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As America ages, issue of long-term care emerges

When the Obama administration recently backed off a long-term insurance program that was part of the law to overhaul health care, we all lost.

The so-called CLASS Act, which even supporters acknowledge had design flaws, would have allowed workers to voluntarily buy a long-term care policy regardless of their health. The benefit wasn't huge, but it might have been enough to allow some seniors to remain in their homes. And it was better than nothing — which is what most people have now.

But as it turned out, the program wasn't financially sustainable and was dropped before it ever launched. That means any serious discussion to address the nation's long-term care needs is unlikely in the foreseeable future. With Congress so polarized, especially on health care, this most likely will be a can kicked down the road until we reach a crisis.

"The biggest economic risk this country faces is the economic consequences of longevity," says Harold Lustig, author of "Naked in the Nursing Home: The Women's Guide to Paying for Long-Term Care Without Going Broke." And, he says, "the problem is not going away."

Without a national solution, consumers are left on their own to plan for the possibility that someday they might need outside help to remain in their homes or to spend time in a nursing home. It's planning that many of us avoid.

"People don't like to think about it," says Dee Mahan, director of Medicaid advocacy at Families USA. "It can get people down."

Some gamble that they won't need long-term care, and they could be right. But if they do, the financial burden can be stiff.

A recent study by the Commonwealth Fund and other research groups concluded that long-term care services are unaffordable. The typical cost of nursing home care, according to the study, is 241 percent of the average household annual income of older Americans. And the national median cost of a private room at a nursing home was $75,190 a year.

The rich, of course, can afford to pay for their own care. And Medicaid will pick up the tab for the poor, although that program is financially stretched.

Planning becomes important for those in the middle. Long-term-care insurance, which pays the bills for home care, assisted living and nursing homes, is one option. But it's a difficult decision, because policies are often complex and difficult to compare, consumer advocates say.

Policies also aren't cheap, and only get pricier as we age. And many insurers have had such weak investment returns in recent years that they are seeking regulators' permission to raise premiums even more.

The Maryland Insurance Administration received 21 requests to raise premiums this year, and so far has approved 11 of them. Maryland limits increases to no more than 15 percent a year.

"Long-term-care planning is a universal need, but long-term-care insurance is not a universal solution, " acknowledges Jesse Slome, executive director of the American Association for Long-Term Care Insurance.

If you are thinking about a policy, Slome and others offer these tips:

Buy early. Slome usually advises people to purchase a policy between ages 52 and 64, while premiums are still affordable.

As an example, take a basic policy that provides a $4,500 monthly benefit for a maximum of five years, with benefits rising with inflation.

According to Genworth Financial, the annual premium at age 55 would be $2,900 for singles, and $3,600 for married couples. At age 65, the annual premium jumps to $5,000 for singles and $6,000 for couples.

Wait too long and you also risk developing health problems that could make you ineligible for insurance. Slome says one out of four applicants ages 60 to 69 is denied coverage, while 45 percent of those between 70 and 79 are rejected.

Check out policy partnerships. To qualify for Medicaid, you must have limited assets. But most states, including Maryland, have programs that allow you to keep a sizable amount and still qualify for Medicaid. The catch: You must buy long-term care insurance.

The policy kicks in when you need care, and once the benefits run out you can apply for Medicaid. (You still must meet other Medicaid qualifications.)

You're allowed to shelter assets equal to the amount paid out by the policy. So, if you used up $175,000 in benefits, you can retain $175,000 in assets. Usually, a Marylander can't have more than $2,500 in assets — excluding a house — to qualify for Medicaid.

The policy must be purchased through a participating insurer, and must offer certain benefits such as an inflation feature so coverage grows over time.

Families USA's Mahan says this is a good place for consumers to start their search. With the states' involvement, she says, this is the closest thing to a Good Housekeeping seal of approval.

Find more information online about Maryland's Long-Term Care Partnership Program and participating insurers at http://www.mdinsurance.state.md.us/

Buy enough coverage. To get an idea of care costs, Lustig recommends going to a facility in your neighborhood to find out prices or checking out one of the industry surveys on costs.

A recent Genworth survey found that the annual median cost of care in Maryland ranged from $19,500 for adult day care to $89,972 for a private room in a nursing home.

Keep in mind, you don't have to foot the entire long-term-care bill with insurance, Slome says. You can use Social Security or tap a 401(k) to pay part of the bills and then purchase a policy with smaller benefits, he says.

Policies can come with lots of bells and whistles, but you can keep premiums down by only buying benefits that you actually will need.

Buy a policy with an inflation feature that boosts benefits as years go by. When you need care, it can be 20 or 30 years down the road, and you can count on the cost being higher then.

Know before you buy. Shop and compare policies and prices. Make sure you understand the terms before purchasing insurance so you avoid ugly surprises later.

Often when Maryland regulators get complaints from consumers, it turns out they didn't understand what they bought, says Joy Hatchette, associate commissioner for consumer education and advocacy for the Maryland Insurance Administration.

"When they are ready to use it, it's not performing the way they thought it should have," she says. "It's in the contract, but they haven't taken the time on the front end to understand it."

eileen.ambrose@baltsun.com

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