The Long Term Care Review by Duane Lipham, CLTC

Home care services have always been popular with many mainly because of the extra measure of independence and freedom that it affords those receiving care. But there may be an additional reason to choose home care or assisted living facilities instead if that is possible.

Here is an article that sounds an important warning on what is often happening in nursing facilities:

“Over the past several years, nursing homes have become dumping grounds for young and middle-age people with mental illness, according to Associated Press interviews and an analysis of data from all 50 states. And that has proved a prescription for violence, as Jackson’s case and others across the country illustrate.

Younger, stronger residents with schizophrenia, depression or bipolar disorder are living beside frail senior citizens, and sometimes taking their rage out on them.

“Sadly, we’re seeing the tragic results of the failure of federal and state governments to provide appropriate treatment and housing for those with mental illnesses and to provide a safe environment for the frail elderly,” said Janet Wells, director of public policy for the National Citizens’ Coalition for Nursing Home Reform.”

One of the great advantages of long-term care insurance is that it allows the policyholder to choose what setting in which they wish to receive care. The Medicaid program on the other hand usually only pays for care received in a nursing facility.

You can read the rest of the article here.

I am often asked about the optimal age to purchase long-term care insurance. My answer is that it depends on what you want long-term care insurance to accomplish.

If you want to truly be covered against the high costs of long-term care at all times you should purchase this insurance as soon as (1) you have assets that need to be protected and (2) you can afford the premiums.

It would be wise for even young people to consider long-term care insurance if they meet this criteria because disability is not limited to any age boundaries. It can strike at any age as a result of sports accidents, auto accidents, strokes, brain injuries, etc.

In fact, almost 40% of patients receiving long-term care are under the age of 65. This is a sober warning that we are all at risk for some kind of disabling incident or illness at any point in our life. It can strike suddenly and without advance notice.

Many financial planners are more concerned with having their clients protect themselves in retirement instead. And it is true that your chances of requiring long-term care services due to aging increase dramatically in retirement years.

So if you are mainly concerned with protecting assets for retirement, what age makes the most economical sense to begin seriously considering the purchase of long-term care insurance?

I usually recommend somewhere between the age of forty-five and fifty-five. There are two main reasons for this:

 The premiums for long-term care insurance are about as low as they ever will be during this period between forty-five and fifty-five and rate increases from one year to the next are relatively small.

 Most people usually still enjoy a measure of good health at this stage in life and therefore they can get additional premium discounts for having a good health history. They can lock in these lower premium rates for the remainder of their life.

After the age of fifty-five premiums start to accelerate more rapidly and change dramatically from year to year in a person’s mid-sixties.

In all cases the course of financial wisdom is to buy earlier rather than later.

Federal employees have had access to a group long-term care insurance plan backed by two of the major carriers in this field for several years. Interestingly, if an individual is in reasonably good health, they could often get a better deal by going directly to those two carriers to purchase an individual policy instead of choosing the government plan.

Recently the Office of Personnel Management announced a rate increase for the government plan because the contract for the next seven years had come up for bid. The contract was awarded to only one of the major carriers, John Hancock. The rate increase for current policyholders has been announced as being between 5% and 25%.

Of course, this makes the government program even less attractive to many when factoring in the current rate increase. My recommendation to prospective buyers of the federal plan is to be sure to compare premiums with the major insurers of individual plans as it makes more sense than ever to do so.

In a recent issue of Kiplinger’s Personal Finance, this question was posed: “What is the rule of thumb for the assets you need to self-insure against potential long-term-care costs versus paying premiums for long-term-care insurance?”

Here is their answer:

“Everyone who can afford the premiums should at least consider buying long-term-care insurance, no matter how much savings you have. The costs for extended care in a nursing home, assisted-living facility or in your own home can be so large that they could destroy your retirement savings, even if you start out with a substantial nest egg. The protection becomes even more valuable if your retirement-account balance has tumbled over the past year or so.

The average cost for a private nursing-home room is $74,208 a year ($203 a day), according to the cost-of-care survey released April 30 by insurer Genworth Financial. And that’s in today’s dollars. If the cost of care continues to rise at its current rate (more than 4 percent per year), then one year in a nursing home could be more than $270,000 if you need care in 30 years.

