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LTC insurance
Old 10-24-2004, 06:56 PM   #1
 
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LTC insurance

Does anyone have experience with Long Term Care insurance? We have been told that a nursing home can take 403B savings from the healthy spouse if one of us has to go into a nursing home (we are in our fifties, but planning ahead). Is it true that one spouse can be left with 80k and a primary residence or is this a scare tactic? We don't know anyone who has LTC insurance nor anyone who is planning to buy it.
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Re: LTC insurance
Old 10-24-2004, 07:04 PM   #2
 
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Re: LTC insurance

Hello Smootchie! I have the same questions, not
for us but for my parents (87 and 85). I also know very little about LTC insurance, except my parents have none
and will not be buying any.

John Galt
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Re: LTC insurance
Old 10-25-2004, 12:30 AM   #3
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Re: LTC insurance

Smoochie, my wife and I bought Long Term Care insurance and I wouldn't have ER'd without it. In a nutshell, if you need LTC there are only three ways I know of to cover the costs: 1) pay out of pocket, 2) Medicaid, 3) LTC insurance. *Only after you have spent down your life savings does Medicaid step in. To qualify you must meet federal poverty guidelines for income and assets.

Having been through the process, I'd make the following suggestions regarding the purchase of LTC insurance:
--Read extensively before buying.
--Shop around, of course. Prices are all over the map.
--Stick with highly rated companies.
--Buy the compound inflation rider.
--We purchased our policy in one lump sum and have no regrets. Premiums are increasing and we're immune to that. They boost the premiums if their customers (as a group) use services at a greater rate, and that's occurring. Other options were 1) ten annual payments and 2) indefinite annual payments.
--LTC companies go through your health history with a fine tooth comb and charge accordingly. Many articles will suggest that you wait until a certain age (usually around 55). We weren't willing to take the risk that our health would hold out. Once we made the decision to buy, we did it (ages 48 and 49, I believe). There are many conditions which can cause a person to become uninsurable at any age, so the best time to consider LTC coverage, IMHO, is when you are HEALTHY. If you wait until you become ill, you risk being uninsurable and you pay higher premiums.
--Use an agent to help you through the process. We used a family acquaintance. It helped. Example: My wife listed her weight on the app. The agent called and asked her to check again; he said 1-2 additional pounds would put her in a better class. She actually weighed more than she thought. He caught other things along those lines that we had no way of knowing would be significant.
--Don't rely on the agent entirely, of course. There are conflicts, as in most financial products. We went in with a reasonably sound understanding of the product and knew what we wanted.
--I communicated almost exclusively via email with the agent. It helped to have written documentation to refer to, and I've always believed that written communication, in some situations, is best. (I buy new cars via email too, and always settle on the price before I step foot inside *the dealership)
--This is my personal bias based on having three grandparents who required many years of care, but I would buy unlimited years (as opposed to 2 or 5 years). I can imagine myself at 87 with three months remaining on a 2 year stay - or my wife in the same situation. It's not something I'd want her to be worrying about.

Anyway, this is probably more than you wanted to know, but I do think LTC is something that needs to be planned for in some fashion. Insurance seemed the best option for us. Self-insuring is a way to go if you have enough set aside for that, but I don't think Medicaid is something I'd want to rely on.
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Re: LTC insurance
Old 10-25-2004, 04:22 AM   #4
 
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Re: LTC insurance

Hello all. Interesting topic.

My elderly and not all that well-heeled parents will
not be buying any LTC insurance. In our case, we can't afford
it, I am quite sure. However, I have been led to believe
that there are a variety of "asset protection" devices
available in the event a person of modest means
(that would include my parents and the 2 of us) needs
LTC. I looked into this briefly with an attorney, but since
it's not a topic to be discussed with my folks, I did not
follow up. So, for those of you in the know, am I right,
or are the options as posted by Bob_Smith really all
that simple?

John Galt
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Re: LTC insurance
Old 10-25-2004, 04:56 AM   #5
 
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Re: LTC insurance

Hi Bob_Smith,
Thanks for the great information. I'm 44 and my wife is 56 and we plan to retire in 2010. A couple of questions.
1.Who did you buy your policy from?
2. How much did it cost?
3. So thinner people pay more? hehe

Thanks,
K. B. Sharkstooth
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Re: LTC insurance
Old 10-25-2004, 07:11 AM   #6
 
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Re: LTC insurance

Hi Sharkstooth! My wife is 56 also. And, I sure wish I was 44 again. So does she

John Galt
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Re: LTC insurance
Old 10-25-2004, 08:37 AM   #7
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Re: LTC insurance

Excellent answer by Bob_Smith. We bought LTC insurance at age 50 (6 years ago). We got policies from CNA Insurance. Each policy covers $100 per day with a 5% componded increase per year. The policies have a 180 day exclusion period and cover unlimited years in a nursing home. They also provide one half of the daily coverage for inhome care. The combined annual premiums for the two policies are $1600. Be warned, premiuns rise rapidly with the age you buy the policy and premiums in general are higher now than when we bought.

