Don't Let Price Increases Scare You Away From Long-Term Care Coverage

Steve Moses, president of the Center for Long Term Care reform, a national policy think tank, defends private insurers, saying: "The government has not set aside any money for the future to back up its promises that Medicaid will care for frail seniors. At least, the private insurance industry has bitten the bullet and is increasing prices so they will have adequate reserves to pay the claims when they start coming in."

Moses suggests that the market for private LTC insurance will never expand, as long as the government is "giving away" the same service that insurers are trying to sell. He points out that middle-class and even affluent Americans have learned the tricks of qualifying for Medicaid nursing-home coverage.

They'll be surprised when they learn that Medicaid provides care primarily in nursing homes that will only become more underfunded and understaffed. Moses believes that the burden of long term care needs will crush the system, wiping out the possibility of such government-provided benefits in the future.

It's quite likely that state insurance commissioners will approve the requested price increases from the insurers. Unfortunately, a side effect is likely to be that fewer people will buy long term care insurance. Then, when the real burden of caring for aging baby boomers hits in the next 10 or 15 years, the states will have to shoulder the cost through their Medicaid programs as boomers run out of their own money.

Still A Good Deal

Don't give up on the concept of buying long term care insurance. Claude Thau, an industry expert, points out that even if you purchased a MetLife policy five years ago, and thus now expect a premium increase notice, you're still ahead. For example, if you purchased a policy costing $1,080 a year at age 50, even with the projected annual increase to $1,274 you're better off than if you waited until now to buy a policy. That's because a new policy with comparable coverage at age 55 (your current age) costs $1,814 a year!

For older insurance purchasers, the numbers are even more dramatic. If you were 60 five years ago and purchased a policy then, the original premium of $1,648 would increase to $1,944. But that's still a bargain compared to the $3,047 annual cost of the same policy if you buy it when you are 65.

If locking in rates is a concern, consider a 10-pay policy where your coverage is fully paid up in ten years. Janice Axelrod, an independent long term care insurance broker in Chicago, says this is particularly attractive for some businesses (C-corporations) which are allowed to deduct the full annual payment.

In other words, don't bury your head in the sand about the very real possibility that in old age you'll need help getting dressed or bathing or getting out of bed. Can you count on your children to be there for you? Would you even want your children to do that? Or will you run out of money trying to pay for care on your own? Those are questions to ask yourself as you consider the value of long term care insurance. And that's the Savage Truth.

 

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