The latest casualty of the Great Recession may soon be the nation’s elderly. Cuts in government payments for patient care and less construction of new nursing homes are already taking a toll.

Add to this the aging baby boom generation and you have a worst-case scenario in which older people who need full-time care won’t be able to get it.

“We believe we’re at a tipping point,” says Mark Parkinson, head of the American Health Care Association (AHCA), which represents nursing homes.

If so, the timing couldn’t be worse. The first baby boomers hit age 65 last year. By 2030, 20 percent of the U.S. population will be at least 65, up from 13 percent today.

Number of Persons 65+ in the U.S. 1900 - 2030 (numbers in millions) - U.S. Administration on Aging

In that same period, the number of 85-year-olds will increase more than 50 percent and the number of 100-year-olds nearly triple. But the number of nursing homes dropped almost 9 percent from 2000 to 2009.

Nursing homes and hospitals are places that everyone wants to avoid … until they can’t. Most people say they want to age at home, but as retiring boomers get older, more will need the type of 24-hour care that only a nursing home or hospital can offer.

That’s because the prevalence of chronic illnesses like Alzheimer’s disease, cancer and diabetes increases with age. Fifty-five percent of all cancers are diagnosed in individuals 65 and older, and by 2030, 7.7 million of those 65 and older will suffer from Alzheimer’s, 50 percent more than today according to the Alzheimer’s Association.

Several trends are cutting into the number of nursing homes. Many homes were constructed during the 1960s under Lyndon Johnson’s Great Society programs. Often those homes are closed because they are old or, with their long hallways and large, multi-resident rooms, don’t fit what current residents want, says Robert Kramer of the National Investment Center for the Seniors Housing and Care Industry.

But the recession has made getting private financing for new nursing home construction tougher. From 2007 to 2011, the number of under-construction nursing home units (the sections of a facility that provide only nursing care) declined by a third.

“I cannot tell you of anyone who has actually developed a new skilled nursing facility in at least the last five years in California,” says Edward Steinfeldt, a consultant to developers of retirement housing and health care.

And existing nursing homes are struggling. They long have lost money on patients whose stays are covered by state-run Medicaid programs, which pay for long-term care for chronically or terminally ill patients who have run out of money.

According to a report this month by the AHCA, in 2011 nursing homes lost at least $20 per Medicaid resident per day nationwide. Total losses came to $6.3 billion nationally, the highest yearly total ever, with higher deficits to come next year, according to the report.

That’s a huge hit since Medicare payments are responsible for more than 20 percent of nursing home revenues. (Medicaid provides about 50 percent of revenues, and most of the rest comes from private long-term care insurance and people who pay out of pocket.)

For the 187-bed nonprofit Lutheran Home in Milwaukee, which has gross receipts of about $20 million, the Medicare slash will take $700,000 to $750,000 straight off the organization’s bottom line this year says CEO Scott McFadden.

The real estate crash has added to nursing homes’ budget crunch. Many clients sell their homes and use the money to pay out of pocket for long-term care services from a nursing home.

Related Article: Tools to help you choose a good nursing home.

By obliterating more than $8 trillion in home equity, the collapse cut the number of patients who can pay their own way. McFadden says that the private-paying clients his home serves used to run out of money in two or three years. Now they’re broke much more quickly.

Once they can’t pay, Medicaid picks up only some of the tab, and the Lutheran Home then starts losing money on them. It’s illegal for a Medicaid-certified nursing home to ask a patient to leave just because they run out of money.

Residing at a nursing home is not cheap. The median annual cost of a private U.S. nursing home room rose to $77,745 in 2011—up almost 30 percent from 2005.

People without chronic conditions have less costly options—it takes about $43,500 yearly to pay for a home health care aide who doesn’t have specialized medical skills, and $39,000 to live in an assisted living facility that provides help with activities of daily life like cooking, but doesn’t necessarily offer health care services.

If nursing homes continue to be squeezed, they may need to cut more staff. A November 2011 report by the University of California-San Francisco concluded that poor quality of care is already endemic in many nursing homes, especially the largest for-profit chains where staffing levels have been cut the deepest to save money.

Local Resources for nursing homes and senior care

• Aging & Disability Services – Seattle/King County: www.agingkingcounty.org
• Aging & Disability Services Administration – Washington State: www.aasa.dshs.wa.gov
• Commission on Accreditation of Nursing Home Facilities: www.carf.org
• Eldercare Locator: www.eldercare.gov/Eldercare.NET/Public/Home.aspx
• Long-term Care Information: www.longtermcare.gov
• Medicare’s Nursing Home Compare service.
• Medicare: Alternatives to Nursing Home Care

Parkinson maintains that so far, homes in his association are keeping up their level of service with less money by eliminating managers, freezing wages, and cutting capital improvements like painting walls and replacing carpets—anything to avoid laying off caregiver staff.

