Once upon a time, there was no such thing as long-term care, at least not as a significant social, political, and economic issue, and certainly no long-term care (LTC) insurance. Americans tended to stay put, which meant that the family had not yet become nuclear; two or more generations lived in close proximity, perhaps even in the same home. The care of the elderly, unless they were critically ill, was a family or community responsibility; and the elderly were generally not all that old. Then, as now, the actual care-giving tended to be the purview of women, but they were far less likely to hold down jobs outside the home, let alone to be their own or their familys sole support.

All that and more changed about 45 years ago, according to Charles Fahey, program officer for the Milbank Memorial Fund. When he entered the field in 1961, long-term care was barely on the radar. As it happens, that was also the year of the White House Conference on Aging, the first time, he noted, that we as a nation got our act together and said this is something big.

The something big was a demographic and epidemiological revolution that began in the last quarter of the 20th century, the former related to population growth in general and to the looming coming-of-old-age of baby boomers, the latter to increasing longevity. If people didnt die relatively young, in childbirth, or of a workplace accident, they were likely to be carried off in what we might now consider middle-age by some infectious disease. In some ways, Fahey said, weve traded off infectious disease for more chronic and organic diseases like stroke, heart failure, cancer, and Alzheimers.

And were surviving those chronic illnesses longer, but at a cost: we are increasingly frail. Fahey pointed out that frailty, in its earlier stages, gets covered up, because weve been able to deal with cataracts, hearing aids, new knees and hips; stents. Eventually and inevitably, people lose physical mobility and/or their executive functioning, the latter a result of dementia. One, Fahey said, cant get out of a chair to go to the bathroom. The other doesnt know where the bathroom is.

Most of this is not exactly news to the general public and particularly to those caring for or anticipating the needs of aging family members. But there is both anecdotal and documented evidence suggesting that Americans have a powerful resistance to planning for their eventual need for long-term care. As Barbara Fiscarel, an independent broker specializing in LTC insurance, put it, I dont think people even want to talk about this. Who wants to think that theyre not going to be able to get out of bed, take a shower, get dressed; make a cup of coffee?

In other words, as Talma Nassim, president of Morstan Plus, Inc., suggested, long-term care is a product that requires someone to face their own frailty and mortality.

We had better get over it: according to a May 2007 report by California-based First Consulting Group on behalf of the American Hospital Association (AHA), the over-65 population will nearly triple from 1980 to 2030. The first of the Baby Boomers will turn 65 in 2011, and more than 37 million of them will be managing more than one chronic condition by 2030. Quite apart from the impact on the health care system, this raises challenges for the Boomers and their children: who will look after them, and how will it be paid for?

Ignorance Is Not Always Bliss

The first, and perhaps toughest, challenge facing LTC producers is simply overcoming the myths, the most prevalent and durable of which has to do with cost. Not only do people tend to believe that LTC insurance is too expensive, they are often woefully ignorant of the cost of long-term care itself.

In December 2006, AARP published a report on The Costs of Long-Term Care: Public Perceptions Versus Reality in 2006, and the findings are dismaying. Despite extensive and occasionally alarmist media coverage in recent years, little has changed regarding public perceptions about long-term care services since our original survey in 2001, AARP reports. Nevertheless, the need for such care will increase: AARP finds that some nine million people over 65 needed LTC in 2006, a number that may grow to 12 million by 2020. And the costs are increasing as well.

Overall, the report found that the majority of Americans over 45 said they were somewhat familiar with LTC services, and 21 percent said they were very familiar. However, it turns out that most actually do not know the costs: asked to estimate such costs as nursing home care, assisted living, in-home visits from RNs or aides, many survey respondents either said they didnt know, guessed, or estimated incorrectly. Additionally, their guestimates reflected no real consensus " the responses were all over the ballpark.

More alarmingly, some people appear to believe they have LTC insurance when, in fact, they do not. A majority have a false sense of security, believing incorrectly that Medicare covers extended nursing home stays and assisted living costs.

Then, too, defining long-term care and LTC insurance is no simple matter, though AARP offers a good starting point:

Long-term care refers to the many services beyond medical care and nursing care used by people who have disabilities or chronic (long-lasting) illnesses. Long-term care insurance helps you pay for these services, which can be very expensive. A policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them.

So much for the nutshell. The underlying questions and issues can be dauntingly complex for a layperson " and for agents and brokers as well: when should you buy a policy? What kind of policy? How does LTC insurance relate to other insurance and to financial planning in general?

Hard Sell

Though some agents and brokers are flourishing selling LTC insurance products, it isnt easy being a clients memento mori (reminder of death), and executives attending the Intercompany Long Term Care Insurance Conference in Dallas in April cited as prime concerns building consumer awareness and demand for LTC insurance. Moreover, as National Underwriter reported in April, the executives attending the conference said that most LTC producers just arent producing. The reasons are as complex as LTC issues themselves:

Producers think LTC insurance is a hard sell because clients consider it too costly;

Many producers do not have enough training about an admittedly confusing product;

Advisors may be reluctant to query a client about his or her medical conditions, a requirement of LTC policy sales;

If the advisor has a long-term relationship with a client, that relationship might be damaged if the client is turned down by the carrier.

