Bad Legal Advice For Long Term Care


Congresswoman Mary Rose Oakar (D-OH) greets Be...
Congresswoman Mary Rose Oakar (D-OH) greets Betty Ford as she arrives to testify before the Select Committee on Aging Subcommittee on Health and Long-Term Care in support of public spending and insurance coverage for substance abuse treatment programs such as those offered by the Betty Ford Center. (Photo credit: Wikipedia)

I just read an article that made my blood boil.  Apparently, the attorney who wrote it is stranded in the last century.  I will not provide a link to the site because I do not want to accidentally imply that I agree with his advice.

I understand that there are good and bad lawyers.  Most of the ones that I know are good, intelligent people.  Like most insurance agents I know, they are human and can make mistakes.  However, most of the ones that I know do everything they can to make certain that they do not make mistakes are act in your best interest.

However, occasionally, I am forced to read or listen to either an incompetent insurance agent or lawyer.  Not all of them are incompetent by choice.  The advice they give was acceptable in the past but things evolve.  What was sound advice a few years ago is no longer proper.

The article I read implied that Long Term Care insurance is no longer viable.  He recommends gifting plans so that if you need Long Term Care in the future, you can rely on Medicaid.

If I did not find that advice so misleading, I would find it laughable.  It may have been sound advice in the 20th century but this is the 21st century and things have changed.

FEWER INSURANCE COMPANIES

Yes, a handful of big name insurance companies have found Long Term Care insurance to be unprofitable.  Their solution has been to stop selling LTCI and leave the market.

However, in the past few years, other insurance companies have realized just how important their services are to the public.  They have taken steps to shore up their policies so that they can continue to offer Long Term Care insurance to people who need it.

POLICIES ARE EXPENSIVE

Yes, for those people who wait to get Long Term Care insurance until after they have reached their 70th birthday and then want all the optional “bells and whistles” policies are quite expensive.

However, the “sweet spot” age for people to buy LTCI is in their mid-50s and early 60s.  Minimal policies without all the optional “bells and whistles” are often less expensive at that age than permanent life insurance.

MEDICAID WILL TAKE CARE OF ME

Yes, Medicaid is the biggest payer for Long Term Care expenses in our nation.

However, Medicaid will not pay anything unless you are able to meet both their income and asset tests.  This is where the concept of “gifting” is considered.

“Gifting” plans are primarily an estate planning tool.  It was not created with Medicaid in mind.

When the “gifting” concept was first discovered for Medicaid it was a little more viable.  Under old rules, any gift of money or property could be included in an applicants asset test for Medicaid qualification if it was given less than 3 years previously.

Medicaid was designed to help the poor.  Too many middle class Americans were using “gifting” programs to impoverish themselves and avoid the spirit of the Medicaid laws.  The Deficit Reduction Act of 2005 (DRA05) extended that “look-back” period to 5 years.

DRA05 did not just penalize middle-class Americans for trying to find a way to get the help they needed for Long Term Care.  DRA05 also allowed states to create “Partnership Plans.”

A “Partnership Plan” allows you to purchase the amount of Long Term Care insurance you need to protect your assets.  If you use up all the benefits in your LTCI plan and still need help, Medicaid will waive both its “asset test” and estate recovery requirements.

The idea behind the “Partnership Plans” is that Medicaid will still be available to help the people who need it.  However, those who can afford to take care of themselves should do so, with the understanding, that Medicaid is still available for them if they run out of money.

FINAL THOUGHT

If you have read my thoughts on insurance in the past, you know that I do not believe that there is one type of insurance policy that will do everything.  I am appalled when I review someone’s portfolio to find that they are spending way to  much for life insurance and not enough for good health insurance.

I believe that with a little concentrated effort you may be able to allocate what you are currently spending for insurance so that you can cover all of your risks and not just some.

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