Six Mistakes When Buying Long Term Care Insurance

[Ready]

http://online.wsj.com/public/resources/documents/print/WSJ_-R001-20140414.pdf

This article:

a) gives me a headache as I try to read through it
b) reminds me why LTC insurance can be a complete rip off
c) confirms that I have no interest in buying a policy.

Curious if others have the same reaction.

 

[brewer12345]

I thought the #1 mistake was buying the damn stuff in the first place.

 

[REWahoo]

I was surprised at the chart showing 58% of men and 79% of women over age 65 will need long term care. This is much higher risk than I expected, especially for women.

 

[powerplay]

I was surprised at the chart showing 58% of men and 79% of women over age 65 will need long term care. This is much higher risk than I expected, especially for women.

The percent of women needing 5 or more years of long term care is pretty high also.

 

[Chuckanut]

Until I can buy it with a guaranteed maximum premium that I can afford, I won't even consider it.

 

[pb4uski]

http://online.wsj.com/public/resources/documents/print/WSJ_-R001-20140414.pdf

This article:

a) gives me a headache as I try to read through it
b) reminds me why LTC insurance can be a complete rip off
c) confirms that I have no interest in buying a policy.

Curious if others have the same reaction.

Attachment only seems to be page one of a multi-page article.

 

[REWahoo]

Try this link: http://online.wsj.com/news/articles/SB10001424052702304756104579449482245063704#printMode

 

[Katsmeow]

I was surprised at the chart showing 58% of men and 79% of women over age 65 will need long term care. This is much higher risk than I expected, especially for women.

I wondered about that also. It seems really high. Also, as mentioned, the percentage of women needing more than 5 years of care seems very high.

Here is a link to the article that came up with those numbers.

http://tinyurl.com/mzdg7sk

I haven't read it closely but it appears to be a prediction about the expected LTC nears for the current cohort of 65 year olds. LTC is defined to include facility care, formal home care, and informal care at home. The numbers are really different when you drill down to nursing home care.

SO this is article is apparently the care needs they anticipate not an actual statement of what is occurring or has occurred. They do say that they believe the current cohort of 65 year olds will have an average LTC need (as defined above) of 3 years.

They do project 79% of women needing LTC and 28% needing more than 5 years. They define LTC needs as based upon a moderate level of disability rather than a more restrictive need of LTC. For example, they use 1 or more ADL limitations while I think most long term policies use 2 or more.

If they use the more restrictive definition then the average length of LTC falls from 3 years (using the moderate definition) to 2.2 years using the more restrictive definition.

The model predicts that 2/3 of years of moderate LTC need will be spent at home. So for 65 year olds (in 2005 apparently when this was done), they predict average years of care at 3 years but only .8 years in nursing facilities and .3 years in assisted living. Of those receiving care, they project 35% using nursing facilities.

The average out of pocket LTC expenditures they estimate for those not on Medicaid is only $38,600. They do say that 6% will incur costs with a present value of $100,000 or more.

Anyway, the point is that the WSJ doesn't really explain that the chart is a model based upon projections and that it isn't just people needing nursing home or paid for care, but includes a much wider group of people with moderate care needs.

 

[REWahoo]

Anyway, the point is that the WSJ doesn't really explain that the chart is a model based upon projections and that it isn't just people needing nursing home or paid for care, but includes a much wider group of people with moderate care needs.

Thanks.

Once again, the devil is in the details...

 

[Fishingmn]

To me the key line (which should apply to many here) - "People with assets of $2 million or more, meanwhile, can probably afford to pay for long-term care out of pocket"

The type of LTC policy I'd consider is a catastrophic care plan that ONLY kicks in after 18 or 24 months. That should be WAY less expensive and cover those much rarer occasions when an extended stay could start to really impact the nest egg.

 

[pb4uski]

I'm don't believe any carriers offer a policy with such a long exclusion period - I'm in a similar boat to you and a LTC policy with cheap, catastrophic coverage would appeal to me too.

 

[Independent]

To me the key line (which should apply to many here) - "People with assets of $2 million or more, meanwhile, can probably afford to pay for long-term care out of pocket"

The type of LTC policy I'd consider is a catastrophic care plan that ONLY kicks in after 18 or 24 months. That should be WAY less expensive and cover those much rarer occasions when an extended stay could start to really impact the nest egg.

