Straight Story: Long-term health care
TESS VIGELAND: It’s time once again for our economics editor Chris Farrell to help you sort out what’s smart, what is stupid and what’s the straight story. Now, Chris, The New York Times ran a pretty disturbing story about long-term health care insurance this week. I know you saw it.
CHRIS FARRELL: I did.
VIGELAND:
All right. But for those who didn’t, the headline of the piece really said it all to me. Aged, frail and denied care by their insurers. Now, Chris, really is the long-term care industry as bad as it sounds in this piece?
FARRELL:
Let me answer with a number, and it comes from the story. And I think the number speaks volumes. Nearly one in four long-term insurance claims in California is denied.
VIGELAND:
Ouch.
FARRELL:
That means thousands of people, you know, pay big premiums for years only to be told when they need the money, they’re out of luck. I think Bob Dylan, I love Bob Dylan, asked the relevant question.
BOB DYLAN: How does it feel to be on your own?
FARRELL:
How does it feel? Horrible. I mean, the average price tag for nursing home care is almost 60 grand a year. Medicare covers very little long-term care. Medicaid does, but only if you’re broke. The solution should be long-term care insurance. But here is the straight story. For many people, it’s too complicated, it’s too expensive, and it’s too risky.
VIGELAND:
Well, it certainly doesn’t sound like something that any of us would wanna buy then. What is it supposed to pay for?
FARRELL:
What long-term care insurance pays for is you get old. You have certain disabilities. A classic test. Let’s say you can’t dress yourself. So you need long-term care. So it may pay for it in a nursing home if that’s necessary, and may be at home care. Or perhaps you move to an assistant living center. It’ll help pay for some of those expenses.
VIGELAND:
But it doesn’t do you any good having insurance if the insurance company doesn’t pay.
FARRELL:
That’s right. I think there are a couple of issues here. I wish it was simply an issue of fraud, or a bunch of bad apples out there. Because you know what, we know how to deal with that.
VIGELAND:
Right.
FARRELL:
Put some people in jail. A couple of good prosecutions, a couple of frail people up on the witness stand. Okay. We deal with that situation. I think with long-term care insurance, the product is only been around since the mid 1980s. It is an expensive product. And it is extremely difficult to understand what this product actually is going to do when you need it. And so, my concern is less about fraud because I think we can deal with that. And by the way, state insurance commissioners, wake up. Start dealing with it. But the bigger problem is whether this product makes any sense. The need is there, but I’m not convinced the product is.
VIGELAND:
What are the insurance companies telling patients in terms of why they’re being denied?
FARRELL:
Well, from the New York Times’ story, a lot of the examples was coming up with things that were not in the contract. For example, you need to spend some time in the hospital first. Okay? Well, that’s not in the contract that you have to spend time in a hospital. It’s really a lot of petty tests that supposedly are in the contract that according to the New York Times’ story, were not in the contract.
VIGELAND:
On the other hand, going back to that number you mentioned earlier, three out of four of those claims in California do get paid. So it might be wise for some people to buy a long-term insurance, right?
FARRELL:
If your employer offers long-term care insurance as an employee benefit, I would look very seriously at it because it’s a very affordable product.
VIGELAND:
But wouldn’t you wanna wait until you’re at your, like, your final employer? I mean, you don’t wanna do that if you’re in your 30s or early 40s, and you might be in a different employer when you retire, right?
FARRELL:
Tess, you just hit on one of the hugest debates in the industry. Do you buy it when you’re in your 40s? You may not need it until you’re 75, 83 years old.
VIGELAND:
That’s a lot of premiums.
FARRELL:
That’s a lot of premiums. But how’s the health care system going to change over that period of time? Will that insurance company be around over that period of time? So it makes more sense, and more people do this, where they want to look at the product when they’re in their 60s, 60 to 65. At that point, however, it’s a much more expensive policy. So I’m in the camp that says, look, in your 40s, you need disability insurance. You’re paying for a health care insurance. If you have kids, life insurance. Long-term care insurance falls way down the list, unless you make a lot of money, or your employer offers it as a benefit.
VIGELAND:
All right. The straight story from our man, Chris Farrell. I guess, we just hope at this point that we live forever and never get sick.
FARRELL:
Now, that is the long-term care policy of all long-term care policies.
VIGELAND:
All right. Thanks, Chris.
FARRELL:
Thanks.
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