What is Considered LTC Self-insure Safe Level?

[samclem]

About relying on Medicaid: Sometimes, the LTC facilities that accept Medicaid as payment are not very nice ones. Many facilities will allow a paying patient who runs out of money to remain in the facility and accept the Medicaid rate, but I'm not sure how common this is, I don't know how often it is guaranteed, and I wonder if the practice will continue in the future as LTC beds get more scarce, prices go up, and (probably) Medicaid reimbursements don't keep up.
Relying on Medicaid my not be a very appealing option, but many would choose it rather than bankrupt a spouse.

 

[imoldernu]

I believe that anyone who is open to learning about Long Term Care as a retirement planning factor, should be aware of these two links.... The first is from Elderlaw, outlining medicaid possibilities.

Protecting Your House from Medicaid Estate Recovery | ElderLawAnswers

You would have to search for laws applicable to your state.

The second, is a fairly recent link to changes in California law, regarding Medicaid (MediCal) recovery limits on amounts that have been spent for nursing home care, and the value of the protected housing.

California’s seizure of Medi-Cal patients’ assets is limited by new law – The Mercury News

FWIW, median home prices in CA are close to $500K and for Los Angeles, more than $620K, so the dollars involved in the law are not inconsiderable.

For those who feel this would not apply to them, congratulations... you have most certainly attained the dollars of security that would make this subject a non-starter. For for others, be sure you understand the laws, as it could make a difference for a surviving spouse. (Particularly in California).

Best of luck in your planning.

 

[mathjak107]

I'm not really sure what your point is. What is the alternative? Work until we drop for a slim chance we may be outliers on needing really long LTC? How many retiree households have resources for something extreme like 40 years of nursing home care without eventually going on Medicaid?

if you don't have the resources than there is nothing on planning to protect . it is not an issue

 

[daylatedollarshort]

if you don't have the resources than there is nothing on planning to protect . it is not an issue

I'm really not getting your point. The OPs question was, "What do you all think is an asset value for self-insuring vs long term care?" I suggested $1M for two as being very conservative, likely being more than enough most retirees will need, and gave some reasons for that. What do you think is enough to self insure?

 

[newtoseattle]

I have been mentally putting aside 250,000$ for us. My idea is that it is enough to relax and pay a long time for home health, or even a couple years for SNF and time for the other to sort out -selling the house, annuity, etc...

I think the LTC insurance industry is too volatile right now (i.e. raising rates, folding companies, etc) . And - its nice to have "cash" to decide what/when you want something -rather than trying to get insurance "approval"

 

[38Chevy454]

OP checking in here. Thanks to all for the information and discussion. Helps me to identify the variables in this, and having different ways that each person looks at it. I am still leaning toward the self-insure route, that may be higher risk for sure. I think the $250K figure is around what I was considering.

I think I really only need to worry about the first of DW or me that needs LTC expenses, once the surviving spouse is in need of LTC I could care less about what is left in the nest egg. As long as the surviving spouse has sufficient assets left to cover expenses at a good quality of life before LTC is required, I am not worried about running out of money if the surviving spouse uses up all that is left. Having a paid for house is a nice chunk that can provide for care expenses, since won't be needing that anymore.

 

[2017ish]

Wouldn't one easy conclusion be that you are relatively safe if you are planning on a conservative withdrawal rate that, when combined with any pension and 3/4 of the highest social of the couple, easily exceeds 2X long term care costs per annum?

In that situation, why would there be any need to sequester--especially if there is no particular desire for a legacy?

 

[samclem]

Wouldn't one easy conclusion be that you are relatively safe if you are planning on a conservative withdrawal rate that, when combined with any pension and 3/4 of the highest social of the couple, easily exceeds 2X long term care costs per annum?

Sure, but that's quite a pile of money. The "2X long term care costs per annum" puts us in the neighborhood of a $180-200K annual spending requirement. If we assume a big-ish $5K per month SS check, that still requires a nest egg of over 3 million dollars.
But, yes, if the couple has a portfolio that big AND the annual spending of a single one of them while not in LTC is less than about $180K per year AND they don't have a requirement to leave anything at the end--then they have LTC covered (if their investments grow at the rate of LTC costs). The rest of us will keep looking for an angle.

 

[MrLoco]

We want to leave an inheritance for our kids, too, in our case so we don't want to spend down the portfolio to zero, if we can help it. I don't have any specific funds set aside. This is just what I have thought about for estate planning purposes and whether or not to purchase LTC insurance.

This is a similar situation in which my wife and I find ourselves in. We also want to leave an inheritance to family. Obviously, if this is not a goal...one can just spend down assets and apply for Medicaid.

After much research, my wife and I are in the process of purchasing a traditional LTC policy. What I have learned:

1) Steer clear of the so called newer "hybrid" policies. These are nothing more than a life insurance policy with a LTC rider. These policies normally require a one time up front premium of $100,000. Not good.

