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Long Term Care
Old 09-23-2018, 02:00 PM   #1
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Long Term Care

It has been 1 ½ years since my last significant post. As an update, I retired late last year after 39+ years with a megacorp. It wasn’t fully on my terms, but I did receive a severance package which was certainly welcome. I am 65 (and now on Medicare) and my DW will turn 65 in a couple months and will go on Medicare in November. We have an immediate $67.9K annual pension (non-COLAed) and our plans for social security will provide $37.4K annually starting in 2019 and will increase to $67.4K annually in 2023. We have $4.3M in financial assets (95% in qualified plans) and we are in the process of selling our house (free and clear) that we hope to clear $650K after commissions and closing costs. Our expenses are quite high for the next year or so (~ $190K), but will be around $120K annually thereafter. I think we should be OK financially as we journey through our next chapter.
Something I am now starting to investigate is Long Term Care. While DW and I are quite active and in good health now, we certainly are fully aware that things can change as we advance in age, and one or both of us needing some sort of Long Term Care support is a definite possibility. Long Term Care can be quite expensive and I want to make sure we plan for it appropriately. I assume our choices are to self-insure or purchase some sort of Long Term Care policy. I would very much appreciate hearing insights on this topic. With our assets ($4.9M after we sell the house) is self-insuring the best route or should we consider a Long Term Care policy? If we go the Long Term Care policy route are the certain types of policies we should consider? Are there certain types we should definitely avoid?
Any insights and suggestions will be most appreciated.
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Old 09-23-2018, 02:59 PM   #2
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With our assets ($4.9M after we sell the house) is self-insuring the best route...
This gets my vote.

We bought LTCI policies 20 years ago but the landscape has changed significantly since then. Not sure the premium costs for a new policy today are a good value.
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Old 09-23-2018, 03:16 PM   #3
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Self insure here too. I checked a policy for DW at 74, the last year you can get one, and a 2 year $200/day is about 13,000 per year.
One thing to look out for, is they claim they will not raise the individual cost of your policy, but can raise the cost for all in you class.
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Old 09-23-2018, 03:26 PM   #4
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With pensions and SS covering most of your expenses, and a very healthy nest egg, I think self-insuring is the way to go. That's what we're doing, with a much smaller nest egg.

Lots to consider:
How likely are you to need it? One or both?
Are you concerned about leaving money for heirs or charities?
etc., etc.

Here are a couple of typical discussions of it:

What is Considered LTC Self-insure Safe Level?

https://www.bogleheads.org/forum/viewtopic.php?t=207424

You can find many more if you search a bit.
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Old 09-23-2018, 04:43 PM   #5
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With our assets ($4.9M after we sell the house) is self-insuring the best route
Yes.
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Old 09-23-2018, 05:32 PM   #6
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With our assets ($4.9M after we sell the house) is self-insuring the best route...
+1 Our strategy too. Less assets here but ~ 10 years younger.

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Old 09-23-2018, 06:05 PM   #7
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Less assets as well but we are self-insuring with a deposit on a CCRC to cover quality and location of our choosing. The CCRC also minimizes the need for DD to have to fight with insurers to get payment.
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Old 09-23-2018, 07:53 PM   #8
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Self insure. In our case, our living expenses are currently higher than NH costs would be.

We'd expect that both spouse's lifestyle would change radically on each side of the bed and as such the costs that we used to spend (travel, dining, cars, boats etc) would just go toward NH costs instead.

Spending the same money in a different way. IOW, it would be a cost shift instead of an additional cost over and above what we're spending now.
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Old 09-23-2018, 08:11 PM   #9
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I also think "self-insuring" is your best bet.

But I wonder how it came to be called that. Insurance is risk-sharing, but with this you are not sharing any risk, you are paying 100% of the LTC bills that come due. Perhaps calling it "self-insuring" makes it sound not so bad.
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Old 09-23-2018, 11:33 PM   #10
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I also think "self-insuring" is your best bet.

But I wonder how it came to be called that. Insurance is risk-sharing, but with this you are not sharing any risk, you are paying 100% of the LTC bills that come due. Perhaps calling it "self-insuring" makes it sound not so bad.
It's a term that's been in use for a LONG time in the insurance business. A former employer, for example, self-insured a high proportion of its employee medical coverage, paying costs directly out of pocket (but with a professional firm doing the paperwork)), buying "excess insurance" to cover the spikes in a bad year.

To me, it's a conscious decision not to buy insurance and putting aside the resources to fund a particular risk.
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Long Term Care
Old 09-24-2018, 12:11 AM   #11
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Long Term Care

I am also in the self-insure camp. As Marko said, other expenses reduce drastically if one or both are in NH’s. Also, I believe that the LTC system will undergo significant changes in the next 15 years. Already many NH’s are closing and most newly built CCRC’s are drastically reducing the number of NH beds offered.
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Old 09-24-2018, 04:27 AM   #12
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I am also in the self-insure camp. As Marko said, other expenses reduce drastically if one or both are in NH’s. Also, I believe that the LTC system will undergo significant changes in the next 15 years. Already many NH’s are closing and most newly built CCRC’s are drastically reducing the number of NH beds offered.
Being involved with this first-hand due to my brother's disability, I'm learning that "home care" is the new growing trend. The Personal Care Assistants, Home Health Aids etc business is booming with NH becoming more of a "last two months" resort.
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Old 09-24-2018, 06:28 AM   #13
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This gets my vote.

