Waking up to the cost of long-term care: should you buy insurance?

Aging, Wntr-Spring, 1992

Should You Buy Insurance?

New guide includes a chart on your chances of a long stay in a nursing home.

Medicare will not pay for long-term nursing home care, although 80 percent of the respondents to a recent national survey thought the program would.

While Medicare will pay for a maximum of 100 days of skilled care in a nursing home, in fact, the average length of stay covered is 28 days of skilled care. This means skilled nursing or rehabilitation services provided on a daily basis and preceded by at least a 3-day hospitalization in the previous month for the medical condition that sent the person to the nursing home.

These are some of the sobering facts readers confront in Long-term Care: A Dollar and Sense Guide, cited by Parade magazine as one of the best guides for persons deciding whether to purchase long-term care insurance. The 1991 Guide is a revised version of one that the United Seniors Health Cooperative of Washington, D.C., first published in 1988 under a grant from the Administration on Aging.

Readers find out from the Guide that Medicare won't pay for long-term care at home either. Medicare generally pays only for skilled home health services needed less than seven days a week and performed under the supervision of an RN. Personal care services, such as assistance in taking a bath or preparing meals, will only be covered when provided in conjunction with the skilled care delivered by an RN or a physical or speech therapist.

If you think your Medigap policy will pay for long-term custodial care in a nursing home or your own home, you're wrong there, too. Medigap usually covers co-payments and deductibles only for the services that Medicare is willing to cover.

Assets Gone in 13 Months

With the national average cost of nursing home care totaling $30,000 in 1990 ($36,000 to $50,000 in metropolitan areas), the Guide says that, in many cases, a person who begins a stay as a private-pay patient in a nursing home exhausts his or her financial resources in an average of 13 months. Medicaid will then pay the bill, but that may mean a move to a less desirable nursing home in a less convenient location.

The Guide points out that in determining eligibility for Medicaid, some of a person's assets are exempted--household goods, income-producing property, burial space and expenses, and a portion of life insurance policies. In 31 states, a person's home is exempt if a spouse or a dependent still lives in it or the patient expects to return home. In most states, spouses of nursing home residents can retain up to $1,500 a month in income and anywhere from $12,000 to $60,000 in assets.

Long-Term Care: A Dollar and Sense Guide makes the obscurities of Medicare and Medicaid comprehensible, opens the reader's eyes to the realities of the costs of long-term care, and provides guidelines to the practicality of buying long-term care insurance. In addition, the Guide offers a comprehensive view of options available to persons concerned about paying for long-term care at home, in a nursing home, or through community services such as adult day care. It discusses the scope, costs, and limitations of each option. Long-term care insurance is examined along with other means of paying for care, such as reverse mortgage, home equity conversion, or other formulas using a house as a financial resource. Ways to protect family assets for inheritance are also discussed.

But if your chief concern is whether or not to buy long-term care insurance, A Dollar and Sense Guide says that depends on the size of your assets.

"You should consider long-term care insurance only if you have over $50,000 in assets, not including your home and car, and your annual income is more than $15,000," the Guide advises. Couples should have $100,000 in savings. For people with less in assets and income, long-term care (LTC) insurance doesn't prevent but only delays the need for Medicaid assistance.

Other facts the Guide brings out: $50 a day in coverage may seem reasonable today with nursing home costs of $80 to $100 per day, but given health and medical services inflation, the average nursing home will cost $150 a day in 10 years--$260 in 20 years.

The Guide also wants readers to be clear about their chances of entering a nursing homen. "At age 65, you have a 40 percent likelihood of being in a nursing home at least once during your lifetime. However, since half of nursing home stays are short, usually three months or less, you have only a 20 percent likelihood of staying in a nursing home for more than one year; and less than a 10 percent likelihood of staying more than five years. Remember, it is the long stay in the nursing home with the associated catastrophic expense for which you are protecting yourself."

The Guide adds that the probability of an individual's having to go to a nursing home "depends upon factors such as personal or family medical history and the availability of caregiver support from a spouse or other family members. Because women are more likely to be widowed, they are more likely to need a long stay in a nursing home." For a look at the separate probabilities for men and women, see the chart below: