Long-Term Care Fraud: Stealing from the Coffers of the Elderly
The population of the elderly in the United States is growing due to the aging of the baby boomers and they are living longer due to improvements in health care. 2010 Census Bureau data shows that seniors (those 65 and older), increased by 15.1% to 40.3 million, or 13.1% of the total U.S. population. Life expectancy in the U.S. is at 78.2 years and death rates are at an all-time low (1). Even if the cost of health care were not rising, living longer will still be more expensive than most of us had planned.
Medical care costs can ravage a senior’s nest-egg quickly. According to Genworth Financials 2012 cost of care survey, the national median rates for a nursing home semi-private and private rooms are $200/$222 per day(2). In Virginia alone the annual rates for a nursing home are $72,088/$82,125(3). Long-term care (LTC) insurance can help alleviate the high cost for elder care and it typically provides for services not covered by Medicare or private health insurance.
LTC insurance policies are expensive. Beyond this, anything involving seniors and money will always be ripe for fraud; add to that the complexity of LTC policies and the potential for abuse increases fraud risk significantly. Seniors and their families need to be aware of the scams that are perpetrated within the LTC industry. Here are some examples taken from the Coalition Against Insurance Fraud (4):
- Selling unsuitable policies. Dishonest agents may try to sell overlapping policies when only one is needed, unnecessarily inflating premiums. Sales pitches will typically prey on seniors’ fears that high medical cost will leave them broke or a burden to family.
- Churning policies. This scam involves “upgrading to a better policy”. The reality is that the upgraded policy is more expensive and may offer little to no greater benefits.
- Deceptively watered coverage. To close the sale, the seller may eliminate or reduce vital policy features to make the premium more attractive. You aren’t told, however, that critical benefits (such as inflation protection, reduced medical care, higher deductibles and/or co-pays) are no longer there.
- Overstating Benefits. Seniors are promised that the policy will cover “all” of the seniors long-term care expenses. For example, many times a policy will lack inflation adjustments for future medical costs. Another example would be overly stringent policy limits and restrictions.
- Making misstatements on applications. Deliberate misstatements about your current medical condition, age, past medical history or other key information are entered onto the policy application to secure the coverage or lower the premium, putting you at legal risk for providing false information.
- Selling bogus or phony policies. Be on guard for fake coverage, especially bogus home health care coverage. These schemes are designed to steal premiums and leave the senior without any coverage.
LTC insurance is a great personal finance tool and as with most insurance you hope you won’t need it but you’ll be glad you had it if a need ever arises. Now that you are armed with the facts you can fight back against fraudulent LTC scams, here’s how:
- Do you need long-term care insurance? Coverage is expensive and the high premiums can drain your income and savings. Consult with a trusted advisor about whether you’re in the right financial bracket for LTC insurance.
- Ask your agent direct questions.If they cannot provide clear answers, pressure you or are evasive – walk away and don’t apologize for it! Some example questions to ask are:
- What is the agents experience in selling LTC policies?
- What insurance companies he or she represents?
- What services does the plan cover – and not cover?
- How do I qualify for benefits?
- Make sure the Insurance company/agent is licensed. Contact your state insurance department to see if the insurance company/agent is licensed in your state. Even if the insurer is licensed, make sure they will be able to pay claims by verifying its financial health. A.M. Best has a list of financial ratings of insurance companies.
- Price shop policies. Check out policies from different insurance companies before deciding. Avoid buying on price alone. The cheapest policy isn’t always the best value.
- Avoid duplicate policies. You only need one LTC policy. Avoid sales pitches that say you need more.
- Know the policy restrictions and benefits. Read the policy and rely on it only. Do not rely on sales pitches. Make sure you understand how to qualify for benefits and ensure you understand what the policy’s benefits are. Don’t sign on the dotted line until you are comfortable with the product and all your questions are answered.
- Fill out the application accurately. An insurer may deny a claim or cancel a policy if your application is inaccurate – it is also grounds for criminal charges of insurance fraud. Sign and return the application only after you’ve double-checked all information — whether you or the agent fill out the application. If you later find an error, notify the insurer immediately. Make sure you receive your policy. Contact your insurance company within 60 days if you haven’t received your policy.
Last but not least if you discover a scam contact your state insurance department immediately. Have all the pertinent facts ready: names, dates, address, phone numbers and have any documents that support your complaint.
Thomas R Kaiser Sr. is a Certified Identity Theft Risk Management Specialist in the financial services industry in mortgage banking, identity theft, check fraud and insurance.