A Comment on Medicaid
Jun 19, 2017
I have received several questions and comments about Medicaid and nursing homes and am waiting for final legislation to answer them, but I can tackle this one on insurance from Eric Lang.
"Hindsight indicates that many would have been better off with a low cost term life policy, no cash value and separate coverage for physical disability and the need for nursing home care in old age, or earlier.
Alzheimer and the associated care costs will burn through 160 or 240 acres in a few years. Nursing home insurance mitigates that risk and is useful while one is still living, unlike life insurance. So is the case with a serious farm or other accident and disability insurance."
Thanks for the great question, Eric. Insurance decisions are shaped by individual risk tolerance and long term care insurance (LTCI) is no different. Let's throw some numbers out.
The most common statistic you see regarding long term care is this one: 70% of those who reach 65 will need long term care. But because of how LTCI is written, only 35% of those who buy insurance at age 60 actually receive any benefits. Mostly this is due to a 90-day waiting period before benefits begin. It's also because 10 days of care recovering from an operation for example, qualifies as long term care so that 70% number is somewhat inflated in my opinion. LTCI has also presented problems with benefit caps, complicated benefit procedures and companies going bankrupt.
Here are some other numbers. The average cost of skilled care in a nursing home was about $90,000 per year with extreme variations between states. The average stay is less than three years, with only 12% lasting longer than 5 years. Those situations tend to stand out more prominently in our thinking however. Almost forgotten is most long term care services are delivered at home, and those average over $40,000 per year.
Nursing home insurance is expense, running 3000 to 5000 dollars per year and premiums have been escalating sharply. Whether it is worth it is a difficult call. Hybrid products of life insurance and LTCI are much more complex and have not been around long enough for good analysis, but might be helpful. The most important point for farmers is schemes to reduce assets like farmland so that you qualify for Medicaid may not be viable options if possible Medicaid cuts are enacted. If that happens, LTCI may merit a second look.