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November Consumer Reports Helps Consumers Decide Whether They Need To Buy Long-Term-Care Insurance

October 8, 2003
Joan Eve Quinn
(914) 378-2436
or Lauren Hackett (914) 378-2561


YONKERS, NY – Few people are able to amass the huge sums of money needed to take care of them in old age. Because finding the resources to pay for help presents a dilemma for many people, Consumer Reports (CR) investigated long-term-care insurance and weighs the pros and cons. CR screened several policies in California to find the best ones, explains what services Medicare and Medicaid cover, and provides shopping advice for choosing the right policy.
Experts predict that by the year 2021 the average rate for a private room in a nursing home will be about $175,200 annually. Long-term-care insurance promises to pay the expenses of people consigned to nursing homes or needing other forms of long-term care. But CR’s investigation of 47 policies reveals that for most people long-term-care insurance is too risky and too expensive. And CR found that long-term-care insurance is so complicated it can stymie the most conscientious consumer. Some highlights of CR’s research findings and consumer recommendations include:
 Long-term-care insurance should not be considered before age 60 except by those with chronic diseases.
 Although policies have become more standardized in recent years, they are fraught with uncertainties that can leave you much less secure than planned.
 Some long-term-care insurers have shaky finances according to CR’s review. If a company goes under, you could lose your coverage and at least some of the money you paid, or face stiff premium increases if the business is bought by another insurer.
 While long-term-care insurance pays a daily benefit for nursing-home care, drugs, supplies, and special services aren’t covered; they can add 20 percent or more to the bill.
 Because of inflation and projected rising costs, the daily benefit bought today will pay a smaller percentage of the cost years from now when care is needed.
 The older you are when you first buy, the more you’ll pay. A plan that costs a 50-year-old $1,625 annually will run a 60-year-old $3,100 and a 70-year-old $7,575.
 People buying at age 40 may pay for nearly 40 years before knowing whether they will need to use the policy.
 You may not qualify for benefits. Insurers will not pay for your care unless you are unable to perform a specified number of what the industry calls “activities of daily living,” such as bathing, dressing, and eating.
 There are deductibles in the form of elimination periods during which you must pay for nursing home care out of your own pocket.
Skip buying a policy if your net worth is less than $200,000, because Medicaid will pick up the bill after you exhaust your funds; or if your assets exceed $1.5 million, because you will be able to pay for your own care; or if you can’t afford the premiums. Consider buying a plan if by age 55 you have a chronic medical condition, your assets are between $200,000 and $1.5 million and you must protect them for a relative, and if you have no family member to care for you. Even with the support of professional and community home-care services you’ll need a family caregiver.
Some shopping guidelines if you decide to buy a policy include: Consider buying at around age 65; look for an insurer that receives high financial-safety marks from insurance-ratings companies; and buy a flexible policy requiring that a person be unable to handle no more than two activities of daily living. Of the insurance companies reviewed offering policies in California, CR lists three as the best: Physician’s Mutual Vista Care TQ/P104, Farmers New World Farmers Premier LTC/TQ100, and John Hancock Custom Care/LTC –02.
“Do you need long-term-care insurance”? is available free at www.ConsumerReports.org.
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