LTC BULLET: LIFE INSURANCE FOR LTC
LTC Comment by Steve Moses: For decades qualifying for Medicaid LTC benefits has been an open invitation to terrible financial planning. Only to get those benefits would people do otherwise idiotic things like giving away all their wealth years in advance of needing care. Or setting up a trust with the sole purpose of self-impoverishment. Or buying a half million dollar home just to hide money that would otherwise have been disqualifying.
Disposing of life insurance is another one of the stupid things people have been doing just to get Medicaid to pay for their LTC. Why cash out or lapse? Life insurance with a cash value counts against Medicaid’s low countable asset limit. So Medicaid policy encourages people to take the cash value and buy an exempt new car or otherwise shelter the assets. At the age of people likely to want Medicaid to pay for their LTC, few still have term insurance which has no cash value anyway. Still many would lapse term policies, even though they’re exempt for Medicaid regardless of benefit amount.
In the following essay, Chris Orestis proposes an alternative to wasting the value of life insurance and dumping the cost of people’s LTC on tax payers prematurely. State Medicaid programs and tax payers are likely to favor his solution. Insurance carriers, not so much. Life insurance policies that would otherwise have been cashed out or lapsed that end up paying in full are less profitable. The result could be the future need to recalculate premium rates toward the upside to compensate for this added cost.
So there’s room for reasonable people to disagree. But we invite you to read what Mr. Orestis has to say and form your own opinions.
Click here to read the article by Chris Orestis at the Center for Long Term Care Reform: http://centerltc.com/bullets/latest/1072.htm