Who pays for nursing?

Insurance: Many opt against a policy for long-term care, but that could prove shortsighted.

Life After 50

April 22, 2001|By Julie Edgar | Julie Edgar,Knight Ridder / Tribune

John Malejan is among a tiny minority of Americans who own a long-term-care insurance policy, and he considers himself pretty smart for it.

He should know. A decade ago, Malejan, of Farmington Hills, Mich., bought policies for himself and his wife, Louise. Four years later, when Alzheimer's plunged her into darkness and forced Malejan to place her in a nursing home, her policy kicked in, covering tens of thousands of dollars' worth of care until her death 2 1/2 years later.

Premiums for Louise's policy amounted to $8,800 over the four years, or the cost of about 2 1/2 months of her nursing care.

"It was a lifesaver, no question," said Malejan, 73, who retired from Occidental Petroleum 18 years ago.

But he acknowledges that the policies are costly -- an obstacle for many Americans, particularly those over the age of 65.

A new guide on long-term-care planning by the United Seniors Health Council in Washington concurs. Retirees who don't have an annual income of at least $25,000 and at least $75,000 in assets, excluding their home and car, shouldn't buy it, according to "Long Term Care Planning: A Dollar and Sense Guide."

Its second major recommendation, one that irritates advocates of long-term insurance, is that people with fewer assets should consider going on Medicaid instead of sinking money into a policy.

Stephen Moses of the Center for Long-Term Care Financing says the guide doesn't tell you that Medicaid won't buy you a room in a nicer nursing home or provide other benefits you would get if you had money. Also, Medicaid does not provide benefits for people who don't want to go into a nursing home.

Most long-term-care insurance policies offer coverage for care in nursing homes, assisted-living facilities and private homes, and for respite and hospice care. The younger you buy it, the lower the premiums.

The subtext of the guide -- "Who will take care of me when I'm old and infirm?"-- is timely as baby boomers are starting to retire, as the over-65 population explodes and as care options multiply.

Yet, even with predictions of rising life spans and increasingly expensive long-term care, people aren't dwelling on the future.

A wake-up call:

* After your 65th birthday, chances hover around 40 percent that you'll do at least one stretch in a nursing home.

* The average daily rate of a nursing home is $150. With inflation, the cost could run you $260 a day in 10 years.

* Medicaid might cover your stay, but only if you're deemed poor and the nursing home of your choice has an available bed.

Assisted living is not much cheaper.

* In-home care ranges from $15 to $50 an hour, and it is estimated that 30 percent of people will need at least one paid home care visit after they reach 65.

* Medicare will fully cover only 20 days of skilled nursing care.

Most people don't consider costs until they need the care.

"People don't have a clue until they hit these crises," said Nancy Boari, a long-term-care specialist with the Stein Group, Northwestern Mutual Financial Network, in Troy, Mich.

That ignorance has been the financial ruin of many families, said Boari. She tells prospective clients that the cost of long-term care is expensive and climbing.

But a selling point, she adds, is that long-term-care policies also cover care for people with chronic medical needs, regardless of age.

Although the market for long-term-care insurance is thriving and the number of policies sold doubled to 6 million between 1992 and 1998, the insurance hasn't taken widespread hold. Only 7 percent of Americans own the policies, said Moses of the Center for Long-Term Care Financing.

According to the Health Insurance Association of America, the median income of buyers is $42,500 and one-third of all policies are bought by people between the ages of 55 and 64.

The mission of the Center for Long-Term Care Financing, a public policy organization partially supported by the insurance industry, is to get people to adjust their expectations of the social contract. Medicare benefits are limited, and Medicaid is a program that won't bear the weight of so many beneficiaries.

"The system cannot continue because we have had a large generation of workers providing for a small generation of retirees. It's turning upside down now. Once the boomers retire and start pulling money out of Medicaid and Social Security, the smaller generation won't even begin to support that burden," Moses said.

How to decide whether to buy

You may want to consider long-term care insurance if:

* Chronic health conditions like diabetes, heart disease and dementia run in the family and could necessitate nursing care.

* Your assets, excluding your home and vehicle, are worth at least $75,000.

* Your annual retirement income is at least $25,000 to $35,000.

* You won't qualify for Medicaid, which is based on assets and marital status.

* You are a woman. Because of longer life spans, 31 percent of women will spend more than a year in a nursing home, compared with 14 percent of men.

-- Knight Ridder / Tribune

Source: "Long Term Care Planning: A Dollar and Sense Guide," United Seniors Health Council, Washington, D.C. (For a copy of the guide, call 800-637-2604. The cost is $19.50. )

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