As a result of disability or a prolonged illness, long-term care is the assistance provided when someone is unable to provide for him or herself. It is a broad range of supportive medical, personal and social services needed by people who are unable to meet their basic living needs for an extended period of time. This may be caused by accident, illness or frailty. Such conditions include the inability to move about, dress, bathe, eat, use a toilet, medicate and avoid incontinence. Also care may be needed to help the disabled with household cleaning, preparing meals, shopping, paying bills, visiting the doctor, answering the phone and taking medications. Other disabilities, falling under the umbrella of long-term care disabilities are due to cognitive impairment from stroke, depression, dementia, Alzheimer's, Parkinson's and so on.
Long-term care is offered through home care agencies, senior centers, adult day care centers, traditional nursing homes, and retirement communities that provide on-going care. However, those needing care generally prefer to stay at home. Long-term care can be as simple as a family member, or friend, taking care of your needs. In fact family, friends, and the community provide the majority of long-term care in the home - accounting for over 75% of care given!
Long-Term Care: History
The first long-term care policies were offered about 30 years ago. These were primarily nursing home-only policies designed to take over when Medicare rehabilitation ran out. They were not the comprehensive benefit policies we see today. It took until 1987 for the total number of policies nationwide to reach 800,000, a literal drop in the sea of traditional US health insurance policies. Since 1987, the number LTC policies have increased annually at an average annual rate of 21%. It is estimated that at the end of 2000 there were approximately 6,000,000 LTC policies in the US generating about $4.8 billion in annual premiums; about 80% of these policies were individual and 20% were employer sponsored group plans. (However, group premiums are only 7.9% of total premiums). Over 2,500 US employers now offer LTC group plans.
The number of companies selling LTC peaked in 1989 at 143 and has been declining slowly to about 110 today. About 1/3 of these companies are Blue Cross/Blue Shield organizations selling in only a few states. Ten or so of these companies offer LTC cash benefits as riders to life insurance or annuity contracts. There are about 60 or 70 Life/Health companies licensed to sell LTC stand-alone policies in more than 40 states.
Facts About Long-term Care
More long-term care is received at home and in community facilities than is received in nursing homes. Of total care provided, 78% is home or community based. One quarter of American households are involved, directly or indirectly, in a care giving environment. This represents 22.4 million families, 64% of them trying to juggle demands of full-time jobs with demands of care giving.2 But long-term care is not just for the old. Out of the total population receiving it, 43% are under the age of 65. Out of 12 million Americans receiving care more than 5 million are of working age3 For those over 65 there is a 41% chance they will spend an average of 2.5 years in a nursing home.4 The combined lifetime risk of needing home and community care as well as nursing home care is about 6 out of 10.
The nature of long-term care in our society is changing. Medical science is keeping us alive longer and there are fewer early sudden deaths. Fewer deaths mean more prolonged health problems requiring long-term care. In addition the population of those over age 65 is increasing while the younger population is stagnating. This trend will continue to put pressure on aging services including long term care. Yet at the same time, the supply of non-paid caregivers is shrinking. Many of these traditional care givers-women-are now working due to an increase in single parent households and due to increased income needs of dual parent households. Also, families are having fewer children thus affecting the future supply of caregivers. And finally, many family members are moving away and are unable to help because they don't live close by. These are all factors that reduce the pool of available caregivers. And this lack of traditional family caregivers is forcing more people to spend out-of-pocket for the services of paid professionals or, so-called formal care.
But that's not all. Care traditionally provided by government agencies is diminishing as well. Medicare spending on home care dropped from $17.5 billion in 1997 to $14.9 billion in 1998 and to $9.7 billion in 1999. A 45% decline in 3 years.6 It's predicted that an aging population over the next 20 years will cause a huge drain on state Medicaid programs, which are currently the primary source of funding for nursing homes. Finally, Congress is sending a clear message it has no intent to create a new government-sponsored, long-term care entitlement program.
The cost of a nursing home ranges from $30,000 to $80,000 per year. Home and community care can range from $12,000 to $50,000 per year.7 Statistics show that after paying for 1 year of long term care, 72% of elderly Americans are impoverished.8 If there is a healthy spouse in that unfortunate household the standard of living is greatly reduced from the loss of assets.
Overview of the Long-Term Care Insurance Industry
There is not enough market-share to support the current number of carriers. In 1998, 10 companies accounted for over 70% of yearly premiums. In 2000, G.E. Capital with 29% market share and the Conseco group of companies with 17% share, accounted for 46% of the market alone. By 2000, 10 companies owned about 84% of the market. There is a lot of consolidation going on in this industry.
Companies selling LTC as a new product require additional capital to build distribution channels and staff administrative and claims departments. Many of these companies report, year after year underwriting losses on their long-term care business. This is not a business for small, poorly rated, or undercapitalized companies. Nor is it an endeavor for companies not committed to years of loss in order to build an eventual profitable book of business. Companies that play the middle ground and sell few policies will eventually exit the market due to high overhead and adverse selection from stagnant sales of LTC. In the past 3 years, 8 major producers have sold out or may sell out. One example is Transamerica being purchased by Aegon. Another is the long-term care business of Time/John Alden/Fortis was acquired by John Hancock. Travelers also sold it's quite sizable long-term care business to GE Capital. These are just a few.
Considering Long-Term Care Policies
In considering long-term care insurance policies various kinds of care are mentioned. Here are the most commonly used terms and their generally accepted meaning. Remember, the definitions given here can and often times are re-defined by carriers in their policy and given special meaning under a particular contract. It is important to read the fine print.
Skilled nursing care is needed for medical conditions that require specially trained nurses or therapists who are licensed by the state. This level of care is on the specific orders of a doctor who dictates the care to be provided and is usually required around the clock, 24 hours a day. It is the care given as part of a severe illness and can extend well after the severest level of an illness has passed. Skilled care can be provided in a person's home with help from practical, as opposed to registered, nurses.
Intermediate nursing care is associated with stable conditions that require daily supervision, but not around the clock care. It is less specialized than skilled nursing care, often involves more personal care and is supervised by registered nurses. Intermediate care is commonly needed for a matter of months and years.
Custodial care is intended to assist with daily living, which includes bathing, eating, dressing, and other routine activities. Special training or medical skills are not required. It is provided by unskilled nursing assistants in nursing homes, day care centers, and at home. It is often called personal care.
It is common for long-term care services to be provided in a person's home. It includes part-time skilled nursing care, practical nursing assistance, the services of a nurses aide, physical or occupational therapy, homemaker assistants, and chore workers, who provide assistance with daily living activities. The cost of long-term care Long-term care is expensive, depending on the severity of a disability, the degree of care needed and where it is to be provided. In 1991, the cost of a year in a nursing home averaged $30,000 across the United States. Skilled nursing care at home with two-hour visits by a nurse three times a week over a year, would cost approximately $12,500. Personal care at home from a home health aide three times a week for two hours would cost approximately $8,400 a year.
The Crisis in Long-term Care
We are facing a potential future crisis in long-term care and so far, the government has shown little inclination to provide a long-term care entitlement program for everyone similar to Social Security and Medicare. With increasing pressure from the AARP and the demands of a voting public that is increasingly growing older, the government's attitude may change. Government programs may take one or the other or a combination of 2 approaches. The first might be a national long-term care insurance program funded jointly by the government, employers and insured individuals. The second might be government support of private LTC insurance. But since not all people can qualify for individual long-term care insurance because of poor health, the government might encourage the establishment of employer group plans in a system similar to the private offering of health insurance through employers. There may be other approaches as well, but it is probably a sure bet the government will eventually intervene in solving a pending long-term care crisis.
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