THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, September 17, 1995 TAG: 9509160262
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: By DEBRA GORDON, STAFF WRITER
LENGTH: Medium: 92 lines
Think you won't need a nursing home? Think again.
Once you turn 65, you have a 40 percent chance of spending at least part of the remainder of your life in a nursing home.
Compare that to the chances of your house burning down. Or your car being totaled. Most of us carry insurance for these eventualities. Why don't we carry insurance for long-term care?
One reason is that, until recently, long-term care insurance wasn't readily available. So only about 2 percent of people in nursing homes in this country have their stays covered by long-term care insurance, according to Art Maier, spokesman for the Health Insurance Association of America.
But with the aging of America - the number of people 85 and older is projected to increase fivefold by 2030 - the need for long-term care insurance is more apparent because the traditional way to pay for such care - the state-federal health insurance program of Medicaid - might be unable to handle these increasing numbers.
Policies are also attractive to the children of retirees, notes Peter Clendenin, former president of the Virginia Health Care Association, a trade group that represents nursing homes in Virginia. According to the Families & Work Institute, a nonprofit research organization, nearly 40 percent of workers will find themselves caring for an aging parent in the next 10 to 15 years, Clendenin noted in a paper he wrote about long-term care insurance. Ensuring that their parent has long-term care insurance, he said, takes some of the financial and psychological burden off the child.
Add recent tightening of state Medicaid eligibility laws that previously had enabled nursing-home residents to shelter their financial assets, and these forces have combined to make long-term care insurance the fastest growing segment of the insurance industry, Maier said.
``It's a critical need,'' said Bob Jackson, senior program specialist with AARP's health advocacy services in Washington. ``It's something that we recommend individuals and families explore, but be very careful to fully understand what the risks are of ever using the product and the benefits within the product.''
The typical buyer of long-term care insurance is 67 years old. And that's too old, Maier said. By that age, the average policy could cost upward of $1,500 a year. Buy it when you're 50, he said, and the cost is about $500.
Policies vary widely in their coverage. Some provide $300-a-day coverage once a person is in a nursing home; others pay as little as $100 per day. A person's pocketbook will have to cover whatever a policy doesn't. Typically, most people receiving long-term care benefits are not eligible for Medicaid.
And policies differ in their coverage time. Some payments end after just a year; others run for the entire time spent in a nursing home. And some, Jackson noted, don't kick in until you've been in the nursing home for 90 days or more. ``It gets to the question of risk,'' he said. ``How capable is an individual to pay for the first 90 days?''
Fortunately, he said, the long-term care insurance products now available are much better than those sold just a few years ago. Then, a hospital stay was required before the insurance kicked in. And policy holders had to go to a skilled-nursing facility - a higher level of care than some nursing homes provide.
``It's a complicated product and a costly product,'' he said. ``But you need to decide if it's worth the risk vis-a-vis the loss (of assets) if you go into a nursing home.''
Not everyone needs long-term care insurance, Maier said. The very rich probably have the money to pay for nursing-home care. And the very poor will be covered by Medicaid.
But for the majority of Americans who fall into the middle class and who don't want to drain their life savings to pay for a catastrophic illness, long-term care insurance is about the only option.
Even employers recognize this. Nearly 150 companies around the country now offer the insurance as an employee benefit, Maier said.
That number should skyrocket soon, he predicts, depending on what Congress decides about the insurance's tax status.
Currently, workplace premiums paid for long-term care insurance, unlike those for health insurance, are not tax deductible. And it's unclear whether the benefits themselves are taxable.
In the next couple of months, the Senate Finance Committee will hold hearings on the issue. Industry experts expect that Congress will pass legislation making long-term care insurance premiums tax deductible for individuals and corporations, and the benefits tax-free. Industry officials are also lobbying to ensure that any legislation would allow employees to pay for the insurance with pre-tax funds.
``If the legislation becomes law, one of the long-term benefits of this is that more and more people will be buying long-term care insurance,'' he said. ``More corporations will offer it, and as a result there will be less dependence on Medicaid, which would be a good thing for every state in the nation.''
KEYWORDS: INSURANCE NURSING HOMES by CNB