Can you afford long-term care? [Daily Press, Newport News, Va.]

Dec. 23--James Vermeiren estimated that Social Security, retirement savings and an assortment of investments weren't enough to pay for a stay in a nursing home.

The 68-year-old Newport News resident is healthy and lives on his own now, but Vermeiren knows that could change.

So in 2002, he purchased long-term care insurance to help cover the cost of a nursing home stay or in-home care. In this area, the estimated average cost of a private room in a nursing home is $70,628 a year.

"I knew I needed to supplement my retirement income and dividends and interest," he said. "I knew I needed more money."

Long-term care insurance isn't making the headlines that the public option, or government-run health insurance, is, but it is a significant part of the federal health-care reform debate.

That's because an unprecedented portion of the population is aging, and the government is already struggling to pay the staggering cost of providing long-term care through Medicaid, said Carol McGowan, vice president and senior benefits consultant in the Richmond office of Rutherfoord, a risk management and insurance brokerage firm.

"Part of it is an awareness issue," she said. "The government wants us to realize there's a need for this coverage."

It's also a budget issue. When people run out of money, they may qualify for Medicaid to pay for long-term care. For state governments, which pay much of the cost of Medicaid, that's a budget buster.

"A lot of people still believe that Medicare will provide long-term care insurance," McGowan said. "Generally, it doesn't. Or they say, 'You know what? I'll go on Medicaid. You have to have very few assets to get on Medicaid. In addition, it will limit where you can go. Not all facilities will take Medicaid patients."

And, Vermeiren said, Medicaid patients don't get the option of a private room in a long-term care facility, unlike patients who pay for their own care.

The rules are likely to soon be tightened further. When Gov. Timothy M. Kaine unveiled his budget proposal for 2011-12 last week, he pointed out that Medicaid expenditures are projected to increase in the state by $778 million. He wants to cut that number by $419 million by significantly limiting services to individuals and reimbursements to health-care providers.

Long-term care insurance protects a person's assets, as well as prevents family and friends from shouldering the burden of paying for care, McGowan said.

But it's not for everybody, said Mike Martin, senior vice president in charge of lifelong health at Riverside Health System.

"You have to make sure that you actually have finances to protect," he said.

In some cases, the cost of insurance outweighs the benefit of protecting assets, if you don't have a lot of assets, Martin said.

And you might be declined due to health reasons, McGowan added.

As part of the federal health-care reform debate, the House of Representatives proposed creating a national long-term care insurance program that citizens can buy into.

Called the Community Living Assistance Services and Supports, or CLASS, Act, it's designed to provide basic help to people who choose to pay for a plan, and coverage is guaranteed to anyone who enrolls, McGowan said. It pays $50 a day or more to help cover services such as in-home care.

"It's going to help individuals stay in their home, which is going to help reduce the overall cost for everyone," McGowan said. "That's what they're hoping this will do."

Martin said there's an increasing awareness of the costs associated with long-term care, and a lot of people don't know their options.

"When they do see those options, many of them are turned off by sticker shock," Martin said. "It's not inexpensive coverage to get, especially if you want to get something that will cover you for the catastrophic situation."

People should start thinking about this in their 50s -- or earlier, if they have the resources, McGowan said.

"The longer you wait, the more expensive it is on an annual basis," Martin said. "There are millions of people under the age of 65 who are in need of long-term care services."

Vermeiren, a Department of Defense civilian employee who retired after more than 30 years of service, bought long-term care insurance through the government. He bought it in 2002, paying $69.90 a month for $75-a-day coverage for up to three years.

That'll change next year, when the monthly premium bumps up to $87.38 for $106-a-day coverage to reflect a new insurance carrier, Vermeiren said.

The long-term care insurance is just part of what he'll need to cover his long-term care.

The other pieces he'll use are civil service retirement, Social Security, investments and a whole-life insurance policy he's been paying into since he was 26.

"Long-term care (insurance) is going to give me about half of the total needed for a nursing home," Vermeiren said. "That'll last me three years before I have to start using my principal, assuming there's no stock market crashes or major tax increases also thrown in there. That's how important it is. This does make a difference."

His advice: Talk to a financial planner when you enter the work force and an elder-law attorney as you approach retirement.

"It's critical that you start early, and a lot of people I know don't do this at all," Vermeiren said. "If you don't get these things figured out, you'll be reacting. You'll be on the defense."

Long-term care insurance

What is long-term care insurance?

Insurance that helps pay for services that assist with health or personal issues resulting from a chronic disease, serious accident, sudden illness or cognitive impairment. Long-term care services focus on maintaining an individual's quality of life.

Who needs it?

It might be for you if you have assets and want to leave things to heirs or have a spouse who could be at risk if you need long-term care and your assets won't cover it.

What determines the cost of long-term care insurance?

Your age, the amount per day it will pay and for how long, covered services, your health and inflation protection.

What's happening at the federal level?

The Community Living Assistance Services and Supports, or CLASS, Act is designed to provide basic help for enrollees who voluntarily pay for a plan. The Senate has also discussed allowing Medicaid to pay for in-home or community care, which it doesn't cover now.

Where can I buy long-term care insurance?

It can be purchased from an insurance agent, financial planner or broker. Some employers offer long-term care insurance. A list is available at www.scc.virginia.gov

Source: Virginia Long-Term Care Partnership (valtcpartnership.org), Rutherfoord's Carol McGowan and Riverside's Mike Martin

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