Tuesday, June 18, 2013

Life Insurance, Long Term Care, Medicaid and You

Not so sure that this is such a great idea:

"State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long-term care—and lower the Medicaid tab in the process."

The concept seems pretty straightforward: you take an older life insurance policy and sell it ("viaticate" is the technical term), and then use the proceeds to pay for long term care. When the policy's value is used up, one turns to Medicaid for continued long term care funding.

This is not a new idea, but the fact that states are now touting it as a viable LTC funding vehicle is telling: they're running out of money and are desperately looking for ways to slow down the ticking time bomb. Under current Medicaid rules, one is allowed to have some life insurance, but of course, that's an asset that states would very much like to tap.

Another factor is marketability. If there's a sudden glut of life insurance policies hitting the market, then of course the price that they command will be affected. Add in the fact that the key phrase in LTC is long term and potential investors could be waiting many, many years for a payoff. Not a great selling point.

But what I find so disgusting here is the states' apparent disregard for their own previous condemnation of stranger-owned life insurance. If it's morally reprehensible in one circumstance, why is it suddenly noble in this application?

Consider that rhetorical.

[Hat Tip: FoIB Holly R]
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