Allianz Life Finds 'A Hope and A Prayer' What Many Americans Relying On As They Ponder Paying For Long Term Care Needs.

Business Editors

MINNEAPOLIS--(BUSINESS WIRE)--Dec. 6, 2002

Middle Income Americans could be hit

hardest by looming long term care crisis

Even though many Americans are worried about paying for long term care in their old age, relatively few have taken steps to provide it for themselves, according to a national survey by Allianz Life Insurance Company of North America (Allianz Life(TM)). Middle Income Americans could be hardest hit if they don't take steps to prepare for their long term care needs.

The survey, "Allianz Life Report on American Priorities: Long Term Care Snare," found that nearly three-fourths (71 percent) of respondents said they are very or somewhat concerned about needing long term care in the future. However, less than one-fourth of the respondents (21 percent) have purchased long term care insurance. This, despite the fact that 68 percent said they think that long term care insurance is very or somewhat important to the financial security of their family.

"A hope and a prayer appears to be what many Americans are counting on as they ponder their need for long term care," said Chuck Kavitsky, president, Allianz Life. "It's clear that although people fear the possibility of needing this type of care and the costs associated with it, they are overwhelmed and would prefer to look the other way and ignore the financial devastation they or their family could face as they age and need the care."

When survey respondents were asked what they would do to prepare for the possibility that they (or their spouse) would need long term care, common responses included "nothing," "hope and pray," "wait for the government to do something," "start saving money," and "research information on long term care needs."

This signals an ominous long term care crisis, given that one out of five Americans over the age of 50 may need this care in the next 12 months, according to Americans for Long-Term Care Security (ALTCS), an independent advocacy group made up of a broad-based network of organizations.

Long term care insurance covers the cost of nursing homes, assisted living facilities and in-home care providers. Most often, this type of insurance helps people pay for care when they are no longer able to care for themselves, although it also covers people who are able to function relatively well in an assisted living facility or with in-home care. The estimated annual cost of a nursing home is $50,000, according to the AARP.

Middle Income at Risk

Despite their failure to prepare for the possibility of needing long term care, most survey respondents understood that they could not count on Medicare to pay for it. Sixty percent said they realize that Medicare is not likely to cover costs of their care, even if they can't afford to insure themselves. One-fourth believes that Medicare will pay if they can't.

According to ALTCS, more than half of the entire population will need long term care at some point in their life. Medicare and Medicaid pay for approximately 56 percent of all nursing and home care, but in order to qualify for Medicaid, people are required to "spend down" one's personal wealth to approximately $2,000.

That means the vast majority of the population--the Middle Income--will be responsible for paying their own long term care bills, because they are too well off for Medicaid and too poor to pay for care themselves.

What options do Middle Income Americans have to cover the risks of living longer? They can rely on their family to care for them, they can deplete their assets to pay for care, or they can buy insurance. However, many believe traditional long-term care insurance is too complicated and/or expensive. Respondents gave the following reasons when asked why they didn't buy the coverage:

-- Too expensive -- 36 percent

-- Don't know enough about it -- 21 percent

-- Didn't know why/refused to answer -- 18 percent

-- Don't need long term care insurance/waste of money -- 13 percent

-- Have enough in savings to cover the costs -- 12 percent

"Middle Income Americans have the most to lose," said Kavitsky. "It won't take long for people to see their retirement nest eggs melt away when they're paying $50,000 a year, out-of-pocket, for long term care. What would you rather do? Pay $4,000 a month for long term care services, or a fraction of that to protect your assets with long term care insurance? Baby Boomers should definitely be asking themselves this question as they move towards retirement."

Insurance Industry Must Step Up To The Plate

The Allianz Life survey also found that nearly 60 percent said they want a long term care insurance policy with basic benefits rather than one with optional benefits at an additional cost (11 percent).

Kavitsky said it's time for the insurance industry to answer consumer needs and demands. "We need to help people understand the economic realities of long term care - what it really costs and what is at stake for their families. It's time we offer a simpler, less expensive solution to cover long term care risks - relevant solutions that Middle America can understand and afford."

Congress is considering proposals to allow tax deductions and/or credits for long term care expenses and insurance premiums. More than 80 percent of survey respondents said they would support tax incentives to buy long term care coverage.

Family Ties

The study found that a large majority of people has had close experience with the need for long-term care. Approximately three-fourths (74 percent) of respondents said they have had a family member who required someone to care for them.

Respondents were split on the question of whether family members should provide long term care, with about 40 percent saying they expect family members to care for them, and nearly 60 percent saying they do not expect family members to provide care.

Other Key Findings

-- Nearly 60 percent of those who had purchased long term care

coverage said they did so to pay for the cost of a nursing

home or in-home care worker. The second most common reason

cited was to prevent them from becoming a ward of the state,

followed by providing an inheritance for their family or

charity.

-- When asked who took care of a family member that needed care,

60 percent said the family and 40 percent said it was provided

by a professional care service. Women and older respondents

were much more likely to personally provide care for other

family members.

-- Women are more likely to express worry over needing long term

care than men (47 percent vs. 34 percent).

-- Americans in the 50-59 year-old category tend to be more

concerned about long term care than are the younger and older

categories. In this case, many of the younger respondents may

view long term care insurance as too far in the future, and

those who are older see it as too late.

Allianz Life "Report on American Priorities"

"Report on American Priorities" is an ongoing comprehensive survey of finance-related attitudes and issues of concern to U.S. consumers. Allianz Life Insurance Company of North America distributes new survey results several times a year. The Allianz Life Report on American Priorities: Long Term Care Snare survey was conducted in July 2002 by Volkart May & Associates. The survey was fielded among 800 Americans ages 40 to 70. The sampling error is +/-3.5 percentage points at the 95 percent confidence level. See www.allianzlife.com/press.

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America (Allianz Life) is a leading provider of fixed and variable annuities, life policies and long-term care products through independent distribution networks and financial institutions in the U.S. Allianz Life is part of the Allianz Group, one of the world's leading integrated financial services providers, with a gross premium income of 75.1 billion euros in the fiscal year 2001 and 1.2 trillion euros in assets under management, and the 18th largest corporation in the world (Fortune, July 22, 2002). Allianz is represented with 700 subsidiaries in over 70 countries around the globe and employs 180,000 people worldwide. Allianz Life headquarters are based in Minneapolis.