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The Pros & Cons of Long Term Care Insurance · CareTalk: Healthcare. Unfiltered.

• 0:00
  Nursing home stays can easily run over $100,000 per year. That cost is a big source of fear for older Americans, 70% of whom are going to need some form of long term care in their lifetime. So long term care insurance seems like a great answer. So why do only three to 4% of people have coverage?
• 0:24
  You welcome to CareTalk America's home for incisive debate about healthcare, business, and policy. I'm David Williams, president of Health Business Group.
• 0:37
  And I'm John Driscoll, the president of Walgreens Health. Hey, come join our ever growing community on LinkedIn, where you can access CareTalk content and interact with the hosts.
• 0:47
  And be sure to leave us a rating, too, on Apple or Spotify while you're at wait, wait, wait, wait, wait. Jump into these complicated things like long term care insurance. Let's start with what is long term care insurance? Isn't insurance cover doesn't my health insurance cover everything, john, I thought you're going to start even like, what is long term care? But let's start with long term care insurance and we can work our way back to what is long term care. So no, your health insurance doesn't cover long term care. It's going to cover a short term stay in a nursing home if you need to be discharged after you're in an accident or something, god forbid.
• 1:27
  But yeah, if you need long term care over 30 or 60 days, you're not going to get it through your regular health insurance or through Medicare. So if you don't want to pay for it yourself, you'd need long term care insurance.
• 1:42
  But again, just to keep the confusion to a minimum, we've got home care, we've got nursing home care, we've got all these other forms of care that are paid for by Medicare and health insurance. What's different about long term care that differentiates that makes it different than regular health care insurance? So you're going to find that, first of all, most people, your confusion, John, you're in good company. So if you ask people if they have long term care insurance, 18% of adults say yes, including 27% of millennials. But only about maybe three, maybe 4% of adults actually have long term care insurance, and they're mostly older people.
• 2:26
  So the millennials, as maybe pessimistic as they are, they seem to think they have long term care insurance. So you would assume, yeah, I'm covered. But no.
• 2:37
  Nursing homes in particular are not covered by Medicare.
• 2:41
  If you look at who actually pays for the cost of long term care, 70% of it, a little bit more is from public sources. 44% of the total is Medicaid.
• 2:51
  That's the program for the poor. But we'll come back to that in a second.
• 2:54
  Medicare does pay for about 20% other public, including the VA. So for veterans is about 6% and the rest is private. And the 29% or so that's private out of pocket is 14%. Insurance is only 8%. And then there's philanthropy.
• 3:10
  If you're lucky enough, which is 7%. So John, Medicaid is the big payer here. That's kind of funny.
• 3:16
  Well, I think the difference that people need to understand and I teed you up for that obvious statistical point, David. You should be thanking me for that. I appreciate it. Thank you very much, Sean, is that there is a differentiation that grays a little bit when you get into Medicare and Medicaid between strictly medical expenses. You're in a car crash, you break your hip, you need acute infusions because you've got cancer. And then the things that affect activities of daily living, which is to say, as people age, they often have a number of services that are pretty essential activities of daily living, like washing yourself, feeding yourself, basic things that if you have the good fortune to live a very long life. Your lifespan.
• 4:08
  How long you live, will extend well beyond your health span, where you're healthy enough to actually manage your daily life.
• 4:15
  And much of the long term care, which is assisted living, as well as nursing homes, as well as home health AIDS, home AIDS, home health meaning health related AIDS to the home, AIDS to the home. Just being really custodial, support, cleaning, picking up after yourself, organizing the house, feeding, cleaning the patient is much more in that activity of daily living area. And really what often qualifies you or triggers long term care insurance for the form of long term care you have is you fail two of the basic activities of daily living things like being able to clean yourself and eat and David, the reality is, with the age of the population ranging that's why the age of retirement is at 65. People used to die at a much younger age in the 60s, in the 50s. Well, right now the average American is going to grow to age to at least 77. And you've got the baby boomers of 10,000 people turning Medicare eligible every year, and a lot of them are going to be over 75. Used to say, John, every day, every year, every day, sorry.
