Misperceptions and Contradictions About LTCI

Questions About LTCIIt seems that the public is becoming more aware of the need for long term care as they age, but have a great deal of ignorance about what the government will cover and what it won’t, and what havoc a long term care event can cause to their life’s savings.

Surveys reveal the increasing awareness trend. Depending on whose survey you use, some 80 % plus of Americans are concerned about outliving their money. Some 80 % plus realize that their health may be a major expense as they age. Some 80 % plus admit that they may require long term care at some point. Some 80 % plus are worried that they may lose their independence.

Most realize that they may have to keep working after age 65 in order to accumulate a retirement stream of income which will sustain their lifestyles as they age. Most realize that they are not saving enough now to ensure that they won’t outlive their money. Most assume that social security benefits will decrease in absolute terms over time, and that social security contributions will increase, at least for those who are younger than the baby boomers.

All these concerns should result in more and better planning for a long term care event. However, long term care insurance sales are 25 % of what they were ten years ago. Where’s the disconnect?

First, the expense of paying down a mortgage and paying for children’s college education inhibits long-range planning. Americans are not buying nearly enough life insurance. They are not saving nearly enough. They worry about the present, not the distant future. This is natural, but it’s bad planning. The result is that many fail to plan at all.

Second, the majority of Americans have misconceptions about what the long term care costs the government will cover. They assume that Medicare covers long term care in a robust way when it does not. They assume that Medicaid covers home care and assisted living facility care in a robust way when it does not. Many underestimate the costs of care. Many overestimate the cost of long term care insurance, even in view of its current costs.

Many assume that the government has a social responsibility to take care of its elderly and is doing so. They do not realize that government is only providing for those without income or assets. Others believe that government should get out of the way, that people should take care of themselves, even though those needing long term care can’t take care of themselves by definition. Others assume that their children will take care of them, not realizing the burdens this would place on their families.

Others trust in God to keep them from needing long term care, a good outlook until you need care. Still others think they can beat the odds and hope they will never need care, despite the fact that some 70 % of those over age 65 will need care at some point. We call this denial, an irrational perception.

The result is that we have a tsunami waiting to happen. The big wave should hit in about fifteen years, when the baby boomers are all in their late seventies or older. It may already be too late to avoid this disaster. Government hasn’t the resources to fix the problem. Private insurance isn’t getting the job done. The answer, if there is one, is a private-public partnership quite different from today’s partnership policies. Time will tell is this can happen.