Long term care: An untapped market

Long term care: An untapped market

Zinkewicz, Phil

With merger fever dominating the property and casualty insurance arena- resulting in dwindling markets for independent agents-and with new competition expected from banks and securities firms, producers are finding it difficult these days to keep cash flowing into their coffers. Those who have not already branched out into the life and health fields are perhaps looking more diligently in that direction for additional revenues.

However, even in the life and health field there is tremendous competition, with the possible exception of one area-long term care. It is ironic that while independent agents bemoan the prolonged property and casualty soft market with lower commission income, they have not pursued the sale of long term care products, especially with the entire Baby Boom generation as a potential market. Perhaps they believe that long term care is too complex. Or, perhaps they wrongfully believe that long term care is the province of government programs.

In point of fact, there is strong evidence that the government may not be able to meet the needs of Baby Boomers in the coming years. A new study recently released by the American Council of Life Insurers (ACLI) shows that most Baby Boomers don’t realize that there is a high chance they will spend the end of their lives in a nursing home. “Middle income Baby Boomers will find that to successfully age `in place–that is, in their homes or in the home-like setting of an assisted living facilitythey will have to use their retirement savings to pay for increasingly expensive long term care services,” says Barbara Stucki, primary author of the ACLI study “Can Aging Baby Boomers Avoid The Nursing Home?” “Without private long term care insurance, many will face potentially catastrophic costs that could lead to impoverishment and the need to use Medicaid-funded nursing home care.”

The study projects that the costs of long term care services will more than quadruple by 2030. At the bottom end of the scale, adult day care, which currently costs an average of $50 per day, will increase to $220 per day. On the next rung, assistance by a home health aide, which now costs $61 per visit, will cost $260 per visit. Staying in an assisted living facility, which currently averages $25,000 per year, will cost $109,100 per year. Nursing home care, which currently averages $44,100 per year, will cost $190,600 per year according to the study.

The ACLI study also projects that by 2030, total national expenditures for home- and community-based long term care will leap from $41 billion today to $193 billion. “These findings illustrate the importance of taking personal responsibility for your financial future and for your future long term care needs,” says Stucki. “We found that about half of long term care policyholders currently receiving benefits report they would have had to move into a nursing home without their insurance benefits. And more than 70% report that their long term care insurance policy pays all of the costs of the services they need. And that goes a long way toward reducing the financial and emotional burden on family caregivers,” she says.

The study also points out that Baby Boomers typically have fewer children, so there is less family available to provide assistance when they reach retirement. The high rate of divorce is likely to take a toll as well because divorced parents are less likely to receive caregiving assistance from their children than are widowed parents. Says Stucki: “Because government programs are biased towards nursing home care, if you rely on government help, the nursing home is where you’re likely to end up. That’s ironic, given that one government study says that half of the people in nursing homes don’t need that kind of intensive care and could have maintained their independence if they received long term care services at home.” However, unless one is very wealthy, it is almost impossible to afford that kind of care without long term care insurance.

The Seattle-based Center For Long Term Care Financing agrees with the ACLI study’s findings and has been on a mission to convince legislators to revamp long term care using private insurance as a base. “The 1970s should have been the golden age of long term care in America,” says the Center in a special report. “The gerontological wedge pushed into American demographics during that decade could have opened an era of unprecedented entrepreneurial problem-solving. By now we would have a market-driven continuum of care seamlessly covering everything from chore services to assisted living to sub-acute care. We would also have an infrastructure of long term care insurance and home equity conversion to finance it. Public welfare might still have a role to play in long term care, but that role would not be the tragedy of perverse incentives and unsatisfactory outcomes it is today.

“Instead,” continues the Center, “with every benevolent intent, Medicaid co-opted long term care by the late 1960s. It impeded the private market for low-cost senior services and housing and discouraged the development of private long term care insurance by providing free or subsidized nursing home care. It created a Frankenstein’s monster of institutional care by targeting only nursing homes.”