• 5:37
  And what that means is you've got an increasingly large percentage of the population that's relatively healthy that's going to age into this area of long term care. And David, the long term care industry is not faring very well. Do you want to talk a little bit about how things are going for the long term care industry that's supposed to be caring for the older folks that you and I will be soon? Yeah. Well, John, I was looking at long term care, as you say, to everyone, many people are going to need it. And so it makes sense you want to have insurance for it. And as I said, many people think that they do. And so I was looking at just like, how much does this cost?
• 6:21
  And it depends is the answer. And it depends on a lot of things like your age, your health, the amount of coverage that you want, whether you want to keep up with inflation and whether it's individual coverage or coverage with a spouse.
• 6:34
  Now, interestingly here, gender factors in too. In health insurance in general, you don't allow for gender.
• 6:41
  But the truth is that women are likely to need care, long term care, more than men and for longer periods of time. So price is higher. Well, they live longer.
• 6:52
  Men tend to die more abruptly for them.
• 6:56
  But anyway, the price of long term care insurance is about $5,000 a year for a couple, on average, for $165,000 of coverage. That varies a lot. Now, how is the industry doing?
• 7:08
  Well, the long term care wait a second, before you go there, since you didn't answer my question initially. What is that $165,000 of coverage, which sounds like a lot, what does that actually cover if you and your spouse were to buy that? Yeah.
• 7:23
  Well, first of all, if you'd have to be certified that you have those two activities of daily living at least that you can't do yourself, and the denial rates have actually gone up on that from really low numbers, up closer to 10%. So you got to make sure that you're really incapable of doing some of these things. But that would cover about a year and a half in the average priced nursing home, because the nursing home is just over $100,000 a year. And people on average actually do go to a nursing home for about that time frame. So that's about what that covers, John. That's what that's based on. Now, it can be used also for home care in some cases, too, or assisted living.
• 8:02
  So there is the possibility for the newer forms of insurance to be able to use it for that, even though that historically has just been for the nursing home. Yeah, historically the need was that people identified in the that there would be an explosion, that this would be a great growth industry and they would cover nursing home stays which were relatively inexpensive. And the way people actually have chosen to live is a lot less time in nursing homes, a lot more interest in getting care of the home. But before we get to how the actual long term care industry has evolved, let's talk a little bit about that great idea people had in the building long term care insurance companies and selling long term care insurance to everyone. How's the industry fared in providing the insurance? Well, it worked pretty well for a while, John, before the chickens came home to roost, otherwise known as the baby boomers. And people started to live longer and have longer stays and for those stays to be more expensive. And so the companies hadn't done too well. And in fact, they've been raising premiums over time, and some of them have gone bankrupt. So in general, it's been a loser in terms of a line of insurance, they underestimated the cost and they overestimated the percentage of people who would let their policy lapse.
• 9:24
  Now, normally what happens is people pay premiums for a number of years, but if they stop, then if they have a need, then they're not covered.
• 9:31
  But what happened is that instead of roughly 4% a year of people canceling their policies, it's been more like 1%.
• 9:39
  So they've got people that have stuck with it and then they get slammed.
• 9:42
  Now COVID, which was bad. David, David, David, David.
• 9:46
  To be fair, these guys had to have been knuckleheads. They sold hundreds of thousands of policies in the growing population that by every estimation was living longer and would need because the longer you live, the more likely you are to need long term care insurance. And frankly, because you're older, you're going to need more of it.
• 10:09
  How they miss that, I don't know, but literally the number of companies that provided long term care insurance was over 100 in the think it's down to 15 to 20 now. So the industry has been decimated by bad decisions. Yeah, well, John, the thing is that the long time frames here are an issue, right? So the people that made those decisions now they're retired. In fact, they probably enjoyed their life in their nursing home at this point. They got their bonus. They're going to claw back the bonus from beyond the grave.