Nearly three-fourths of Genworth’s initial claims are for long-term-care services received in the home, and those expenses can be even higher. The survey found the average rate for state-licensed home health aides was $18.50 per hour, which adds up to more than $400 per day for people who need 24-hour care.

You could buy a long-term-care policy with a daily benefit that would cover the entire cost, or you could buy enough insurance to cover a portion of the cost and plan to self-insure extra expenses yourself, which still limits some of your risk.”

I often speak with consumers who have a net worth of 2 million dollars or more and who assume that their decision to self-insure is the smart one. Of course, everyone has to determine what the best course of economic action will be for their own future, but some are raising questions about whether it might make better sense for even affluent individuals to purchase long-term care insurance as well.

Here is an article that raises some interesting points to consider:

“Surprising economic times can reveal fault lines in previously solid assumptions. The conventional wisdom was that the wealthy would pay for long-term nursing care out-of-pocket and middle-class and upper-middle-class Americans should buy long-term-care (LTC) insurance. Advisors assumed that affluent clients would have the income stream to cover skilled staff for in-home care or full facility care regardless of the length of convalescing, if necessary.

In fact, wealthy Americans with a very comfortable standard of living and adequate resources to cushion from portfolio shrinkage have expressed concern about the expense of healthcare in the future. In a 2008 survey by Northern Trust, the cost of health care came in second after inflation eroding income as the chief concern of Americans with a minimum net worth of $1 million (not including primary residence). The truth is that more people need to consider those costs. Those who reach age 65 will have about a 40% chance of entering a nursing home, according to the U.S. Department of Health and Human Services. For those who do enter a nursing home, about 10% will stay there five or more years—a long time to be paying for nursing care out of pocket.

Moreover, even the published averages of nursing care and in-home care can be misleading when you consider the likely high service expectations of wealthy families. Average rates buy you rooms in facilities that your affluent client may perceive as more Motel 6 than the Four Seasons. For a high-end care facility such as one in Boston associated in with Harvard Medical School with its own hospital on the grounds and highly trained staff, the yearly costs are well over $100,000, or more than $270 per day. In New York, however, $398/day is just the average cost, according to the 2008 Cost of Care Survey from Genworth Financial. According to the survey, the five-year annual increase in the average cost of private or semi-private room in a nursing home is 4%.”

You can read the rest of the article here.

Affordability is a vital ingredient in any successful long-term care insurance plan. And there are ways to help make this kind of insurance more affordable without sacrificing good coverage.

If you receive quotes from several highly rated insurers and yet find that the premiums are still too much to bear, there is no need to panic and assume that long-term care insurance costs too much. You may be able to adjust the benefit amounts of the original quotes to bring the premiums more in line with your expectations.

One way to lower premium costs is to make sure you know what the actual costs of care are in your area. There are many statistics used when discussing long-term care costs and often these are based on national averages. The actual cost of home care, assisted living facilities and nursing facilities in your particular area may be much lower.

You can find out what long-term care care costs locally by either downloading the latest Genworth Cost of Care Guide or by calling a few local home care agencies and facilities to ask for comparison rates.

Another way to lower long-term care insurance premiums is to use a shorter benefit period. Many consumers feel that having unlimited benefits is necessary to have good coverage. A recent study published by the American Association for Long-Term Care Insurance in their 2009 Sourcebook revealed that only eight percent of those who buy a three-year benefit period exhaust the policy and still need care. Only a little over one percent of those with a five-year benefit period will see their claims closed due to policy exhaustion.

This means that lowering the benefit period can be a practical way to lower insurance costs without sacrificing vital coverage.

Another way to bring down long-term care insurance premiums is to increase the elimination period (the number of days after your care begins that precedes the insurance company’s first payment of claims). Almost ninety percent of individual long-term care insurance policies use an elimination period between ninety and one hundred days according to the same 2009 Sourcebook referenced above. If your initial quotes used a thirty-day or sixty-day elimination period, you may be able to significantly lower the premiums by choosing a ninety-day elimination period instead.

