Consumer Reports article on long-term care insurance "out of touch" with reality.

An article on long-term care insurance published in the November 2003 issue of Consumer Reports is biased and contains information that is wrong.

(PRWEB) October 27, 2003 --Well-known professionals in long-term care are describing a November article on long-term care insurance as out of touch, politically motivated and a "hatchet job".

Matt McCann, a nationally known expert and speaker on long-term care issues said that the November Consumer Reports article is very misguided and contains information that is just not true.

Phyllis Shelton, author of Long-Term Care: Your Financial Planning Guide (Kensington Books, April 2003) says the article shows again the political motivations of the Consumers Union,the publishers of Consumer Reports. The Consumers Union and Consumer Reports want a national health care system and their article has very little to do with the truth.

Consumer Reports says Long-term care insurance is expensive, unreliable and generally lousy -- according to a new study by Consumers Union. Despite that assesment they suggest you might want to buy some anyway. The facts are that the insurance is not very expensive, very reliable and supported by both federal and state government and financial advisors. Experts in long-term care agree that people should purchase a policy

"Insurance of any kind is one of the few products, if not the only one, you hope you never use. You don't have auto insurance with the hope you will crash into a tree. You don't have homeowners with the hopes a tornado will wipe you out. You won't have health insurance hoping you have an operation. You do, however, want to transfer the risk because holding onto the risk yourself could wipe you out. Even though most of those risks are "low", you still want to transfer the risk, " said Matt McCann an Illinois based specialist in long-term care.

With top companies with good policy language, making a claim is not hard. For the first time, the dollar-value of yearly claims paid to long-term care insurance policyholders exceeded $1 billion. The annual report compiled by the National Association of Insurance Commissioners (NAIC) also showed the actual cumulative "incurred" claims being $11.1 billion through the year 2000 - the latest year which a report had been issued for cumulative totals. The industry is paying claims in record numbers. A fact the Consumer Reports article ignores.

McCann agrees with Consumer Reports that shoppers should look at only top rated companies. Several of the largest insurance companies in the world offer great LTC coverage, according to McCann. He says companies like John Hancock, Transamerica, Allianz, MetLife are among those with outstanding plans.

"Unless you have health problems, always stick with top companies (A rated) with lots of experience in long-term care," McCann said.

" ... buying long-term care insurance is too risky and costs too much, " says Consumer Reports. McCann just shakes his head is disbelief.

"I'm sorry; I don't see their logic. The top companies in long-term care are all huge, A rated companies. As far as cost goes, the cost is very small compared to the risk, " McCann said.

"No matter what age you are now, if you were to buy a mid priced long-term care policy you'd pay out less for your lifetime premiums than you would pay for one year in a nursing home. The best time to buy is when you are healthy and premiums are lower when you are younger. Most of my clients use long-term care insurance as a retirement planning tool ... average age - 54, " McCann explained.

"A person buying a policy at age 40 will pay around $685 annually for a good plan. Lets say you either die or go on claim at age 80. You have paid during the 40 years $27,400, which is perhaps a half-year in a nursing home today, " he said.

"Now let's say you stay self-insured ... meaning you don't buy insurance and you will pay out-of-pocket when the time comes you need care. Using the average cost of care cited in the article of $181 a day with a 5.6% rate of inflation, the daily cost of care in 40 years would be about $1600 a day! The $27.400 we saved by not paying LTCI premiums would only cover 17 days of care! So even a short period of time on claim you would get all your money back and more,' according to McCann.

McCann says this is why the federal government, as well as many financial advisors, including people like Suzi Orman and Terry Savage, are recommending long-term care insurance. The risk of needing care is the single biggest involuntary risk we face in our lifetime. According to the US General Accounting Office, 60% of those who reach 65 will need some form of long-term care. Other studies place that figure even higher.

"The fact is, as medical science gets better and better, we all live longer and longer. Things that used to kill us right away, don't," he said.