Bill Mulligan, a managing director at Ziegler Capital Management, which provides low-cost financing for nursing home developments, argues that given the decreasing supply and rising demand, nursing homes are still a good investment.

“The demographics are going to level off the number [of homes], maybe even increase it at some point,” he says. But Steinfeldt, who also works with developers, has little confidence in their profitability: “Why would you go into a business that can’t cover its costs?”

If major shortages of nursing home space do surface, they’ll likely show up in urban and high-poverty areas first. Widespread waiting lists have already been reported in Tallahassee in Florida, Rapid City in South Dakota, and San Francisco. Homes also have been closing in poor neighborhoods—a study published last year in the Archives of Internal Medicine showed that nursing homes shut down there more often than elsewhere (the hardest hit cities were New Orleans, Oklahoma City, San Francisco, and Dallas).

And Medicaid patients may have an increasingly hard time finding nursing homes that will take them–Kramer says when homes replace their old buildings, they often cut the number of beds to make space for more private rooms and sophisticated medical facilities that can attract the higher paying Medicare and private-pay clients.

“Every adult is going to face this nursing home crisis in some way, whether it’s through their own care or the care of loved ones,” says McFadden. “Ignoring it is not going to make it better.”

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Questions to ask before you buy long-term care insurance

By Caroline E. Mayer
This story was produced in collaboration with 

In the last years of Martin Privot’s life, his family had to start selling his assets to pay for his nursing home costs. “He needed 24-hour care and couldn’t be left alone,” recalls his daughter Toni Footer. “My biggest fear was we would run [through his money] and wouldn’t be able to provide the care that he needed.”

Privot died in 2008, from post-surgical complications and other ailments, before all his assets were depleted. Yet Footer, 61, says her dad’s experience “reinforced my already strong feelings that long-term-care [insurance] is a necessity.”

The Rockville, Md., resident says she pays about $2,500 every year for such coverage for herself. “It’s expensive — in fact, it’s gone up twice — but it’s worth every penny. It provides a peace of mind that my family won’t have to struggle to find money to pay for my care.”

Coverage fell short

Mary McClelland came to the opposite conclusion after seeing how her mother’s expenses were often deemed exempt from coverage.

Her mother, Ruth Mezick, purchased long-term-care, or LTC, insurance in 1990 at age 78 when she was in fairly good health, paying an annual premium of $2,827 until she died 11 years later. In her mid-80s, her health began to deteriorate, and she spent time in a nursing home, at home with help and in assisted living.

“She was never in one place long enough to qualify. She ended up getting about 10 days’ coverage, worth about $1,000,” says McClelland, who lives in Falls Church, Va. “That was a lesson to me; I decided it doesn’t always pay off.”

The question of whether to get long-term care insurance bedevils consumers and their advisers. Unlike medical insurance, it is intended primarily to cover people who need assistance with so-called activities of daily living — for example, the care of a dementia patient or someone recovering from a broken hip.

Even advocates acknowledge that it isn’t for everyone. Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an industry group, sums it up well: “Long-term care is a universal issue facing all Americans who are getting older. But long-term-care insurance is not a universal solution.”

So how great is the need for such coverage? It depends on how you look at the data. “One in two Americans are likely to need long-term-care services sometime in their lives,” says Amy Pahl, a consulting actuary for Milliman Inc., a leading actuarial and consulting company.

However, Pahl adds, of those who might need long-term care, about a third will not meet the most common deductible period of 90 days because they will either die or recover before then.

To determine if a long-term-care policy makes sense for you, it is important to understand how the coverage works and what’s available.

Don’t Think Medicare Will Cover You

Most standard health insurance plans do not cover long-term care. Nor does Medicare or insurance policies that supplement Medicare.

Medicaid, however, is the largest source of coverage for long-term care. The program pays for more than two-thirds of nursing home residents, according to data from the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

But Medicaid comes with significant limitations. The choice of facilities that accept Medicaid is narrow, and the program is restricted to people with extremely limited income and virtually no resources, which forces middle-income consumers to spend down their assets if they want to qualify.

“Medicaid is supposed to be a safety net, but unfortunately it rests just about a half-inch off the floor,” says Tom West, a Northern Virginia financial adviser and long-term-care expert.