There are other ways that an experienced long-term care specialist can help make this kind of insurance more affordable for you. If you ask for suggestions on lowering your premiums the specialist will be happy to work with you to craft a long-term care insurance policy that is effective and affordable.

The Corporation for Long-Term Care Certification included an eye-opening article in one of their recent newsletters indicating that some of the financial assumptions that has been made about out-of-pocket expenses for long-term care has not been entirely correct. Here is an excerpt from that newsletter:

“A new analysis found that newly 30% of LTC costs are paid out-of-pocket – that’s 10% higher than previously estimated. The discrepancy is explained by factoring in the cost of assisted living, which had been excluded from previous data sets. Families contributed $64 billion of their own funds to pay for care in 2006 (that number is probably substantially higher today), with the money coming from home equity, income from adult children or retirement savings. All three of these asset sources have lost value in the recent downturn, putting more of a financial burden on the uninsured. “

I am often asked about which age is the best to begin seriously thinking about applying for long-term care insurance. Here are the resuts of a recent study by the American Association for Long-Term Care Insurance, a national industry trade organization that tracks data on this subject from many large insurers:

“Individuals mistakenly think long-term care planning is something that can wait until after retirement, but because of health changes that tend to occur in our 50s and early 60s, the facts shows otherwise,” explains Jesse Slome, the Association’s executive director. “Between one-fifth (20%) and one-third (33%) of individuals who submitted an application for long-term care insurance between ages 60 and 69 were declined coverage because of an existing health condition according to the biennial study.” The industry average for declined applicants between ages 60-to-69 was 22.9 percent. For ages 50-to- 59 it was 13.9 percent.

While insurers can decline individuals who apply for coverage with existing health conditions, most reward those who apply while in relatively good health. “Just over half (51.5%) of individuals who applied and were accepted for coverage last year between ages 50 and 59 qualified for “preferred health” discounts,” Slome acknowledges. These discounts can reduce the cost of long-term care insurance by 10 to 20 percent each year. “The savings can amount to hundreds of dollars a year for a couple,” Slome notes, “and they won’t be taken away in the future should your health change.”

You can read the rest of the article here.

There are many opinions about long-term care insurance mainly based on anecdotal evidence. Once a year the American Association for Long-Term Care Insurance publishes a LTCI Sourcebook that cuts through the fog of opinion and helps establish the facts instead.

The 2009 version of this publication just became available and here are the results of the data gathered from a large sampling of the leading long-term care insurers about those who have an individual long-term care insurance policy:

 8.25 million Americans currently have long-term care insurance and last year 8.5 billion dollars were paid in claims to 180,000 policyholders. Of the new claims opened during 2008, 61% were age eighty or older, 30% were between seventy and seventy-nine and only 9% were under the age of seventy.

 Sales by issue age – It was found that 24% of buyers were between the age of forty-five and fifty-four. 53% were between fifty-five and sixty-four. 15% were between the age of sixty-five and seventy-four.

 Sales by daily benefit amount – Only 6% bought policies with a daily benefit between $50 and $99, while 31.5% were between $100 and $149, 35% were between $150 and $199, and 27% bought more than $200.

 Sales by elimination period – The overwhelming favorite elimination period chosen was ninety days with almost 83% of buyers choosing it.

 Sales by benefit period – Benefit period choices by consumers were as follows: 2 years – 7%, 3 years – 30%, 4 years – 15%, 5 years – 24%, 6 – 10 years – 11%, Lifetime/Unlimited – 13%.

 Sales by benefit increase mode – 40% chose 5% compound interest, 16% chose simple interest, 13% chose a Future Purchase Option, 7% chose CPI (consumer price index), 14% chose none, and 10% chose other forms of inflation protection benefits instead.

There were many other interesting facts revealed by this important gathering of data that I will try to include in future articles. The information presented here should be helpful to anyone who is seriously considering the purchase of long-term care insurance.

Now that the economic crisis has taken a severe toll on the retirement portfolios of many seniors it is becoming increasingly clear that a large number of them are woefully unprepared for the rising costs of long-term care.

In addition, many are just simply in denial mode and wish not to even consider that they will have to face such challenges down the road.