Author and long-term care expert Phyllis Shelton says the article shows zero awareness of the stress that families suffer every day with home caregiving and ignores all the statistics from think tanks like The Conference Board which projects that elder care is almost ready to replace child care as the #1 dependent care need in America in the next few years. By 2008, almost 40% of the work force with an approximate age of 51, will be at the prime age for caring for their elderly family members (Census Bureau) and twelve percent of caregiving families use money allocated for college funds and 26% use money set aside for retirement (John Hancock study as reported in the Journal of Financial Service Professionals, 9/99).

McCann added that a lot of people think that only senior citizens need to worry about long term care, so we put off preparing for the possibility. The fact is that untimely accidents or illnesses can strike at any age. While 60% of people who will need long term care services are 65 or older, 40% are working age adults between the ages of 18 and 64. This according to the GAO.

People of any age can develop serious conditions that require assistance with routine daily activities for an extended period of time and such help is very costly. Long-term care insurance can help cover the cost of this care and protect a families assets.

According to the federal government, the average nursing home stay is 2.6 years and the national annual cost of a semi-private room is $52,000. By the year 2030, it is estimated that the cost will be $190,600.

In 2000, the average cost for assisted living facility was $25,300. By the year 2030, the average annual cost is projected to be $109,300. Costs also vary based on the level of assistance you need.

The national average annual cost of home care is well over $20,000 (that's $18/hour, five hours per day, five days a week for a home health aide) - and it's expected to climb to $68,000 by 2030.

"Remember, LTCI will pay for not just nursing homes. Assisted living facilities, adult day-care, as well as homecare are covered by most good plans," McCann said.

Perhaps the biggest disservice written in the Consumer Report's article is suggesting a person wait till age 65 to purchase LTCI.

"You can only get a policy if your health is fairly good at the time of application. Once you have a stroke, become an insulin dependent diabetic, or suffer from memory loss, it is too late. Again, most of my clients (some 400+ each year) start looking at this in their late 40's and early 50's. One out of four 65 year olds are rejected for long-term care insurance. You can't buy homeowners insurance once the fire has started ... same thing with LTCI, " McCann added.

The US Congress and former President Bill Clinton started to urge people to purchase LTCI back in 1996. The federal government now provides federal employees with a group plan. President Bush is suggesting an above-the-line tax deduction for LTCI premiums.

Shelton attacks the article for suggesting people to consider a plan if you have no willing or available family member to take care of you as being unrealistic.

"How many family members (or anyone else) can provide 24-hour care??? Long-term care insurance may be he only thing that keeps someone out of a nursing home by providing the family with money to hire help so the primary caregiver gets enough rest to keep the care recipient at home. Half of the people on claim with home care benefits say they would be in a facility if it werent for their LTCI home care benefits (Cohen, Marc, PhD, et al -- Dept of HHS and RWJ Foundation Home Care Research Initiative, 4/99). Also, employees whose family members have LTCI are twice as likely to stay in the workforce, because they have the money to hire caregivers while they are at work (MetLife Mature Market Institute, 3/01). Obviously the authors of this article have never been responsible for someone who needs long-term care or they would have some understanding of the demands on the caregivers life. Almost 55% of severely disabled people have a spouse and children and still require formal care so the family just cant do it all," she says.

Making the right choice can be hard. Both experts agree that a consumer should talk to a specialist in long-term care insurance ... one who represents all the top companies. Make sure the agent knows his stuff. If you are healthy look at only A rated companies. If you are married and are in good health a group LTCI plan may be more expensive. Individual plans are underwritten per individual. In most cases they will cost less.

A good LTCI plan will protect assets, help make quality care available, protect the lifestyle of the healthy spouse and limit the burden placed on the family as well as giving a person ability to maintain their independence.

"Most people hope they will never need care. Most people want to avoid a nursing home. The facts are clear; many of us will need care, in our homes, adult daycare, assisted living facilities as well as nursing homes. You can either plan for it or not. But by not planning you risk spending down your hard earned assets and placing a burden on your family. Common sense says to plan," McCann said.
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