Maybe You Don't Need Long-Term Care Insurance After All

[eridani]

http://www.bloomberg.com/news/2014-11-12/maybe-you-don-t-need-long-term-care-insurance-after-all.html

Report from Center for Retirement Research at Boston College
http://crr.bc.edu/briefs/long-term-care-how-big-a-risk/

Mediciad.gov - Community-Based Long-Term Services & Supports
http://www.medicaid.gov/affordablecareact/provisions/community-based-long-term-services-and-supports.html

The biggest threat to a retiree's nest egg isn't a stock market crash. It's a long illness requiring round-the-clock care.

The statistics behind that scenario -- $81,000 a year for a nursing home, $184,000 for 24-hour home care -- are what sells long-term care insurance policies. But while past research suggested that many more people needed the coverage than bought it, a new study suggests that most people should just skip it.

The study, by Boston College's Center for Retirement Research, focused on singles, who now make up the majority of Americans. Long-term care insurance makes financial sense only for the richest 20 to 30 percent of unmarried people, it finds. For the rest, it makes more sense to go without. If they need care, spending down their assets and then letting Medicaid pick up the tab is the most practical solution.

Long-term insurance can pay off for wealthier singles, even under the Center’s new math. It takes $260,405 in assets, or about $90,000 in annual income, to put a household in the top 25 percent, the Russell Sage Foundation and the Congressional Research Service estimate. These affluent customers can afford the premiums, and insurance can protect their heirs' inheritance if that's a goal. The same logic works for couples, but only if they're even wealthier. Webb warns that forthcoming research will show long-term care insurance makes even less sense for married couples than it does for singles.

Comment by Don McCanne of PNHP: The Affordable Care Act included Senator Ted Kennedy’s Community Living Assistance Services and Supports Act (CLASS Act) which would have provided long-term care. Unfortunately the specifics of the CLASS Act proved to be unworkable and thus it has been suspended. But according to this new study, unless you are wealthy, you do not need long-term care insurance anyway. Most of us can simply spend down our assets and then Medicaid will take care of us.

Think about how that could apply to the increasing use of patient cost-sharing, especially the ever-higher deductibles. We could eliminate individual health insurance coverage. When individuals are faced with expensive acute or chronic conditions, they could simply spend down their assets and then go on Medicaid to cover their future health care costs.

The obvious flaw in all of this is that it would require near destitution for us to have our heath care expenses covered. Other nations automatically cover these expenses for everyone without forcing them to relinquish their assets. It is a sad commentary that we accept the policy that a person must go broke before we will provide them with long-term care. This should not happen in a caring society.

But what are we doing with moderate-income individuals and families right now? We are requiring cost-sharing, especially deductibles, at a level that wipes out liquid assets for many of them, if they even have such assets. Financial hardship has become an expected consequence for far too many people who have significant medical needs. It is primarily wealthier individuals and families who have the assurance of being able to obtain health care without losing their assets.

Long-term care should be covered by our health care financing system, and significant cost-sharing should be eliminated. A single payer system would ensure that all of us could get the care we need, including long-term care, without adverse financial consequences.

If we really do expect that people should use their personal assets to contribute to the financing of health care, do it through estate taxes, but make the taxes equitable, that is, progressive. Do not take away from our seniors what little they have in the final years of their lives.

And do not charge the estate specifically for the amount of health care that was given. We shouldn’t deprive families of their modest inheritances just because medical bills were high late in life. Estate tax rates should not apply to smaller estates, but then the rates should increase with the size of the estate, unrelated to whatever health care costs the family faced. Yes, the rich would pay more, but that’s the way it should work in a caring society.

[enough]

1. k&r (nt)

[Vinca]

2. Forget money. If I get to the point of needing long term care I hope I'm well enough to kill myself.

Seriously. Being an elderly person parked in a home is my worst nightmare.

[Recursion]

3. What we're doing now is a stealth inheritance tax on the middle class

Medicare/Medicaid essentially get liens on estates if you have to use them.

[SoCalDem]

4. Especially since more and more people have fewer and fewer assets

We are soon buying our last house...with cash, and will list our three grown sons, (as owners) on the title. It will be the family "vacation compound"....We will be the "unpaid, live-in caretakers"...

There will be no mortgage interest to deduct, and our income is small enough that we should owe little if any income taxes anyway. The state we are moving to has no state income tax (WA), so it makes more sense to us, to just deed the house over to them now, and save them the hassle later on after we are gone..

Our only personal assets will be our SS, my measly pension, and our savings/retirement account money..

We have discussed the what-ifs, and are relatively sure that we will take care of each other as we age, and will avoid "long term care" like the plague...