About 10 million Americans need long-term care. Long-term care refers to the assistance and services provided to people who are limited in their ability or unable to perform basic activities, such as bathing or dressing, because of chronic illness or disabling conditions.
Most people with long-term care needs rely heavily on unpaid help from family and friends. Still, spending for long-term care services is substantial.
In 2002, national spending on long-term care totaled $180 billion, or about 12 percent of total health care (including medical and long-term care) expenditures. Nearly two-thirds of long-term care expenditures are for institutional care.
For individuals with extensive long-term care needs, long-term care services can be costly. In 2002, the average annual cost of nursing home care was $52,000 for a semi-private room and $61,000 for a private room. The average hourly rate for home care provided by a home health aide was $18.5 At this rate, four hours of home care daily would total about $26,000 annually.
Medicaid is the nation’s largest source of financing for long-term care, followed by out-of-pocket payments by the people receiving care and their families. Medicare and private health insurance provide limited coverage for nursing home and home health care. Few people make any long term care planning and have private long-term care insurance, although the number is growing.
Source: Fact Sheet
Costs for long term care insurance in 2012 have risen compared to the prior year and several insurers have filed for rate increases raising concern among consumers and consumer groups.
“No one likes to pay more so concern is understandable,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an industry trade group representing several thousand specialists who market LTC insurance. “But there is quite a bit of misinformation surrounding what’s taking place.”
To address the issue, the industry executive has been speaking with reporters, consumer representatives and making available association staff to discuss the matter with consumers. Slome appeared today on Martha Stewart’s radio network to explain what’s taking place.
“Historic low interest rates are the primary culprit and the Federal Reserve has indicated it plans to keep rates this low for the foreseeable future,” Slome notes. For every one-half percent drop in interest rates, a long term care insurance company needs a 15 percent premium hike to build up the needed capital to pay future anticipated claims.
Regarding the need for rate increases on existing long term care insurance policies, Slome explains it is never a take it or leave it proposition for the consumer. Insurers always offer an option by which the policyholder can continue to pay the same amount.
The Association executive points to a recent request for rate hike from a leading insurer. Policies affected are those offering a five percent automatic compound or simple inflation coverage, where benefits automatically increase by five percent each year for the life of the policy. “The company offers an option to reduce their future inflation percentage which allows people to avoid the rate increase altogether,” Slome says.
This is a prospective reduction in inflation; so all inflation additions previously applied to the policy will remain in place. “There is no reduction of their current benefit level,” Slome points out. “Only future inflation increases would be at a rate lower and the new inflation percentage offered as an option to customers will be in the range of 2.7% to 3.9%.”
Slome advises consumers with long term care insurance policies to speak with their agent regarding their concerns. “The protection is still incredibly important for people to have and valuable to those who need it,” Slome points out. “Last year, insurers paid over $6 billion in benefits to some 200,000 individuals who own long term care insurance. The largest open claim has surpassed $1.5 million and the policyholder paid less than $2,500 for their protection.” Some eight million Americans currently have some form long term care planning protection.
Based on some findings, 60% of the population will be needing some form of long term care sometime during their lifetime. Because of that, it is essential to prepare for the possibility of needing extended care in the future.
No other event can be as life-changing or devastating to an elderly’s financial security and lifestyle as needing long term care. It can alter, in so many degrees, the three main retirement dreams of elderly Americans:
1. Being independent
2. Being healthy and receiving enough health care
3. Having enough money for daily needs and not depleting financial assets
The sad reality is, majority of the American public undermines the importance of long term care planning and does not prepare for the devastating crisis of needing eldercare during their retirement years. This lack of planning can have a negative effect on the older person’s family, in relation to time, money and lifestyles. Worst of all, it can impact the family’s emotional health.
Due to the changing demographics and changes in government funding (i.e. Medicare), members of the baby boomer generation, without a doubt, need to plan for long term care before the elder years are upon them. Without the necessary preparation, you may end up in a financial disaster.
Long-term care as an employer-provided benefit continues to be a dwindling part of an employee’s overall health care benefits package, according to the results of a Long-Term Care (LTC) Benefits Program Pulse Survey announced today by HighRoads, the industry leader in employer health care compliance and benefits management. Key findings show that 51% of survey respondents provide long term care while 49% do not. About half of those who have dropped LTC say they did so because the insurance carrier offering the coverage has exited the market. On a positive note: 96% of companies who are offering LTC coverage say they will continue to do so.
In other key findings, the survey found that, of those who do not offer the coverage, some 40% plan to do so again in the future, on a voluntary arrangement, as opposed to a group basis.
HighRoads conducted the survey to assess current employer practices and future plans for offering long-term care (LTC) benefits programs to their employees. Respondents ranged in size from fewer than 5,000 employees to more than 50,000 employees. The majority of respondents have more than 10,000 employees.
“HighRoads’ survey indicates that long term care plans‘ coverage is continuing to be an endangered item for employees. The country has a growing number of retirees – many of whom will need some type of long-term medical care services in the future. It is a serious issue when insurers no longer are willing to provide this as part of an employee’s health benefits plan,” said Michael Byers, CEO, HighRoads. “With the elimination of the CLASS provisions from the ACA, which would have enabled working Americans to purchase coverage to supplement LTC and Medicare and pay for non-medical expenses to allow a disabled person to remain independent, millions of Americans will be left without a safety net should they become disabled,” added Byers.
According to data from the 2005 National Interview Survey and the 2004 National Nursing Home Survey conducted by the Health Policy Institute at Georgetown University found that over 10 million Americans need long-term services and support to assist them in life’s daily activities and that number is expected to grow with the aging of the population and growing number of people with disabilities.
The HighRoads survey found that more than 90% of the employers who offer LTC do so as an additional benefit to their employees. The remainder is equally divided between offering long term care as part of their overall health care strategy and being required by union contracts to offer this benefit.
Of the employers who responded 71% offer coverage on a group basis. The remainder offer it on an individual basis.
The world’s leading employers choose HighRoads to gain complete control over their health care costs and compliance. With HighRoads’ service, employers have online access to benefits plan information and pricing, competitive benefits benchmarks, and complete benefits management. The privately-held company is headquartered in Woburn, MA.