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LTC Bullet:

Aging Anomalies Analyzed

Friday April 9, 1999


Two recent public opinion surveys, one sponsored by the National Council on Aging (NCOA) and John Hancock Mutual Life Insurance Co. and the other by the American Health Care Association (AHCA), produced some fascinating public opinion data on long-term care financing in the United States. Many of the findings are puzzling, however, if everything we hear about the risk of catastrophic long-term care costs reflects reality. It doesn't. Here's the story:

The third iteration of the NCOA/Hancock Long-Term Care Survey, published March 23, 1999, reports a lot of seemingly anomalous responses.

For example, although...

* 87% of Americans think long-term care is a big problem in the U.S.

* 69% said they were worried about paying for their own or their spouse's long-term care

* 79% of older boomers believe long-term care is the greatest risk to their standard of living during retirement

* 82% of respondents agree that it is irresponsible not to plan for their own long-term care needs


* 73% of the respondents incorrectly said Medicare is the primary funding source for most older people's long-term care costs

* 7 of 10 respondents failed a 10 question true/false quiz on basic long-term care facts, scoring a "50" or worse

* Only 29% were familiar with reverse mortgages and 50% with long-term care insurance [fewer than 10% of seniors have purchased LTC insurance]

* Only 12% feel they have adequately prepared for the risk of long-term care

The American Health Care Association survey, published April 7, 1999, revealed more seemingly anomalous responses.

For example, although...

* 68% of boomers say they are not financially prepared for long term care should they need it later in life


* Half of all boomers haven't given any thought to how they will pay for their long term care needs

* 27% of boomers think they are covered by long term care insurance when very few boomers actually carry this coverage

* 85% of boomers cannot name Medicaid as the primary funding source for the vast majority of nursing home residents

* Four out of five boomers interviewed do not know how long term care is paid for and 25 percent say they are unwilling to consider paying for any additional insurance to cover these costs

* While 41 percent of boomers interviewed are willing to pay between $1-$49 per month for long term care insurance, less than 6% of boomers are willing to pay $100 or more per month (According to the American Council of Life Insurance, long term care insurance policies range from approximately $30-$440 a month per individual depending upon the age of the policyholder and the level of coverage provided.)

What could possibly explain these findings? Are American consumers ignorant? Illogical? Irrational?

"It's a paradox," according to Nancy Bern, senior vice president, John Hancock, as cited in a March 23, 1999 NCOA press release. "Long-term care is an increasingly familiar and important issue to aging boomers with older parents, and the issue is a growing concern among policymakers in Washington. But still, most Americans don't discuss long-term care with their families and they neglect to plan for it."

"There is definitely a reality gap in how Boomers view their retirement needs," said Tony Fabrizio, partner of Fabrizio, McLaughlin & Associates, one of two firms collaborating on the American Health Care Association (AHCA) study (cited in an April 7, 1999 AHCA press release). "Boomers are completely confused about how health care--specifically long term care--is paid for in retirement.... These findings make us wonder if Boomers are planning for yachts and sunsets at the risk of ignoring their biggest financial burden, long term care."

The data in these two surveys is not as strange as it seems according to Steve Moses, President of the Center for Long-Term Care Financing. He says:

"People only insure against real risks. Despite all the media hype about long-term care costs, the simple fact is that the average senior qualifies for Medicaid nursing home care without fancy financial planning and without spending down assets significantly. Virtually anyone, regardless of income or assets, can qualify for Medicaid long-term care benefits quickly by legally sheltering or divesting assets. Medicare provides generous long-term home health benefits to most medically qualified seniors, although it has been cutting back severely recently.

"Americans verbalize worry about long-term care financing because of the increasing barrage of media coverage on the issue. The vast majority of them are not worried enough, however, to expend the substantial premiums necessary to purchase long-term care insurance. They are not worried enough about long-term care for the simple reason that, when the worst happens and formal care becomes necessary, the government usually pays. Something over 80 percent of all nursing home costs in the United States are paid directly or indirectly by government programs or private income (not assets.) To avoid the anguish and expense of long-term home care, families often turn to Medicaid financing of nursing home care which has contributed to the well-known institutional bias in America's long-term care service delivery system.

"These facts explain why Americans report strong concern and worry about long-term care, but they fail to plan and insure adequately for the risk. They do not know who pays for long-term care, but they assume, correctly, that someone or something must pay. Ironically, the 'soft landing' provided by easily accessible Medicaid and Medicare financing has desensitized the public to the risk of financing long-term care. The only way to change this situation and create a stronger market for private long-term care insurance is to establish a real financial risk that cannot be avoided by turning to Medicaid nursing home benefits after the insurable event occurs. The Center for Long-Term Care Financing has proposed new public policy that would achieve that goal, assure universal access to top-quality long-term care at the appropriate level for all Americans, and save Medicaid and Medicare money in the meantime.

"Our white paper entitled 'LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle' documents the statements made above about public financing of long-term care, explains why most Americans can be genuinely worried about long-term care financing but still fail to plan or insure adequately, and advocates a method to encourage the early purchase of affordable long-term care insurance while empowering those who fail to insure with the ability to purchase quality home care and assisted living in the private marketplace."

You can purchase a copy of the Center for Long-Term Care Financing's "LTC Choice" report for $24.95 (free to media) by contacting Nadia Morgen at 206-447-1340 or by clicking here to email your request.