Long-term care comes out from the shadows

June 11, 2009 Howard Gleckman calls it "the phone call." He's received two of them, and more than half of Americans can expect a similar jolt. "You're minding your own business and the phone rings," he said. "Suddenly you're caught up in a huge crisis. You don't know where to start. They're throwing jargon at you. Mom or Dad is in the hospital and about to be discharged. The nurse gives you a list of nursing homes and says 'Pick one.'" Gleckman, a Washington-based senior research associate at the Urban Institute, is the author of "Caring for our Parents," which chronicles the plight of family caregivers and details his own struggle to care for his ailing father and father-in-law.

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The choices many of his subjects faced were dire, reflecting a broken system, he said. One woman had worked hard and saved money all her life, but she had to burn through it in her final years until she was broke and ended up in a nursing home, sharing a room with a stranger.

For many people, it's hard to imagine needing daily assistance to manage a long decline in health, let alone figuring out how to pay for it. Few Americans want to ponder their own physical or mental disability and demise, and if they do they often mistakenly believe a public program will cover the bulk of their expenses, experts say.

While demographic and financial realities make planning for future long-term-care needs increasingly important for both individuals and the nation as a whole, it isn't clear that lawmakers will address long-term care's significant problems in the context of broader health reform.

In Washington last week, lawmakers held a hearing on the value of private long term care insurance. So far only Sen. Edward Kennedy, D-Mass., appears to be trying to integrate long-term-care changes with efforts to overhaul the health-care system.

Proposed changes
On Tuesday, as part of his health-reform bill, Kennedy proposed to deduct premiums from workers' paychecks amounting to $5 to $65 a month, depending on income, to help pay for their future long-term care. Participating individuals could use the cash benefit, set at a daily minimum of $50, to pay for an array of in-home support and services or institution-based care, but the incentive is for disabled people to remain in their homes for as long as possible.

Following a plan similar to Kennedy's could have saved Medicaid nearly $50 billion in 2005 by keeping people off the public program, said Larry Minnix, president of the American Association of Homes and Services for the Aging, which represents nonprofit aging-services organizations.

He pointed to a study performed for his group by Moran Company that found Medicaid expenditures for long-term care, assuming that everyone eligible would opt in, would be cut in half.

"The White House and the Senate and House are looking for ways to pay for badly needed health-care reform," Minnix said. "Think what $50 billion a year would do to help with that other larger problem."

His group has partnered with about 200 organizations including the Alzheimer's Association, Paralyzed Veterans of America, the National Council on Aging and The Arc of the United States to push for the inclusion of long-term care in health reform.

"We're not the first country to grow old, and we're not the first one that has increasing levels of young people with disabilities who live longer," Minnix said. "Most of them want to work, want to be engaged in society, and for those who can't here's a way for their families to help them stay in a place they call home."

"We think what this [bill] will do is allow some of the long-term-care insurance products, which have been slow to catch on because of preexisting-condition screening and expense, to create wraparound or supplemental products, which have been very successful with Medicare," he said.

Today, the financial burden falls heavily on the nation's family caregivers, an unpaid, informal work force of at least 40 million who often dig into personal savings, tap home equity and use income from adult children to cover long-term-care costs for a loved one. Family caregivers typically spend $5,500 a year on their charges, or $9,000 a year if they're long-distance, Minnix said.

Unpaid family caregivers often have to quit their jobs as well, Gleckman said.

Drawbacks and limitations
Long-term care often begins where other patchwork health care ends and many families find they have to scramble in short order to arrange and pay for a stricken relative's home care, adult day care, assisted living or nursing-home care.

More than 10 million Americans, or almost 5% of the adult population, need long-term services and support to get through the day, according to a recent report from the Kaiser Family Foundation. And those numbers are projected to balloon as the baby boom generation advances into old age.

Health and disability insurance are no help, with the former typically covering acute medical needs and the latter only providing income replacement for someone sidelined by illness or injury. Private long-term-care insurance has played a small role so far, covering only 10% of all seniors.

Medicare covers hospice services for people expected to live no longer than six months, but it only kicks in temporarily for people who need extended health care. Beneficiaries are typically limited to transitional skilled-nursing care after a medical event, such as three months of nursing-home care or home health care following a hospital stay.

Medicaid, the government program for the poor and low-income, pays for most nursing-home stays, but it typically requires people to spend through their assets before accepting them. In some states Medicaid also covers home-care services, but many states are paring back their offerings as the recession crushes their budgets.

Most people who receive long-term-care services are 65 and older, but 42% are younger people with disabilities and chronic illness.

Like health insurance, private long-term-care coverage isn't guaranteed. Companies reject about 15% to 20% of people who apply.

Gleckman called the chances for long-term-care reform this year a "long shot."

"It is inevitable that we're going to have to change the system we have for financing long-term care," he said, calling private long-term-care insurance a "niche product."

"It works well for a certain group of people, but it's not a policy solution to this problem," he said, noting that social insurance may be a better option. "Nearly every other country in the world has looked at this and decided a welfare-based system doesn't make sense....Requiring people to spend through their resources until they end up on Medicaid is a fairly stupid way to do it."

Evolving product
Sales in the individual market have been plummeting with the sour economy. Sales of private long-term-care insurance policies fell more than 30% in the first quarter, marking the second consecutive quarter of double-digit decline, according to a survey from Limra International, an insurance and financial-services research group.

A growing number of employers are making plans available. Forty-five percent of employers offer private long-term-care insurance to their workers, according to the Society for Human Resource Management. Still, there are few takers.

Private long-term-care insurance has come a long way from when it was used primarily to cover nursing-home stays, said Beth Ludden, a senior vice president at Richmond, Va.-based Genworth, one of the largest long-term-care insurance providers.

Long-term-care policies are often "judged by products issued 20, 25 years ago that were limited in coverage and potentially not commensurate premium to benefit," she said. "Over time the coverage has improved and the price has not gone up as dramatically as has been portrayed in the media."

The typical Genworth individual policyholder is age 57 and pays an average of $2,000 a year for single coverage with robust benefits, Ludden said. Last year, the company introduced cheaper policies with coinsurance and a deductible that sell for about 40% less, she said.

Today's policies also better account for advances in care that may appear in the future, she said. "All of our products contain an alternative plan of care benefit, which allows us to consider services that were not otherwise described in the product if they meet the needs of the client in a more robust fashion."

About a third of policyholders end up needing to use their benefits, she said. "It's a good hedge in the face of uncertainty."

Ludden said her concern with Kennedy's bill is that middle- and upper-income people may mistakenly think Medicaid will cover their needs.

"We want to focus on keeping the Medicaid program for those without means," she said. "We need to help those Americans that do have means understand they need to take on the long-term-care risk themselves."