Yet Kansas Insurance Commissioner Sandy Praeger cautions that long-term care policies may not be a good investment for some people. “It’s mostly a policy to protect your assets [so you don't have to sell everything to pay for care] in case you get sick. If you don’t have assets to protect, then you shouldn’t be buying it.”

But even those with few assets might consider some protection because it will allow them more flexibility than Medicaid if they need to choose a nursing home.

How The Coverage Works

Typically, a policy pays a fixed daily benefit ($150 is common) for a certain period of time (often three to five years) starting at a specified time (90 days is common) after the beneficiary becomes disabled.

The policy covers nursing home expenses, assisted living charges or less costly in-home-care bills.

Many policies also allow the initial fixed daily benefit to rise 3 or 5 percent annually to keep up with health-care costs. The policyholder agrees to a premium that can increase only if the change is approved by state regulators.

Such increases have occurred frequently in recent years and, as a result, once-flat premiums have risen sharply. So have nursing home costs, which averaged about $214 a day — or more than $78,000 annually — for a semi-private room last year, according to a national survey by the insurer MetLife.

“Long-term care insurance keeps you from being dependent on the government or relatives and it provides liquidity, even for people who have a lot of assets,” says Rockville financial planner Arthur Stein. “You don’t have to rush and sell assets in a down market, like today’s, to cover health costs.”

As people’s needs have changed, long-term care policies have expanded to cover assisted living and home care; some new policies are flexible enough to anticipate technologies that don’t yet exist, such as robotic care.

“The policies have become very innovative,” says Slome. “Today you can go in and design coverage for particular needs and desires; you can even buy long-term-care insurance to enable you to get your care on a cruise line if you want it — and can afford it.”

Today’s policies can also allow couples to share benefits, so a husband and wife can each buy a shorter-term policy, for example three years of benefits. About 70 percent of coverage today is sold to couples, Slome said.

If it turns out that the husband needs more than three years’ coverage, he can tap into his wife’s benefit pool. And in some policies, if the husband completely exhausts the couple’s coverage, the wife may still receive some nominal benefits if she needs care, too.

Local resources:

At the end of 2010, about 7 million Americans had long-term care insurance, according to LIMRA, an association of life insurance and financial service companies. About 422,000 new policies were written in 2010. About 56 percent were sold individually, with the rest sold through employer- or association-sponsored sales.

The 2010 health-care law has a provision creating a voluntary, long-term care insurance program. However, in October, the Obama administration announced it would not implement the provision (called the CLASS Act) because it was financially unsustainable.

According to Slome, the average age of the buyer is 57, with three-quarters of the policies written when purchasers are between 45 and 64.

When buying insurance, the younger the consumer, the lower the annual premiums. Today, according to Slome’s association, a 55-year-old couple in generally good health can expect to pay $2,675 a year for $338,000 of benefits; that figure would grow to $800,000 by the time they reach 80 if the policy contained a 3 percent annual compounded escalation clause.

If they are 65, however, that same policy would cost $4,660 a year and grow to only $527,000 in coverage when they are 80.

For Washington area residents, even that coverage can be less than needed. The Guide to Retirement Living SourceBook, a comprehensive listing of retirement community, nursing home, assisted living and rehab facilities and home-care options in the area, puts the daily local cost per person of nursing home care at $235 to $304, or nearly $86,000 to $110,000 a year. Daily assisted living costs run between $108 and $162. (The SourceBook is owned by The Washington Post Co.)

Steep Rate Increases

One of the key concerns among consumers is the rise of premiums.

“It’s probably the most frequent complaint I hear,” says Praeger, who heads the National Association of Insurance Commissioners’ health and managed care committee. “The problem is, the older policies weren’t priced right to begin with. Companies expected about 8 percent of customers to stop paying their premiums, when, in fact the lapse rate is closer to 2 percent.”

That meant the insurers had to cover more beneficiaries than they expected at a time when the economic downturn has meant less return on their investments.

Praeger acknowledges that rate increase requests have posed a dilemma for insurance commissioners. “If we don’t give them the rate increase they need, the insurance carriers could become financially impaired, and that doesn’t help people,” she says.

In fact, in recent years, a number of companies have stopped selling policies. As a result, she adds, it’s hard to turn the increases down.

The policies can be very complicated, and Praeger advises consumers to consult with their accountant, attorney or other trusted financial adviser before purchasing a policy. “It’s important  to understand what you’re buying, what the benefits are. It’s very complicated so work with someone you know and trust if you want to buy a policy.”

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

By Caroline E. Mayer

Determine if you qualify financially

Washington state has prepared a guide to buying long-term care insurance

Don’t buy if the out-of-pocket cost for the coverage would be more than you can afford. Consumer Reports advises people that if their net worth, excluding their home, is below $300,000, long-term care insurance is not a good buy for them.

