Thursday July 29, 1999
In the following letter to the editor, Center for Long-Term Care Financing VP David Rosenfeld responds to Henry Weil's article "Stocks vs. Insurance" in the August, 1999 issue of Money Magazine (Vol. 28, No. 8., pps. 52-53). Weil's article recommends investing in the stock market instead of purchasing insurance to cover potential LTC costs.
Henry Weil's article "Stocks vs. Insurance" in the August issue of Money is a disservice to readers considering the purchase of long-term care insurance.
Weil concludes that investing insurance premium money in the stock market may be a better use of funds than purchasing insurance you may never use. In making this argument, Weil demonstrates a failure to apply the fundamental principles of insurance.
Although Weil states that "insurance is always bought for protection against unlikely events," he is unwilling to apply this core concept to long-term care. Weil acknowledges that Americans face a 1 in 4 chance of spending more than a year and a nearly 1 in 10 chance of spending five or more years in a nursing home at a cost of between $32,850/yr and $146,000/yr (Weil's figures). Weil even describes these costs as potentially "devastating." In reality, expensive long-term care is exactly the kind of risk that most Americans should insure against.
Instead, Weil concludes, "If you start investing the average $802-a-year premium at age 50, in thirty years (assuming a 7% return) you'll have $81,863. Begin at age 65, invest $1,829 for 15 years, and you'll have $51,007. True, a long stay could exhaust those sums, and you might need nursing home care before you turn 80. But if you don't end up needing long-term care, the invested cash will always be yours, while money spent on premiums will vanish."
But what if you do need expensive long-term care? Even if
you're lucky enough to avoid care until your 80s, Weil's rainy
day fund would vanish in less that one year in some parts of the
country and in less than two years everywhere else. Then what?
Weil doesn't explain that you'll likely be forced into an already
overburdened Medicaid program with its notorious reputation for
problems with access, quality, reimbursement, discrimination and
institutional bias. Moreover, recommending that readers roll
the dice with their long-term care when taxpayers (a.k.a. you
and me) may have to bail them out is irresponsible and offensive.
Very truly yours,
David M. Rosenfeld, JD, MSW