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Check out this article by Professor Katherine Pearson of Penn State Dickinson School of Law:  Evaluating Long-Term Care Insurance in a Troubled Economy

 

"I'm not going into a nursing home, and I'm not spending my money on nursing home insurance." How many times have I heard that?

If you can comfortably afford $9,000 a month for nursing care maybe you're right. But how many people can do that? And if you're a couple - can you spend $9,000 for one of you and the other stay at home with all of the usual house and living expenses?

"But long-term care insurance is expensive," you say. After you pay the first month's nursing home bill, I'll ask you if you think it's expensive then.

Here is Suze Orman on the subject (Suze Orman, 9 Steps to Financial Freedom, pp. 83-84):

"What if you never use long-term care insurance? It will be wonderful if that's the case. The purpose of insurance is to cover catastrophes. You should always hope you'll never have to use it.

This is the question clients ask me all the time about LTC insurance

Now let me ask you a few questions.

Do you have fire insurance? If you own a home, you have to have it. If you do, have you ever used it? Only 1 out of every 1,200 people ever uses fire insurance. But that doesn't mean it isn't a good idea.

Do you have automobile insurance? If you have a car, you do. If so, have you ever used it? Many of us are afraid to file a claim even when there's a reason to, for what it might do to the cost of our premiums. Only 1 out of every 240 people ever uses car insurance. But most of us still have it.

How many people do you think use long-term care insurance? One out of every three, among those who have it. It is used more than any other kind of insurance, yet it's the kind of policy that way too few of us have.

Why do you think you'd need LTC insurance if you already have health insurance? Because there is not one health insurance policy in existence that covers long-term care.

If the situation were this dire, are you thinking it would be better all around just to dump the bills on Medicare? You couldn't. Because Medicare won't pay them. Medicare will only pay 100 percent for the first twenty days of a LTC stay and will pay only if the facility is a Medicare-approved skilled nursing home. . . . Medicare pays for less than 2 percent of all the people in nursing homes today. If you want to count on being one of those 2%, good luck. Anyway, do you believe that Medicare is going to be thriving by the time you're in your eighties?

Well, what about Medicaid, then? Doesn't Medicaid pay for nursing homes? An agency of last resort, Medicaid currently takes over, at any age, when you're financially destitute. It's welfare. Medicaid is a federal agency but run in each state by the state. Currently, it's true that 40% of people in nursing homes are paid for by Uncle Sam - but Medicaid is not the answer.

For one thing, "financially destitute" is a tricky concept. If you are reading this book, you're reading it so you won't be financially destitute, and I'll tell you what I tell my clients: If your plan is to divest yourself of your assets should a nursing home become inevitable, please turn to another financial adviser. Historically, many people have made themselves poor on paper to qualify for Medicaid by transferring assets and trying to make it look as if their money has disappeared. This is a demeaning process and can be devastating to the spouse, if there is one, who remains at home. The spouse who needs long-term care is then sent to a Medicaid-approved nursing home, which is not necessarily a place where you want to spend your last days. These are often overburdened facilities, and quite simply, our government can no longer afford to fund them."

 

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Spencer Law Firm LLC
320 Race Ave
Lancaster, PA 17603

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