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Community Care Benefits Will Attract Seniors

The following is an excerpt from an article which appeared in the August 10, 1998 edition of National Underwriter:

Community Care Benefits Will Attract Seniors

By Samuel X. Kaplan

The long-term care industry has developed to the point where LTC insurers need to expand policy designs once again. In addition to offering conventional nursing home and home health care coverages, they need to offer a range of more practical—and marketable—benefit options. 

These options, often referred to as "community care benefits," bridge the gap between home and nursing home. They include assisted living facilities, adult day care, adult day health care, board-and-care homes, ECHO (elder cottage housing opportunities) homes, adult congregate living, and CCRCs (continuing care retirement communities)—in addition to traditional home health care. 

A handful of LTC insurers have already unveiled policies that include coverage for some of these services. But availability is limited, and some contracts offer only a few such benefits. I believe LTC insurers would attract more buyers if their policies included a full gamut of community care benefit options, from which consumers can pick and choose. 

Such contracts would be highly marketable, because, as the American Health Care Association notes, community care helps preserve independence and quality of life. (See an October 1997 article on the topic at the association website, www.acha.org.) Also, insureds owning pool-of-money LTCs would like the fact that the multiple community care benefit feature helps extend policy benefits. 

And, because the benefits will help deter or avoid use of the far more costly nursing home care, the feature should aid in keeping down claims expenses—a critical point for insurers. 

Nursing home coverage has been the cornerstone of most modern LTC policies. But that might not be a big enough attraction to spur greater sales. Consider: Of the 12 million Americans in need of LTC services, only 1.6 million, or 12 percent, currently reside in nursing homes (University of Missouri/Columbia, 1993; HCFA, 1996). 

In part, that small number reflects the widely reported lack of financial coverage for such care that exists today. But it is also indicative, I think, of the lengths to which people will go to stay out of nursing homes. Nursing home confinement means institutionalization and loss of independence, and survey after survey shows that older people don't want that. (See "Housing Options for Older Americans," 1998, at the Administration on Aging website, www.aoa.dhhs.gov.) 

For moderately impaired individuals, a community care setting often offers an attractive compromise. Here's why: Community care, as the name implies, aims to help people maintain connection with the general community, with a maximum level of functioning. It encompasses not only care in the home but the vast range of transitional services that exist between home and nursing home. 

People who make use of community care generally can no longer take care of themselves, but they do not require the continual supervision found in nursing homes. So, they receive room and board but maintain varying degrees of autonomy and independence. However, if and when they need help, it is readily available. 

Even so, utilization data show that only a small percentage of LTC services are currently being delivered in community care settings. At any given time, only 2 million patients (16 percent of the LTC population) are receiving these services—most of them in their own homes. (See William D. Spector, et al, in their 1996 article, "Appropriate Placement of Nursing Home Residents in Lower Levels of Care," in The Milbank Quarterly.) 

Moreover, the public is generally not well educated about availability of community care services. In fact, at open enrollment meetings and LTC seminars, the vast majority with whom I speak still equate LTC with "moving into a nursing home" (or worse, into the "poorhouse"). 

This should serve as a wake-up call to the senior products industry, especially when you consider a recent study by Agency for Health Care Policy and Research. This agency found that at least 15 percent of nursing home residents could be placed at a lower level of care, such as in an assisted living facility. (See Genevieve W. Strahan's 1997 article, "An Overview of Nursing Homes and Their Current Residents: Data from the 1995 Nursing Home Survey," in Advance Data, No. 280.) 

This is unfortunate, because community care is an attractive alternative for moderately impaired individuals, and is often more cost-effective. For example, the average per-diem private room rate in an assisted living facility is $71, compared with $111 per diem for skilled nursing home care and $83 per visit for a home health nurse (Assisted Living Federation of America, 1998). Such savings are significant, especially since the care often results in better quality of life. 

Community care presents a major opportunity for the senior products market. The greatest potential exists with transitional services, such as ECHO homes and CCRCs, which so far have been left largely untapped. 

There are also brand new community care benefits just waiting to be developed. My belief is that innovative insurance companies will start creating these benefits, introducing them as components of plans that incorporate a high level of choice and flexibility. Rather than offering standard off-the-shelf policies, they will allow insureds to custom design their own plans, selecting the community care benefits that fit their lifestyle. 

Just as child day care is not an acceptable option for every parent, adult day care will not be attractive for every senior. And the desire for choice will only grow as the baby boomers, with their emphasis on individualism, reach retirement age. 

Of course, community care is not without pitfalls. As a newcomer to the LTC arena, the community care business still does not have standards of care that are as well defined as those for nursing homes. But the insurance industry can play a leading role in remedying this situation by developing quality standards and applying them during provider credentialing and recredentialing. 

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