, but health-care costs are going to the moon."
While the cost of long-term care policies is high, it can make financial sense when future costs are considered.
Depending on an individual's age, annual premiums for low-end policies range from $828 for someone in their 40s to $3,484 for someone in their 70s. For people in their 50s the price is $1,108 and for someone in their 60s it costs $1,783.
Using the example of someone who is 55 years old who might need nursing home care when they are in their 80s, the annual premiums paid over 30 years amounts to $33,240, far less than the yearly cost at present rates.
But critics say such low-end policies cover so little as to be worthless and that the policies were written by insurance companies to make money.
"The odds are always with the house," said Zoran Basich, an attorney who works with Nursing Homes Services, which helps people get federal money for nursing home costs.
Basich said policies that cover the bulk of costs in a nursing home had annual premiums ranging from $7,000 for an individual to $12,000 for a couple.
He said the insurance companies' target is people in their 50s. He explained that people who bought the high-end policies at that stage and did not use it before turning 65 often drop the coverage once they retired and moved to a fixed income.
"This is not the panacea that it is portrayed as," Basich said. "If they (insurers) told you that this was a partial way of paying for your care, that would be a different thing."
Consultant Kearns said there are a few basic considerations he suggests to clients when they are deciding whether to buy long-term care insurance.
The first is the future of an individual's spouse or partner who could either end up caring for the individual or spending their savings on nursing facilities. He also said that he explains that the insurance protects the inheritance of children and others.
Five states have "partnership policies" that serve to protect assets of those who enter nursing homes as long as they previously purchased long-term care insurance.
California, New York, Connecticut, Oregon and Indiana allow such individuals to go directly onto Medicaid once their long-term care policies expire while still keeping the financial assets they had at the time they purchased the insurance policy. Any assets obtained after that purchase would have to be forfeited to the state.
