Long-Term Care Insurance: Not Always a Good Buy

Private plans are available, but getting one isn't necessarily a good idea.

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Long-term care has been in the spotlight this week, with a Government Accountability Office report just out, a congressional hearing today, and new survey results on the subject. But all the concerned commentary about how we're going to meet the need for long-term care as baby boomers age really only highlights how elusive solutions are.

Today, Medicaid and other government programs pay for most long-term care, whether it's in a nursing home or for assisted-living services at home. Only about 10 percent of long-term care costs are covered by private insurance. But as many as two thirds of people over 65 eventually may need some sort of long-term care, according to some estimates. Many policy experts, estate planners, and others advocate long-term care insurance as a good way to provide financial security and stability for people against this unknown as well as to relieve the burden on an already stretched Medicaid program.

But as the GAO report released this week found, these private policies aren't necessarily a good buy. Even though more than half of states have adopted standards that help keep premiums stable, many consumers are at risk for crippling increases, either because their state hasn't yet adopted rate-setting standards or because they bought policies before the standards went into effect. Since policyholders may pay premiums for decades before they actually need long-term care services, steep premium increases can be especially painful. Do you drop the policy you've been paying into for 20 years and lose your entire investment, or do you suck it up and pay the increase?

The report also found that claims settlement could be problematic. For example, while nine of the 10 states reviewed had a requirement that companies pay claims in a timely fashion, the definition of "timely" ranged from five to 45 days, and two states didn't define timely at all.

These findings are not particularly surprising; advocates for seniors and others have been chronicling problems with this type of insurance for some time. I wrote about potential pitfalls and how to avoid them not long ago.

The Commonwealth Fund and the publication Modern Healthcare also took a look at long-term care this week. Their survey of 196 healthcare opinion leaders found that 79 percent were in favor of adding a long-term care benefit to Medicare, which could be financed by a premium paid by some combination of individuals, the government, and/or employers.

For Bonnie Burns, a training and policy specialist with California Health Advocates who has long followed the twists and turns of the long-term care debate, it's déjà vu all over again. When I talked with her, Burns was on her way to Washington to testify about long-term care at a congressional hearing today. She recalled giving similar testimony before Congress on another occasion—nearly 20 years ago. Proposals circulating at that time would have created a federal long-term care insurance program that would have given people an opportunity to join at various ages, with premiums being higher for those joining later in life. The plans didn't fly then, and she doubts a proposal to add long-term care to Medicare would pass now. "How would we finance it?" she asks. "We'd be talking about a huge increase in costs to a program that is already strained today."

There are no easy answers. But a presidential campaign offers an excellent opportunity to share ideas, don't you think? To date, however, the candidates haven't been overeager to discuss long-term care. In fact, I don't think they've brought it up at all. What do you think could be done to address our long-term care needs for the long haul?