But the facts are clear. The cost of long-term care is one of the most significant financial risks that seniors face today. Here is an Associated Press article that discusses the results from some of the latest studies on this subject:

“The high cost of long-term health care will drag down the quality of life for nearly two-thirds of today’s retirees. It can cost $77,000 a year for a nursing home room and $20,000 for in-home care, expenses that many people are ill-prepared to absorb, said the Center for Retirement Research at Boston College.

A new analysis shows that when the cost of health care and long-term care is included, 64 percent of retirees likely will be unable to maintain the lifestyle they had before retirement.

“This is the No. 1 issue staring us in the face over the next decade,” said Paul Ballew, a senior vice president at Nationwide Mutual Insurance Co., which provided a grant to fund the study.

The cost of health care will create such an unexpected hardship on unprepared retiring baby boomers that it’s imperative to sound the warning now, said Alicia Munnell, director of the Center for Retirement Research.”

You can read the rest of the article here.

Recent studies are indicating that the average age for consumers who purchase long-term care insurance is continuing to drop year after year. I can certainly agree with this as I have observed more interest in long-term care being shown by folks in their mid-forties and early fifties.

There is also a trend to lower long-term care insurance premiums by choosing to co-insure a portion of facility care costs if that should become necessary. Since so much care is provided either at home or in an assisted living facility these days this kind of strategy can be a smart choice. This is because there is often some income that has been used for daily life outside the nursing facility that can often be redirected to help pay for nursing facility costs without dipping into vital retirement assets.

Here is the results of a recent study that comments on these trends:

“The American Association for Long-Term Care Insurance says survey findings show that more younger people are buying long term care insurance due to the more affordable cost-sharing approach of LTC insurance.

Some 400,000 individuals purchased long-term care insurance protection in 2008 according to a just-released report. The overwhelming majority (84%) of individual buyers in 2008 were younger than age 65 and three-fourths (76%) selected a more affordable approach to this protection by opting for coverage for a specific number of years.

The annual study conducted by the American Association for Long-Term Care Insurance, the industry’s professional trade organization, analyzed data on 215,000 buyers of individual long-term care insurance protection. According to the organization’s research, some 8.2 million Americans now have long-term care insurance protection purchased on an individual basis (typically through an insurance professional) or through a plan offered by their employer.

“Individuals continue to purchase protection at younger ages,” explains Jesse Slome, the Association’s Executive Director. In 2008, some 53% of individual buyers were between ages 55 and 64; compared to 50% the prior year. Another 24% were between ages 45 and 54 (2008). “The age of buyers keeps dropping as consumers — especially baby boomers — understand the cost-saving benefits of locking in good health discounts and ways to make protection more affordable,” Slome explains. In 2000, the average age of an individual buying long-term care insurance was 67.

The number of individuals purchasing long-term care insurance protection for a specified number of years also increased according to the Association study. Just over three-fourths (76%) of buyers in 2008 opted for coverage for a claim lasting five years or less; a slight increase over the prior year (71%). “The most expensive long-term care insurance policy is one with an unlimited benefit period (one with no cap on the number of years benefits will be received),” Slome explains. “Consumers are right-sizing their protection taking into account available savings and retirement income. This cost-sharing approach can reduce the cost of protection by 30 percent or more.” ”

You can read the rest of the article here.

SmartMoney is an established, respected source of information on personal finance for consumers, so I was pleased to read their positive view of long-term care insurance in a recent article.

I will include an excerpt from that article here that discusses the perils of not having long-term care insurance to pay for skyrocketing costs. But after that the article also provides some excellent recommendations to try to lower those costs as much as possible. It’s very good reading.

Here is the article excerpt:

“The so-called sandwich generation — those caring for their children and their aging parents — are being squeezed more than ever these days.

The retirement savings their parents were depending on are being decimated, while health care and other costs associated with caring for them skyrocket. Add to that steep college tuition bills and the strain on the family budget is, well…overwhelming. According to a 2005 Pew Research Center report, 13% of baby boomers (about 9.75 million) are in such a situation.

