What Do Clinicians Need to Know About Private Long-Term Care Insurance?

A new article from the Journal of the American Geriatrics Society (JAGS) offers a deep dive into some of the hard-hitting questions geriatrics clinicians face when discussing long-term care (LTC) insurance with older adults and caregivers.

Despite common misperceptions, financing for LTC is largely left to individuals in the United States. But with services and supports varying almost as much as fact-vs-fiction, providers often struggle with keeping patients informed while also helping them make informed decisions that best support personal needs.

Without advocating for any specific solution, the new JAGS article—authored by Brian McGarry, PT, PhD, and David C Grabowski, PhD, of the Department of Health Care Policy at Harvard Medical School—addresses several important questions older adults and caregivers may have and how health professionals can orient their responses to high-quality, person-centered care.

Below is a teaser of Drs McGarry and Grabowski’s analysis. For a deeper dive, visit https://doi.org/10.1111/jgs.16075. 

What is private LTC insurance? Private LTC insurance is the primary product available to US consumers to help protect against financial exposure associated with LTC. Individuals purchase a defined set of benefits that can be accessed once a predefined level of disability is met. In return, beneficiaries pay an annual premium until benefits are triggered (failure to pay the premium typically results in termination of the policy and forfeiture of the benefits). In 2015, the average annual premium was $2700; premiums increase with individuals’ age at the time of purchase. Only 11% of individuals aged 65 years and older currently own an LTC insurance policy.

Does LTC insurance make financial sense? That depends. For households with limited income and assets to protect from “spend down” to Medicaid eligibility, LTC insurance has limited financial benefit. Very wealthy households likely also have little need for LTC insurance, since they have the means to self-insure. As a result, LTC insurance primarily targets the “middle-mass” of aging adults with sufficient wealth to protect but with insufficient wealth to pay comfortably for long bouts of care.

Who is healthy enough to purchase LTC insurance? Prior to selling policies, LTC insurers perform extensive screenings of mobility, the ability to perform activities of daily living, cognitive health, medical history, health behaviors, weight and height, and other health markers. The results of this “underwriting” process (the process an insurer uses to assess the financial risk associated with a potential customer) determine whether to offer an LTC policy. It is estimated that 40% of individuals aged 50 years and older would be deemed ineligible to purchase LTC insurance based on their screening.

What are the benefits and pitfalls of LTC insurance? The primary benefit of LTC insurance is that it protects against catastrophic spending for LTC needs. LTC insurance also can provide policy holders with peace of mind, particularly when discussions about LTC take place while the policy holder is still healthy and able to articulate preferences and needs. Still, LTC insurance policies are expensive, and premiums often increase with time. The risk protection they provide is also incomplete as benefits have predetermined caps. Given the nature of LTC, policy holders also run the risk that insurers will not be in business when benefits are needed (an average of 24 years separate policy purchase from LTC claims).

Who should buy LTC insurance? There is no easy answer. When faced with this question, clinicians may be served best by helping individual patients reorient their thinking toward future care needs, including care preferences and financing options. Because many adults wrongly believe Medicare covers LTC services—and because people tend to underestimate the risk of ever needing LTC—providing basic facts may be an important place to start any LTC conversation.