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It's Not A Financial Plan Without Long Term Care

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Growth in the need for long term care by boomers expected in the decades ahead will create significant drains on the ability of Medicaid to meet the demand, recent studies show.

The financial burden on Medicaid will only increase in the next 2 decades, when the oldest of the boomers start to reach the years when a significant number will need long term care, notes Howard Gleckman, author of a new report by Boston College’s Center for Retirement Research, “Medicaid and Long Term Care.”

“Not only will this large generation produce a substantial increase in the number of elderly, but a growing percentage of retirees may not be able to afford long term care due to pressures on traditional sources of retirement income,” Gleckman states.

He points to another study by Georgetown University’s Long Term Care Financing Project, released in February, that found private LTC insurance covered just 7% of total national spending on such services in 2005. Medicaid paid almost half of it, while the remainder was paid largely by Medicare or by individuals.

Policymakers are looking for ways to curb that growth, including shifting the cost to individuals, Gleckman points out.

“Congress and the states are also making Medicaid eligibility more restrictive,” he adds.

For boomers, such findings “drive home the need to plan for long term care earlier than they might have anticipated,” notes one LTC insurance professional. Without insurance to protect assets, retirement income won’t be able to handle the financial demand, says Thomas Riekse, managing partner, LTCI Partners LLC, Libertyville, Ill.

LTC planning is “part of projecting into the future the same way you design a retirement portfolio,” says Riekse. “The obvious implication of the [Boston College report] is there will be less money available for Medicaid, and if you want control over your destiny, look at LTC insurance.”

Despite the implications of the study, it probably would not be fruitful for producers to issue dire warnings to clients about what could happen to them as they age, Riekse cautions.

“I am not comfortable with scare tactics,” says Riekse. “I don’t think they’re effective, and they’re not the right way to discuss the issue.”

The best approach is to let the facts speak for themselves, he says.

“So if producers can put long term care in the framework of a bigger economic message, it’s not a scare tactic. It’s the same approach as going to a doctor. It’s not scary if the doctor can do it in positive way.”

He notes that due to increased awareness among boomers, clients are often raising the LTC issue with their advisors. But if not, the producer should raise the issue by using an approach he or she feels most comfortable with.

“Life insurance producers tend to be more emotional, because that’s their background, while a CPA is looking more at the financial implications” of LTC. Regardless of approach, the sales presentation should lead to the same conclusion: A retirement plan is incomplete if it’s not backed up with LTC insurance, Riekse advises.