A newly-released survey shows just how conflicted Americans are about long-term care insurance. And how unrealistic they are about how much long-term care costs and how much insurance they can buy for what they are willing to spend.
The survey, completed in 2014 by the consulting firm RTI International and the survey research firm GfK Research for the US Department of Health and Human Services, found that consumers prize two attributes above all others when they think about long-term care insurance: They want lifetime coverage and low premiums. Their willingness to buy any LTC insurance declines dramatically as premiums rise and the benefit period shrinks.
For instance, fewer than half of those surveyed were willing to spend more than $50-a-month for a long-term care insurance policy that covers $100-a-day for 3 years.
In the real world, it is possible for a 60-year-old to buy such a policy. But it would come with no inflation protection beyond the right to buy additional insurance in the future. And it would provide a total maximum benefit of only about $109,000. To put it another way, it would pay less than half the daily cost of a nursing home stay or about five hours a day for home health aide time. Not nothing, for sure, but much less protection than consumers say they want.
Curiously, the survey found that while respondents are very sensitive to changes in the length of a policy’s benefit period, the size of the daily benefit was much less important to them, especially once it reaches $100. There was little difference in the level of interest for a $100-a-day benefit and a $300-a-day benefit.
When given a choice of actions to take if they became disabled, big majorities favored modifying their homes or relying on friends or family to help them. The least popular choices: moving into a nursing facility (only 28 percent said they’d be willing) or using the value of their home to help pay for long-term care costs. The willingness of just four-in-10 to use home equity is especially problematic since housing wealth is the biggest asset of many older people.
When it comes to public policy choices, the survey provided some important clues but also a lot of confusion and many contradictions.
According to the survey—of more than 15,000 non-institutionalized adults age 40-70—people believe that financing long-term care should be an individual, and not a government, responsibility. They strongly favored voluntary programs over mandatory, universal insurance.
Yet nearly two-thirds think government should offer voluntary public insurance and similar percentages favor the use of government tax subsidies to encourage people to buy coverage.
People trust private insurance more than government, but show a significant lack of confidence in both. More than half say they don’t trust government to run an LTC insurance program, while about one-third distrust private insurers.
As with many other surveys, respondents had little idea of how much long-term care costs or who pays. Only 20 percent correctly estimated the cost of nursing home care and just 15 percent knew how much home health costs. More than a third said they didn’t know enough to even guess. Only one-quarter knew that Medicaid is the primary public payer of long-term care costs.
Some results were downright contradictory. Only one-in-five respondents strongly agreed that “everyone should have LTC insurance” through a “mandatory public program.” One-in-four backed mandatory enrollment in private insurance. Yet, more than 40 percent said it was OK to require people to buy insurance “if the price is not too high.” Hard to know what to make of all that.
If you are looking for other evidence about how confused consumers are about LTC insurance, this survey has it. For instance, two-thirds said government should promote LTC insurance with tax subsidies. However, tax deductions or credits would be of no benefit at all to the two-thirds of households who are non-itemizers.
What does it all mean? People want lifetime insurance coverage but don’t want to pay for it. They don’t want mandatory government insurance but do want government subsidized private insurance. And absent insurance, they have no real idea how to protect themselves against the risk of needing long-term care in old age.
Thank you, Howard, for your thought-provoking article and your invaluable perspective.
Your last paragraph hits the nail on the head. You summarized:
“People want lifetime insurance coverage but don’t want to pay for it. They don’t want mandatory government insurance but do want government subsidized private insurance.”
The good news is that in many states they can get “lifetime insurance coverage” and “government subsidized private insurance” at an affordable price.
Over 43 states have passed landmark legislation creating a “public-private” partnership to help the middle-class plan for long-term care.
These states have approved for purchase a special type of long-term care insurance called a “long-term care partnership policy”.
This program is designed to encourage the middle-class to purchase an amount of long-term care insurance that is equal to their assets. If the long-term care insurance policy runs out of benefits they can apply for Medicaid to pay for their care and all of their assets would be protected from Medicaid “spend down” and “estate recovery”.
In other words, they get an unlimited amount of coverage while only having to pay for an amount of coverage that equals their net worth.
What would the survey have found if they’d asked this question:
If the government approved of special long-term care insurance policies that would protect all of your assets would you be willing to pay $100 per month for that coverage?
I suspect the resounding answer would have been “YES!”
The median net worth for those 55 and older is between $165,000 and $232,000 (according to a survey done by the Federal Reserve in 2013).
A healthy, married couple, both age 61, could share $250,000 of long-term care insurance benefits for about $98 per month per person. (This would include the state-required inflation protection and a starting monthly benefit of $5,000 per person). If this couple exhausted their $250,000 of benefits, they would be able to protect $250,000 of their countable assets from Medicaid.
Caveat: Rates for long-term care insurance vary significantly between insurance companies. Your readers should make sure they work with an LTC insurance specialist to find the best “LTC Partnership policy” in their state.
Although these “LTC Partnership Programs” have been around for years, most people don’t know about them. I’ve told people about these programs and they’ve refused to believe me until I send them the link to the government webpage:
‘Thanks, again, Howard, for your article and for all that you do to help our country face the “elder care” crisis we are facing.
Scott A. Olson
It is really interesting to know that so many people are confused by long term insurance. I would have thought that this was more of a universal thing. That is why it is so important for you to do your research on things like this. You really want to make sure that you are able to get as much help as possible in the future.