Should You Secure Your Health Care?

By Martha M. Hamilton
Sunday, October 15, 2006

My friend Kathy Seddon spent more than three years taking care of her parents during their stay in a nursing home. Her mother, who died at 88, had Alzheimer's and Parkinson's disease. Her dad, a retired preacher who died at age 91, suffered from dementia.

Given her family's medical history, when the government made long-term-care insurance available to federal employees, Kathy signed up in a heartbeat.

"It was real simple," she said. "I took a look at where things could be headed."

Now retired from her federal job, Kathy was 55 when she opted for long-term-care coverage. And while it's not for everyone, for folks in Kathy's situation, with neither husband nor children -- and a genetic background that suggests she may someday need full-time nursing care herself -- long-term-care insurance makes sense, according to the experts.

On the other hand, said Morris Snow, "if everyone in your family dropped dead of a heart attack at 50, you may feel like playing the odds." Snow is a principal in Mercer Human Resource Consulting's health and benefits division.

Long-term-care insurance covers people who need help with some of the basic activities of daily living, such as bathing. Depending on the policy, that care may be delivered in a nursing home, an assisted-living facility or by health-care aides at home.

For most people, family history isn't as definitive as Kathy's. In those cases, finances are the key to whether long-term-care insurance makes sense or not. Generally speaking, it's not for people with either a lot of money or very little.

Affluent consumers may be able to put aside enough money over time to pay for several years of nursing home care if they need it. And low-income consumers are eligible for Medicaid. Jointly funded by the state and federal governments, Medicaid pays medical bills for low-income, the elderly and people with disabilities.

But people in the middle may want to look into long-term-care insurance. With the average daily cost of a private room in a nursing home at $206 and home health-care aides charging about $25 an hour, paying out of pocket for long-term care could quickly wipe out everything you've accumulated.

One benefit of such insurance is that it allows you to protect property or money that you'd like to pass on to your heirs or keep for your own needs. If you end up in a nursing home without long-term insurance, you may have to use the very assets you'd like to protect to pay for your care until they are nearly gone, and Medicaid kicks in.

A big question about long-term-care insurance is when to buy. Buying at an early age may mean you'll have lower premiums and an easier time qualifying. But premiums may increase while you hold the policy. In the past several years, many insurers raised premiums by substantial amounts, Snow said. But he added that he thinks insurance companies have become better at pricing policies, which may result in a lower risk of premium increases in the future.

Another question is whether you can afford the premiums after you retire. If not, you could lose everything you have paid into the plan. "It's not for people with limited resources because the premium could be more than they can afford at the time they're closest to needing it," said Sandy Praeger, insurance commissioner for the state of Kansas.

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