Experts Now Say Forget LTC Insurance and Spend Down Your Assets for Medicaid Instead

A study by Boston College’s Center for Retirement Research, revealed that long-term care insurance makes financial sense only for the richest 20 to 30 percent of unmarried people. For the rest, it makes more sense to spend down assets and then letting Medicaid pick up the tab. The caveat to this is that the study focuses on nursing home care and for that foregoing LTC insurance may make sense. The average nursing home stay for a man was less than a year; for women, 17 months. And 45 percent of patients don’t stay more than three months. Many of those short nursing homes stays end in death. Those visits are often covered by Medicare following a hospitalization. Previous research showed that some 30-40 percent of elderly single individuals should optimally purchase long-term care insurance, far higher than the actual 13-percent coverage rate. Although it is optimal for only a small percentage of single individuals to buy insurance, this study shows that many more would be willing to purchase a supplemental policy that could transform Medicaid into comprehensive, non-means-tested insurance. But policymakers have yet to devise a means of permitting such policies while at the same time containing Medicaid costs. Looking at the other side of the coin, Jesse Slome, executive director of the American Association for Long-Term Care Insurance speaking to Bloomberg says that “most customers see long-term insurance as ‰ÛÏnursing home avoidance insurance.” ‰ÛÏThey want to remain in their own home,‰Û and private insurance gives them more options for home health care than Medicaid. Long-term care insurance was never meant to be universal, he says. I think nursing homes and assisted living homes will become more irrelevant over time and aging in place will be the norm. Even if we don’t necessarily take good care of ourselves physically as a nation, technology and pharmaceuticals and other supports will allow us to live in our homes longer. To pay for that care long term care insurance could make sense. And remember assisted living is by and large an out of pocket expense. I say get the insurance if you can afford it.