I understand that CNA is no longer writing new LTC policies. We worked with a friend who is a financial planner. He provided 3 quotes and the policy provisions and options and we made the choice.

Be advised that the laws have been tightened up considerably regarding divesting of assets to reach the level where Medicaid will cover nursing home costs. I looked into all this in 1998 when my elderly parents were facing the situation. What I learned then convinced me to get LTC insurance.

Grumpy
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Re: LTC insurance
Old 10-25-2004, 10:07 AM   #8
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Re: LTC insurance

My parents purchased "nursing home insurance" many many years ago and both used it. In those days the compound cost of living feature was not available so by the time they needed it the payout was modest. Also, because it only paid for licenced nursing home care, other care needs (such as assisted living or home care) were not included.

Nursing homes today are truly medical facilities. Most frail elderly (and some not so elderly) who cannot be looked after at home are in assisted living enviornments. Medical care is extending the time we live but we are also extending the time of twilight. The cost of living in long term care facilities is not a lot less than nursing homes!

Husband and I purchased LTC policies in our late 50's. Often policies issued for a couple are cheaper than those purchased for each individually as insurers know that a person living alone needs compensable care sooner. One LTC agent offered us a cheap policy with a new underwriter- I wouldn't touch that with a 10-foot pole. I want my insurer to live longer than I!!!

Educate yourself on the insurers, the criteria for receiving benefits and the type of care paid out on is a start. GE, Prudential, Allianz, John Hancock Life Insurance Company and Metropolitan Life Insurance Company all write LTC policies.

I have looked at an employee group policy offered by Prudential with an option that if the rate increased the policy holder can choose a lower benefit for the same price.

EFMoody is a financial planner with an "attitude", here are some of his comments:
http://www.efmoody.com/longterm/answer.html

http://www.efmoody.com/longterm/commentary.html

The Federal Office of Personnel Management sponsors a LTC program for employees and retirees (it is NOT taxpayer funded). The insurance specialists at OPM reviewed insurer proposals and selected a program they thought offered the best value for the people they serve. Plan participants pay 100% through an alotment out of their pay/pension. If you want to see the impact of delaying the time you purchase a policy use this link:
https://www.ltcfeds.com/NASApp/ltc/d...needs/ratecalc

IMHO LTC is akin to putting your kid through college: the poor are provided for, the wealthy can aford it, those of us in the middle spend all of our savings.

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Re: LTC insurance
Old 10-25-2004, 12:02 PM   #9
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Re: LTC insurance

Quote:
I looked into this briefly with an attorney, but since it's not a topic to be discussed with my folks, I did not follow up. *So, for those of you in the know, am I right, or are the options as posted by Bob_Smith really all that simple?
John - No! It's not that simple. I listed some options we chose, but they aren't all right for everyone (except the compound inflation rider), and there are many more issues to understand before contacting an agent. One of the most important is this: how much coverage do you need? For us that involved these steps:
--Determine all sources of income.
--Work through a worst case scenario and determine how much you can afford to pay out of current income sources for LTC. Worst case scenario usually involves one spouse in a nursing home and the other still in the community. With both in a nursing home the expenses of operating the household in the community can be reduced to almost nothing. That frees up existing funds to apply to LTC. But it could be pretty tough to support both infrastructures simultaneously. We went with the entire cost of a good home in our area.
--Determine current nursing home costs. I called around and checked with homes I knew to be good.
--Once you have that data you can determine, very roughly, how much you would need today.

And there are many, many other variables:
--Deciding on a lump sum payment wasn't an easy choice, for example. We have no regrets; it made our planning easier, we're done dealing with it, and we avoid future increases. But convincing arguments could be made against it.
--Some policies offer assisted living facility and in-home benefits. We went with those.
--Selecting an elimination period is important (we chose 90 days).

Other issues:
--Making sure you're covered in every state
--Making sure you understand WHO determines whether ADLs are impaired, and HOW that is determined.
--Checking the company's service reputation (are they a pain to deal with or do they have a rep for paying without hassles?)
--Making sure Alzheimer's is covered, and understanding what conditions must be present before coverage kicks in
--Understanding the term "eligible facility"
--Understanding what has happened in the past, in your state, if a company goes belly-up. In my state there is a guarantee fund for folks who currently are under claim. For those who aren't, bankrupt companies have been sold to other carriers who have assumed the policies (so far), but there's no guarantee of that occurring.
--understanding all the various riders - which ones to select (like compound inflation) and which ones NOT to select.
--and on and on and on...