In some respects, selling LTC insurance is not unlike persuading a child to eat spinach or save up money from an allowance. Fiscarel said that even clients with an elderly parent receiving LTC benefits resist seeing themselves in a similar position. And there is a tendency to wait until Im old enough to need the benefits. That kind of delay is financially dangerous, she pointed out, citing the example of two of her clients, one 67 years old, the other 62, who hold similar policies. The older client pays annual premiums of just over $7,000; the one just five years younger pays less than half, about $3,000.

There are exceptions, of course, and some believe that consumers are getting the message. Kevin Johnson, of National Long Term Care and New York Long-Term Care Brokers, has specialized in LTC insurance since 1988, during which time the Baby Boomers have, as it were, come of older age. Boomers, he said, are used to planning out their retirement and financial affairs better than previous generations. And with that, I think, most people realize that the only thing they havent insured for that could involuntarily take away all their nest egg is long-term care. He pointed out that the only form of insurance with a higher-degree of payoff than long-term care is life insurance: About 60 percent of us will need some form of care before we die.

Evidently he is successful in getting the word out: Johnson said that in the first quarter of 2007, his company experienced the best LTC sales in five years. Sales grew steadily throughout the industry from about the mid-90s, he said. Those were our best years. Then we got into 2000 and sales dropped off; now theyre way up again.

Products and Perplexity

Even Fahey, with some 45 years of experience, finds LTC insurance very confusing " there are just so many variables. So it is no wonder the public is often confused. As a people, Americans may value choice, but too many options and decisions can lead to paralysis.

There are, of course, variations from state to state. A New Yorker planning to retire to Florida, or a Minnesotan heading for Arizona, may actually need to know the insurance regulations in two states.

And new products and combinations seem to appear on the market daily. Nassim said that one of the fastest growing areas of long-term care insurance is the employer-based long-term care insurance benefit plan. Many such plans, she noted, also help employees with financial planning overall. Here too, however, there are misconceptions on the part of employers that often make such insurance a tough sell.

As John Noble, director of LTC insurance products for Unum Group, explained in National Underwriter this past April, employers, like individuals, tend to believe that LTC insurance is too costly. They are also convinced that employees do not want to spend benefit dollars on such insurance, that employees are not old enough to be interested, and that the federal government and/or disability insurance covers LTC costs.

The notion that state or federal programs cover LTC costs is among the most widespread and deeply-held beliefs. And it is not entirely or always wrong. As Noble pointed out, Medicaid does help with the cost of LTC, but only once an individual has effectively bankrupted him or herself by spending down all assets to the poverty level. There is also the Partnership Program (sometimes called the Partnership Plan), which combines private LTC insurance and Medicaid Extended Coverage. The plans were first created in the late 80s and early 90s in four states " California, Connecticut, Indiana, and New York (in 1993) " and still are available only there. But the 2005 Deficit Reduction Act made it easier for states to establish Partnership programs and, according to the Alliance for Health Reform, many states have plans to create them.

But the plans are so complex, and explaining them so difficult, that, as Nassim noted, a broker needs to complete a special course and receive certification to sell them.

Still other products are appearing on the market, designed both to afford more alternatives to suit specific circumstances and to attempt some simplification of the complexities. In April, Genworth Financial announced the launch of its Cornerstone Advantage, touted as having a unique design and innovative approach that makes LTC insurance more mainstream by using common insurance vocabulary " co-pay and dollar deductibles " to make the coverage easier to understand.

Another product, launched this spring by MedAmerica and aptly named Simplicity, as the companys news release puts it, also is designed to eliminate the needless complexity of a typical long-term care insurance policy. While Genworth emphasizes that its product dramatically reduces premium cost, MedAmerica stresses the similarity of Simplicity to a bank account, in that benefits are paid in cash directly to the policyholder, who may use the funds in any way he or she wishes, without any approval requirement.

So-called hybrid products, combining longevity and LTC protection, seem likely to be on the horizon. As National Underwriter reported in March, the Pension Protection Act of 2006 will help spur further combination product development by allowing the introduction of tax-advantaged combination annuity-LTC insurance products beginning in 2010. The underlying premise is that, under the act, annuity distribution payments in a combo product would not be taxable if they are used to fund qualified LTC expenses. But carriers still have a way to go in designing the actual products, and the article notes that there are developmental hurdles to overcome in combining these two types of coverage.

If You Throw Enough Money at It

In many ways, Fahey said, long-term care is an economic problem. If people have money, they can figure it out. But a great many have only some money, and to make it work, theyre going to have to sacrifice a great deal, he added.

He believes that the solution unquestionably is a combination of public and private coverage; many experts in both arenas agree. But it is also clear that long-term care itself is a moving target. And since the arrows of government policy, legislation, and regulation tend to fly slowly, it is up to the insurance industry, as is so often the case, to find the bulls eye.

Additional Sources of Information

Thomas Day, director of the National Care Planning Council, offers a good explanation of what long term care is and how it is provided at www.longtermcarelink.net/eldercare. The AARPs discussion of LTC insurance, at www.aarp.org, may be useful to producers for explaining to their clients what their options are. That website also includes the full report on the costs of LTC and public perceptions, as well as state-by-state data. New York States Partnership for Long-Term Care is outlined in a brochure available at www.nyspltc.org. Other useful sources include the Alliance for Health Reform, www.allhealth.org, and the National Council on the Aging, www.NCOA.org.