Self-insuring for LTC????

[REWahoo]

My policy has not had one increase in the 11+ years I have owned it. Who knows, 5 years from now it may be out the roof. If that happens, I might drop it. And if I do, I won't feel as though it was a bad deal due to the low cost and the plan did bridge a gap as Rewahoo pointed out.

Many ways to look at it.

+1

We've owned our policies for 14+ years and also have never seen an increase. I'm fully aware that can change - and change dramatically - at any time.

Should the premiums increase to the point it no longer makes sense to keep the policies, one strategy I have considered is dropping the policy on DW and keeping mine in force. DW would probably have a far more difficult time living on a significantly reduced income if I required prolonged nursing home care than if the situation were reversed.

If necessary, I can do fine living out my remaining days in an RV out in someone's cow pasture...

 

[samclem]

For now I am looking at "walling off" an amount each year for Ltc instead of paying premiums.

For those who are self-insuring (or on the fence, and self-insuring unti lthey decide), buying LTCi without the inflation rider might make sense. Buy a policy slightly bigger than you need right now, but accept that it will be way too small in 20-30 years. Especially for "younger" people, LTCi without the inflation provision is a LOT less expensive. In effect, what you'd be doing is buying decreasing coverage--If the unexpected happens and someone needs care early, the policy would cover the vast majority of the costs. As time goes by it would cover less and less, but your own savings would be building up to make up the difference. Then, we just have to spend less and hope that we end up on one of those FIRECalc lines that goes up high and to the right . . .

 

[grasshopper]

If necessary, I can do fine living out my remaining days in an RV out in someone's cow pasture...

You are welcome to use the RV hook-up on the ranch.

 

[grasshopper]

I sometimes hear men say this (including Mr. A. who doesn't even own a gun). I always wonder at what point, before total dementia, that somebody would "know" all hope is lost, it's time to pull the trigger, and would still be able to do so. Gruesome line of thinking!

Amethyst

Yea, I may have to rethink this, maybe pick a shade tree closer to the homestead. I do love that old Alligator Juniper an awful lot.

 

[Katsmeow]

What I really want is a LTC policy that acts like an excess policy where I have a self-insured retention of something like $150,000 or $200,000. The policy only kicks in after I've spend that much. I am not that worried long term about the average nursing home stay. OK with paying for the first 2 or 3 years and would without question self-insure if that was all I need we would ever look at.

But, not everyone is average. As I mentioned, DH's mother was in a nursing home for about 8 years. It is the 8 year stay that would impoverish me and that is what I want to insure against.

But you can't buy what I want. Instead you buy coverage for 3 years (or whatever) and then once it is paid out if you are facing paying for the rest of the stay out of your own funds or having the spouse needing LTC going on Medicaid and then back to the impoverishment issue.

 

[samclem]

What I really want is a LTC policy that acts like an excess policy where I have a self-insured retention of something like $150,000 or $200,000. The policy only kicks in after I've spend that much. I am not that worried long term about the average nursing home stay. OK with paying for the first 2 or 3 years and would without question self-insure if that was all I need we would ever look at.

Yes. There are a number of us here who want such a policy--true, high-deductible LTCi (from a reliable company). But apparently no one sells it.

 

[FIYes]

Some good food for thought in this thread....Sam Clem's idea about an Ltc plan with no inflation rider and Googily's suggestion that his parents Ltc plan led to getting in home help sooner rather than later. As you can tell from my posts this issue has been a concern for me. Thanks to the OP for starting the thread and for the good replies.

 

[mickeyd]

LTCi seems to be one of our most reoccurring topics.

We are not fans of this insurance~too costly, not enough claims paying experience, easy enough to cover with your own retirement stash (in many situations). This is commonly called self-insurance or non-insurance.

 

[Katsmeow]

easy enough to cover with your own retirement stash (in many situations). This is commonly called self-insurance or non-insurance.

And, there's the rub. Sure if I was certainI could cover it from our portfolio no problem. And I'm not even that averse to - if I was the last one alive - to use my portfolio to pay for my care until depleted and then be on Medicaid.

What I am afraid of is covering DH's care from our portfolio, leaving me broke with nothing left but SS, home equity and whatever amount Medicaid let's the spouse keep at the time. If DH (or I) needed care for 2 or 3 years, it is "easy enough" to do so from our own resources. But, if one of us is the person who needs care for much longer than average then "easy enough" means severely worsening the quality of life of the spouse not receiving LTC.

 

[daylatedollarshort]

There are many Medicaid exempt asset classes and income streams where money can legally be moved to prior to the five year look back period. I don't see needing to insure or self insure for more than 5 years plus some planning time. Plus the average nursing home stay is less than 3 years.

 

[pb4uski]

Add me into the chorus of folks that would like to see an LTC policy for catastrophic loss with a high deductible (say $100k or $150k).

My nightmare scenario is that either me or DW end up being in a NH for 8 or 10 years.

I would think that since so few people stay over 2 years that a catastrophic loss policy could be affordable.

 

[Katsmeow]

There are many Medicaid exempt asset classes and income streams where money can legally be moved to prior to the five year look back period. I don't see needing to insure or self insure for more than 5 years plus some planning time. Plus the average nursing home stay is less than 3 years.

As for the first point, this assumes the look back period will stay 5 years. At one time, it used to be 3 years. In the future, it might be 7 years or 10 years or forever. As boomers age, much stress will be put on Medicaid for long-term care. I hope the law will stay as it is now, but experience would say that it was more realistic to fear that it wouldn't.

As for the second point, the fact the average nursing home stay is less than years doesn't help at all if DH or I are part of the more than average.

About 1/4 of nursing home residents stay there more than 3 years with 10% more than 5 years.

