Tags: Medicaid | long-term-care | welfare | population

How to Pay for Your Nursing Home Stay: Tax the Young?

By Wednesday, 19 November 2014 08:25 AM Current | Bio | Archive

Large financial firms are running a year-end TV advertising blitz. Their theme: How will you pay for retirement? It's a good question. Saving as much as you can and planning ahead are excellent ideas.

On the other hand, living a leisurely retirement might be a secondary concern for many older Americans. Nothing will bankrupt you faster than a long illness that requires skilled nursing care. Medicare generally pays for only 100 days as follow-up to a hospitalization. Beyond that, you are on your own.

With nursing homes in some parts of the country costing $10,000 a month or more, very few people can afford to pay out of pocket. Some move in with their children and try to manage medical needs at home. This can work, but it also puts a huge burden on the younger relatives.

Most financial experts have a ready answer to this dilemma: Just go on welfare.

They don't use that word, of course. They know people are proud and don't want charity, so they approach the matter gently. Bloomberg had an unusually candid report recently on long-term care insurance. Describing a recent study from Boston College's Center for Retirement Research, Bloomberg said:

"Long-term care insurance makes financial sense only for the richest 20 to 30 percent of unmarried people, it finds. For the rest, it makes more sense to go without. If they need care, spending down their assets and then letting Medicaid pick up the tab is the most practical solution."

Read that paragraph a couple of times and consider what was said. The best professional advice for the majority of the population is . . . spend all your money so you are "poor," then go on Medicaid.

In other words, don't bother with taking responsibility for your own future. Tax the rest of society because it "makes more sense."

As an accounting matter, this is probably accurate. At any given point in time, the number of people who don't need long-term nursing care vastly exceeds the number who do. We're a civilized society that takes care of widows and orphans. We can provide for our senior citizens who need more help than their families can afford or aren't qualified to deliver.

Many Americans have a problem with this idea, and rightly so. People should provide for their own and their family's needs. Yet we are also in an awkward position in which the regulatory structure prevents the private sector from giving us a cost-effective alternative.

You can bet the insurance companies would love to sell less expensive long-term care insurance to the 70 or 80 percent of the population that Boston College says are better off on Medicaid. For whatever reason, they don't. That leaves many people with no good choices.

Solving this problem won't be easy, and might not happen at all by the time you need long-term care. Until then, you are probably a few months away from being a welfare case. Is this an uncomfortable fact? Yes, it is, but it is a fact nonetheless.

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PatrickWatson
Large financial firms are running a year-end TV advertising blitz. Their theme: How will you pay for retirement? It's a good question. Saving as much as you can and planning ahead are excellent ideas.
Medicaid, long-term-care, welfare, population
506
2014-25-19
Wednesday, 19 November 2014 08:25 AM
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