The Latest   l   Articles, Speeches & Reports   l   LTC Bullets Newsletters

Media   l   LTC Graduate Seminar   l   Members-Only Zone

  Search   l   About Us   l   Contact Us   l   Home

* Subscribe to the Center *

LTC Bullet:

Money Magazine Misguided on LTC Insurance

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.

Dear Editor:

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.

Weil writes, "After weighing the pros and cons, I prefer to add the premium costs to an investment portfolio that I can use in sickness and in health." What scale is Weil using to weigh the pros and cons? The tone and content of Weil's article reveals more of a personal bias against long-term care insurance than anything approaching a well-informed objective analysis of long-term care financing risks and options. Money's readers deserve better.

Very truly yours,

David M. Rosenfeld, JD, MSW
Vice President