2) Realize that the interview process in terms of your medical history is extensive when applying for a Traditional LTC policy. You will need to fill out pages of information pertaining to your own medical history, your parent's medical history, and sign a release allowing the insurer to check accuracy of all information with your family physician. They will know every medication you are taking and every surgery /disease you have ever had. Know that after all this there is a very real possibility you may be denied.

3) Check the financial stability of the insurer. The insurer we are going with is highly rated and is one of the few to never have had an increase in premiums. Of course they may in the future....but none to date. FActor in future premium increases. You will need to budget for this.

4) Our goal was to offset about 50% of future LTC costs. Really a hedge. This keeps premiums reasonable. Beware of the riders offered. Most are not needed.

5) Look for a policy which offers a partnership plan. In a nutshell this is a plan where your state will allow you to keep assets(usually) ....dollar for dollar....based on what the insurer paid out for LTC costs before applying for Medicaid. For example, suppose your insurer pays out $500,000 for your LTC costs and your benefits expire but you do not (). You only need to spend down assets to where you have $500,000 remaining and you can apply for MEdicaid and the $500,000 remains in your estate. It is the state's way of rewarding you for having a policy to offset a portion of your LTC costs. Good luck.

 

[audreyh1]

Wouldn't one easy conclusion be that you are relatively safe if you are planning on a conservative withdrawal rate that, when combined with any pension and 3/4 of the highest social of the couple, easily exceeds 2X long term care costs per annum?

In that situation, why would there be any need to sequester--especially if there is no particular desire for a legacy?

Sure. But most people can't wait to make a pile that big to retire, let alone retire early.

Some articles a while back have mentioned $3M to $5M as the threshold net worth needed to self insure for LTC.

Theoretically, every year you are retired if you could draw, say, $200K of income, you could set half aside for LTC. Doing that indefinitely seems excessive.

Most LTC policies, certainly what can be bought today, have a limit on the coverage. To me, if I already have that amount in fairly safe assets and can get by fine without drawing on it (including it in my SWR calc) until needed, then I have the equivalent of an LTC policy. Should more be earmarked just in case? I don't know.

 

[Luck_Club]

Long Term Elder Care can take many forms...

I'm currently managing care for two elderly family members.

One is totally bed ridden can't walk, dress, bathe, etc and needs 24 hour care.
This person is receiving around the clock in home care for $169 per day. Seems like a lot but is $3,000 a month less than nursing home care. This only works due to the family members relatively small size. Their care will probably run shorter than the average. Though it is hard to predict exactly how long.

The other is morbidly Obese. Weighing in at over 350 Lbs for a 5' 8" frame. This family member is not going to be eligible for in home care due to size and lack of muscle strength. True definition of I've fallen and I can't get up. When this family member needs 24 hour care, it will be for a longer than normal stay and will require full on nursing care. Once they are in the nursing home, they will better manage the diabetes, (won't be able to just eat sugar anymore) thus leading to an extended life. Currently they have someone coming in to help 3 times a week for about $90. Estimated they will end up in full time care within 2 years at the current pace they are losing mobility, and their stubborn resolve not to do anything to change it.

 

[athena53]

Long Term Elder Care can take many forms...

I'm currently managing care for two elderly family members.

<snip>The other is morbidly Obese. Weighing in at over 350 Lbs for a 5' 8" frame. This family member is not going to be eligible for in home care due to and lack of muscle strength. True definition of I've fallen and I can't get up.

Wow- I get on my high horse about healthy living and the cost of obesity on FB (to the point that I've irritated a few people) but hadn't thought about this element. When DH died he was down to 117 lbs at his last doctor visit and he was 6 feet 2. I took care of him at home but picking him up off the floor when he fell wasn't too strenuous for me as long as I was careful. I've read (here, maybe?) that nursing homes charge more for obese patients because moving them requires more than one person. I can see that home health care aides aren't an option if you're that heavy.

 

[imoldernu]

Frankly, I can't understand the discussion being centered only on the amount of money that would be "safe", without more consideration being given to the long term safety provided by medicaid guarantees that insure that the surviving spouse would be allowed to keep the "owned" home. Current rules insure that medicaid would provide nursing home care for as long as is needed... while safeguarding the "home" for the other spouse.
The idea of selling the home to pay for nursing home care, could leave the survivor without sufficient assets to live.

Of course... when there are sufficient assets to pay for 5 or 6 years of LTC, the spend down would not matter, but those of us who could be be hit with $500+K in expense, might be left with only SS. Depending on state law, part of the cost of a Medicaid lien may be abrogated... leaving monies for an estate, while continuing to allow the surviving spouse housing security. It's a matter of understanding Elderlaw.

Hard to think that far ahead, but when you can see the effects of making a poor decision, up close and personal, it makes sense to look at all the alternatives. Living in a CCRC and seeing friends and neighbors dealing with LTC, and having to face hardship when money runs out, we have seen where poor advice and planning mistakes have hurt those who are in their final years.

