Long-Term Care Insurance or Lifestyle Insurance?
is author of Long-Term Care: Your
Financial Planning Guide, Kensington Books. She is also
President of LTC Consultants, a Nashville-based company specializing in
web-based (www.ltcuniversity.com) and live long-term care insurance training
and marketing materials. Her organization has trained over 40,000 insurance
agents and delivered 2,020 employee education meetings for the Federal
Long-Term Care Insurance Program. You can visit Phyllis's website at
www.ltcconsultants.com/consumer to purchase her book
"Long-Term Care: Your Financial Planning Guide" and to email her.
"Failing to consider long-term care needs is the #1
mistake investors are making with their retirement savings."
"Cracks in the Nest Egg", Wall St.
This quote may be behind the heightened interest Wall Street is showing in
long-term care insurance. As a result of a recent presentation to Lehman
Brothers on Wall Street, I just completed a live CNNfn interview on July 18,
2003 and as is the case with most interviews of this type, the first question
centered around nursing home care, and the introductory graphic showed an
elderly woman in the nursing home. Thankfully I was able to change the focus
of the interview to home care and make the point that a long-term care
insurance policy may be the only thing to keep a person out of the nursing
home by providing money for the family to hire help and keep the patient at
home. Some policies in fact provide a cash benefit that can be used however it
is needed - to pay family members, friends, neighbors or even to use on
medical equipment, drugs, home modifications, etc.
I jokingly tell the agents I train that you can use the money to have your dog
dipped, as it is really up to the family how the money is used. After the
explanation that automatically follows to the agents from colder climates
without flea problems, they finally understand that I'm just describing the
flexibility of the cash benefit. There is additional responsibility for IRS
reporting and matching of FICA taxes for the informal caregivers, but for
families willing to accept these responsibilities, the cash benefit provides
I was also able to steer the interview to younger ages when asked who should
consider long-term care insurance. I automatically replied that LTC insurance
may be of interest to anyone over age 18 who has a concern about preserving
their lifestyle in the event they or someone they care about has an extended
period of care to help with physical needs, such as bathing, dressing, moving
around and so forth, or to help with a cognitive impairment, such as
Alzheimer's. I then cited a 22-year-old college student from Nashville who had
a car accident last year and sustained the same injury as Christopher Reeve;
he is paralyzed from the neck down. Since he isn't married, his parents are
taking care of him at great cost and time commitment.
The best question came when another reporter jumped in with some skepticism
and asked if advancements in medical technology that help people live longer
and healthier is lessening the need for long-term care insurance. I replied
with some humor that the person who is in great health and really takes care
of him or herself, may have an even greater need for long-term care insurance.
Think about it - people who really take care of themselves may not have a
major heart attack or massive stroke and die. Instead, the older "healthy"
person may just WEAR OUT, and the healthier the person is, the longer the
wearing out process can take, and the more long-term care the person may need!
Finally, I pointed out that the baby boomers are really starting to buy
long-term care insurance. Why? Because baby boomers are having to take care of
parents while sending children to college and save for their own retirement.
They're learning that caregiving robs a family of time, money and overall
lifestyle. Very few families today can manage the process without outside
help, and at the national average of $18 per hour for the services of a home
health aide, that outside help carries a hefty price. And parents today really
don't want their children doing personal things for them, like dressing,
bathing and toileting. Long-term care insurance can remove the need to do
those personal things by providing money to hire caregivers.
Long-term care insurance also helps women in particular, who may wind up
losing a career because it is typically the woman who is thrust in the role of
primary caregiver, and maintaining a demanding career can be impossible when
combined with caring for a spouse or parent 40 or more hours a week. A MetLife
Mature Market Institute study showed that employees whose family members have
long-term care insurance are twice as likely to keep their jobs.1
When asked the #1 thing we need as a nation to get more Americans to buy
long-term care insurance, I immediately said "better tax incentives" and
several major surveys from the Health Insurance Association of America confirm
that answer. Both individuals and employees say that is the #1 event that
would cause them to buy LTC insurance.
Unfortunately, Congress doesn't seem to connect the dots between offering
better tax incentives for LTC insurance vs. providing long-term care for the
baby boomers with public assistance, i.e. Medicaid. If that happens, we will
have unprecedented taxation in this country. Sweden, for example, has a
national long-term care program, but the tax rate comes in around 55%!
I am appealing to Americans everywhere to contact their representatives and
senators and ask them to pass House of Rep. bill 2096 and Senate bill 1335.
These bills provide an above the line tax deduction for an age-based amount of
long-term care insurance premium and allow employees to pay that same amount
with pre-tax dollars. My website
has a great place to link to Congressional representatives with a suggested
letter to send.
With or without this legislation, however, employees should ask employers to
offer long-term care insurance and individuals should ask their insurance
agent or financial planner for information. Even people who perceive
themselves to be affluent are buying long-term care insurance because they are
finally understanding how expensive long-term care is ($60 - $120,000 a year
depending on geographical region and triple that for 24-hour care)2 and how
fast it is growing (tripling in 20 years)3. When the lost investment
opportunity is considered in addition to self-paying, the cost to an estate
can easily run into the millions for a five year episode of long-term care.
And besides, when do affluent people for 100% for anything? Automobiles, real
estate, jewelry, boats? Why should they pay 100% for long-term care?
Ultimately, long-term care insurance is for the family. Half of the people
receiving long-term care insurance benefits at home say they would be in a
facility without their long-term care insurance policy.4 LTC insurance is
keeping families together and preserving lifestyles, relationships, and
financial plans for generations to come. In the really big scheme of things,
long-term care insurance is preserving dignity - a priceless outcome.
1 The MetLife Study of Employed Caregivers: Does
Long-Term Care Insurance Make a Difference? MetLife Mature Market Institute,
2 "MetLife Market Survey on Nursing Home and Home Care Costs, 2002",
MetLife Mature Market Institute, April, 2002
3 Heffler, Stephen, et al, "Health Spending Projections For 2001-2011:
The Latest Outlook", Office of the Actuary, Centers for Medicare and Medicaid
Services, Health Affairs, March/April 2002, p. 208 (5.8% projected growth rate
for home health and nursing home care 2001-2011)
4 Cohen, Marc A., Ph.D., et al, A Descriptive Analysis of Patterns of
Informal and Formal Caregiving among Privately Insured and Non-Privately
Insured Disabled Elders Living in the Community, Department of Health and
Human Services, Office of Disability, Aging and Long-Term Care Policy and The
Robert Wood Johnson Foundation Home Care Research Initiative, April 1999.