Long-term care is highly expensive

New York TimesSeptember 1, 2013 

  • What long-term care insurance pays for

    Long-term care insurance pays for some or all of the costs stemming from in-home, assisted-living and nursing-home care that aren’t covered by health insurance or Medicare.

    Individuals must be in decent health to purchase long-term care insurance. The older a person is when he or she takes out a policy, the higher the premiums.

    The N.C. Insurance Department offers this description:

    “Long-term care is the day-in, day-out assistance you might need if an illness or disability lasts a long time and leaves you unable to care for yourself. This may or may not include a nursing home stay. In other words, it is a continuum of services that can be provided in a variety of settings ranging from one’s own home, assisted living facility, adult day care facility or a nursing home. Long-term care covers a broad spectrum of care and services ranging from basic personal care to medical care.”

    The American Association for Long-Term Care Insurance calculates that a 60-year-old couple in good health can expect to pay a total of about $3,335 a year in premiums for $340,000 in benefits. But prices vary significantly based on factors such as age and the level of inflation coverage – that is, the percentage that benefits increase each year to account for inflation.

    In North Carolina, long-term care insurance operates under a different regulatory scheme than auto insurance or homeowners’ insurance, where the insurance commissioner has a say in rate increases. With long-term care insurance, the commissioner doesn’t have the authority to establish industrywide rates. Companies request rates individually, and state regulators are required to approve them as long as they’re actuarially justified.

    Staff reports

Few sticker shocks are as bracing as the price of hiring someone to help with the simplest activities – bathing, toilet use, dressing, eating and moving.

Whether recovering from surgery or a stroke, or suffering a chronic illness such as arthritis, those needing skilled help need deep pockets indeed. And those requiring full-time nursing or assisted-living care face even steeper costs.

A report this year by Genworth Financial, an insurance provider based in Richmond, Va., estimates the national median daily cost of a private room in a nursing home at $230 a day – an increase of 3.6 percent over 2012. Sharing that room is only $27 a day less, according to the report.

The report says the median annual rate this year for a private nursing home room is $83,950.

For those who need less care, an assisted-living facility’s median national daily cost is $3,450 a month, an increase of 4.55 percent since 2012. Those able to remain in their homes will pay a median national wage of $19 an hour for a licensed home health aide or $18 an hour for a helper.

For those healthy enough to remain at home, even while needing a range of medical or daily living care, an aide, nurse or senior companion can address their needs more affordably.

Starting last April, John Hancock and Genworth, two major vendors of long-term care insurance, raised their rates for women by 15 to 40 percent, said Brian Gordon, president of MAGA, an insurance agency in Riverwoods, Ill.

“I was surprised that this didn’t happen a long, long time ago,” said Gordon, whose company has been in business since 1975.

Not only do women live longer than men, he said, but they tend to use more care themselves in later life, typically after caring for, and losing, their spouses.

“I’ve seen some women needing long-term care for 14 to 16 years,” he said. “The longest I’ve seen with a man is two or three years.”

In the past, retirees relied on defined-benefit pensions to help defray these costs, and often were able to sell their homes for healthy sums, providing the means to pay for institutional care, while those with more limited means relied on Medicaid.

But the 2008 stock market crash diminished the value of many nest eggs, and the housing market has not fully recovered in some regions. Preparing for the cost of long-term care is now a concern for many aging Americans.

With 10,000 baby boomers retiring every day for the next 19 years, the issue of how to pay for care is more pressing than ever. That challenge is receiving attention from lawmakers, with the creation in December of a 15-member federal commission on long-term care, responsible for finding more affordable solutions for older Americans. State lawmakers also are pushing insurance companies to make clear to policyholders that they can sell a life insurance policy to pay for long-term care. Democratic Kentucky state Rep. Robert R. Damron is spearheading the battle through the National Conference of Insurance Legislators.

Some insurance companies also allow life insurance holders to convert the value of a policy to a long-term care policy, but this varies by carrier.

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