Home Health Care, With or Without Insurance

Al Clapp’s article “Long-Term Care Insurance” (September 2003) was informative and thought-provoking.

The significant costs associated with long-term care make insurance an attractive financing vehicle, especially when one realizes that social programs such as Medicare will not pay for in-home care with the activities of daily living.

The growing numbers of elderly will lead to changes and new alternatives. While improvements in policies have expanded in-home coverage and have increased the flexibility in obtaining caregivers, the changes will continue.

The current delivery process for in-home care from health-service agencies must be addressed. Paying an agency $17 an hour (or more) when the caregiver receives $7 an hour makes no sense. A better way is to directly hire a qualified worker without an agency, at a rate greater than $7 and less than $17 an hour, therefore making the cost of the care more affordable.

With or without long-term care insurance, families with resources will pay for the services they need or do without them. Insurance should be another tool to fund these costs.

I appreciate that Mr. Cronen’s company favors hiring less costly home caregivers. What home caregivers cost today is an important concern. Most LTCI reimbursement policies require an insured at home on claim to hire a home caregiver either from a licensed home-care agency or hire privately a certified home health aide. On an hourly basis, the average reported national cost of licensed home-care agency caregivers has indeed been reported at $17. LTCI companies may offer policyowners a discount of $2–3 hourly, especially for longer-term arrangements with licensed home-care agencies. The costs presented in my article assumed a caregiver must be employed seven days a week and available 24 hours a day. The article also indicates that costs vary greatly if a single caregiver lives in ($200 daily/$73,000 annually), in contrast to having two shifts of care ($312 daily/$113,800 annually). Unfortunately, information on the wages or earnings of private caregivers is not available. Assuming FICA is withheld, health insurance paid, and modest vacation and other benefits are offered, it is estimated that they may earn wages comparable to licensed home-care agency aides, at least in the more expensive greater New York area.

With the elder population doubling in the next 20 years and the growing shortage of caregivers, the article also notes that costs are generally expected to compound 5% annually, equivalent to doubling every 15 years. Therefore, it is important to recognize the importance of the 5% compound inflation rider. LTCI buyers should consider the more flexible home-care coverage that is offered by only a few policies, and to compare the amount of coverage purchased versus possible costs.

I should clarify the statement in my article about life insurance companies that discontinue selling LTCI coverage and policies. It is important to recognize that the policies sold in the past probably remain in force. While the coverage of older policies may be valuable as premiums increase with age and a person may become rated or uninsurable, it is also important to periodically review policies in force, an insurance company’s financial strength, and the relative value of the coverage. If a company’s financial ratings are lower than an A from A.M. Best or its premium pricing prices on an older policy were considerably underpriced, a company may request permission to increase premiums on a policy class from the state insurance department. In summary, LTCI is guaranteed renewable, but premium prices are not guaranteed. Consider better companies that are committed to LTCI, as well as policies with flexible home-care coverage that permit an insured on benefits to hire a private caregiver.

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