Today, tackling that monster practically on his own is Martin Bayne, a 50-year-old former owner and president of a successful insurance agency who used to earn a six-figure annual income. Bayne, a 1981 graduate of the Massachusetts Institute of Technology, spent most of his life in Middletown in Orange County. He became actively interested in aging and disability issues when he began working in the insurance industry soon after he graduated. Bayne was exposed to the problems of the elderly when his grandfather was paralyzed by a stroke at age 49.

He moved to Albany in the early 1990s, where he started New York Long term Care Brokers, the largest long term care insurance brokerage agency in the state. Bayne used to visit nursing homes and talk to many of the residents. He saw them as real people who still wanted to live their lives. “They don’t have their own lobby in Washington. They don’t speak with a great voice. They are silent. There’s no one to act on their behalf as an advocate, and I decided I would try to help them,” says Bayne.

Twelve years ago, Bayne began publishing a monthly newsletter about aging and long term health care issues. Six years ago, he was one of the first people to establish a Web site on the Internet called “Mr. Long term Care.” While he was still working in the insurance business, Bayne was diagnosed as having Parkinson’s Disease. He retired from the business but, despite his illness and the fact that he must walk with a cane and take large doses of medication, he remains committed to the issues involved in long term care.

Since he was diagnosed, Bayne began working with the Parkinson’s Action Network, the same advocacy group with which actor Michael J. Fox is associated. “I think it’s good that Michael is going to be a spokesman for Parkinson’s,” says Bayne. “Like it or not, we have this fascination with celebrities. They can get a lot accomplished.”

On his Web site, Bayne has written his “Manifesto for Independence.” He says, “When first thrust into the role of a long term care caregiver or patient, we begin to understand that our adversary is a formidable opponent. And as the true nature of this adversary is revealed, you begin to realize what’s at stake. Everything. What we value most-our dignity, independence, family relationships, even our life savingsbecomes barter overnight. In essence, our very lives become negotiable.”

Bayne admits he doesn’t have all the answers to the questions involved in long term care, but he says, “I do know that we have to start talking about these issues today, not yesterday.” Bayne’s Web site contains interviews he has conducted with former President Jimmy Carter, First Lady Hillary Rodham Clinton, Senate Aging Committee head Charles Grassley, as well as non-political leaders in long term care. One of Bayne’s most recent activities was to compile a series of weekly non-commercial audios narrated by executives from the nation’s most prominent long term care insurance companies. The talks gave an easy-to-understand overview of long term care insurance.

But that doesn’t mean that he is in the insurance industry’s pocket or even that he believes long term care insurance is the only answer to the long term care problem. Recently, he was interviewed by the Wall Street Journal when he called for a national boycott of a major provider of life and health insurance products. The company said it was exploring selling its individual life insurance and reinsurance business. He said that this action and similar actions by other life insurers creates “transition orphans,” policyholders who unknowingly buy policies from insurers who plan to ultimately sell the policies to other insurers. The new insurer may not be able to pay claims in a fair and timely manner or have sufficient reserves to pay claims, he says.

During the six years of operating “Mr. Long term Care,” Bayne says he has spent more than $500,000 of his own money to keep it going. Recently, the Novaratis Foundation for Gerontology, supported by Novaratis Pharmaceuticals, formed a partnership with Bayne. Novaratis will supply funding needed for Bayne to hire a small writing and public relations staff.

Bayne says that what is needed is a program that will educate the public about the problems of long term care, one that will offer the elderly a choice as to what type of long term care they need and financing coming from both the public and private sector. He says also that Congress has been reluctant to tackle the problem of long term care because currently most people are paying for it themselves. Congressmen believe that if they really educated the public on the issues, it could bankrupt government programs. “What we need is a spokesman,” he says, “someone such as Senator John Glenn.”

Meanwhile, he believes that the insurance industry has to do its part by creating dependable long term care insurance products. Agents have to do their part by becoming active in the arena, learning the issues and selling the products that Baby Boomers need.

Copyright Rough Notes Co., Inc. Sep 2000

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