From Market Watch —
Older Americans increasingly opt for ‘continuing care at home’ plans or join programs that foster community support.
After surviving cardiac arrest in 2013, Martin Faga left the hospital to begin his recovery at home. It didn’t go smoothly.
“It wasn’t clear what care or help I needed,” says Faga, 77.
While his health improved over time, the retired chief executive of Mitre Corp., a nonprofit organization that runs federally funded research-and-development centers, knew he’d want more support if he needed in-home care again. So in 2015, he and his wife jumped at the chance to join a newly launched program offered by Goodwin House, a local nonprofit continuing-care retirement community.
As members of Goodwin House at Home (GHAH), the Fagas stay in their home of 35 years in Falls Church, Va., while receiving long-term-care benefits that kick in if they experience cognitive or physical decline and need help with activities such as eating, bathing or dressing. Those benefits include an insurance contract that covers costs related to long-term care — such as paying for home health aides — and care management from a licensed social worker who can coordinate the hiring of in-home aides, oversee care after discharge from a hospital and evaluate the type of nursing home or other facility that would make the most sense if the couple ultimately needs to move out of their home.
The couple paid an upfront membership fee of more than $180,000 — and continue to pay about $1,000 a month — for a plan that’s 90% refundable if they terminate the contract. In return, the couple can receive a daily benefit up to $402 to pay in-home caregivers if either of them cannot perform at least one daily-living action, with a maximum lifetime benefit of about $1.1 million. It is one of five plans that GHAH offers; others have lower upfront fees based on one’s age and benefit level.
“At first blush, the care-management component may seem like a minor secondary benefit,” Faga says. “But it’s not. It’s equally important to the long-term-care-insurance component.”
“She was very engaged and monitored all of that,” he recalls. “And because it’s Goodwin House calling a provider, the provider has to perform or it’ll lose lots of business. If I had to call care providers on my own, I’m only one person, so I have less clout.”
Faga and his wife also gain peace of mind knowing that if they ever need to move into an assisted-living facility, their GHAH membership will pay off.
“They will never leave you hanging,” he says. “If all of a sudden something bad happens and we have to move, they can work something out among the 50 or so facilities in this area. We know where to turn, and our daily benefit can go toward paying the facility.”
Less insurance, more options
Faga isn’t alone in his concern about where to turn if physical or cognitive decline set in. Aging baby boomers often worry about who will take care of them if they’re unable to manage on their own.
Since the 1980s, some people nearing retirement have mitigated this concern by buying long-term-care insurance. But that’s no longer a popular option, as policies have become more restrictive with longer waiting periods before benefits kick in (up from an average of 20 days in 1990 to 93 days in 2015), lower monthly benefits, shorter benefit periods and less protection against rising costs due to inflation.
Meanwhile, annual price increases ranging from 25% to over 100% have put the plans out of reach for many retirees. Most insurers stopped selling long-term-care policies; today, only about a dozen companies offer new policies, down from more than 100 in the 1990s. Traditional long-term-care insurance may not even exist in a few decades.
“It’s hard to imagine that the retail model of long-term-care insurance is viable in the years ahead,” says Thomas West, a partner at Signature Estate & Investment Advisors in Tysons, Va.