I would also like a policy with a long elimination period. However, 18 or 24 months would be illegal in some states. This is the MA statute

Individual policies may not include elimination periods of greater than 365 days, whether services are received within or away from the home.

http://www.mass.gov/ocabr/docs/doi/legal-hearings/211-65.pdf

CT had a maximum of 100 days as recently as 2003 http://www.cga.ct.gov/2003/olrdata/ins/rpt/2003-R-0810.htm

WI maximum is 365 days http://www.allaboutlongtermcare.com/guides/wisconsin-shoppers-guide.html

 

[SJ1_]

http://online.wsj.com/public/resources/documents/print/WSJ_-R001-20140414.pdf

This article:

a) gives me a headache as I try to read through it
b) reminds me why LTC insurance can be a complete rip off
c) confirms that I have no interest in buying a policy.

Curious if others have the same reaction.

Yes

The reason it is so confusing is they are trying to hide that fact that they
are going to screw you one way or another.

 

[F4mandolin]

I haven't paid real close to the statistics that they use over the years. But....I do remember when the policies first started coming out that the claims for how many people would need LTC was a lot lower than now. That change could be natural with better studies taking place.....but my suspicious mind tends to think that the numbers are getting bumped up to try to make more people panic and join in.

 

[imoldernu]

We've had the insurance since 1993.
At the time, long term care costs were about $40,000/yr. Our policy pays $36K/yr ($100/day)... no inflation clause.
Since the beginning, the payments for both of us have gone up from $2200/yr
to $2400/yr. Just one bump about 6 years ago.

The inflation part is the single reason why I would be hesitant to buy again, though at this point, we look at what we've spent as an investment, and would not stop paying.

Here's the part that doesn't show up in the WSJ statistics:

The 1993 LTC costs for a nursing home were $40K... which should translate to $65K today. In fact, the LTC costs in that same facility today is actually $85K, outrunning what the inflation escalator would have provided.

Ya have to think about that for a minute... What it says, is that actual costs have outrun the projections, so even if I had planned to cover inflation over that same period, I would still come up short by $20K/yr. based on the current Nursing Home rates.

 

[pb4uski]

To me the key line (which should apply to many here) - "People with assets of $2 million or more, meanwhile, can probably afford to pay for long-term care out of pocket"

The type of LTC policy I'd consider is a catastrophic care plan that ONLY kicks in after 18 or 24 months. That should be WAY less expensive and cover those much rarer occasions when an extended stay could start to really impact the nest egg.

Yes, but when they say "people" it is unclear if are they talking about one person or a couple. IOW, would a couple self insure with $2 million of assets or $4 million of assets?

 

[mpeirce]

I would also like a policy with a long elimination period. However, 18 or 24 months would be illegal in some states.

Me too, but then this would make it more like, you know, actual insurance, rather than a prepaid plan.

I really annoys me that we continue to move away from health insurance and toward health plans that try to hide the costs from people.

Oh yes, and get off my lawn!

 

[tryan]

FIL, and Dad "dodged the bullet" ... hospice at home. Helps that the care they needed lasted months not years.

My mother cancelled her LTC insurance after caring for dad. Decided that's how she wants "to go" ... surrounded by family.

Family can make the difference between NEEDING LCT and getting it (and the insurance there of).

 

[ChrisC]

http://online.wsj.com/public/resources/documents/print/WSJ_-R001-20140414.pdf

This article:

a) gives me a headache as I try to read through it
b) reminds me why LTC insurance can be a complete rip off
c) confirms that I have no interest in buying a policy.

Curious if others have the same reaction.

I'm sure our cognitive biases run rampant when we read articles like this one. For many, it reinforces their decision not to take out LTCi. For others, like me, it confirms I made the right moves when I purchased this policy for my wife and I in 2003 at ages 48 and 50. We've sunk around $25K into these policies (a sizeable portion of this is essentially tax deducted/affected by paying the premiums through my HSA), which have 5 year coverage with an annual inflation adjustment, with total benefits now at $475K this year.

Every time, we hear of a relative or friend on LTC (my Mom has been in a nursing home the last 7 years on $10K monthly costs and now on Medicaid), it confirms our bias that we did the right thing in purchasing the policies. Also, we started looking at assisted living facilities for MIL and ourselves (in case we ever had to go that way) in the area we're relocating in retirement, and this again confirmed our bias that we made the right decision. Can we "self-insure"? According to this article, we can, but I'm not really sweating paying the $2600 in annual premiums. If the premiums really hit the roof, I'd reconsider things but I am satisfied with the current plan, for now.