Worst-Fear Insurance

Nursing homes, or what we now euphemistically call “long-term care facilities,” are a relatively recent phenomenon. Until about 30 years ago, great grandmothers usually existed as a shadowy presence in a family, often confused and crotchety until they became ill, took to bed, and died. Nobody thought of putting them “in a home.”

Sometimes, if a family were lucky, great-grandma lived independently until she had a stroke or fractured her hip, and then family and family friends would scurry around caring for her until she took to bed and died. Great-grandpa had preceded her years earlier.

Nowadays, things have gotten complicated. Families are dispersed–or nonexistent–and 50-somethings regularly worry about what will happen to them if they become disabled and unable to care for themselves. Would they need to “be placed” in an extended care facility? The prices of these places sound astronomical. Would they have to sell the house? Empty the IRA and leave the surviving spouse penniless? Yikes.

The insurance industry to the rescue! Just sign here for peace of mind with your new Long Term Care (LTC) insurance policy. Start paying now and in 30 years if you do survive that stroke, but find yourself in a nursing home, your bills will be covered. Whew! You feel better already!

As doctor who for the first 15 years of his career specialized in geriatrics, I do have some opinions on this. Let’s get some facts straight.

1. Most people do not end up in nursing homes until they get very old. The odds are distinctly in your favor that you’ll never find yourself in one, and all that money you spent on your LTC premiums is gone for good. Generally, nursing homes are occupied by very old women. They outlive men, remember? (For this reason, long-term care insurance for men is a cash cow for insurance companies).

2. Most people begin their stay in a nursing home after a hospitalization, which means their bill is covered by Medicare and their Medicare supplement policy for the first three months. A good facility is oriented to rehabilitation and tries to get them back to independent living. Most post-hospital nursing home patients are discharged home.

3. However, if it looks like a long stay in the nursing home is needed (which occurs with severe Alzheimer’s, for example), the administrative staff of most nursing homes is very good at getting these patients on Medicaid (coverage for indigent patients), usually by shifting assets to the independent spouse or children. There are numerous horror stories of spouses losing their homes, etc., to pay nursing home costs, but these are unfounded and do not occur. Most people now in nursing homes are not “self-pay” or covered by their own insurance, but rather have their bills paid by Medicare, Medicaid, or the Veterans’ Administration (VA).

4. Let’s say you buy LTC insurance in your 50s. By the time you (statistically) would need it, you’re in your 80s. Even at that age, only one person in ten will ever “need” nursing home placement. Why the quotes around “need”? Because you might not need it after all. One fact is for certain: fewer and fewer people are being admitted into nursing homes. Maybe your spouse, kids, or friends can take care of you. Or maybe all you need is to pay someone to stop by every day and help with household chores, meal preparation, or a bath. This is a lot less expensive than a nursing home.

5. Insurance companies play their usual games with LTC insurance. To get a policy requires medical clearance (history and physical exam) and the company can tack on an exclusion (like “coverage except for heart disease”). Then, if you need to be placed in a facility, your policy is void because in addition to your Alzheimer’s (heaven forbid), you also had a heart attack ten years earlier.

6. It’s not surprising that several of these LTC insurance companies are being investigated for the usual insurance misdemeanors (inappropriate rate increases, being insolvent, not paying claims, etc.).

If you investigate LTC insurance, you’ll find it’s pretty expensive. In fact, you could probably have a nice vacation every year for what you’ll pay annually in premiums. And do realize that we have no idea what America’s health care system will be like 30 or 40 years from now. Why fork over tens of thousands of dollars for coverage which, statistically, you will never use?

Let me close with a suggestion for elderly adults and their children about the “what if?” issue of long-term care.

If mom or dad or both have reached the stage where they can’t take care of themselves, start exploring assisted living communities located throughout the US. There are many extremely attractive centers, situated on substantial areas of land, that combine residential, intermediate, and skilled-level nursing centers. The residential units look like really nice one, two, and even three-bedroom condos. I’ve visited several and, believe me, they are infinitely more cheerful than the gloomy nursing homes you may have been exposed to (and shook your head at worriedly).

Once your family agrees on a community, your parents sell their house and use the funds to buy an apartment at the residential level. This can include meals and apartment maintenance. The centers have a huge menu of activities and an onsite doctor’s office. There is a monthly fee involved, usually reachable with a combination of Social Security, retirement income, and sometimes family help. If in the future an illness occurs and intermediate or skilled-nursing placement is needed, there are no additional fees to move from one level to the next. All costs are covered up front. No surprises.

How do these organizations survive? When your folks pass on, the title of their apartment reverts to the organization, for resale, and it keeps the proceeds. If you personally are hoping to benefit from the sale of your parents’ home, this arrangement isn’t for you. That aspect of your inheritance is lost, but your parents, grandparents, or you, when you get old, will get very good care.