A late 2008 Avalere Health study and chart book commissioned by Long Beach healthcare nonprofit, The SCAN Foundation, contains information that appears to have surprised a lot of people connected with the long-term care industry. The analysis, “Long Term Care: an Essential Element of Healthcare Reform,” reported that seniors, people with disabilities and their families in the United States pay nearly 30 percent of LTC services out of their own pockets – nearly 10 percent more than previous estimates.
In dollars, that means that in 2006, the most recent year figures are available, individuals and their families provided $64 billion out of their own assets to pay for long-term care. Unpaid caregivers, usually family members sacrificing time and resources to care for loved ones at home, provided $350 billion worth of free care. In comparison, private health and LTC insurance contributed slightly more than $16 billion.
The study, which intended to look at Medicare and Medicaid contributions to long-term care in order to propose policy changes, included the private contributions because the figures was so startling to even seasoned policymakers.
“To finance these contributions, most seniors and their families rely on home equity, income from adult children, or retirement savings,” Avalere Health wrote in a press release earlier this month. “All of these asset classes have lost considerable value over the past year, resulting in diminishing funding capacity in the face of a rapidly growing long-term care population.”
The reason private insurance’s contribution to pay for long-term care is so low is twofold. Too few people purchase LTC coverage because it has been too expensive. During the past couple of years, states have partnered with LTC carriers to make coverage more affordable. These policies are worth considering.
The second reason is that insurers are experts at finding ways to delay and deny LTC benefits. If you are old or sick, they figure time is on their side. Some LTC carriers had undercapitalized or spun-off their LTC divisions in such a way that their funds may not outlast their pool of policyholders.
Yet despite these drawbacks, the alternative is far bleaker. Better to purchase LTC coverage now and fight the company for benefits later, than become part of that rapidly growing percentage of people exhausting their assets to pay for care.