When Shirley and David Neitzel of Hodgkins, Ill., bought long-term care insurance 15 years ago, they didn’t expect they would need it. David was 57 and Shirley 41, and both were healthy. The decision to buy it was a practical one; they have no children to help care for them if necessary.
Their lives changed dramatically in 1991, when David was diagnosed with Alzheimer’s disease. David lives at home and Shirley is his primary caregiver. A nurse helps care for him 20 to 24 hours a week.
This care costs $40,000 a year after taxes, and insurance covers about one-third of the cost, Shirley Neitzel said. She works as an independent distributor of nutritional and personal care products and finds that the insurance allows her and David to stretch their savings further.
More Americans are realizing the benefit of purchasing long-term care insurance, partly because the oldest Baby Boomers are now in their 50s and caring for elderly parents while also planning for their own retirement. Financial planners, insurers and tax incentives to secure one’s assets also encourage people to buy plans.
A good decision
Shirley Neitzel bought their insurance, administered by Aetna, through her former job at Argonne National Laboratory, near Lemont. Shirley Neitzel now calls that purchase “the best decision we ever made.”
The number of people buying long-term care insurance nationally is growing by 20 percent a year, said Winthrop Cashdollar, director of the Center for Disability and Long-Term Care Insurance at the Health Insurance Association of America in Washington. The association represents insurance providers in the private health-care system.
The number of people paying for nursing care with insurance also is inching upward.
In Illinois, about 2 percent of people in nursing homes have their care paid for with long-term care insurance. Ten years ago that number was 1 percent, said Bill Kempiners, executive director of the American Health Care Association in Springfield. Nationwide the figure is 4 percent, according to association figures. The organization is part of a national federation representing long-term health-care facilities.
But although more policies are being sold, the percentage of the population holding long-term care insurance is small. Less than 10 percent of the nation’s senior citizens have the insurance, Cashdollar said. People shy away from buying it mainly because it is expensive, they might not use it, and they feel overwhelmed trying to choose among a wide variety of coverage options. The policies have been available for about 20 years, Cashdollar said.
Public programs not enough
Many people also believe that the government-sponsored health programs, Medicare and Medicaid, will cover their expenses.
About 63 percent of the people in Illinois nursing homes have their care paid for by Medicaid, and 7 percent by Medicare, Kempiners said. Medicaid, which serves low-income people, pays for about 68 percent of nursing home stays nationally. But Medicare does not cover many types of long-term care, and both programs have strict guidelines regarding what is covered and how to qualify for funds.
“People assume Medicare covers long-term care, but if you overestimate Medicare, then you underestimate your financial risk,” Cashdollar said.
Buying long-term care insurance provides “a predictable cost of a non-predictable risk,” Cashdollar said.
Nursing home care costs an average of $50,000 a year, said Marc Cohen, vice president of Waltham, Mass.-based LifePlans Inc., which researches long-term care for providers.
The average annual premium for long-term care insurance in 2000 was $1,677, Cohen said. The younger a person is when he buys long-term care insurance, the less expensive it is, he added.
The insurance can quickly pay for itself if care is needed. Shirley Neitzel estimated that their insurance paid for itself within five years of the onset of David’s illness. But people waver on buying long-term care insurance, she said, because “no one wants to look at the future and think it’s going to be bleak.”
Kempiners, who bought a policy when he was 50, said: “When you first think about getting it, it is usually when kids are in college and your life is going along, and it doesn’t look like you really need it. People worry about wasting money.”
1 of 5 will need care
Roughly one out of five Baby Boomers will need nursing home care at some point in their lives, Kempiners said.
This care typically entails help with daily living activities such as bathing, getting dressed and eating. Occupancy in nursing homes is likely to rise due to changes in the health-care system that quickly move people from hospitals into nursing homes, then to home health care, Kempiners said.
Insurance providers find that people are starting to buy the insurance at a younger age. Approximately one-third of all buyers in 2000 were younger than 65, up from 19 percent in 1995, Cohen said.
“People are beginning to realize public programs–Medicare and Medicaid–aren’t going to cover them and they must take personal responsibility,” Cohen said.
The growing number of policies sold and the drop in the average age of enrollees is attributed in large part to the increasing number of employers offering long-term care insurance, Cohen said. As of 1999, more than 3,000 employers offered long-term care insurance to employees, according to the health insurance association.
The federal government announced in December that it would offer long-term care insurance to its employees, the military, retirees and their families. This move is expected to encourage even more employers to add long-term care to their benefits programs because businesses tend to look to the government as a model.
Employer plans helpful
Purchasing long-term care through an employer eases the decision of what kind of insurance to buy, and group rates can be less expensive for beneficiaries. Twenty-one states, including Illinois, make private long-term care insurance benefits an option for state or other public employees, according to a two-year-old study conducted by LifePlans for the Health Insurance Association of America.
The California Public Employees’ Retirement System offers long-term care insurance to all California active and retired public employees and schoolteachers, their spouses, parents and parents-in-law. As of December, about 160,000 of its members bought the insurance, which was a 10 percent increase from the year before.
Obtaining insurance through the retirement system shaves 10 to 30 percent off the cost of buying an individual policy, said Eileen Tell, vice president for product development at LTC Group, which is the third-party administrator for the California system’s long-term care program. Employers gain from offering the insurance because they can deduct it as a business expense on taxes while also trimming the number of missed work hours someone might take to care for a family member.
Further, a more stable workforce is maintained because people caring for disabled elders are better able to keep working rather than having to quit to care for a disabled elder, according to a 2001 study by the National Alliance for Caregiving and Life Plans.
More care options
Long-term care insurance also is attractive to people who want to choose the type of care they receive. The insurance covers a range of options, including nursing homes, assisted-living facilities and hospice, home and community-based care.
“People who are concerned about being in a nursing facility versus someplace else should be aware that long-term care insurance can give you a choice of where you want to be,” Cashdollar said.
Also, the type of coverage and care offered by Medicare and Medicaid can change, while an insurance policy is stable, Cohen said.
Problems that can emerge with long-term insurance include rate increases, outdated policies, or difficulties that arise when consumers buy the insurance in one state, then move to another state where the long-term care system is different.
“We don’t see that many complaints about long-term care insurance,” said Guenther Ruch, administrator for the Division of Regulation and Enforcement at the Office of the Commissioner of Insurance in Wisconsin. “Most complaints are marketing related or agent conduct or rate increases. But we don’t see that many of them.”
Premium hikes often cause people to drop their policies “because they already are very expansive, and people are often retired and can’t come up with the money,” said Bonnie Burns, director of consumer education for California Health Advocates, which is the association of HICAP program managers. HICAP (Health Insurance Counseling and Advocacy Program) is a senior health insurance counseling program funded with state and federal money.
Shirley Neitzel said long-term care insurance allowed her and David to maintain their close relationship.
“It has enabled me to keep my best friend and husband at home,” she said. “I want him to have the dignity he deserves. We’re doing great. He’s a happy camper. We still have fun together. We chair dance, listen to old music. I see his blue eyes twinkling and his little smile, and it’s worth it. We’re blessed we’re together.”
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For more information, call the Health Insurance Association of America toll-free at 877-582-4872 (877 LTC-4USA) or visit the “consumer information” section of www.hiaa.org. Consumers in Illinois also may call the Illinois Department of Insurance at its Chicago office, 312-814-2420, or in Springfield, 217-782-4515.
