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LTC Insurance: A Better Choice Than Ever By Wm. Terry Wood, RHU Long-term care insurance is looking like a better choice than ever for Washington State's consumers. This important insurance product has rapidly evolved to become one of the most viable means of funding a wide range of medical and non-medical services. The evolution of long term care, itself, has redefined both the consumer of long term care and the purchaser of long term care insurance (LTCI). Until about thirteen years ago, LTCI was known as "nursing home insurance," and purchased primarily as Medicare supplemental coverage. As such, the purchaser was typically over the age of 65. Since then, the popularity of LTCI has grown substantially for several reasons: (1) People are living longer and being kept alive longer by medical technology; (2) consumers, themselves, are becoming more eager to buy a product that helps protect their life savings from the strict impoverishment rules that govern Medicaid; (3) LTCI products are now much more comprehensive than in the past, covering a wide variety of services including home care, assisted living, adult family homes, and nursing home care; (4) and more people in nursing homes are overtaxing the state's Medicaid programs, requiring states to look for funding alternatives. Since the creation of LTCI , almost 30 years ago, one dramatic trend is the shrinking age of the average purchaser. Insurers are now witnessing the purchase of LTCI by those in their 50's, 40's, and even 20's. Retirement planners often remind their clients, regardless of their age, to plan for the possibility of long term care as a means of protecting their families and their hard-earned assets. Those in the 18 to 64 working community are finding long term care insurance benefits being offered, usually on an optional basis, by their employers, fraternal and business associations, banks, credit unions, and chambers of commerce. Unfortunately, many working individuals are not aware that long term care is a form of health care that is typically not covered by their employers' medical plans. This leaves unsuspecting employees shocked, surprised and financially overwhelmed when faced with ongoing nursing care needs following the acute phase of a serious illness or injury. Health care reform has seen a rise in Health Maintenance Organizations (HMO's, Provider Service Organizations (PSO's), and other forms of case-managed health care. Along with greatly increased case management, there has been a sharp reduction in hospital patient days. Those who, in the past, would have received rehabilitation in a hospital setting, are now finding themselves in other settings, including extended care, skilled rehab care, and home care. Many younger people are now seeing their colleagues and friends receiving long-term care. Perhaps the most well known of these long term care patients is Christopher Reeve, the Hollywood film actor best known for his Superman roles. The situation involving Michael J. Fox, recently diagnosed with Parkinson's Disease, further increases public awareness that serious diseases, such as his, are not reserved just for the elderly. More common, however, are those who live and work in our own communities, like a local young man who suffered a crushing fall while climbing Mt. Rainier and is now receiving ongoing long term care, and victims of automobile accidents and boating accidents, as well as weekend warriors working on the roofs of their homes, and pruning trees. Long overdue federal and state government recognition that LTC insurance offers a viable alternative to Medicaid spend-down strategies has finally appeared in recent legislation. Examples of this are: • Pending Medicaid reform, whose current language includes block grants and dollar cutbacks, will require that the individual states act more responsibly if they are to conserve Medicaid funds for the truly needy. Estate recovery will have to be more aggressive. "Business as usual," in which state Medicaid agencies instruct the public on how to divest assets (even when those assets may represent hundreds of thousands of dollars) in order to access Medicaid, will have to change. The entitlement philosophy, which has prevailed for so many years, must be replaced by a philosophy that encourages individual responsibility. • Washington State's Public/Private Long Term Care Partnership, which, if and when fully implemented, can play an important role in informing consumers about the viability of long term care insurance. The educational component included in the Partnership will help the "state" to meet its responsibility in educating its public about long-term care issues. At the same time, this program would create an incentive or those who wish to protect their assets to purchase private LTCI. Partnership policies, like all LTC policies sold in Washington State, would meet rigid consumer standards and offer asset protection, which would be subject to special Medicaid rules. The asset amount protected is equal to the amount of benefits you purchase. The higher the LTC benefit you purchase, the more assets are protected (should you eventually apply for Medicaid). This protection would guarantee that buyers do not have to spend their life savings on LTC care if their coverage ever expires. Purchasers will be able to qualify for Medicaid benefits, but still retain some assets. Partnership policies are not yet available due to conflicting Federal Regulations. Additionally, Washington State requires its Public Employee Benefit Board to make LTC insurance available to state employees. Like the Partnership program, a key feature is that the state must provide education to its employees about long term care funding issues. Finally, and most significantly, the Kassebaum-Kennedy Health Care Reform Bill was signed into law at the end of August 1996. It includes important language that grants IRS tax deductibility of LTC insurance premiums. The federal government wants people to purchase LTC insurance and now offers the consumer an incentive to be individually responsible rather than rely on Medicaid. Under this legislation, long term care insurance is considered to be health insurance. Benefits are tax free and premiums are tax deductible to the extent that they exceed 7 -1/2 % of one's adjusted gross income (AGI). This threshold may soon be lifted to allow a deduction "off the top". Long term care insurance is available in several forms: Individual,Employer Group, Affinity Group. Individual plans offer maximum benefit design and flexibility. Often, premium discounts are available to married and/or domestic partners and for those who are in excellent physical health. Employer offered plans often have an added advantage over individual plans in that employees may have the opportunity to enroll on a "Guaranteed Issue" basis. This can be an extremely valuable benefit to those employees who have health conditions that would render them "uninsurable" under an individual plan. Affinity Group plans offer premium discounts on individual coverage. Employers generally have tax incentives for purchasing and/or offering LTCI to their employees. Our three major existing entitlements, Social Security, Medicare, and Medicaid are in serious trouble and will survive only with dramatic and necessary changes. The future health and well- being of our country lies not in promoting more entitlements, but in developing programs to encourage individual responsibility. These latest developments in the "evolution" of LTC insurance are a good step in the right direction.
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