Even though he is only 58, retired periodontist Jack Saxonhouse, of Boca Raton, Fla., is a firm believer in long-term care insurance. He learned its importance in the worst way: from what happened to his mother.
“Five years ago, she broke her hip in New York,” Saxonhouse said. “She had no long-term coverage, and Medicare didn’t cover very much at all.”
After seeing her spend thousands of dollars for care, Saxonhouse persuaded his parents to buy long-term care policies. But early last year, his 95-year-old mother canceled the insurance because of the expense. Then, she had to be hospitalized with heart trouble. That meant her husband, who has Alzheimer’s disease, had to be cared for at home by nurses and aides, costing $1,100 a week.
“They’re still paying for some home care, and they’re paying through the nose,” said Saxonhouse, who holds long-term care insurance for himself and his wife. “They say they can afford it, but I fear that a serious illness could cost them a great deal of money.”
Not many Americans under 65 are thinking the way Saxonhouse does. Only 20 percent of the 5.8 million long-term care policies set up and sold through mid-1999 are held by those under 65, according to the Health Insurance Association of America.
At a time when nursing homes can cost as much as $50,000 annually, and home health care can eat away tens of thousands of dollars a year, long-term care insurance, even though pricey, can be a solid investment for those with assets they want to protect. It’s also a good investment for people who don’t want to become a financial burden to their relatives.
But unlike other forms of insurance, in which policies are either standardized or pretty straightforward, long-term care insurance is a complex product. Virtually every company’s policy differs on such matters as qualifications for coverage, when coverage kicks in, who determines eligibility for benefits, the amount of coverage, the term of the policy and, of course, the premium.
Of course, you might wonder, why would someone who has Medicare and Medigap coverage, a Medicare HMO or Medicaid eligibility need a long-term care policy in the first place?
Medicare does not cover “homemaker services” unless a patient is homebound and also getting skilled care such as nursing or therapy. The homemaker services must relate to the treatment of an illness or injury, and even then, only a limited amount of care is available each week.
Medicare supplements, or Medigap policies, do not cover long-term care costs, either. However, some plans do pay up to $1,600 a year for services to people recovering at home from an illness, injury or surgery. But first, you must qualify for Medicare-covered home health services.
As for Medicaid, it pays for nursing home care for the poor. Most people buy long-term care policies so they do not reach that level.
One crucial factor in buying long-term care insurance is having a good agent, one who sells a lot of such policies.
But it’s a good idea to do your homework before you contact an agent. There are several books on the topic, as well as Internet sites. Be prepared to spend some time sorting it all out.
For starters, agents have a few tips that should help steer your course. Among them:
– If you can afford the coverage, the earlier you enroll the better.
Insurance agent Robert Dobbs, of Delray Beach, Fla., tells the story of a brother and sister, both just under 50, who decided to buy coverage. They got a very solid plan for less than $500 a year each. Had they waited until they turned 50, that same coverage would have cost $1,500 a year.
In general, the cost of a policy purchased at age 60 will be two to three times as much at 70 and double again at 75. The younger you are, the lower the premium you’ll pay during the life of the plan.
Also, it’s a very good idea to buy a policy before your health diminishes. There’s less chance you’ll be approved for long-term insurance if you’re already sick.
– Pay attention to companies’ financial ratings, and seek those that specialize in long-term care insurance. Also, make sure the agent represents many companies, so he or she can tailor the policy to fit your needs.
“I only deal with A-rated companies,” said agent Eddie Rubin, of Delray Beach, Fla. “I want to be sure the company will be answering the phone in 10 or 20 years when a client might need coverage.”
– Find out who makes the decision about when someone is entitled to long-term care benefits. Such a determination often is based on whether a patient is unable to carry out specified acts of daily living, such as dressing and bathing, but there can be a difference of opinion there.
“The best case is when your own personal physician, not the company doctor, can certify you need extended care,” Rubin said.
– Think in terms of buying three years of coverage rather than a lifetime policy. You will save a significant amount of money, and usually you’ll be given the option to renew.
“Three years of coverage generally is sufficient, except in cases of Alzheimer’s disease, which could last for 10 to 15 years,” Rubin said. “An actuary would tell you a person who goes into a nursing home will usually expire within three years.”
– Don’t rely on friends for advice on what policy to buy.
“They’ve bought a policy and put it away in a filing cabinet. Chances are they don’t even know what coverage they have,” said Alan Cohen, of Cohen Insurance Services in Boynton Beach, Fla.
– Remember that home health care is a very important part of long-term care insurance.
“I never sell a benefit with less coverage for home health care than for nursing home care,” Cohen said. “Home health care is used 80 to 90 percent of the time when someone needs long-term care.”
– Consider avoiding policies with elimination periods, meaning that benefits don’t kick in for a specific number of days after you begin receiving long-term care. Such elimination periods can run from 20 to 100 days.
“Policies with elimination periods are cheaper, but what if you need long-term care for a month or two? With an elimination period, you might have to pay out of your pocket for all of the care,” Cohen said.