The National Association of Insurance Commissioners also recommends that consumers spend no more than 5 percent of their income on a long-term care policy.

If you need long-term care but have few financial resources, Medicaid should quickly kick in to pay, although that will probably limit your choices for care.

On the other hand, if you have a lot of resources (some financial advisers put that threshold at $2 million), you may be able to self-insure and pay the costs as they arise, thereby eliminating the need to buy a policy.

Shop around.

Unlike car insurance where you can switch carriers easily, it can be expensive to change long-term care policies because the premiums increase as you age and you lose the investments already made. Comparison shopping is critical.

Some companies and associations (such as alumni groups and AARP) offer group policies with relatively liberal eligibility, making it easier to obtain coverage if the policyholder has any health issues.

However, these policies may have more limited benefits than individually purchased plans.

If you are young or in excellent health, a group plan may also be more expensive; you may end up paying more to subsidize your less healthy peers.

And if you are certain you want LTC insurance, the younger you are, the better. Your annual premiums will be smaller, and you have less chance of being denied for health reasons.

Know what’s covered.

Policies differ greatly so know what you are buying:

• What services are covered?
• How long is the disability period before benefits kick in and what happens if you move from one facility to another?
• How much does the policy pay per day for nursing home care, home-health care and assisted living?
• How long will benefits last?
• Is there an inflation adjustment that anticipates rising medical costs as you age?
• How long are benefits extended (one, three or five years, or indefinitely)?
• Who determines benefit eligibility — your doctor, or the insurance company’s doctor — and on what basis?
• Are preexisting conditions excluded?
• Does the policy cover mental or nervous disorders, alcoholism, drug abuse or self-inflicted injuries?

The National Association of Insurance Commissioners advises consumers to look for policies that include at least one year of nursing home or home health care coverage, including intermediate and custodial care; coverage for Alzheimer’s disease; inflation protection; a guarantee that the policy cannot be terminated because you get older or your health deteriorates; no requirement that the beneficiary has to first be hospitalized to receive benefits and a 30-day cancellation period after purchase.

Check out the insurance company.

Review a carrier’s record with your state insurance commissioner’s office. Find out how long it has been in business its complaint record and history of raising rates. Stick with a company that has an A financial rating.

Also, the National Association of Insurance Commissioners and the American Association for Long-Term Care Insurance have consumer guides on their Web sites.

The Department of Health and Human Services provides extensive information on it’s website, longtermcare.gov.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Zocalo Public Square: How Doctors Die

Photo: Hanspeter Klasser

Years ago, Charlie, a highly respected orthopedist and a mentor of mine, found a lump in his stomach. He had a surgeon explore the area, and the diagnosis was pancreatic cancer. … He went home the next day, closed his practice, and never set foot in a hospital again. He focused on spending time with family and feeling as good as possible.

Several months later, he died at home. He got no chemotherapy, radiation, or surgical treatment. Medicare didn’t spend much on him.

It’s not a frequent topic of discussion, but doctors die, too. And they don’t die like the rest of us. What’s unusual about them is not how much treatment they get compared to most Americans, but how little (Dr. Ken Murray, 11/30).

Photo courtesy of Hanspeter Klasser

Health Affairs: An MS Patient Loses Trust When She Finds Out Her Doctor Is Paid By Drug Companies’

Last year, four years after showing initial symptoms of multiple sclerosis (MS), I walked out the door of one neurologist’s office and, after several months of searching, switched to a different doctor.

It was the final act in a series of events that had gradually eroded my trust in the first neurologist’s judgment, which I believe was colored by his financial relationships with drug companies who manufacture and market medicines for MS patients. … Given my background in medical ethics, I was familiar with the potential conflicts of interest that exist for physicians participating in clinical pharmaceutical trials.

Assuming that my neurologist was being compensated for running the trial, in addition to his earnings from seeing patients in his neurology practice, I’d asked him if that was the case, and he confirmed that it was (Maran Wolston, December 2011).

The New Republic: More Health Care Heresy From Newt

Newt Gingrich

Newt Gingrich’s past endorsement of an individual mandate has drawn fire from conservatives. But that’s not his only health care heresy.

In 2008, Gingrich made the case for another idea that became part of Obamacare and, in due time, the focus of right-wing attacks.

Worse still, at least from the standpoint of conservatives, he did so by writing an op-ed for The New York Times. Oh, and did I mention he had some help? Gingrich had a co-author: John Kerry, the Democratic senator and former presidential nominee. … they also acknowledged that ultimately the private sector couldn’t solve this problem on its own.

