Affording Long-Term Care

For Dr. Saul Silver, buying long-term care insurance for himself was an easy choice. “My father was fully independent a year ago, but now he is driving around in a motorized cart.

This is what happens when we get older. You can’t walk. You can’t take care of yourself. This is something we have to face even though we don’t want to,” says Silver, whose mother broke her back and lost mobility as well.

Indeed, only 8 percent of people who should be looking into long-term care insurance actually do so, says Brian Gordon, president of MAGA Ltd., a Riverwoods, Ill. long-term care consulting and sales firm. Some are scared away by high premiums—often ranging from $800 to $4,000 or more a year and continuing to rise as baby boomers age. Others avoid thinking about the unsettling possibility of being so sick one day that they will need help bathing or dressing.

But Dr. Silver, a 54-year-old cardiologist, has his eyes wide open. He tries to live a healthy lifestyle, following advice he gives his patients, but knows there are no guarantees of both longevity and good health. He knows how expensive it is to pay for care without insurance because he recently moved his parents into an assisted living facility. He bought a long-term care policy because he doesn’t want to be a burden on his wife and two sons and wants to protect his assets in an uncertain economy. “I am lucky,” he says. “I can afford it. For me, it was a no-brainer.” For others, it is a more complicated choice.

Long-term care insurance helps cover healthcare costs when someone cannot take care of himself because of extended illness, accident or disability. The insurance helps pay for in-home aids, adult daycare, assisted living or nursing home care, which are all becoming more expensive and often at a dizzying pace. The average price of a private room in a nursing home nationally is $219 per day, or $79,935 a year, according to a Met Life survey. Contrary to popular belief, Medicare supplements do not pay for chronic care, only recuperation for a limited number of days. Medicaid, the federal- and state-funded program that provides medical care for low-income people, will pay for nursing home care—but only after someone spends down the majority of his assets.

“It wouldn’t take long to deplete a retirement plan if you are talking about $6,600 a month. There are very few financial plans that are significant enough to absorb that kind of cost,” says Kevin Miller, managing partner of Northwestern Mutual Financial Network-Pittsburgh, which sold the policy to Dr. Silver. “Most people will have a few million dollars in retirement. That is not enough. Your retirement is not in order unless you have long-term care insurance. It’s the foundation of your retirement plan.” He says long-term care insurance gives people the choice of in-home care, the most popular option, or other care outside the home.

Gordon agrees the insurance gives people flexibility and peace of mind. Still, he counsels clients first to save enough for retirement before they buy long-term care insurance. “In my opinion, long-term care insurance comes after you have everything else in order. It’s a luxury. The last thing you want to do is pay for two or three years and then drop the coverage because you can no longer afford it. That would be money down the drain.”

Jim Miller, who writes a syndicated column called “The Savvy Senior” and does segments on aging for “The Today Show,” says people have to weigh the advantages against the high premiums.

“It’s a great thing to have, but is it worth the money? It depends on the family. It is expensive. It eats up the pocketbook. It erodes wealth. You have to weigh the risks and out-of-pocket expenses. If you start premiums at age 55, and your premiums are $100 a month, and you don’t need nursing home care for 25 years, you are going to pay $30,000 out of pocket for insurance you might not use. But if you go to a nursing home at age 85 for five years, that would cost $400,000. Then it would be a great investment.”

Often, the decision whether to buy a policy comes down to how committed someone is to passing on wealth to their children.

“Some people want to leave money to their kids,” says Miller, who has no children and has opted not to buy long-term care insurance. “It’s a huge issue that their will is going to their kids. Other people don’t have kids or they just don’t care about it. It just depends on the person.”

Long-term care insurance does more than just protect assets. It brings peace of mind to adult children, who sometimes live far away from their aging parents. Baby boomers who have struggled taking care of their aging parents are increasingly looking into policies for themselves so they don’t burden their own children.

