When planning your retirement, the possibility of needing some form of long-term-care becomes a 7 out of 10 chance after age 65. You could get lucky and live a full and healthy life without ever requiring long-term-care services in California (3 out of 10 people), or you could fall under some level of assistance from short term in-home care, to long term skilled facility care (the other 7 out of 10 people).
Proponents of long-term-care such as Dr. Mark Meiners, a professor of health administration and policy at George Mason University, says, “That isn’t to say long-term-care insurance is right for everyone. It is not. The wealthy can be reasonably sure their savings will be enough to pay directly for long-term care, whatever its duration. And despite concerns about quality, Medicaid is there for the poor. But what about consumers with midlevel savings—in other words, most people? These consumers need long-term-care insurance the most. They tend to have too little savings to pay for even a couple of years of care without impoverishing themselves and their families, and too much to qualify for Medicaid” (WSJ, 2012).
Opponents of long-term-care such as Prescott Cole, a senior staff attorney at California Advocates for Nursing Home Reform say, “For those with little wealth, a policy will never be suitable. They will be covered by the long-term care provided by Medicaid. For individuals with incomes of at least $250,000 a year and substantial savings, the smarter move might be to either self-insure or use their resources to pay for high-level in-home health care. For mid-wealth individuals, the answer is not so clear. The average annual premiums for policies sold to seniors run around $3,500 per year. But few—if any—policies pay 100% of the daily private pay rate, currently about $250 per day. Policies typically pay $150 a day. So, even a resident with a policy will have to dig into savings to pay the difference” (WSJ, 2012).
Mr. Prescott’s argument is one of setting up a savings plan in the event something should happen. While they may be a great idea, most people are simply not disciplined enough to set aside $3,500 per year for 30 years with a strong rate of return, and with the stock market cycles, you never really know if 30 years from now your investments will flourish or flounder at the time you need them most. People buy car insurance with the odds of 1 in 340 suffering a loss, or 1 in 1200 home insurance policies suffering a loss due to fire. In long-term-care, after age 65, 7 out of 10 will need to access some level of benefits or pay out of pocket for care.
Dr. Meiners says it best, “The important thing to understand is that there are a wide range of policies offering different degrees of security, but all preferable to taking the chance of being financially decimated. According to estimates done by the American Association for Long-Term Care Insurance, a typical couple buying a shared policy providing immediate benefits worth $328,500 at age 55 pays an annual premium averaging $2,700. By age 80 their joint benefit has grown to $708,000 with the built-in inflation protection. Alternatively, a typical couple buying a shared policy with $219,000 of coverage could reduce their premium by about 20% to 25%. That’s a viable option for those who are worried about this risk. If more coverage is affordable, buy more coverage. But some is better than none” (WSJ, 2012).
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Source:
Should You Purchase Long-Term-Care Insurance? (2012, May 14). Retrieved July 13, 2015