More action was necessary, they said, and that action had to come from government … That’s the problem for Gingrich when it comes to improving the delivery of health care. He isn’t crazy. But plenty of influential conservatives are (Jonathan Cohn, 12/13).

Photo by Gage Skidmore

Newsweek: Could This Be The End Of Cancer?

By all rights, Shari Baker should have said her final goodbyes years ago. In 2005, more than a year after three doctors dismissed a lump under her arm as a harmless cyst, she was diagnosed with stage IV (metastatic) breast cancer … In May 2006, she traveled to the University of Washington.

The (cancer) vaccine was injected into her upper arm; she got five more shots over the next five months. Today, with scans detecting no cancer anywhere, Baker seems to have beaten some extremely stiff odds. …

By “cancer vaccine,” scientists mean something that will stimulate the immune system to attack malignant cells (Sharon Begley, 12/12).

The Atlantic: The Top 10 Health Stories Of 2011

Photo by Jean Scheijen

Coffee is good for you. And coffee is bad for you. Cell phones cause cancer. And cell phones don’t cause cancer.

Like any other year in health, 2011 was one of conflicting studies. In the end, we’re not always sure how to act or what to drink or when to exercise, but we do know more about ourselves and the world we live in thanks to researchers everywhere and the work that they do.

However broad or specific their conclusions, however small or large their sample size, medical studies do contribute to our wellbeing simply by existing and, if nothing else, by making us think twice about the things we eat, say, and do on a daily basis (Nicholas Jackson, 12/14).

Photo courtesy of Jean Scheijen

The Daily Show: Ed Gillespie

Jon Stewart talks health care with Republican political strategist Ed Gillespie (12/8).

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

By Jessica Marcy

A poll released Tuesday found that an overwhelming majority of doctors support palliative care, with 96 percent responding that they believe enhancing the quality of life for seriously ill patients is more important than extending life as long as possible.

Despite these sentiments, many physicians responded that they have some hesitations about palliative care and that there are barriers to its full adoption.

Notably, the poll, released by National Journal, also found a dramatic “generation gap” in physicians’ education and training on palliative care.

Seventy-three percent of physicians age 39 or younger report “a great deal” or “some” exposure to palliative care during medical school compared to 36 percent of those age 40-49, 23 percent of those age 50-59, and only 6 percent of those age 60 or older.

Ezekiel Emanuel

Speaking at a National Journal event Tuesday, oncologist and bioethicist Ezekiel Emanuel, who currently teaches at the University of Pennsylvania, called upon the medical community to push for even greater incorporation of palliative care into the health system.

Emanuel, the brother of Chicago Mayor Rahm Emanuel, said that his own career illustrates the major transformation in end-of-life care training. In 1984, during his third year of medical school, he decided to switch gears to pursue a PhD on end-of-life care issues, noting that his adviser told him, “That’s a career ender. Nobody wants to talk about end-of-life care.”

Despite such initial discouragement, he went on to incorporate palliative care in oncology treatment at the Dana-Farber Cancer Institute and later served as the founding chair of the Department of Bioethics at the NIH Clinical Center until last August and as a special health policy adviser at the White House, where he raised attention about ethical issues in end-of-life care.

Meanwhile, the poll found that 91 percent of physicians believe patients are not adequately informed about palliative care; other physician concerns include that patients are reluctant to accept it because it means they might not recover, health insurance companies and Medicare don’t reimburse adequately for consultations, there aren’t enough palliative care physicians and services and patients can’t afford the care.

Many physicians also reported that they received little training on operational and financial aspects of palliative care and that they would like more on those topics.

Shannon Brownlee, the New American Foundation’s acting health policy director, expressed concerns that the current reimbursement system inhibits the full use of palliative care, which would lead to the reduction of expensive treatment.

“This is the horrible dilemma that hospitals find themselves in,” Brownlee said. “When you reduce that volume, you’re punished.”

Emanuel said that at some point insurers and Medicare will have to “make a leap together” to better support paying for palliative care. Emanuel, recalling Republican charges that the 2010 health law would establish “death panels,” noted that such political tactics “completely backfired.” Instead, he said they reinvigorated physicians’ efforts to improve end-of-life care.

“My inbox was flooded with support from physicians and it renewed the recognition by physicians that we have to do something on this,” Emanuel said.

The poll, conducted by FTI Consulting and commissioned by National Journal, surveyed 500 board-certified physicians, 45 percent of whom were primary care providers and 55 percent specialists between Oct. 28-Nov. 2.  The poll has a margin of error of plus or minus 4 points.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.