We bought LTCI policies 20 years ago but the landscape has changed significantly since then. Not sure the premium costs for a new policy today are a good value.
+1 we're self insuring with a lot less in assets than the OP. The value proposition of current offerings are not attractive enough for me to jump on board... especially considering that the issuing company can increase premiums at will at which point premiums paid thereto is lost money.
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Old 09-24-2018, 08:30 AM   #14
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Being involved with this first-hand due to my brother's disability, I'm learning that "home care" is the new growing trend. The Personal Care Assistants, Home Health Aids etc business is booming with NH becoming more of a "last two months" resort.
And that’s more or less how it should be, IMO.
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Old 09-24-2018, 09:08 AM   #15
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My wife and I were in a similar situation to yours last year. We actually have about a million more as far as invested assets go and we still purchased a long term plan. Why? As a hedge.



Do not get "lulled" into this notion of "self-insuring," because I used to think the same thing. "We have plenty of assets to help pay for LTC costs years from now." (We are 59 and 58).



First off....stay away from the newer hybrid LTC plans. These are usually a single premium payment policy (usually between $50,000 and $100,000) and are nothing more than life insurance policies with a LTC rider. Not worth it. Do your homework and try for a traditional LTC policy. Yes premiums could and probably will increase. But do you know how much a private nursing home room will cost in 25 years? In my state about $20,000/month. Now imagine you and your wife are in a skilled nursing facility at the same time. And yes your investments will grow over the next 2 decades....but why not hedge a little and have a little insurance to help pay these costs? This is what we did. We purchased a policy that covered both of us with a 180 day elimination period which will still only cover about half of the monthly cost of LTC. My thinking is that if we need it at least we will get some help. If we never need it at least we did not overpay. Consider also, some spend a decade or more in a memory care center.


One of the details of our policy that we really liked is that any amounts our plan pays for LTC; we can shield if we ever needed to apply for MEdicaid. This is a state operated initiative "partnership program." We would probably never need this but it is a nice option to have to protect assets for future heirs.


Again I see LTC policies as a hedge. I paid off my mortgage 15 years ago yet I still carry homeowner's insurance. I could easily pay to rebuild my house if it burned down....but the insurance gives me peace of mind so I pay for my homeowner's policy.



The one problem I see you having is that the "sweet spot" to purchase a LTC policy is between 58-63. Beyond this the premiums become very expensive. Also, only 50% of applicants are accepted. Be prepared to give all details and permission to access your medical records. Acceptance is no sure thing.



Good luck whatever you decide.
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Old 09-24-2018, 09:18 AM   #16
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Being involved with this first-hand due to my brother's disability, I'm learning that "home care" is the new growing trend. The Personal Care Assistants, Home Health Aids etc business is booming with NH becoming more of a "last two months" resort.
The policies I looked at and the one I purchased all included:

100% of monthly long term care insurance benefit may be used for care received at home, in assisted living, at adult day care centers, or in nursing facilities.

Home care is medical and non-medical services provided to you in your place of residence. Services may include help with activities of daily living, maintenance and personal care services, homemaker services, respite care, hospice care.

Adult day care centers are facilities or organizations that can provide medical and non-medical care and support for you during the day. Adult day care centers are not overnight facilities.
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Old 09-24-2018, 09:18 AM   #17
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I had LTCi at age 50, I thought it was cheap, I had 3 years coverage, but I let it expired a few years ago. It was cheap when I started it, but the premium kept going up. But I think for only 3 years here, life insurance is better for me. I don’t plan to check in early to CCRC, I like my garden and space too much. I’ve told my kid to have home care for me. That’s what I plan for my husband too.
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Old 09-24-2018, 02:16 PM   #18
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I'll have to disagree with MrLoco. I see the hybrid plans as a sound and often better option than traditional LTC insurance for those that can afford it.
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Old 09-24-2018, 02:28 PM   #19
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It's a term that's been in use for a LONG time in the insurance business. A former employer, for example, self-insured a high proportion of its employee medical coverage, paying costs directly out of pocket (but with a professional firm doing the paperwork)), buying "excess insurance" to cover the spikes in a bad year.

I would argue that, for a large company, there is risk sharing across all the employees.
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Old 09-24-2018, 02:49 PM   #20
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I'll have to disagree with MrLoco. I see the hybrid plans as a sound and often better option than traditional LTC insurance for those that can afford it.
I agree the hybrid are good options for a couple and is one of two plans that has unlimited benefit time (i.e. pays as long as you are in care no time limit or dollar limit based on the monthly amount purchased).

Also see #3 and #8 from Clark Howard (not endorsing Clark but it is an outside data point that I agree with)

https://clark.com/insurance/long-ter...ce-honor-roll/
"
3) You should not buy LTC insurance if you are very wealthy or very poor. ‘Very wealthy’ would be having investable assets of $3 million to $4 million. And ‘very poor’ would mean qualifying for Medicaid.

8) Wealthier families who don’t to see the legacy they wish to leave heirs get eaten up by medical bills may want to consider a hybrid policy, which combines traditional LTC coverage with potential life insurance benefits."
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