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Long-term Care Insurance Offers Little Assurance to Policyholders
By Beverly Goldberg, The Century Foundation
October
8, 2007
Some eight million people have bought long-term care insurance as a means of providing for their future health care needs. Their goal is to ensure that they will be able to afford the kind of care they want when they are no longer capable of managing by themselves. Unfortunately, two major problems call into question the wisdom of relying on such insurance. First, not only are the costs of coverage steep, but more and more insurers are denying claims, and second, the kinds and quality of care people hope to receive as a result of having coverage may not be available when they need it.
The costs of insurance coverage for long-term care are substantial, especially for the elderly at the bottom of the income scale. The Journal of Financial Planning reports that “many upper-middle-income individuals (around $60,000 to $100,000 a year) presumably could afford a $1,000 to $2,000 annual LTC insurance premium, . . . most middle-income individuals ($30,000 to $40,000) may not be able to afford those premiums. . . . Lower-income individuals (say around $20,000) could seldom afford LTC insurance premiums.”
In addition, many people have discovered that such insurance is not the safety net they thought it would be, given the attempts of the companies that sell these policies to deny claims. Senator Charles Grassley (R-Iowa) has just sent out letters asking for explanations from eleven major insurers about the 92 percent increase in complaints about such policies between 2001 and 2006. The New York Times reports that “complaints involving claim denials resulted, in a majority of cases, in reversals that favored consumers,” which seems to indicate that the companies are routinely denying claims in the hopes of avoiding meeting their obligations.
In an earlier article, the New York Times noted that “some long-term-care insurers have developed procedures that make it difficult—if not impossible—for policyholders to get paid. . . . In California alone, nearly one in every four long-term-care claims was denied in 2005.” The article goes on to note that “few of the cases or complaints filed against Conseco, Bankers Life, Penn Treaty or other insurers have received much attention, in part because many lawsuits filed against long-term-care insurers have been settled with the requirement that depositions, documents and settlement terms be kept confidential” and that “despite the complaints against long-term-care insurers, few states have conducted meaningful investigations.”
The reality is that, although the efforts of Senator Grassley are admirable, particularly for bringing the issue before the public, when it comes to private long-term care insurance, stricter state oversight of providers remains the first line of defense for consumers today because the insurers currently are regulated by the states in which they operate.
The second major problem encountered by those concerned with long-term care lies with the quality and availability of that care, even for those with adequate insurance coverage. There already is a shortage of caregivers, a situation that is expected to worsen dramatically as the numbers of elderly in need of care grows. (According to Department of Health and Human Services estimates, the number of people who will be needed to care for the elderly in the future will reach 2.7 million by 2010 and range from 5.7 to 6.5 million by 2050.) And, as the number of caregivers becomes increasingly inadequate, the quality and availability of care can only suffer.
Nursing homes in particular have been hit hard by the shortage in caregivers, and the current deficit in nurses is expected to balloon over the next decade or so.
The shortage of people to work as home health care aides also is worsening, in large part because of efforts to limit immigration, especially of low-skilled workers, and to deport undocumented aliens. According to the Wall Street Journal, “immigrants, whether legal or undocumented, make up a disproportionate share of those who care for the elderly—and the need for such workers is set to explode in the coming years. . . . One Census Bureau survey counted 850,000 low-skilled home-care workers in the country, 254,000 of them born abroad—and that number doesn’t count many undocumented immigrants caring for people privately.”
Solving the problems facing our long-term care system will not be easy. When it comes to the behavior of insurance companies, since insurance currently is the way most people hope to prepare to pay for such care, stronger state oversight of insurers offering long-term care policies is a critical component of any solution. When it comes to the worsening shortage of caregivers, there are a number of possible initiatives that could help lessen that problem:
Create a civilian health service corps that will train people to provide basic home health care in return for funds for vocational training or community college education after a given term of service is completed.
Provide forgiveness for loans taken out to cover college tuition for nurses who work for a certain mandated time in nursing homes.
Provide funding to help nursing schools expand to train more nurses, develop courses in the area of gerontology, and provide training in diversity.
Increase the pool of available home health care workers by increasing the number of visas for low-skilled workers.
Without concerted efforts both to monitor the insurers and to increase the number of available caregivers, those currently paying long-term care insurance premiums—and their family members—are in for a rude awakening.
Beverly Goldberg, a Senior Fellow at The Century Foundation, is the author of Age Works: What Corporate America Must Do to Survive the Graying of the Workforce.
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