“It’s a crisis situation that is going to hit baby boomers very soon,” says Alisa M. Rodney, CLTC, a certified long-term care specialist and trainer for Long Term Care Resources, a national brokerage with an office in Bridgeville. “If someone gets sick, the whole family wants to help. The children want to be caregivers. Guess what? They are working and they have their own families. This can devastate a family.” Rodney doesn’t recommend the insurance for everyone, but she says boomers have to weigh the risk of getting older without it. “Long-term care insurance is expensive no matter what age you get it,” she says. “But compared to the cost of care, it is a tiny fraction.

Here are some commonly asked questions about long-term care insurance:

Who should buy it?

People should consider buying long-term care insurance only if it does not take away from day-to-day expenses. “If it is between the mortgage and long-term care insurance, pay the mortgage,” says Northwestern Mutual’s Miller. “If it is between your spending an extra month in Florida and long-term care, get the long-term care insurance.”

Some say that wealthy people—those with assets of $3 or $4 million—can self- insure and don’t need to buy it. But others say the insurance is increasingly appealing to the rich, who want to protect their assets. “I have clients who are millionaires who take it out,” Rodney says. “They would no sooner want to pay for this than a car totaled.”

Women tend to use it more than men. Gender, family medical history and longevity are other factors to consider. “If your parents died when they were 95 and had Alzheimer’s, and you are a woman, I would consider it,” says Jim Miller, a.k.a. the Savvy Senior.

Some corporations are researching it, too. Businesses can get tax write-offs for offering long-term care insurance to employees, either by underwriting the entire cost, sharing the cost with employees, and/or giving the best coverage to key employees. “This can be a good attraction to get people to work for them,” Rodney says. It’s also a way for employers to make sure they don’t lose employees to family problems.

When should you buy a policy?

The earlier the better, because it is more affordable and easier to get a premium, insurance agents say. “Once you get into your 50s, you need to take action,” Miller says. “The discussion should take place in your 40s.” “The average age of someone buying long-term care insurance is 58, compared with 69, 10 to 15 years ago,” Gordon says. Contrary to popular belief, long-term care insurance is not just for seniors. Gordon says more than 5 million Americans of working age receive long-term care.

Underwriting has become more stringent for all ages, but especially for people in their 70s and up. “Carriers are requiring face-to-face assessment and more medical records,” Gordon says.

What medical conditions make it hard to get coverage?

“No companies will insure you if you have Alzheimer’s or Parkinson’s,” Rodney says. “People who have had a stroke generally cannot be insured anymore, but years ago they could.” But other conditions, such as a quadruple heart bypass, do not preclude coverage. Diabetes is a tricky area, with coverage depending upon history and how many units of insulin are taken. Sometimes people can get long-term care insurance with osteoporosis, Rodney says, but they may get rejected if they have had a history of fractures.

How much does it cost?

Premiums vary widely, depending upon age, health, number of years and amount of coverage. Discounts apply for good health and spousal partner benefits. (See chart, opposite).

Customers can pay a less expensive premium by not insuring the entire risk. Someone with a pension might consider buying insurance that pays $180 a day, instead of $220, making it much less expensive. “It can be presented wrong,” Gordon says. “If someone is selling them everything but the kitchen sink, it can be very, very expensive.” Many agents suggest, though, that customers under 70 get a policy that adjusts for inflation at 5 percent compounded. Don’t just shop price, however, agents say. Make sure you are dealing with an established company and a knowledgeable LTC advisor.

How does long-term care insurance fit in with a retirement community?

It depends upon the retirement community. “If someone comes in with long-term care insurance, we ask to evaluate it,” says Jim Pieffer, senior vice president of Presbyterian SeniorCare, which operates Longwood at Oakmont. “If it is good policy, we will give them discounts on their monthly fees.”

Pieffer believes a Continuing Care Retirement Community (CCRC) such as Longwood at Oakmont gives people insurance against future health care costs by charging an upfront buy-in fee but then approximately the same monthly fee whether someone is in independent living or a nursing home unit. “We think Lifecare is a better alternative. If you come in healthy, you are covered for the rest of your life.”

A resident looking at a CCRC typically doesn’t need long-term care insurance too, he says. “But if you already have it, it is a chip you can use when negotiating your costs or fees with a retirement community.”