On average, these informal caregivers who take care of an elderly friend or relative spend $5,500 a year just on the day-to-day expenses like food and doctor visits, according to a 2007 study by the National Alliance for Caregiving and Evercare, a health-care coordination program. Should that elderly parent need to be put in a full-time facility, the costs rise exponentially. The average annual cost of a semi-private room in a nursing home is $69,715, while the average cost of an assisted living facility is $36,372 a year, according to a 2008 MetLife survey.

Don’t expect much help from the government or insurers. Medicare will only cover the total cost of staying in a skilled nursing facility for up to 20 days and won’t cover the cost of an assisted-living facility or home care at all, says Mary Winners, owner of About Senior Solutions, a referral service and advocacy organization in Monrovia, Calif.

In fact, without long-term-care insurance, which typically covers the cost of nursing homes, assisted-living facilities and in-house care, the last years of a senior’s life can be financially devastating for everyone involved.”

You can read the rest of the article here.

No one likes to pay insurance premiums of any kind and long-term care insurance is no exception. We pay these premiums because the alternative leaves our investment assets and retirement income exposed to high risk if long-term care becomes necessary and we have to pay for the care ourselves.

It is no secret that the cost of nursing facility care can quickly drain a retirement nest egg and force a retiree into financial ruin. By purchasing long-term care insurance a policyholder is accepting a small loss each year in the form of premiums paid. This relatively small loss helps make sure that they will not be wiped out financially by unmanageable long-term care costs in the future.

Those unfamiliar with long-term care insurance often wonder how long the premiums will need to be paid. The answer is that there are three choices for the premium payment period usually offered by insurance carriers.

The most popular choice by far is a “lifetime” payment period that requires the payment of premiums until death or until the policy is activated. Some object to paying these premiums for such a long period of time.

In response to that objection I usually ask the prospective client to consider other forms of insurance that they most likely own. For instance, would they expect to only pay premiums for health or major medical insurance for a short time, or do they plan on paying those premiums for life? Wouldn’t they expect to pay auto insurance premiums for as long as they are a driver? Isn’t it reasonable to pay homeowners insurance premiums for as long as they own a home?

As long as the financial risk is present, the payment of insurance premiums is prudent. Since the risk of needing long-term care is present for as long as we live, the premiums for long-term care insurance can be expected for the remainder of our life.

The second and third options for payment of long-term care premiums allow the policyholder to condense all of those expected premium payments into a shorter time period. For those under 55 years of age, a “pay to age 65” option may make sense. For others a “ten year pay” option may be a good choice.

Because the expected premium payments over a lifetime are simply condensed into a shorter time frame the cost of these premiums are much higher. Therefore these options usually make sense for policyholders that can take advantage of tax deductions that help them reduce the overall cost of their long-term care insurance.

Stephen Moses is an outspoken and vocal advocate for long-term care reform in this country and he has a long history of speaking before state and federal government agencies to help shed light on what kind of reform is needed in this field.

He is now weighing in on the impact that the current healthcare reform movement may have on long-term care. He has written a couple of articles on his blog for the Center for Long-Term Care Reform that express his outlook on this situation. Here is an excerpt from one of those articles:

“Clearly, the federal government has painted us into a fiscal corner from which there may be no collective escape. Individuals, especially the young, and the private sector will bear the burden of a long, slow return to financial stability.

By that I mean this: Because the government can’t tax, borrow, or inflate its way out of this mess, they’ll have nowhere else to turn but to ratchet down entitlement programs and other public spending.

Medicaid, ostensibly a welfare program, but always before a de facto entitlement, will no longer finance LTC for the middle class and affluent. The best we can hope is to save something for the poor.

Social Security and Medicare will be welfarized. It’s already begun with means tests that tax or reduce Social Security benefits and drive up co-insurance for Medicare’s Part B and Part D for higher income people.

When current health and LTC reform proposals hit the fiscal wall, government will pull back the traditional social insurance and welfare “safety net” little by little. As that happens, individuals and families will return to savings, private insurance and personal responsibility.

Maybe our Depression-era parents were right after all. Save, invest and insure, they warned. Don’t count on anyone else, least of all the government, to bail you out.”

