A Better Way To Insure Your Senior Years?

Nursing-home care can blow apart the retirement kitty you carefully tended through the decades. Nearly 30% of people over 75 stay in nursing homes for more than three years, at a yearly cost of as much as $60,000.

You can take out long-term-care insurance, but that's hideously expensive. Under John Hancock Mutual Life Insurance's standard five-year plan, a New Yorker would pay yearly premiums of $1,453 for a 40-year-old to $4,018 for a 65-year-old. Or you can tap Medicaid. To get it, though, you must dissipate most of your assets--an insidious exercise known as "spend-down."

Now, under an interesting new long-term-care policy-- provided by insurers in partnership with state governments--you can avoid financial ruin. With the new "partnership policy" in New York, the insurer pays for up to three years, then Medicaid kicks in. For New York residents, the beauty of this is that you don't have to touch your assets. (The setup is slightly different in other states, which require you to spend-down some assets before turning to Medicaid.) Even better, partnership plans cost about a third less than conventional coverage.

How is it possible that states will permit you to milk Medicaid funds and not require you to evaporate your assets? The states, which administer Medicaid, figure that the new policy saves them money because otherwise, many people would hide their wealth and go on the Medicaid rolls early. Likewise, insurers can hold down premiums since Medicaid eliminates their outlays for patients staying more than three years.

ASSETS, NOT INCOME. The new policy is available in New York and Connecticut, and soon will be in California and Indiana. Seventeen other states are examining it, and Clinton's health-reform plan may copy it. Aside from Hancock, about a dozen insurers, including Travelers and Mutual of Omaha Insurance, have signed up.

The partnership policy isn't perfect. If you buy the coverage in New York and retire to Florida, which to date doesn't offer the plan, tough luck. Another drawback is that the policy protects only your assets, not your income. So you might be asked to pay some bills from your pension or annuity checks. You do get to keep every cent of your Social Security, however.

You can buy cut-rate conventional long-term coverage, though it may not take care of such vital services as physical therapy. The partnership plan does everything. Given the pitiless climb of nursing-home expenses, any relief is worth a look.

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