Tuesday, March 16, 2010

Is long term care insurance a scam?

I've worked with a few families in the last year that have had long term care policies. In theory, long term care insurance provides the ability to pay for home care or assisted living costs and protects loved ones from the burden of caregiving. Just like any insurance policy, you hope you'll never have to use it but it's better to be safe than sorry. The Long Term Care Insurance National Advisory Council has good information on statistics, policies, and more. They include this fact: "In 1994, 7.3 million Americans needed long term care (LTC) services at an average cost of nearly $43,800 per year. By 2000, this number rose to 9 million Americans at nearly $55,750 per year. It's currently near $75,000 per year. By 2030 those needing LTC will skyrocket to 23+ million Americans, with projected, individual long term care costs reaching $300,000 annually per individual!" However, this does not account for the number of family caregivers who either choose to care for their loved one or cannot afford in-home care and do not want to place them in a nursing home. This also does not compare usage of hired caregivers vs. nursing home vs. assisted living placement. Anecdotally, it is less expensive to hire a 24 hour caregiver than it is to place someone in a nursing home; people tend to do better in their own home out of familiarity.

People spend years paying their LTC insurance premiums, with the premiums increasing due to age or higher percentage of claims. What happens when they finally want to access care? My experience has not been good because of the many limitations and paperwork. It seems, in the end, that long-term care insurance is just like any other type of insurance company. In order to be compensated, the patient must qualify according to the insurance company's qualifications. They look at 6 of the Activities of Daily Living, including bathing, dressing, eating, toileting, incontinence, and transferring. If a person can do these things, then their claim will not be paid. I had a patient with cancer that could do all six, some days better than others, but was at a higher risk of falling; the insurance company would not agree to coverage even though she needed care. Finally, once she needed assistance with transferring, they agreed to 6 hours a day, 3 days a week. Anything outside of that, the patient would have to cover. When I say that they covered those 18 hours, I mean they covered the maximum daily benefit and the patient was liable for any additional costs. Most policies will cover up to $50-100 per day (the national advisory council says the maximum daily benefit can go up to $400 but I would imagine you pay through the nose for that policy!) You are then responsible for the rest. There are often limited benefit periods as well so if you need care for more than the 3 or 4 years in your policy, you are again on your own.

Let's say that you're fine with the limitations of your policy. It's time to access care. Here are your choices. You can hire a caregiver through an agency. That means you can't hire anyone privately- just a licensed and bonded agency. The agency must provide a plan of care and fill out at least 1 portion of your claim paperwork. In my area, agencies seem to have less 24 hour caregivers or are pushing families to hire 2-12 hour caregivers instead, which drives up the cost. This is another consideration because it'll be a greater out-of-pocket expense. Or you can go to a nursing home, which the policy may reimburse at a higher maximum daily rate. Or you can go to an assisted living facility...for a little while at least until you need a higher level of care, in which case you're right back where you started. Any residential group homes are excluded because they do not have the type of licensing required by insurance companies. This is a true pity because those places have some of the best caregivers and often wonderful, homey environments and opportunities for socialization.

Once you've decided which option best suits you, the paperwork parade begins. You'll mail in your initial claim generally after the first month of care but it could be another 60-90 days before you'll receive your first reimbursement check. So you'll need to have more money upfront in order to pay for the care you need.

Recently I went over a patient's long term care plan with her daughter; the patient had a long term care insurance policy. The patient could no longer live independently but she had a small dog so nursing home placement was out. The daughter decided to look into hiring a caregiver and as she made phone calls, she found out the insurance company would pay $50 a day, barely making a dent in the cost of a caregiver. The daughter wasn't satisfied with the caregiving agencies she spoke with. A friend told her about a group home in the area; the daughter visited the group home and loved it- plus they agreed to take the patient's dog too! She spoke with the insurance company but they would not reimburse care because the home doesn't have the "proper" license. The daughter decided they will just pay privately anyway. This patient is lucky in that she has a good retirement account and can afford to pay privately. Many people are not in the same position.