It's not simple, but we found it was doable with hours of research, asking many questions, etc. I probably spent a good 20-30 hours of time on it, and I was working FT at the time. I had the advantage of working with a good agent in a very small town. I think small town insurance agents are more likely to be aligned with the customer. If something goes wrong, word spreads fast. Likewise, if they treat you very well, word spreads fast.

K.B. - yes on the weight. My wife is 5'0" tall and 104 pounds (I'm 6'5" and 210 lbs.) She put 98 lbs (if memory serves) on the app., which she believed to be true the last time she weighed. That was too light. Of course we thought thinner is always better, and didn't give that much thought. But apparently thinner is not better here.

The costs were in three tiers (standard, preferred, and preferred plus). For each category there were different charges for each of of the three options (lump, 10 year, annual). For the lump sum option the charges (per person) were $25,756 (standard); $20,605 (preferred); and $15,454 (preferred plus). Having an agent who can (and will) catch things like the weight issue has the potential to save quite a bit - in this case it saved around $5,000 (the difference between preferred and preferred plus on my wife).
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Re: LTC insurance
Old 10-25-2004, 12:34 PM   #10
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Re: LTC insurance

Quote:
$25,756 (standard); $20,605 (preferred); and $15,454 (preferred plus).
Thanks Bob. I did not know such an inexpensive life time option was available. Such an option would indeed seem to make planning easier, if reputable companies still offer this type of thing. I was planning to wait until age 50 or so before deciding, but now I am wondering if I should deal with it sooner.
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Re: LTC insurance
Old 10-25-2004, 03:36 PM   #11
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Re: LTC insurance

Michael, a couple of disclaimers: I bought three years ago. Annual premiums have gone up since then, so single-payments will likely be higher too, if they're still offered. They discontinued the policy I bought shortly after I got it - in fact the week after.

I live in a relatively low-cost rural area. When I bought my policy, the price of a single room with maximum care, in a facility I knew was good, located in a tiny town with about 1000 population, was $110 per day. Others were in that ballpark. So that's what I bought - $110/day. If I had planned to purchase LTC in a city, the costs would have been higher for good care, and I would have paid more for coverage.

There are certainly pros and cons to waiting. For me, the risk of becoming uninsurable superseded all the other issues. I may very well be proved wrong, but I do feel much better having that coverage locked in. Even if we never use it (and I hope we don't) the peace of mind will have been worth it to us.
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Re: LTC insurance
Old 10-25-2004, 05:10 PM   #12
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Re: LTC insurance

With all due respect to Bob_Smith's decision, I think
it may be overkill to buy LTC with an "unlimited"
stay provision. Do your homework on the statistics
of the typical length of stay.

Cheers,

Charlie
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Re: LTC insurance
Old 10-25-2004, 05:24 PM   #13
 
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Re: LTC insurance

Thank you all for your replies. The part that I don't understand is this: If someone has a pension, he/she will not have that pension taken away if the other spouse goes into a nursing home. Since we have 403B accounts that we have built up (because no pension was provided for us), how can it be legal for the healthy spouse to lose what equates to a pension? Is there any legislation being considered to prevent this?
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Re: LTC insurance
Old 10-25-2004, 06:17 PM   #14
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Re: LTC insurance

Quote:
Do your homework on the statistics of the typical length of stay.
Here are some stats:

The Ohio Department of Insurance estimates that on average, there is about a 50-50 chance that you will spend some time in a nursing home after you reach the age of 65. However about half of the people entering a nursing home stay 3 months or less; almost 80% stay one year or less; and fewer than 10% stay in a nursing home longer than 5 years.

So, if you want to play the odds, you don't need LTC at all. * If you want to protect yourself against an average stay, a couple of years should do the trick. * Of course, what insurance is really for is low-probability events like a 10-year stay.

The insurance companies can profitably play the odds. Many of us can't.
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Re: LTC insurance
Old 10-25-2004, 06:41 PM   #15
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Re: LTC insurance

Well this is where you can see the complexity of the whole undertaking. There are many who take Charlie's approach - buy according to average length of stay - and that may very well be the way to go for some. In fact, most articles you'll read will recommend that. The problems I had with that approach are these:

1) I'm not buying days of care for a large group. If I were, average length of stay statistics would drive my decision. I'm buying for two people. As a couple, either we will need more than 2 or 5 years of care - or we won't. Averages provide odds for groups, but they provide no consolation if we, as individuals, happen to fall toward the right side of the bell curve.

