Harvey and Joy Krautschun's life together makes a good sales pitch for a new insurance product that the state of South Dakota hopes the Spearfish financial advisor will sell lots of - long-term care partnership plans.

The state Department of Social Services and the Division of Insurance encourages South Dakotans to plan ahead for the day they may need a nursing home or some other type of long-term care. Its Long Term Care Partnership Program allows people to buy a private insurance plan that will pay long-term care benefits while protecting some of their financial assets from Medicaid eligibility rules, should they ever need to access that government program because they've exhausted their own financial resources.

Krautschun knows all about the high cost of long-term care. He's been paying out-of- pocket for it ever since his wife, Joy, suffered a near-fatal heart arrhythmia in 1995 at the age of 44. That medical crisis left her with cognitive deficits and in need of full-time care at their Spearfish home.

"Most people are going to deal with the issue of long-term care, whether by design or by default," said Krautschun.

In fact, at some point after they turn 65, two-thirds of all Americans will need help with the activities of daily living and 40 percent of us will eventually spend some time in a nursing home or assisted living center, or receive nursing care in our homes, according to Kathi Skoglund, a DSS program specialist who offers public education sessions around the state about the new public-private partnership plans.

The cost of that care goes up every year. Right now, its $143 per day, and rising, for nursing home care. In South Dakota, one year in an average state nursing home costs $53,000 and the average person stays for 2.5 years. The average cost of an assisted living facility in South Dakota is currently $80 to $100 per day.

Insurance to help pay those costs has been available for many years, but as of July 2007, those products can contain an added benefit: For every dollar of private insurance benefit that's paid out, the insured person can protect $1 of his or her assets from Medicaid's eligibility limits. If a policy pays $100,000, $250,000, or more in benefits, the holder of it can preserve an equal amount in assets - money that will not be counted toward their net worth by Medicaid.

That makes the policy a win-win-win situation for the consumer, the state and the nursing home facility, according to Randy Moses, assistant director of the Division of Insurance.

"From a consumer standpoint, long-term care insurance is a good idea and good asset protection. From the state's standpoint, it's obviously a good thing for taxpayers," Moses said.

Medicaid is a federal health care program for low-income people administered by the states, which also contribute dollars to the program. In South Dakota, Medicaid pays for about 60 percent of all nursing home care. But an estimated 20 percent of people who purchase long-term care insurance will never enter the Medicaid system, which makes the product a money-saver for the government program, state officials say.

"It's certainly our hope that it's going to be a product more widely purchased by the public," he said.

As of June 30, nearly 1,000 South Dakotans had purchased one of the new Long Term Care Partnership plans.

As the owner of Financial Benefits, Inc., Krautschun said he writes perhaps 5 or 10 of the policies a month, but he has noticed that the state's public education campaign is increasing consumer interest in them.

He's sold on the idea of LTC insurance for younger people, when premiums are low and affordable. Like Joy Krautschun, 40 percent of people who will need long-term care - because of accident or illness - are still of working age, Skoglund said.

Long-term care insurance is a rapidly changing product, with variables, features and prices that vary from plan to plan.

"It's really been interesting to watch how this product has evolved and morphed in the last 10 years," Krautschun said.

People in their 20s and 30s now can buy it for about $1,000 per year, with a lifetime benefit and inflation protection, features that weren't available in the marketplace 15 years ago, before Joy's illness.

"It's not on their radar at that point in their life, but it should be," Krautschun said of younger consumers. But it is a "flashpoint" for him, he says, given his life experience, and he'd like to see more people purchase the product when it is still relatively inexpensive to do so.

Unfortunately, long-term care expenses don't usually interest people until they begin to see their parents or grandparents face those costs. But by the time people are in their 50s and 60s, annual premiums for long-term care insurance might be $5,000 per year or more, already too expensive for many consumers who are struggling with other household costs and tough economic conditions.

Krautschun stops well short of promoting LTC insurance for everybody, regardless of age or income level.

"Each situation is very case-specific in this arena," he said, stressing that the future benefit must be weighed carefully against current income stream and the cost of monthly premiums.

"It would very difficult to make the recommendation for a 65-year-old with … a limited income stream that they should buy long-term care insurance," he said. "If they need that income to live on, it's hard to say don't buy food and medicine and pay your long-term care insurance premium instead."

For many people who wait too long, any decision about LTC insurance will be out of their hands. Many people won't qualify for it because of health conditions or because, given their age and income, the premium is prohibitive, he said.

The new asset-protection product doesn't make sense for the very wealthy or the poor, but the typical middle-income American who may want to protect a nest-egg or pass on a small inheritance may benefit from one, experts say.

The only way to know for sure is to consult an insurance agent and shop around for the right plan and the best monthly premium, they agree.

"The operative term is risk management: What's the best way to identify and understand the risk while figuring out what you can afford to pay for and what you can't," Krautschun said. "It's a very individual decision."

Nursing home administrator Ron Kortemeyer says the new LTC insurance product is good for the economic health, and for the long-term viability, of South Dakota nursing homes.

"It's really a source of private pay, as opposed to Medicaid," Kortemeyer said.

Kortemeyer, director of Good Samaritan facilities in New Underwood and Rapid City, says 65 percent of all South Dakota nursing home residents are Medicaid clients. The state puts that figure at 59 percent. Nationwide, 44 percent of the U.S. long-term care bill is paid for by Medicaid, but it pays a much bigger percentage in a lower-income state such as South Dakota.

Nursing homes prefer private-pay patients because Medicaid reimbursement rates for skilled nursing care fall $15 to $30 (per resident, per day) short of the actual costs of providing that care, Kortemeyer said. As nursing homes approach Medicaid patient loads of 70 to 75 percent, a facility's viability is in question, he said. The annual shortfall for the New Underwood facility, which has a 65 percent Medicaid patient load, is about $300,000.

Good Samaritan facilities are a health care ministry affiliated with the Evangelical Lutheran Church in America, but they can't operate in the red. "We're nonprofit, but we still say, "No margin, no mission."

He worries that, as its population ages, the state will lose skilled nursing home facilities and the consumer will lose choices about where they spend their last years.

Kortemeyer agrees that long-term care insurance is a win-win-win scenario for nursing homes, their residents and taxpayers.

"People should look at preserving their ability to pay privately," he said. "Without it, you're limiting your ability to choose."

NEXT SESSION

The next educational session on South Dakota's Long Term Care Partnership Program will be held on Thursday, Oct. 30, in Rapid City and Friday, Oct. 31, in Spearfish.

The informational programs are at 3 p.m. and 5:30 p.m. in the Rapid City Public Library on Thursday and at 9:30 a.m. and noon on Friday in Hudson Hall, 222 W. Hudson St. The sessions are free and open to the public.