Some of the best private long-term care policies on the market do not adequately protect consumers from out-of-pocket spending for nursing home costs, according to a study released by the American Association of Retired Persons.
The study, The Impact of Owning Private Long- Term Care Insurance Policies on Out-of-Pocket Costs, found that most of the policies examined restricted coverage by imposing prior hospitalization and level-of-care requirements. This means that many of the policies would not cover nursing home costs for an individual who moved directly from home to a nursing facility, or who needed a high degree of medical care in that facility.
Although there has been research on the characteristics of private long-term care insurance, until this report there has been little information on whether such policies actually reduce the staggering out-of-pocket costs incurred by the elderly during a nursing home stay.
The 11 policies examined were among the best and most popular on the market, yet there was still a great deal of uncertainty concerning how much the policies are likely to pay toward nursing home stays. (Findings are based on policies collected during the Spring and Summer of 1988.)
The study found íhaí the two most important restrictions in the policies are prior hospitalization and level-of-care requirements. "Policies that include either of these requirements leave consumers unable to ascertain coverage because buyers have no way of judging whether their nursing home stays are likely to meet these requirements," said the study.
Two other problem areas are lack of inflation adjustment and policy maximums. Without inflation protection, a policy may have only limited value if the policyholder does not enter a nursing home for many years after purchase. The study recommends that policies have coverage for at least 4 years to ensure protection against longer nursing home stays.
Based just on these four areas, the policies examined "failed to achieve the basic purpose for which they were bought," said the study.
For more information or copies of the report, contact Theresa Varner, AARP, Public Policy Institute, 1909 K Street, NW, Washington, DC, 20049; 202-7284747.