FASTSTATS - Nursing Home Care

 

[Katsmeow]

I would think that since so few people stay over 2 years that a catastrophic loss policy could be affordable.

Well it isn't that few. In the study I cited in my post before this 25.6% had been in the nursing home more than 3 years with 10% there more than 5 years. For an insurer, that would seem fairly risky. No one would pay for the catastrophic policy unless it was affordable but I could see the insurer thinking that an affordable policy didn't provide it enough premiums to cover the quarter of people that stay more than 3 years. Further with health advances, it is entirely possible that in future stays will increase as it is more possible to keep people alive longer.

 

[tmm99]

Has anybody looked into lump sum LTC/Life insurance hybrid?
Someone I know got this thing called Asset Care 1 Basic Life and he paid a lump sum premium and LTC is piggy-backing with life insurance.

I just googled it.
Asset-Care® Long-Term Care Whole Life Insurance | Asset-Based Long Term Care - State Life Insurance Company, a OneAmerica company

Asset-Care is whole life insurance that allows access to 100% of its death benefit for qualifying long-term care expenses (paid monthly). Clients can help protect their assets from the risk of long-term care expenses while at the same time receiving guaranteed cash value growth and death benefits. Even if care is never needed, Asset-Care provides value. It can be purchased with a one-time single premium or annual premiums.

 

[tmm99]

I am just thinking... if there is any chance that you are moving to another country, getting an LTC insurance may not be a good idea, right? (or you can take it out of the country?)

 

[daylatedollarshort]

As for the first point, this assumes the look back period will stay 5 years. At one time, it used to be 3 years. In the future, it might be 7 years or 10 years or forever. As boomers age, much stress will be put on Medicaid for long-term care. I hope the law will stay as it is now, but experience would say that it was more realistic to fear that it wouldn't.

As for the second point, the fact the average nursing home stay is less than years doesn't help at all if DH or I are part of the more than average.

About 1/4 of nursing home residents stay there more than 3 years with 10% more than 5 years.

FASTSTATS - Nursing Home Care

How much risk you are willing to accept is a personal choice, but we are going with the self insured, Medicaid planning route. In the future the look back period might be less than 5 years, or there might be more non-countable assets and income streams than there are now.

There are pretty long lists in books and on the Internet of ways to convert countable assets to cash and then use the cash to purchase noncountable assets, including businesses, business property, retirement accounts in spouse's name, personal residence, and certain annuities.

Not everyone is going to end up in a nursing home and for those that do the stay is usually less than 3 years, so we are going with the odds.

 

[2B]

I sometimes hear men say this (including Mr. A. who doesn't even own a gun). I always wonder at what point, before total dementia, that somebody would "know" all hope is lost, it's time to pull the trigger, and would still be able to do so. Gruesome line of thinking!

Amethyst

I know two people that shot themselves after getting a "no hope" cancer diagnosis. The problem with relying on that approach with dementia is that the person with dementia doesn't realize or accept the diagnosis. I doubt anyone with dementia would actually commit suicide.

 

[Corporateburnout]

I am just thinking... if there is any chance that you are moving to another country, getting an LTC insurance may not be a good idea, right? (or you can take it out of the country?)

The LTC policy I have through mutual of Omaha covers Canada and the UK. Not sure why only the UK and not other EU countries

 

[Independent]

I'm interested in the forum participants wisdom on the issue of self-insuring for LTC.

My own situation is as follows:

DH and I each have LTC policies (not linked) that we purchased at 60. Each policy started at $170/day in benefits with automatic annual increases of 5 percent(now about $216/day). The benefits are good for only 4 years of use. Each policy has a 90 day period of residency before benefits kick in. Each policy could be used for in home care. The annual premium for both policies is $5,000.

Our finances are: Fully cola'd pensions, SS total 137,000/year. Total Annual expenses of $185,000, including Fed& State taxes of $50,000 (high partly to cover conversions of tIRA's to Roth over time). TA of $2,850,000. No debt.

I've made some reading errors recently, so I'm trying to be careful with the numbers, but this is what I see.

According to the MetLife survey, the average cost for NH care is $248/day or $90,000/yr. That's for one person.

If I were in your situation, I'd notice that our combined SS + COLA'd pensions is $185,000. Half of that would nearly cashflow NH expenses, though the person in the NH also has other expenses.

Once I'm in the NH, I can stop planning for a 30 year life span. Half your assets, which would be $1,425,000 would certainly be enough to cover that "other expenses" for many years. It could be spent at the rate of $142,500 per year for 10 years, for example, which is way above what I could imagine "needing".

With those numbers, I'd say that I don't need LTCi, I'm not going to die broke. LTCi would be a psychological benefit in knowing that I've got a belt-and-suspenders-and-another-belt plan.

(FTR, we're operating on less than half your income/assets. We haven't bought LTCi, though I see it as a very close call for us.)

 

[samclem]

Since we've talked about Medicaid, we should also mention the partnership programs that allow a person/couple to qualify for Medicaid while keeping a lot more of their assets. To do this, you need to buy a LTC insurance policy that is approved by the state for this "partnership program", then when you've spent down your assets to pay for LTC to the value of that policy, you can keep the rest of your money/assets and still go on Medicare. It's one way to avoid total impoverishment of the surviving spouse.

The bad news is that these "partnership approved" policies generally (always?) must include the inflation protection, so you can't get away with the much less expensive "decreasing real value" option and qualify for Medicaid at the higher asset level.

The (minor) good news is that some states allow a state income tax deduction for LTC insurance premiums.

 

[Chuckanut]

Add me into the chorus of folks that would like to see an LTC policy for catastrophic loss with a high deductible (say $100k or $150k).

My nightmare scenario is that either me or DW end up being in a NH for 8 or 10 years.

I would think that since so few people stay over 2 years that a catastrophic loss policy could be affordable.

+1