2) We should buy insurance for catastrophic costs, right? Buying less based upon average length of stay turns that on its head - you assume all the risk for the truly catastrophic event. It's not all that much more to go with unlimited days.

3) Most importantly (IMO) very old people tend to worry about having enough. I saw that with my grandparents. My sister, who was a nursing home administrator for several years, confirms that this is an issue that weighed heavily on many of her nursing home patients. I know myself (and my wife). If I buy two years or five years and end up needing the care, statistics about average lengths of stay aren't going to be any comfort then; I'd be feeling like the clock is ticking from day one, even if I end up not needing more than average! It's one thing to examine this from the perspective of a 52 year old looking at something far off into the future that may not happen at all. But imagine yourself or your wife in 30 years. Are you really going to look back and say you're glad you saved a couple thousand dollars 30 years ago if you find you're in need of care? I'd be kicking myself for not going the last mile. This is almost as much about peace of mind as it is about covering costs.

We did consider the average length of stay stats before buying. In fact, this nugget of data is usually prominently featured in every LTC article as a kind of "A-HA!!" finding that those in-the-know can use to save a few bucks. I don't think it's that simple.
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Re: LTC insurance
Old 10-25-2004, 07:31 PM   #16
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Re: LTC insurance

Quote:
The part that I don't understand is this: If someone has a pension, he/she will not have that pension taken away if the other spouse goes into a nursing home. Since we have 403B accounts that we have built up (because no pension was provided for us), how can it be legal for the healthy spouse to lose what equates to a pension? Is there any legislation being considered to prevent this?
Smoochie, Medicaid was designed as a resource for people who can't pay for their own medical needs. It was NOT designed to act as a national long-term care financing program. There is no such program. We're on our own when it comes to LTC. You really must be down to almost nothing to qualify for Medicaid, *and I don't believe retirement plans are exempt, but I haven't verified it. The rules vary by State, but if you email your Department of Human Services office, I'm sure they can tell you for sure.

Nevertheless, you don't want to be relying on Medicaid. It's a funder of last resort. People used to transfer their assets to their kids so they could qualify, but that's tough to do now because there are look-back rules. You are on your own.
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Re: LTC insurance
Old 10-26-2004, 05:08 AM   #17
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Re: LTC insurance

I bought a LTC policy for myself 3 years ago at age 50 from John Hancock. As I understand, presently there is a lot of consolidation in this area and a lot of companies are getting out of LTC. I would stick with a major: Met Life, GE, John Hancock, I'm sure there are others. Rates are going up, and even after you sign up for a policy premiums can and probably will increase.

I bought a 10 year pay policy. Pay for 10 years, and then the policy is paid up for life. I pay $3,500 per year, have $150/day coverage, inflation rider, 180 day waiting period. I could afford to self insure, but decided to buy coverage and not have to worry about it. At age 60 I will have it paid for and have coverage for life.

Another reason I did it: I have two small companies (I am a homebuilder). One is an S Corp, one is a C Corp. I can pay the premiums from my C Corp and they are 100% deductible to the corporation. So after taxes, my cost is even less, about $2,300 per year.
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Re: LTC insurance
Old 10-26-2004, 09:26 AM   #18
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Re: LTC insurance

I bought the UnumProvident indemnity LTC policy the beginning of 2004 at 56 for $1366 a year. I went with $220 a day 3 years+ coverage for nursing home, assisted living, home care, with inflation protection and 90 day elimination period. I just caught it before it shot up 40%. They also no longer offer the indemnity plan. This policy allows me to spend in todays dollars $237,660. so if I was in a nursing home or had homecare at a lower daily rate in todays dollars, then this policy would last longer.
The agent I started with almost cost me many thousands of future dollars as she only offered the new products and didn't realize that the older product was still available for another month. You need to do your own due deligence to confirm the information you are given.

Good Luck

MJ
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Re: LTC insurance
Old 10-26-2004, 10:56 AM   #19
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Re: LTC insurance

A few have commented here, and others have written, about the "average legnth of stay" in a NURSING HOME. What has happened is that nursing homes are providing medicare patients post-hospitalization nursing care in a skilled facility. Those stays tend to be 3-6 weeks because medicare pays, at best, 20 days. One elderly patient can experiance several of these stays in the last 10 years of their life. Any mathematician knows that can skew data.

Assume that that we are insuring against a condition of aging: The question to ask is "What portion of that population is receiving home or facility care, and for those who have passed away in the last 5 years what was the period of incapacity?"

Here is a link to the Financial Planning Assn Journal Sept 2004 which focuses on LTC insurance:
http://www.fpanet.org/journal/articl...es/jfp0904.cfm


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