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LTCs Are Experiencing a Wave of Continual Transformation

The following is an excerpt from an article which appeared in the February 21, 2000 edition of National Underwriter:

LTCs Are Experiencing a Wave of Continual Transformation

By Samuel X. Kaplan

There is a wave of transformation rolling through long term care policies, changing the way people think about care. 

For example, alternative settings are quickly becoming more than just the preferred choice for seniors; they are becoming what people expect when they consider aging. 

The fear of nursing homes (and long term care) is fading as people realize that viable and more pleasant alternatives now exist. 

And the LTC services available through innovative product options keep on expanding. They now include: residential care, assisted living, and independent living facilities; adult day care centers; hospice services; board and care homes; personal care homes; home health care; home modification services; skilled care; home health aides; personal care aides, companions and chore aides. 

Indeed, increased competition from products offering such a wide range of options may mean that the traditional nursing home approach to LTC will remain a fact of the 20th century, but not the 21st. 

One of the ways alternative settings are gaining ground is through greater attention to quality of care. As more baby boomers see their parents leave the comforts of home, assurances that loved ones will be physically, mentally and financially protected are becoming highly significant. As a result, the boundaries set for tangible quality standards are becoming at once more widespread and specialized. 

As you may recall, so-called "quality standards councils" for LTC were considered an anomaly when first introduced in 1990. But today, the entire industry seems to be following suit. In fact, a National Advisory Committee has reportedly met to develop the standards of a new national voluntary accreditation process for assisted living providers - to enable providers to prove they can meet more than just minimum care standards. Perhaps we are edging closer to the day when guaranteed quality products no longer make headlines. 

Meanwhile, Washington continues to swirl with proposals, bills, legislation and speakers, all vying for approval to solve the dilemma of how people will finance their long term care. For example: 

—The American Association of Homes and Services for the Aging has been lobbying Congress to support the so-called "return-to-home" legislation. This asks HMOs to permit nursing home residents to return to their own facility after a hospital stay instead of transferring elsewhere. 

—President Clinton is asking for even greater tax breaks for family caregivers. 

—A bipartisan senators group has introduced a bill to increase reimbursements for medically complex beneficiaries. 

—Several states have even pioneered the effort to help meet the needs of family caregivers by developing state-funded support programs. 

While Washington wriggles and prospective policyholders learn more about LTC, insurers are going ahead and debuting still more innovative new products. One launched an annuity, for instance, that offers a pension income with built-in protection for those who require LTC. By taking a 10 percent smaller annuity when they retire, owners can rely on the annuity payout doubling if they need to pay for nursing care. 

Other plans, which offer an option to pay for LTC benefits in full during their income-producing years, are particularly attractive to baby boomers who are preparing for their own elder years. This 10-pay option features 5 percent compound inflation protection and enables policyholders to pay for the policy in full within 10 years. 

Other benefits, such as a "bed reservation" provision, which reserves the policyholder's bed in a nursing home or alternate facility if the person leaves the facility for hospitalization, vacation or family event, offer peace of mind in event of drastic change. 

Also, more and more policies are covering homemaker and personal care services, including meal preparation, shopping, light housekeeping, laundry and bill payment. Such benefits greatly relieve the burden on the current informal caregivers and are particularly attractive to baby boomers in planning their parents' care. 

Innovative policies now cover a broad range of services that make LTC a less fearful prospect for potential buyers. The emphasis is on independent living and more help at earlier stages to enable the elderly to remain in their homes longer. 

In most cases, the costs are becoming more rational, and the rate increases more measured. Rates in some individual plans are even guaranteed up to 10 years. 

Going forward, employers and individuals will look for more options that focus on independence and home settings. It's up to the LTC insurance industry to meet this demand and to look out for the long-range financial security of policyholders by offering compound inflation protection. 

Only 10 percent of Americans over 65 are currently estimated to have LTC coverage. So a big market exists, "waiting" for the right product. 

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