• 10:42
  So that seems unlikely. Now, a good positive for the long term care insurers was COVID. Because, John, during the pandemic a couple things happened. First of all, a lot of the policyholders just died because they didn't need their coverage, because they're dead. And then others actually went home from the nursing home and were taken home. So there was a little blip there for a couple of years where they were making money.
• 11:07
  But that has now come and gone.
• 11:10
  Now there's a big issue of the price of care going up, John, and that although it's predictable health care costs have gone up, maybe it's gone up to a greater extent.
• 11:21
  Some of that has to do with a crackdown clamp down on immigration. So there's often these nursing homes are staffed by immigrants and also those certainly that provide home health a lot fewer, those people around being invited here.
• 11:37
  And so that's part of the problem, driving up costs and limiting availability. Well, I think it's all of the above, Dave. You've got an industry that's literally collapsing, that was losing billions going into COVID, made in the hundreds of millions of dollars during COVID And it's probably going back to losing money because the nature of a long lived policy with people who keep needing more service is it's hard to actually estimate correctly the compound cost increase. When you combine the fact that they missed how long people were going to live, they probably mispriced health care inflation and they may have coverage that's pretty considerable. And depending on the policy that was sold, the company may not have the ability to actually increase its prices consistent with actually paying for its long term liabilities. In addition, the nature, the mix of things that people need has gone from being more predictably, nursing home, classically custodial care in an okay facility. I don't think anyone's people aren't competing on the for the most part, the industry is not competing on quality. It's competing on value.
• 13:01
  But also assisted living where you need a little less custodial care. It's more expensive because there's less people kind of managing your drugs and managing your ADLs and frankly, care to the home where honestly, the vast majority of people really want to get care and support in the home. They don't want to leave their homes. In fact, that can be a devastating indicator of how long you're going to live is really losing your capacity for independent living and all of that for those policies that provided support for assisted living and home AIDS have also exploded. So the mix of services is getting more expensive.
• 13:40
  The burden on the companies has gotten greater. But David, there's got to be a solution. Yeah, John, this is a bad news story all around. This is exactly what insurance is for and it doesn't seem like the industry is competent at providing it. So what are some alternatives? I mean, how do we fix I mean, I think I was going to point out that you're real Debbie Downer on this topic. So we come up with some solutions. So let's break it up to a couple of areas. One is what can people do on an individual basis now? And then what should sort of reform should be made? Long term care insurance. And then more broadly, what kind of structural things? So what does an individual family do now? Either they don't have long term care insurance. It's unaffordable. They have needs. Well, there's a few things. One is they just delay care so that someone is just suffering more. And instead of two ADLs, they've got three or more or five things that they can't handle. The family chips in to help either uncompensated or undercompensated.
• 14:43
  They spend down to medicaid. That's what a lot of people do. So that's kind of on the individual level, explain what that spend down to Medicaid means. So I said we would come back to this, John, because it's something 40 plus percent, 44% of the total spending on long term care is from Medicaid. Now, that's not just because poor people got sick and needed to go to the nursing home. What happens is that people that were better off ended up qualifying for Medicaid in order to get long term care insurance. Often that's because they just spent all their money up front. They now qualify for Medicaid because they don't have assets and their income is low. It also sometimes people intentionally kind of spend down, give money away or hide it so that they can qualify for Medicaid. That's what happens. I don't think that's a good solution. That's not really what Medicaid should be spending all its money on. In the long term care insurance market itself, I would like to see policies that are more like insurance.
• 15:41
  Sometimes we think about health insurance. It covers all the routine things.
• 15:44
  Insurance is really for things that are unlikely to occur and will be devastating if they did.
