Over the past 20 years, long-term care insurance has expanded from simple nursing home coverage to covering care in assisted living facilities and in an individual's own home. Today, insurance companies are busy marketing their product to boomers. But, according to a number of surveys, boomers are not listening.
Bill Vaughn is a policy analyst with Consumers Union, the group that publishes Consumer Reports magazine. Vaughn is considered an expert when it comes to health care issues. But when he looks at long-term care insurance, like most Americans of about the same vintage, he resists.
"It's the last thing you want to buy," Vaughn says. "You want to spend your money on vacations. It's a chore to buy this. It brings up negatives images, images of the end of the road, of death. It's certainly not a product you go joyfully off buying. So, people keep putting it off."
Greg Seal is a financial planner who runs his own company in Denver. He says boomers are skeptical about long-term care insurance not only for emotional reasons like this, but also for practical ones.
"Baby boomers are carrying a lot more debt than their parents were at this age," Seal says. "So they have more debt responsibility and they're more concerned about paying off that debt than they are about funding this 'risk.'"
The risk of needing some kind of long-term care is high. Two-thirds of seniors will need it at some point in their lives. But they will mostly need it only for short periods. Just one-fourth of individuals over 65 will end up needing long-term care for one or more years.
Who Should Buy?
So, for a healthy person in their mid-50s, is long-term care insurance worth it? That's a question Joel Gold wanted to answer. Gold is a professor of finance at the University of Southern Maine, as well as a financial planner.
He looked at the cost of care: about $100,000 a year in a nursing home, or $25 an hour for care in an individual's home. He also factored in the probability of needing long-term care.
"Long-term care insurance is a viable tool for women at any age and it is advisable for younger and middle-aged males," Gold says. "Unfortunately, because men tend to die sooner than women, buying this coverage did not prove worthwhile for older men."
Seal says baby boomers also are often mistaken about how long-term care may be paid for. Many think Medicare will cover long-term care costs. The fact is, it won't. Medicare pays for short-term medical care at home or for a limited stay in a nursing home, but only after a hospitalization and only after a number of criteria are met. Medicaid pays for long-term care, but not until people have already used up the majority of their financial assets.
Rapidly Changing Industry
In addition, actually buying long-term care insurance is not simple in the fast-changing health care industry. Vaughn, of Consumers Union, says ads are often misleading and use scare tactics. He adds that because the industry is relatively young, many companies that did offer policies have simply closed down.
Other companies that are still in the business raise their prices, in some cases, significantly. One company raised the cost of coverage 800 percent in just one year.
On top of that, here's the biggest unknown: Will the insurance you buy today pay for types of care that may be available in the future?
"No one really knows what we'll have 30 to 40 years from now," says Mila Kofman, a policy analyst with Georgetown University. For instance, in the '70s when most long-term care insurance was first sold, most of the care at the time was provided in nursing homes. Back then no one could envision assisted living or care in the home."
So, Kofman says, a 50-year-old might buy long-term care insurance today that pays for assisted living. But 30 years down the road, something better might come along, like some sort of video or robotic monitoring. That's something your policy wouldn't even envision today and may not pay for in the future.