Wednesday December 13, 2000
Seattle—
As you may know, the Center for Long-Term Care Financing promotes private
financing in general and long-term care insurance specifically, among other options,
as a means to achieve our public policy goal of universal access to top quality
long-term care for all Americans. Diverting most people away from our public
programs via private financing with insurance or otherwise will allow these now
overburdened and underfunded public programs to offer high quality care at the
appropriate level to the genuinely needy, whom those programs are meant to
protect. Thus, we take the opportunity
now and then to rebut unwarranted and/or unnecessarily harsh criticism of LTC
insurance when remaining silent would perpetuate false or misleading statements
about a product and industry this country desperately needs to succeed.
Martin Weiss, Ph.D. rates insurance companies.
His firm, Weiss Ratings, Inc., is well-known and respected by many in
the media. Center for LTC Financing
President Stephen Moses recently served on a panel with Dr. Weiss at the
Society of American Business Editors and Writers' (SABEW) 6th Personal Finance
Conference in Tampa, FL. The panel's topic was "Long-Term Care: Insure or Impoverish?" According to Moses, Weiss criticized
long-term care insurance severely, lambasted LTC agents as mostly
"duplicitous," and ignored the panel's assigned topic, i.e., whether
private insurance or self-impoverishment is the better course for long-term
care planning.
Given Weiss's public antagonism toward private long-term care insurance and
LTCI agents, we thought it would be a good idea to review his booklet
"Weiss Ratings' Consumer Guide to Long-Term Care Insurance: Your Personal Guide to Long-Term Care
Insurance, Medicare HMO's and Medigap Insurers." A copy distributed at the SABEW meeting was "based upon a 54
year-old individual who resides in Florida." The booklet offers additional copies tailored to the needs of any
specific individual for $29 each by calling 800-289-9222.
To our surprise, Dr. Weiss's outspoken public attack on long-term care insurers
and agents was not repeated in his published consumer guide. The booklet is actually quite thoughtful and
restrained. It contains a lot of good
advice. For example:
"The
best way to determine [how much long-term care insurance] you will need is to
contact some local nursing homes, assisted living facilities, and home health
agencies and ask them what their average daily cost is."
"Your
safest bet is to pay for lifetime benefits.[if you can afford them]."
"We highly recommend you consider purchasing [the inflation protection]
option."
"The bottom line is that you should be skeptical of policies that have
comprehensive benefits, loose underwriting standards, high agent commissions,
and low premiums. It's the old
adage: If it sounds too good to be
true, it probably is."
Unfortunately, not all of the advice in the Weiss guide is this good. Ironically, given his insurance
specialization, he does not seem to understand why people need insurance. The purpose of insurance is to replace the
small risk of a catastrophic loss with the certainty of an affordable premium. Nevertheless, Weiss says:
"If you have an adult child or other family member that could act as a
caregiver, you're less likely to need the coverage of a long-term care policy.
. . . It is estimated that, for persons
who reached 65 years of age in 1990, only 9% will live in a nursing home for 5
years or more." Obviously, if you
are lucky (and prescient) enough to know you will have a self-sacrificing
caregiver and if you are willing to plan years in advance to burden that person
with your care someday, you may be able when the time comes to delay long-term
care institutionalization for awhile.
That, however, is not why you need long-term care insurance. You need insurance to protect you precisely
against the relatively small probability (nine percent) of the relatively
catastrophic risk of an institutional stay lasting five years or more. Of course, it wouldn't hurt to have
insurance coverage that also relieves the burden on your caregiver by making
professional help and respite care more affordable.
Weiss makes a similar mistake when he advises:
"[M]uch depends on your health status, the medical history of your
family, and your lifestyle. If you're
concerned you may get a chronic health condition, then long-term care is
likely. If not, it should be a lot
easier for you to do without."
This
is nonsense. The healthier you are, the more likely you will live long enough
to suffer one of the chronic illness of old age that require expensive,
professional long-term care. Your medical history or your family's is largely
irrelevant. The purpose of insurance is
to prepare for the unlikely, not to gamble on probabilities.
Weiss passes on a lot of commonplace advice that is rarely questioned, but
bears careful scrutiny. For example:
"A simple rule of thumb: If you
have to use your savings or make significant lifestyle changes to pay the
premiums, don't do it. It probably
means you can't afford it. How much
should you have? On average, figure
$25,000 to $35,000 in annual income and $75,000 in assets per person. (not per
household, and that does not include your home or car.) Above that level you should be able to
afford long-term care insurance. Below
it, Medicaid will probably absorb the costs."
What's wrong with this advice? It might
actually make very good sense indeed to use some of your savings or to curtail
your lifestyle somewhat in order to be able to afford long-term care
coverage. The biggest value added by
private long-term care insurance is not asset protection. Medicaid planners can
give you that after the insurable event occurs for a fraction of the cost of
private insurance premiums. The main
reason you need private LTC insurance is to be able to purchase quality
long-term care in the private marketplace at the most appropriate level including
home and community-based care. If you
rely on Medicaid instead, you may become trapped in an under-financed nursing
home, reliant on a welfare program that is approaching bankruptcy, and
vulnerable to benefit recovery from your estate in the long run anyway. The
smart consumer will seek creative ways to afford private long-term care
insurance including financial assistance from adult children (why shouldn't the
"kids" pay to protect their own inheritances?), home equity
conversion, economizing in other budget areas, and yes, even cashing in a CD or
selling the vacation home. It's well
worth a little financial pinch to obtain insurance that helps you stay off
welfare and retain your independence and control.
So, what does Dr. Weiss have to say specifically about Medicaid?
"Medicaid
will cover your long-term care expenses if your assets and income are below the
level defined in your state. If you're
not already at that level, you can get there by spending down your assets or
transferring them to someone else. . . .
However, transferring assets is a planning tool to be used well ahead of
time. You do this so that when it come
time for you to need long-term care, you immediately go onto
Medicaid."
This is terrible advice for reasons already discussed. To his credit, however, Weiss does go on to
warn: "Going on Medicaid, however,
is not something we recommend if you can avoid it. In general, it's not a good idea to deplete all your assets and
the quality of care you would receive through Medicaid is questionable."
Our advice to Martin Weiss: By all means, keep the cold hard light of objective
analysis and scrutiny shining on private long-term care insurance. But for heaven's sake, shed a little more
light and apply a little more skepticism with regard to Medicaid, the primary
public financing source for long-term care.
Today's easy availability of public dollars after the insurable event
occurs has anesthetized people to the risk of expensive long-term care. This government- induced indifference to the
need for private insurance constitutes a much greater danger to the public's
access to quality care than any flaws, however serious, in private long-term
care insurance products or agents.
_____________
*** Forward freely; encourage subscribers! ***
The Center for Long-Term Care Financing is a 501(c)(3) charitable non-profit
organization dedicated to ensuring quality long-term care for all
Americans. Ask how you can support the
Center today! Visit our website at http://www.centerltc.org/needhelp.htm
or contact Amy Marohn at amy@centerltc.org
for details.
This e-mail is the latest installment of "LTC Bullets" - the Center's
periodic online news service covering the latest information and trends in
long-term care financing. We welcome
responses to the material presented.
All
past issues of LTC Bullets may be read on the Center's web site at www.centerltc.org
Please direct any questions or requests to info@centerltc.org
Thank you for your time and interest.
Center for Long-Term Care Financing
11418 NE 19th Street
Bellevue, WA 98004
Ph: 425-467-6840
Fax: 425-467-6829
E-mail: info@centerltc.org
Web: www.centerltc.org