It’s also worthy to note that even in countries that have “universal healthcare”, they do not have “universal long term care”. In order for someone to receive state-funded long term care in the U.K. or Canada, they have to spend down their savings just like Medicaid here in the U.S.

In short, as we work through the reform of our country’s healthcare system, keep in mind that “healthcare reform” is not the same as “long term care reform”.

A contributing editor for SmartMoney.com recently discussed some of the most common mistakes that people make about their financial future. She covered quite a bit of ground but then brought up the subject of long-term care insurance. Here is what she said as reported by CBS News:

“In addition, plan ahead for any health-related costs that may crop up, including those for any aging parents you may be taking care of in the near future. “A nursing home can easily set you back $75,000 or more a year, and Medicare does not cover long-term care,” says AuWerter. For the typical middle-class family, she suggests considering long-term care insurance in your early sixties. This will allow you to still be eligable for the insurance, but gets you into a plan before the premiums become too high. ”

I am in agreement with her thoughts on this in general. However, I would advise most consumers to look seriously at long-term care insurance in their early to mid fifties as this would realize a significant savings over the life of the policy.

You can read the full article here.

In this article I will try to answer one of the most common questions that baffle consumers who are considering purchasing a policy.

Why are my premiums higher than someone else I know?

There can be many reasons why premium rates vary from one person to the next. Age and policy design differences alone can have a big impact on the premium paid by two separate individuals.

But suppose two individuals were the same age and had an identical policy setup from the same long-term care insurer. What could most likely be the cause for a different premium rate for each policyholder?

In this care it is most likely that one received a more favorable rate classification than the other. When the underwriter reviews the results of the telephone interview and the medical records of an applicant, their decision is not simply approval or disapproval.

All long-term care companies have a rate classification system that is designed to assess the degree of risk that each applicant poses based on their health history. In many cases there are only two levels of risk, “preferred” and “standard”. However, other carriers may add two or three more levels of rate classification.

Preferred rates are usually reserved for those with an exceptional health history. This means that they would most likely be well within height/weight build guidelines, with no major illnesses in the past, and taking a minimum of prescribed medications, if any at all.

Standard rates are applied when there has been a history of potentially serious illnesses in the past such as heart attack, cancer, arthritis that requires medication, back problems that resulted in surgery, etc. Or the applicant’s height/weight ratio may also disqualify them for the best rate classification if it is too high.

Sub-standard rates may be applied to those who have had even more serious conditions or whose potentially disabling illness is considered more advanced. If the health problems are too serious the applicant is simply declined.

How do rate classifications affect my premium?

Those with a preferred rate classification get the best premium rates since they pose the lowest risk to the insurance carrier. Those with a standard rate classification often receive rates that are between ten and fifteen percent higher. Those who are considered sub-standard often see their premiums increase an additional twenty five percent.

It is very important to work with an agent who represents several major carriers as each company will have a unique underwriting procedure and the independent agent can help get you the best rates by comparison shopping.

One of my good friends in this field, Scott Olson CLTC, recently posted this article on healthcare reform on his site that I would like to share with my readers as well. Here it is:

“There is going to be major healthcare reform over the next few years. Groups from every political spectrum are in favor of healthcare reform.

Every adult American (regardless of political affiliation) knows that there’s no free lunch. First-class healthcare cannot be pulled out of a hat. Whether we’re talking about President-elect Obama’s healthcare proposals, Sen. Clinton’s proposals, or Sen. Baucus’ recent white paper on healthcare reform, they’re all founded upon getting more people “into the system” as a means of increasing healthcare dollars and cutting costs; with an eye on improving quality in the long run.

Sen. Baucus’ “healthcare reform” proposals are the most far-reaching of any proposals that have been put forth by other politicians. He is mandating that every American have some kind of health insurance coverage–whether it be employer-based, individually-owned, or part of Medicaid, SCHIP, or other gov’t program.

Sen. Baucus’ 98-page proposal on “healthcare reform” had only two pages that discussed “long term care reform”. Those 2 pages make very interesting reading. His recommendations for “long term care reform” are:

1) Make Medicaid more efficient and cost-effective
2) Allow Medicaid beneficiaries to be able to receive care in the community (instead of just nursing home care)
3) Make long term care insurance more affordable and accessible.

