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How coronavirus is disrupting long-term care insurance

American Association for Long-Term Care Insurance Director Jesse Slome joins Yahoo Finance’s Zack Guzman to discuss COVID-19’s impact on long-term care insurance.

Video Transcript

ZACK GUZMAN: As we've been discussing the fallout of the COVID-19 pandemic, we, of course, have been reporting the case count here in the US, but we've also seen the death count from the pandemic and COVID-19 rise through all of this, and that's providing some additional stresses on the nation's health-care network. Premiums for long-term insurance coverage are also rising as questions remain about the long-term health consequences that recovered patients will be facing and grappling with in months down the line. And that's quickly adding to costs and draining Medicare funds at an unsustainable rate, according to many experts.

And for more on that, we're joined by American Association for Long-Term Care Insurance Director Jesse Slome. And, Jesse, thanks for taking the time to chat.

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When we're talking about all this, it's interesting to see some of those statistics coming out for how much patients are really grappling. A CDC survey pointing to about a third of 270 nonhospitalized patients who tested positive for coronavirus saying that they hadn't returned to normal health even two to three weeks later. So what's your take on how, I guess, a lot of these costs might be overlooked right now as months down the line as more people get exposed to the virus, they're still going to be dealing with all this?

JESSE SLOME: Well, it's a huge issue. And as it pertains to long-term-care insurance, there's a sense of urgency because a number of companies are raising rates currently on new applications. They're also affecting the ages that you can apply for this coverage.

So people are very much aware that they want protection, that they don't want to go into a nursing home when they need care. Long-term care is an option, but there is a reason to act sooner rather than later if you're in your mid 50s, mid 60s.

ZACK GUZMAN: Yeah, and when we talk about that, obviously if you're poor and qualify for Medicare, then there's that issue to grapple with if funding runs out on all of these, I guess, policies when we think about how much money it costs to treat these patients. We've already seeing a lot of people struggle with that funding considering how many states out there hadn't boosted funding for Medicare.

But on the flip side, when you talk about people paying for long-term care, what are you seeing in terms of those premiums increasing since this is a large issue when we talk about the size of the problem impacting all Americans?

JESSE SLOME: Well, the rates are increasing on new policies. That's primarily because of interest rates. Interest rates are so low. They are only going to stay low for some long period of time. And so that's what really is driving insurers to look at new policies and say in order to ultimately make them profitable, we have to raise rates.

A couple of insurers have already done that. The issue is when one or two do it, others typically will follow. So, you know, I would expect if you're applying for long-term-care insurance, if you're doing it today, that same policy a week from now, a month from now will cost you anywhere from 10%, 20%, even 40% more.

ZACK GUZMAN: Which is a big number considering, you know, how much all this costs out there. But we've heard reports of people with hospital bills in the hundreds of thousands of dollars dealing with COVID-19 issues, whether or not they were diagnosed originally that way or not as we learn more about how the virus impacts the body.

But on the flip side, we do see a lot of Americans losing their jobs right now, which would mean losing their health-care coverage and dealing with all this. On the Medicare front, as I highlighted, a lot of states had not boosted coverage there for Americans applying for Medicaid. 12 states hadn't exposed-- or expanded the program, rather, including Florida and Texas when we see case counts rising there. So what's your take on how quickly the funds tied to that might be extinguished and what it says about some poor Americans trying to grapple with the costs of all this?

JESSE SLOME: So it's a huge issue. One, if you're poor, long-term-care insurance is something that you're going to turn to the government, whatever government programs are there. Medicare pays very little. Medicaid pays most of it. How much longer the federal government will print money to subsidize Medicaid? That's anyone's guess. How much taxpayers will bear? That's anyone's guess. So for the poor, they're going to just have to sit tight and hope that government programs get better or bigger in the future.

For hospitalizations for seniors, that's typically going to be covered under Medicare. Long-term care are the kinds of services you need due to aging when you're not going to recover-- Alzheimer's, just aging in general.

So long-term care used to-- you know, people would think of it as being in a nursing home. The fact today is there are 40,000 deaths in nursing homes due to COVID-19. People are very much aware that they do not want to go into a nursing home, and so individuals are going to have to have the financial wherewithal to avoid that.

Long-term-care insurance is one way of doing that. It's nursing-home-avoidance insurance. But it's really-- you're going to have to be middle income to moderate affluent in order to buy insurance.

ZACK GUZMAN: And as you said, the cost of that insurance just went up through all of this as well. But Jesse Slome, American Association for Long-Term Care Insurance director, appreciate you joining in the conversation to discuss all that as I know it's something that a lot of Americans are watching right now, so appreciate it.