Nursing home and long-term care insurance being sold to the elderly is often full of exclusions and exceptions that reduce protection, the General Accounting Office told a House Select Committee on Aging hearing yesterday.

Other witnesses said salesmen often use extremely questionable marketing tactics.

Rep. Claude Pepper (D-Fla.), chairman of the subcommittee on health, who presided over the hearing, has long been an advocate of stronger regulation of insurance policies for the aged.

"Each day unsuspecting elderly are ripped off without even knowing it by agents who are out to make a fast buck . . . . I can tell you that agents where I am in Florida are just drooling at the sight of more and more seniors looking for this type of coverage," said insurance agent John Gilmore of Naples, Fla., detailing how sales of nursing home and other insurance for the elderly sometimes use scare tactics -- such as asking, "How would you like to spend the rest of your life eating Kal-Kan?" -- deceptive concealment of "fine-print" limitations on coverage and policy-switching.

Lillian Simmons, 68-year-old volunteer for a Pepper subcommittee, said that some of the 12 agents she contacted in the District of Columbia, Maryland and Virginia told her that unless she bought long-term-care insurance she could "end in the poorhouse." In Virginia, she said, a salesman told her a policy would cover all nursing home and custodial costs, when it had no custodial coverage and did not cover Alzheimer's disease; in the District, an agent refused to give her a straight answer on custodial-care coverage.

The GAO said that by last April about 420,000 people had long-term-care insurance. It surveyed 33 policies offered by 25 companies in 1986, at premiums ranging from $20 to $7,030, depending on age and coverage.

The GAO found that policies usually paid a specified amount that did not increase to compensate for inflation. Five paid only for care in a skilled nursing facility -- not intermediate care or other facilities, which house most elderly who are institutionalized; 29 would pay for a nursing home only if a person were ill enough to require hospitalization first; 18 excluded benefits for nonorganic nervous and mental disorders; 16 excluded benefits for alcohol-related diseases; 16 for narcotic-related diseases, and 12 excluded benefits for all nervous and mental disorders including Alzheimer's disease.

Bruce Boyd of the Health Insurance Association of America, declaring that "One bad apple spoils the barrel," said his association had helped the National Association of Insurance Commissioners in 1986 develop a model law, already adopted by 10 states, forbidding exclusion of Alzheimer's, prohibiting cancellation of policies solely for age and providing other protections.