He summarizes his “long term care reform” proposals in one paragraph on page 80 of his report. He states:

“Achieving ultimate success will require both public and private solutions. While we consider options to improve the care in our public programs (i.e. Medicaid), we should also explore policies that make quality long-term care insurance products more affordable and accessible.”

No one is proposing a “universal long term care program”. During the presidential campaign, both Senators Obama and Clinton came out in favor of strengthening consumer protections for long term care insurance and encouraging the purchase of long term care insurance. Sen. Clinton even proposed a 50% tax credit for long term care insurance to encourage more people to own it.

As we work through the reform of our country’s healthcare system, keep in mind that “healthcare reform” is NOT the same as “long term care reform”. ”

To read Sen. Baucus’ white paper on “healthcare reform” click HERE

The Corporation for Long-Term Care Certification recently included this interesting comment in their January 2009 newsletter:

“The Centers for Medicare and Medicaid Services has launched the federal government’s first website devoted to ranking of the 15,800 nursing homes that participate in the public insurance system. Homes are assessed based on health inspection surveys, quality control measures and staffing levels

In this first round of rankings, twelve percent of homes earned a top rating of 5 stars; twenty-two percent earned the lowest rating of 1 star and the remaining sixty-six percent were distributed fairly evenly at 2, 3, or 4 stars.

Consumers are urged to use the ranking in their evaluation of nursing home alternatives in their area, but are advised the data is no substitute for personal visits and discussions with administrators.

To review the rankings, click here for the Nursing Home Compare section of the www.medicare.gov site.”

Many consumers wonder what the underwriting process for long-term care insurance is about and how it all works. Let’s discuss that for a few minutes in this article.

Why is underwriting necessary?

The answer to this question has to do with how insurance functions. Essentially, it is a pool of money into which several people have made deposits. These funds can then be used to pay for financial losses for some of those individual depositors due to an unforeseen circumstance that may arise. In the case of long-term care the funds could be used to pay for custodial care for individual policyholders should it become necessary.

The amount that each policyholder has to pay in premiums will be directly affected by how much money the insurance carrier expects to have to pay out for claims. This means that the insurance company has to manage the risk that they will have to pay money out of that central pool of funds. The more they have to pay out, the higher the cost of the insurance.

To manage the payout risk each insurance carrier employs underwriting procedures to make sure that those with high risk medical histories are not allowed into the insurance pool and thereby drive up the cost for everyone else.

What underwriting procedures are employed?

The first step of underwriting that all carriers use is the application form where the applicant lists their relevant personal health history and authorizes the insurance company to examine their medical records as well.

Often the carrier will schedule a phone health interview that lasts for about 15 – 20 minutes. One of the main purposes of this telephone call is to assure the carrier that the applicant does not already have any cognitive problems that would become evident in the way the phone conversation is conducted.

Afterward the carrier will often request a copy of the medical records from the primary care physician of each applicant to verify the overall health of each person seeking insurance. If specialists have treated the applicant for any serious illness in recent years, a copy of those medical records may be requested as well.

This is where the whole process can sometimes bog down for a few weeks if the doctor’s office does not process the record request quickly. However, once the medical records are received at the carrier a final underwriting decision is usually forthcoming very quickly.

AHIP (America’s Health Insurance Plans) has just released the results of a new study that shows despite the fact that more than 75 percent of women believe they will need long-term care, only 19 percent currently have a long-term care policy. Only about five percent of the U.S. population over the age of 45 have long-term care insurance, suggesting that many of the women surveyed have a false sense of protection against the cost of long-term care.

AHIP commissioned the study to determine opinions on their financial situation, knowledge of long-term care insurance and the impact of the economy on their finances. The study shows of those women who do not have LTCI, 27 percent believe they are covered under their current insurance policy, and 24 percent are unsure whether their policies provide coverage.

Many women do not feel prepared for retirement, are worried about their finances and are not confident with the steps they have taken to prepare for retirement. Only 35 percent of women have actively thought and planned for long-term care.

This is a very illuminating study and you can read the full report here.