Did AARP Rip Off My Old Mother?

    I don’t mean to knock AARP, an organization that helps us all as we get older, but I have to question their efforts to promote the sale of long term healthcare insurance. My mother died recently, and the experience was a great learning one for me in many ways. Getting old and dying involves a lot of details and it really helps to be prepared. My mother was a fiercely independent person who lived alone for the last third of her ninety one years. Around 1995 she purchased long term healthcare insurance policy from AARP. I assumed she was afraid my sister and I would not take care of her and she wanted peace of mind. She tried to buy that mental comfort at $220 a month, spending around $32,000 before she died without requesting even a dime in benefits.

    For the last several years my mother was in and out of the hospital. She refused to live with either me or my sister, Becky, and she didn’t want to go to an assisted living home. I would force her to stay with me and my wife when she was very sick, but she’s always pack her bags and sat on the edge of her bed demanding to be taken home when she got well. Lesson number one: old people want to stay in their homes. The AARP policy did provide for some at home professional care, but it had severe limitations and didn’t pay much. As it turned out, Medicare covers some at home help which we used on various occasions.

    In the end my mother had two very strong wishes. First, she wanted to die at home. Second, she wanted to leave Becky and me something, and the only thing she had was her house. To have gone to assisted living or a nursing home would have required selling her home. Medicaid will pay for a nursing home if the individual is poor, so a common practice for old people is for their families to sell their parent’s homes, pay for nursing home care until the money runs out and then get their parents on Medicaid. My mother grew up during the depression and had strong objections to going on the dole. She hated the idea of Medicaid.

    I’m guessing she bought that AARP policy assuming it would keep her from using Medicaid and losing her house. However, reading the policy after the fact, which was in large print and easy to understand verbally, the math just wasn’t there to make it practical. Nursing homes at the low end run around $6,000 a month and that policy only paid $50 a day, or $1,500 a month with a limit of 1,460 days – for a maximum value of $73,000. It didn’t even start paying out until day 91 of a nursing home stay. My sister moved from Portland, Oregon to take care of my mother, who was a total invalid for the last three months of her life. In other words, even if we had put my mother in a nursing home, the policy would never have paid out. Lesson number two: any insurance must cover inflation and practical experience.

    So when is a long term care policy worth buying? My wife and I have no children. I assume I will die first and my wife will have to live by herself. Single living is very common to the baby boomer generation anyway, even before old age. Thus, insurance for long term healthcare is appealing. I’m seeing it promoted and advertized on TV and in magazines. Mathematically, when does it make sense? If my mother had put $220 monthly in the bank, she would have had about $40,000 dollars when she needed it to spend starting on day one. Assuming she really would have gone to a nursing home, which I don’t think was her desire.

    Dying at home is expensive too. We had to hire non-professional sitters. Even in a rural town where wages are low, sitters can run to thousands a month for 24×7 care. Personally, at my current age and thinking, I plan on going to assisted living, this runs about half the cost of nursing home care (and not covered by long term care insurance). But I’m only 55, and who knows how I will think when I get to be 90. Lesson number three: it’s impossible to plan for specific arrangements in the future. That leads me to believe that putting money in the bank is better than buying an insurance policy because it’s more flexible.

    I currently buy insurance betting if I die my wife will have some money to help her get by. It’s a precautionary thing. Life insurance become more expensive and less practical as you get older, but is very practical if you die young. When is long term health care insurance practical? I’m guessing it’s not in many situations. If my mother had been forced to stay in the nursing home for the last 9-12 months of her life, she would have gotten her money back, but it wouldn’t have covered her true expenses and she would have still had to sell her house. All the policy would have done would have been to delay becoming poor enough to go on Medicaid.

    One year of low end nursing home care is about $72,000. I’m guessing, unless you have Alzheimer’s or some other condition that involves a long slow decline, that on average you’ll spend less than a year in a nursing home. The decision between assisted living and nursing home care seems to be whether or not you can get out of a building under your own steam in case of a fire. Most people will need far more money for assisted living expenses than for nursing home care – not the territory of long term care insurance. My mother never understood this and I’m wondering if she thought the policy covered assisted living.

    In the end, my mother wanted to die at home and Becky and Hospice Care were the miracles that allow that. My sister had to quit her job and rent her house to come stay with my mother and that was a huge sacrifice on her part. I think Becky felt she owed me that because I always lived closer to my mother and helped her during her long retirement. Thus having children is a key component to long term care. Like I said before, my wife and I do not have children. Most of our regular friends do not have children. Where does that leave us? It makes the urge to buy some kind of insurance stronger, but I have to wonder after seeing my mother’s experience and ask if it’s worthwhile.

    I wonder what kind of insurance AARP is selling today, twelve years after my mother bought her policy. I’m sure the market is constantly evolving. Would something I buy today be practical when I get ready to use it 20-30 years from now? How can we best plan for the future? I know this might sound silly, but I’m hoping that science and technology will perfect robotic health caretakers so if I want to stay in my home as long as possible. I’m guessing though, a good supply of cash will be the most flexible problem solving insurance. I also have to wonder how the system will handle the bulge of aging baby-boomers.

    Medicare pays for Hospice care, and I think they do this because it’s far more cost effective than letting people die in hospitals. My guess is any end-of-life living arrangements for the future might follow this lead. Can nursing homes be made more affordable and more humane? There is work in that area now. Long term health insurance policies need to prepare us for various kinds of possibilities. I don’t think AARP ripped off my mother, but I don’t think it sold my mother a good policy either. Long term care insurance should be more like what was called whole life insurance – more of an investment than a gamble. What we need is something like a 401k for our final days (402k?). We need to save for living without working but remaining independent, and we need to save for our dying months when we can’t take care of ourselves

jwh