Is Long Term Health Care Insurance Appropriate for You?

SALESMAN: “Most elderly people, when asked by the American Association of Retired Persons how they would pay for long-term care, responded that Medicare would cover the cost. Unfortunately, they were wrong.”

PROSPECT: “I didn�t know that.”

SALESMAN: “Medicare does not cover long-term care. It pays for some nursing and home health-care expenses, but these must be medically related and short-term in nature.”

PROSPECT: “What about Medigap?”

SALESMAN: “Medicare supplemental insurance (Medigap) does not pay for long-term care and Medicaid, the welfare program that does cover long-term care, requires recipients to “spend down” to the poverty level before becoming eligible.”

PROSPECT: “What do you mean poverty level?”

SALESMAN: “They will allow you only about $7500 dollars! In addition, as of January 1, 1997 it is a federal crime to transfer money to other family members in order to become eligible for Medicaid. That means your family could lose all your assets if you go in a nursing home.”

PROSPECT: “So, how do I pay for long term care without depleting my assets? Insurance?”

SALESMAN: “That�s right Mr. Prospect, now let me show you why our company�s policy is the best one for you today.”

Most people have heard this pitch. They are scared by it. It is natural to worry about the disastrous effects on your family�s well being of Alzheimer�s disease or prolonged, lingering senile dementia. Insurance companies encourage fear, it�s their business. They know you will buy if you are uncomfortable. Here are some facts that may help you alleviate your fear.

Most retirees and pre-retirees who we see at BWFA don�t need long term health coverage because they don�t have an insurance need. This fact is cleverly left out of most salesmen�s pitches. The method that results in the most policy sales is to assume you need the coverage. As insurance advisors paid by a fee, not a commission, we are in a better position to advise you. We start by looking at your need. We project your income and expenses to see if LTHC coverage is actually needed. It usually isn�t.

Let�s look at the risk you take if you don�t have the coverage. The average stay in a long term assisted living facility is 2 1/2 years. Today, the cost of a nice facility in Maryland is about $60,000 per year. This fee includes room and board. This means that the average BWFA client would have an average exposure of $150,000.00. Most of our clients can pay this bill either by selling their home and moving into assisted living facilities or by managing their cash flow from existing assets. Ordinary expenses of living eliminated while living in the facility (property taxes, home maintenance, utilities, food, etc.) nearly offset the cost of an average claim.

But what if the claim is above average? Would your assets be consumed? Here are some helpful statistics. Of the population of those over 65, only 43% will need a long term care facility. Of those who actually move to a long term facility, only 1 in 10 will stay longer than 2 1/2 years. This statistic is telling. It says that only 4.3% of those over 65 will actually have a claim that exceeds the $150,000 mentioned above.

My wife and I sometimes visit the Methodist home to see friends. The last time we asked, the administrator told us that the average age of residents in the facility was 92. We never see any 55 year olds there. Although this is a small sample, it is quite true that the probability of using your policy benefits in early years is even less than 4.3%.

Contact us before buying LTHC coverage. We�ll do something radical for you. We�ll tell you whether you need it.