Long-term care can bankrupt Americans

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By Sondra Shapiro

Two years ago my husband, David, and I bit the bullet and purchased a long-term care insurance policy. We had begun talking about retirement, and when we broached the topic of someday needing home or institutional care, we felt financially vulnerable. So we began exploring long-term care insurance options.

After doing exhaustive research on what a policy should include, how much it should cost and what we should be aware of, we called a highly recommended agent. Because we were in our 50s the premiums were relatively reasonable, especially when weighed against what it could cost our family for long-term care. That’s not to say it was an easy decision to assume an extra expense during these uncertain economic times.

Ultimately, we decided that biting the bullet was better than the alternative — financial ruin — which is affecting many families faced with such care. A new study by MetLife’s Mature Market Institute reports that the cost of health and daily living assistance provided in a facility or at home, is rising faster than inflation for most long-term care services.

As for that long-term care insurance option I was touting, the cost for a new policy for people 55 to 65 rose by as much as 50 percent compared with five years ago. Companies have been dropping products because they are financial losers; and for many of the remaining policies the premiums are rising or coverage is decreasing — or both.

In the last five years, monthly rent for assisted living, which includes help with daily living activities, rose 17 percent to $3,486; the price for a private room in a nursing home rose 4 percent to $248 a day.

One small reprieve was that the cost for home-health aides and adult-day services remained the same. However, according to a report in the Wall Street Journal, which cited a report by the Medicare Payment Advisory Commission, home-health-care spending by Medicare beneficiaries climbed 129 percent to $19 billion from 2000 to 2010.

Long-term care funding is an afterthought for most families. Since it’s a huge expense that primarily retirees confront, it has been easier to not think about it until something happens.

With such dire financial consequences for families, it boggles the mind why long-term care was not on the radar during this or any election in memory.

To be fair, the national priority has rightly been deficit reduction and ways to get us out of the recession. To be realistic, the financial consequences of long-term care for families and the government cannot keep being ignored.

There was a small ray of hope tucked within President Obama’s sweeping health care plan. Called the CLASS Act, it would have set up a national, voluntary long-term care insurance program. Though it was barely sufficient, at least it was something that could have been built upon — that is until it was scraped by the Obama administration.

Individual states have begun passing consumer protection laws pertaining to the sale of long-term care insurance policies. Massachusetts just became the 47th state to do so.

As the population ages, the demand for care will reach staggering levels. This makes federal neglect a huge mistake.

As history shows, the prices will keep escalating. Ultimately, the burden will bankrupt families and those families will turn to government (Medicaid) for help. The Medicaid system, which has become the primary payer of such care, was not designed to foot such a bill and cannot continue to do so. There needs to be a more efficient and cost-effective solution.

When FDR signed Social Security into law in 1935 as a New Deal program, he said its impetus was to keep the nation’s elderly out of impoverishment. In FDR’s day, with a lifespan of 65, there was little concern about long-term care or about its cost depleting household savings. Today, with an average lifespan of 80.8 years, the country again faces the issue of poverty in old age because of the cost of long-term custodial care.

Though today’s Americans are less welcoming of big government, it is in the nation’s best interest to help its neediest. As far as I’m concerned, I’d welcome any talk including public/private initiatives. Anything would be better than the status quo of silence in Washington.

Like my and my husband’s decision to buy insurance despite the uncertain economic climate, it’s time for the country to bite the bullet.

Sondra Shapiro is the executive editor of the Fifty Plus Advocate. Email her at sshapiro.fiftyplusadvocate@verizon.net. And follow her online at www.facebook.com/fiftyplusadvocate, www.twitter.com/shapiro50plus or www.fiftyplusadvocate.com.