• 15:51
  A lot of the nursing home stays are not that long, so it's a year and a half on average. But to be able to make it so that people could perhaps pay for the first few months or six months of care in a nursing home and then have the insurance kick in and not have a limit, that I think could work, but that's not allowed according to the regulations. That's one thing you could do on the long term care insurance. I think all your ideas are terrible. I think we need a state or federal solution. This has got to be like flood insurance, David. We've got this megawave of aging Americans.
• 16:29
  We've got an industry that doesn't really do a very good job at insurance or support, and we've got an underfunded elderly services industry, home health.
• 16:41
  We can't get enough home health AIDS, to your point, because we've screwed up.
• 16:44
  And we've clamped down on immigration, which is one of the greatest sources of labor relief in an area where people aren't paid enough to do really tough but really vital jobs that really provide for the civility of aging with grace, even if you're near death. There are other countries that have figured this out. Singapore and the Netherlands, two of your favorite vacation destinations, have got federal funds for those countries that provide for long term care insurance. I mean, we should probably figure out how effective they are, because in both cases, those are very long lived populations.
• 17:24
  The state of Washington is now providing. It's not unlimited coverage, but coverage for everybody in the state. But I think that in absence of an effective private sector with this massive problem, we've got to see some public sector solutions. What do you think of, know, like Singapore and the Netherlands? Let's find like, two of the smallest countries and give those an example. Sure. But people live for an awfully long time, and they're both well organized, relatively inexpensive, very effective healthcare systems. Thank you very much, David. You've got to do your research.
• 18:01
  We look better than Russia. How's that? So, John, on these points so you mentioned flood insurance. So flood insurance is great, right? So the Feds come in and they subsidize people that are living close to the ocean. The problem with flood insurance, John, is it doesn't solve the problem of climate change. Right. If there's going to be bigger hurricanes and more flooding, flood insurance, sure, it helps if you're not my point. If you're florida right. It's a different podcast. You're not going to be able to reduce the cost of health of long term care insurance without reducing the cost of the but we could at least be honest about the social obligations we cover for health insurance.
• 18:41
  That's why we have Medicare and Medicaid. No one's talking about taking that away.
• 18:44
  Well, maybe some of your Republican buddies are. But in general we understand that providing some element of universal coverage is part of our obligation as a country and as a state. Why don't we treat the last six to twelve months of your and my life with the same respect we treat the earlier parts of life? This elementally is driving, I'm sure, mental health and other clinical costs, because in some cases people who can't get a space in the nursing home actually do end up stuck in a hospital, frankly, because it's easier to get paid. We've got to do a better job. And I think this is one of those situations, David, where the private sector has failed and the public sector has to step in. What's your problem with that, John? One of the examples of a dysfunction that was mentioned in a good Kaiser Health News article on this, which is co authored by one of our former guests, Jordan Rao, was that there was somebody that was denied coverage. They were denied long term care insurance because they were taking antidepressants, and they were taking antidepressants, apparently to deal with the stress of caring for their elder who didn't have a long term care insurance himself.
• 19:57
  So yeah, there's plenty of problems, John. I think we do have the federal solution, which is Medicaid, that exists, and we should be focusing on reducing the need for long term care and reducing the cost of it and focus less on the insurance side. That's my suggestion.
• 20:11
  Well, I think you've had a couple of examples of Congress, some bipartisan ideas, the Class Act and others which haven't gotten any traction, but I think we've got to dust those off and we've got to think about a big government solution here, regardless of what you and your Republican buddies are thinking about it. So I like that. You're in Trump colors, by the way. Thank you, John. My last point was going to be that Class Act and Congress, I think, are an oxymoron.
• 20:37
  So I'm not surprised that didn't get through. Well, that's it for yet another episode of Care Talk. We've been talking today about long term care insurance or the lack thereof. I'm David Williams, president of Health Business Group. And I'm John Driscoll, the president of Walgreens south. If you liked what you heard, or you didn't, we'd love it. If you'd subscribe on your favorite service.