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General Electric and Long Term Care

Posted on: August 16th, 2019 by Mark R. Friedman

Hey folks!  Some light summer reading for you this late August.
General Electric (GE) has been in the news lately.  Harry Markpolis, a financial type who sounded early warnings on the Bernie Madoff Ponzi scheme, released a report claiming that GE is in much greater financial trouble than its accounting statements have let on.  GE stock took a big hit yesterday on this news.
I skimmed this report.  Some of the claims seem rather sensational, and I have no idea whether it’s true… but the claims rest in large part on the idea that GE is ultimately holding the bag on a lot of disastrous long term care (LTC) insurance policies.
LTC insurance policies cover long term care.  Typically policy holders buy them when they’re young and healthy, and pay premiums over a number of years.  When the policy holders get older, some percentage will develop conditions that necessitate long term care, such as dementia or Alzheimer’s disease.  Long term care may be provided at home, with home health aides, in an assisted living facility, or in a nursing home.  LTC insurance policies often pay out a fixed amount per day for a limited number of years.  Some policies pay the full cost of long term care for several years, which allows elder law attorneys a much greater degree of flexibility when doing asset protection or Medicaid planning.
The report claims that GE Capital reinsured a lot of LTC policies that were sold to young healthy people in the 1980’s, 90’s and early 2000’s.  The company took in big profits from the premiums, but the report alleges that GE never set aside enough funds to pay out these policies when they eventually come due.
Now and in the coming years, the policy holders are reaching their senior years and many more will start making expensive claims on these policies.  The report alleges that GE doesn’t have the capital to cover these costs, and this will have disastrous effects on the company.
Again, I have no idea whether this is true, and the company is denying it vigorously.  But it’s an interesting issue.  It’s certainly true that society is aging, and we have to figure out how we’re going to provide long term care to all the people who will soon need it.  In Maine, forget about paying for LTC, they’re struggling just to find enough people to do it!
Food for thought.
But zooming in from society-wide issues and into local issues, if you or a loved one may need long term care, please call or email FriedmanLaw to discuss your options.
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