Last update - 02:03 13/07/2007
Nursing care insurance? Don't waste money on it
By Ronny Linder-Ganz
Is a person who pays insurance for nursing care privately or through his health maintenance organization over many years actually wasting his money?
Surprisingly, for quite a few people, primarily from the lower percentiles, the answer is yes, according to Dr. Udi Frishman, an expert in health and nursing care insurance.
Here is an imaginary example to illustrate the error:
Abraham and David are good friends, who their whole lives save money for their retirement, but with one small difference.
While Abraham and his wife put aside around NIS 300 per month for health care insurance, David and his wife decided that they prefer to "take the risk" and invest their liquid NIS 300 in the good things in life, such as an annual vacation or a family dinner at a restaurant.
Abraham does cut back on his spending to pay for the insurance, but he thinks that in so doing, he is assuring his future.
Absurdly enough, Abraham is mistaken.
Around a year ago, he and his friend David fell ill, their situation deteriorated and unfortunately, both of them became patients who were unable to care for themselves. Their families decided to place them in an institution that suited their needs at a cost of NIS 9,000 a month.
Because Abraham and David could not allow themselves to pay for this option, their families turned to the state for assistance.
According to the Health's Ministry's eligibility rules, their resources and their children's financial resources were reviewed to ascertain if the two were entitled to assistance.
After the clerks realized that the two had no source of any income, including none from any property, and that the families also did not have the means to help cover the cost of being placed in a nursing home, they decide that they are entitled to full funding for the NIS 9,000 cost of moving into a nursing home.
But then the clerks discover that Abraham has nursing care insurance.
If so, they inform his family, the insurance will cover NIS 6,000 of Abraham's bill, and the state will cover only the remaining NIS 3,000.
On the other hand, David receives full funding from the state.
This specific story many be hypothetical, but it most certainly could happen. Such stories do indeed occur in reality. Frishman explains that a distortion in the law is the reason why money that a policyholder accumulated throughout his life in a nursing care insurance policy may one day be deducted from the amount the state pays for hospitalization in a nursing home.
According to the Health Ministry's eligibility rules, a nursing care patient must inform the ministry of the existence of nursing care insurance of which he is the beneficiary. In addition, the rules state that "the Health Ministry will collect from the patient or the insurance company the maximum sum to which the patient is entitled from the insurance." On the other hand, a person who did never invested an agora in nursing care insurance may actually receive a bigger amount of funding from the state, which will cover the cost of his hospitalization.
"This means," says Frishman, "that a person who his whole life paid for nursing care insurance, will lose out twice. First, because he lowered his standard of living and that of his children as a result of paying a premium to an insurance company, and second because he received less money from the state for a nursing care facility.
This flaw applies only to people in the lower 1-6 percentiles, who "successfully pass" the entrance test and find themselves eligible for assistance from the state. More established people, from the seventh and above percentiles, the ones who can pay NIS 9,000 a month on their own or with help from their families, are not entitled to assistance from the state in any case, and therefore when the time comes, when they want to move into a nursing home at their expense, they can certainly use their insurance money.
Even a patient who requires nursing care, whose family decides not to place him or her in a nursing home and instead rely on home care, can benefit from the insurance fund without the state being involved, because in this case, the state is not taking part in covering the cost of the care.
According to Udi Frishman, "this is a case of an Israebluff, a vast misleading of the state's weak and poor population. In the existing situation, it is preferable for the elderly and those with low incomes to "waste" their money on quality of life than to put aside that same money for a nursing care insurance policy."
According to Yossi Manor, the president of the Insurance Agents Association, "Specifically for people who don't have a lot of money, the importance of acquiring a nursing care insurance policy increases. Moreover, most the people requiring assistance today remain in their home and desperately need the insurance money.
Of course, the fairest solution to this problem is for the state to stop redeeming the money from private nursing care insurance policies of those who have been recognized as eligible for reimbursement of nursing care costs.
In the meantime, given the distortion of the law, for whom is it not really worthwhile to take out nursing care insurance? The answer is complex, says Frishman, because the eligibility test depends not only on monthly income but also on the presence of assets, passive income, the pension levels of the couple and their children's financial situation.
In principle, if the family of a person receiving nursing care has a total income that is less than NIS 9,000 a month, it is not worth taking out a nursing care insurance policy. For example, let's say the person needing nursing care and his spouse have an apartment that could yield NIS 2,000 per month, and their children could help by providing another NIS 3,000 per month. In this situation, acquiring a policy is worthwhile only if the couple's total income from their pensions is more than NIS 5,000 per month.
As far as salary, using a sweeping general assumption, it is possible to determine that for a couple whose combined income is less than NIS 6,000 per month, in the current situation it is not worth to take out a nursing care insurance policy. It would simply be a waste of money for them.
In a family where the couple's combined income is NIS 6,000-9,000 a month, it is a good idea, before taking out a policy, to review the expected overall income of the couple from pensions and other assets or from relatives, and only if the expected income exceeds NIS 9,000 is it worth investing in nursing care insurance.