The Ins and Outs of Long-Term Care: An Expert's View
Insurance of all types can be a minefield for America's aging population. People over 50 are paying more for health insurance and could see enormous increases in those costs depending on what happens with the health insurance system in the U.S. Over the decades there has been an increasing push for people to take out long-term care insurance (LTCi), as well.
HealthCentral asked Chris Orestis, Executive Vice President of GWG Life, for some insight on how people should move forward with their health related insurance. Chris is a 20-year veteran of the insurance and long-term care industries; is nationally recognized as a healthcare expert and senior care advocate; is the author of "Help on the Way" and "A Survival Guide to Aging"; and is a frequent columnist with a currently popular series entitled "The Healthcare Hunger Games." Here, we ask Chris about long-term health planning and what he thinks the best U.S. health insurance would look like.
HealthCentral: Chis, Medicare does not cover long-term care, so long-term care insurance (LTCi) is being touted as a necessity for the future. In the past, some LTCi policies were good, but many others failed to provide what people thought they were paying for. Has that changed? Can people trust that most policies will be there when it comes time to pay out?
Chris Orestis: People who buy LTCi don’t need to worry if the policy will be there when they are older. Insurance companies are required to maintain minimum reserve levels to meet their obligations. Further, insurance is regulated at the state level and every state maintains reserves funded by the insurance companies as a compliance requirement. The real question here is not if a policy will be able to meet its future obligation, but will the insured continue to make their premium payments and not lapse their policy before they need it. The real risk for owners of LTCi are premium increases to their policies and/or just stopping making premium payments at some point before going on claim.
HC: I know several people who are paying for in-home care with their LTCi policies. Do most policies cover in-home care? How about rehabilitation care?
CO: LTCi can cover all forms of long-term care such as skilled nursing care in a nursing home or at home, assisted living and memory care. The primary forms of care tend to be paid for along these lines:
Home care comes in a number of forms, both medical and non-medical. Non-medical services consist of things like light housekeeping, transportation, meals, toileting, medications, and assistance with other activities of daily living. Medical services from licensed professionals include wound care, oxygen and ventilators, palliative care, monitoring vitals, and pain care. Non-medical services provided at home by non-licensed workers are more common, and are considered private pay. Because medical services are provided by licensed medical professionals they can be covered by LTCi, as well as Medicare, and Medicaid for people who qualify.
Assisted living is often looked at as the half-way point between home care and nursing home care. If a person is not able to remain in a home-based environment, but is not yet sick or impaired enough to be admitted into a nursing home, then an assisted living community (ALC) may provide the ideal mix of care and residence. Assisted living is almost always private pay and most communities can help families sort through a variety of funding options.
Nursing homes are a specific type of licensed, skilled care medical facility providing custodial care for people suffering from chronic, debilitating conditions. Memory care and hospice services can also be provided in a nursing home. Medicare will cover the first 100 days of rehabilitation care upon direct discharge from a hospital. Medicaid will cover long term stays if a person qualifies both financially and meets the definitions of medical necessity. LTCi will also cover nursing home care at a pre-established daily rate and with a lifetime limit.
HC: At what age do you recommend people take out LTCi policies?
CO: The younger and healthier you are when purchasing LTCi (or life insurance) the better. But it is also important to balance your age and health with ability to continue premium payments for years to come. If you buy a policy in your 40s but don’t need it until your 80s that means you would need to keep the policy in force for four decades. Many people buy LTCi in their 50s and 60s but if you have had any major health challenges you could end up being denied coverage based on the underwriting.
HC: Do you feel that Medicaid, the government plan that takes over paying for nursing home care once people’s assets are spent down, can survive? Do you see a way to make certain that it is there to help those who need it now and will in the future?
CO: Medicaid is a tax payer funded entitlement program designed to provide a healthcare safety net for the poor, disabled and children. Since first enacted in the 1960s it has morphed into the default payer of long-term care services for the elderly in this country and the fundamental underpinning of the Affordable Care Act (ACA/Obamacare).
Eighty percent of Medicaid dollars are spent on less than 20 percent of the eligible population, which is almost entirely driven by long-term care costs.
When a person is on Medicaid they are no longer able to choose what they want for long-term care. Most forms of homecare and assisted living are private pay, which means you must have resources other than Medicaid to be able to pay the monthly out-of-pocket expenses. The typical scenario for a person on Medicaid is that they will go into a nursing home and most often share a room with another patient.
HC: Most people still don’t have a very good idea of how much it could cost to grow old simply because they can’t envision themselves needing assistance, let alone a nursing home. How can we create the urgency needed to get people looking into policies at a younger age?
CO: The costs of long-term care are increasing every year, but most families and advisors do not understand what they will be confronting when it is time to start paying for care. Too many people wait until they are in the middle of a crisis before they start trying to figure out how the world of long term care works. Families go broke quickly trying to provide for a loved one. Compounding this problem is that most don’t know the differences between Medicare and Medicaid, or the differences between home care, assisted living and nursing home care, or what is and is not covered between public and private pay. And most certainly don’t understand the growing array of long-term care insurance, annuity and life insurance products.
HC: Moving on to health insurance here in the U.S. What would you like to see come out of Congress in terms of health insurance for the future?
CO: Incentives that encourage people to plan and take more financial responsibility for the eventuality of these staggering costs can serve as a different approach to curb Medicaid spending on long-term care. This approach uses tax incentives to reward people who plan, or use assets and income to remain private pay instead of going onto Medicaid. If people are private pay they will remain in control of their care decisions and avoid becoming, in effect, impoverished wards of the state. Fortunately, there are still options that can be used to cover the cost of care for those who failed to plan.
For example, there is an untapped resource for many seniors — namely, life insurance policies they bought years before that they are being forced to abandon in order to qualify for Medicaid. Some states now allow seniors to exchange their policies for long-term care benefits. These states want policy owners to obtain the full value of a life insurance policy through the Secondary Exchange Market instead of lapsing or surrendering them back to the insurance company.
HC: How can people in their 50s who don’t have access to employer-sponsored insurance possibly pay the increased premiums? Do you think that more people will simply do without, rather than try to pay premiums for health care they may or may not use?
CO: The most basic premise of health insurance coverage is to spread risk across the largest possible population so the costs are lower for everyone. If you have 1,000 healthy people paying into a “risk pool” and you have 100 people from that pool receiving care it will be less expensive than if that pool were reduced to 500 people. The problem is that in a free-market healthcare system, the young and healthy will delay purchasing health insurance for as long as possible, while at the same time the older and sicker population will be looking for coverage and services today. This is where the debate of incentive vs. mandates comes into play for how you get the young and healthy population to participate in the risk pool. From a political perspective, which side of that debate you are on depends on your fundamental belief of whether healthcare is a right or a choice.
HC: What is your idea of the best type of health insurance for the U.S. to work toward?
CO: My ideal health plan for America is one based on incentives to increase participation. People should be rewarded through various forms of tax incentives to purchase health insurance, life insurance and LTCi. They should also be rewarded with lower premiums for making healthy choices in living — better eating, exercise, weight, and so on. More emphasis needs to be placed on education and incentives to live healthy and prepare for future healthcare needs through insurance obtained by either employment or as an individual. Lastly, the more that is done to incentivize people to prepare for staying private pay in long-term care the longer the safety nets of Medicare and Medicaid can be extended to cover people into the future.
HC: Thank you, Chris, for helping us understand more about the importance of planning for future health issues.