Now I'm not saying you shouldn't look into long term care insurance. LTC insurance is recommended for anyone over 40. I'm sure it works out perfectly well for some people. I think the costs and limitations need to be considered. Personally I would recommend you start a separate account or CD and deposit your "premium" there instead. That way you can access care when you need it and you can choose whatever option works best for you, not the insurance company. And if you never end up using the money, I guess it'll be a nice inheritance for your family.

Has anyone had a positive experience in accessing long term care insurance? Do you have your own policy?


Honey Leveen said...

Long-term care insurance policies are a God-send. I have close to 3000 LTC policy holders and have had at least 300 of them collect in 22 years. Of course I expect this number to rise greatly with the passage of time. Only 1 of my claims has been denied, and that was unfortunately due to antiquated policy language not covering assisted living. Many of my clients claims have had to be re-submitted because they were not sent to me prior, so I could check them before submission. They came to my attention after a problem occured. Some of the problems you describe are due to antiquated language from the first generation or 2 of LTC policies. You will find that policy language now is extremely lenient. Any LTC policy today would pay the claim you describe because ADL failure on todays LTC policies can be based on a standby need. YOu describe a standby need for care. I have had MANY cases where claims were denied due to user error. This may be because the use of LTC insurance to pay for care is relatively new and submitters, doctors, agencies, etc, are unfamiliar with claim forms and how to submit them. I have found this to be the case often. I have had cases where ADL failure was not checked off because it was standy need and the user thought hands on assistance was necessary inorder to collect: not so. When we correct and re-submit the claim, it gets paid easily and promptly. A lot of success with LTC claims is based on the knowledge of the person submitting the claim. Pity is that many, if not most, clients lose their agent and there is no one to turn to for advice on how to correct the claim. This is a big pity, it scars the reputation of LTC insurance. In reality, LTC insurance will prove itself to be the only way for the vast, rapidly approaching tsunami of people needing care to assure themselves of dignity, options, choices in coming years. If you ever have questions about LTC insurance, how it works, or have trouble with an LTC claim, please call me at 713 988 4671 and I will help you. I ernestly hope you own LTC yourself. You are on the front lines and see too much of what happens when a family does not have sufficient $$ to pay for care, and is torn apart because of this. There are fabulous LTC policies that truly work and are reasonable in cost. I am at your disposal as a resource. Honey Leveen www.honeyleveen.com, www.ltcqueen.com Thanks for a well written blog.

Honey Leveen said...

Your comments in your last paragraph are faulty because it is arithmatically impossible to deposit premiums in a separate account and have them grow to represent more than a smattering of the actual cost of care if it is needed. I think you must know this. You are endangering yourself, your readers and clients by copping out this way. Call me or email me and I will show you very leniently worded and reasonable LTC protection...not for the purpose of your buying it (although that would be nice), but for the purpose of giving you information that will evidently be vital to your ability to help others.

LeighSW said...

Thank you for the feedback, Honey. My patients' policies tend to be 20-30 years old so I'm glad to hear that today's policies are more lenient and worded. If what you say is true, then it would be a very good investment for everyone.

Anonymous said...

Well, don't think things are much different today! My mother recently used her long-term care policy and I can say we had all the issues as noted above, even though she bought and paid for an excellent policy at the purchase time as well as for today's market. I in fact just looked at purchasing a long term care policy for myself and came to the conclusion it was not worth the investment for myself. I think health issues should drive this decision but unfortunately the insurance companies really don't have a clue and they are all about betting on the healthiest of people buying policies and never needing them or limited need. I feel the best long term care is with families who have thought ahead and pooled resources to provide caregiving in the home setting. No matter which way you go, long term care insurance or not, you are going to have to pay, even more than the premiums costs. So "save and invest in your own health" is my motto. That is the best long term care plan on the market and it is never too late!