 

[jkern]

For me LTC reserve is about $100k. Current LTC here is about $120k per year. Assuming I'm the last one standing, I could redirect my income sources ($85k per year) toward LTC and $100k would pay for approximately 3 years worth. Considering all the unknowns, this is close enough for me.

 

[daylatedollarshort]

Most LTC policies, certainly what can be bought today, have a limit on the coverage. To me, if I already have that amount in fairly safe assets and can get by fine without drawing on it (including it in my SWR calc) until needed, then I have the equivalent of an LTC policy.

That's what I was thinking. I did get EQ insurance on the house this year, so like others here in California our house should cover any likely LTC needs, the non LTC spouse would move to a condo or townhome. If we needed extra after that we have the five year look back period covered which gives us time to work with an elder care attorney and shift assets to the kids, trusts or Medicaid exempt asset classes.

 

[mathjak107]

the problem is look back was 3 years first , then it was changed to 5 . it can change again and blind side your plan . that is what changed our mind about self insuring .

to easy to get caught up in changes in look back , which already changed . but preserving assets still does not help when the stay at home spouse is forced to live on what medicaid allows .

preserving a million bucks in assets and then your stay at home wife has to live an impoverished lifestyle because medicaid restricts her income sucks !

 

[daylatedollarshort]

It is true the look back period could change but it it went from 3 to 5 then 5 to 7 that is still something we could muddle through.

I just checked an online calculator and the rates for us for LTC would be around $3.25K a person per year for 3 years of coverage at $300 day. If we both live 30 years that would be $195K in premiums, assuming no rate increase. Assuming chance of needing LTC 40% per person, average stay 2.44 years, I think for us statistically we are better off self insuring.

 

[mathjak107]

premiums usually work out to one years projected cost in a snf by the "higher usage age's .

regardless when you start the premiums will kind of reflect that.

the first year we had our policy the insurers were still trying to get a handle on usage and costs so we had an 8% increase .

they were blind sided early on at pricing these policy's as they believed most folks didn't need the care . boy were they wrong as they found those with policies used those policies . at one time they were lifetime , they under estimated so much . so think about the fact that if pro's who do this for a living can't get the cost estimates right what chance do we have guessing by the seat of our pants .

we have not seen an increase now in 3 years .

 

[samclem]

they were blind sided early on at pricing these policy's as they believed most folks didn't need the care . boy were they wrong as they found those with policies used those policies . at one time they were lifetime , they under estimated so much . so think about the fact that if pro's who do this for a living can't get the cost estimates right what chance do we have guessing by the seat of our pants .

IIRC, the major error made by insurance companies was not a miscalculation of the costs of care, but a mis-estimation of the lapse rates they would experience (how many insureds would let their policies lapse before using them). When a policy lapses, it is great news for the insurer (collected premiums and didn't have to pay out--yippee!). As it turned out, people who had the policies let them lapse much less frequently than predicted by the insurance companies. A cynic might say that they've done a lot since then to "improve" lapse rates by jacking up their premiums and making the guarantees in the policies less dependable.

FWIW, I don't see any reason to believe that the per-day cost of LTC is likely to dramatically increase in the future. If anything, all the reports of the dearth of jobs for low-skilled workers indicates there will downward pressure on pay rates for those who help oldsters to take the meds on time, keep them fed, etc. But, it seems likely that the likelihood of needing care and the duration of care required could go up due to advances in treatments for various illnesses, leaving us prey to the many chronic maladies of old age.

 

[Hermit]

I haven't thought of it as a specific amount. My SS, plus a couple of small pensions, plus 4% of my investable assets, should cover anything, including memory care. I'd be selling my house and most other expenses (car, travel, home maintenance) would go to zero. I'm widowed at this point and would not under any circumstances marry a guy who might have to rely on Medicaid for LTC.

I am in the same boat except my house will not have any market value and will go to DD. I hadn't thought about those issues with a marriage, but also assumed any late-in-life wife would be somewhat equal financially.

 

[Independent]

It is true the look back period could change but it it went from 3 to 5 then 5 to 7 that is still something we could muddle through.

I just checked an online calculator and the rates for us for LTC would be around $3.25K a person per year for 3 years of coverage at $300 day. If we both live 30 years that would be $195K in premiums, assuming no rate increase. Assuming chance of needing LTC 40% per person, average stay 2.44 years, I think for us statistically we are better off self insuring.

The only online premium calculator I've found so far is the Federal program. Did you find another?

 

[Independent]

IIRC, the major error made by insurance companies was not a miscalculation of the costs of care, but a mis-estimation of the lapse rates they would experience (how many insureds would let their policies lapse before using them). When a policy lapses, it is great news for the insurer (collected premiums and didn't have to pay out--yippee!). As it turned out, people who had the policies let them lapse much less frequently than predicted by the insurance companies. A cynic might say that they've done a lot since then to "improve" lapse rates by jacking up their premiums and making the guarantees in the policies less dependable.

FWIW, I don't see any reason to believe that the per-day cost of LTC is likely to dramatically increase in the future. If anything, all the reports of the dearth of jobs for low-skilled workers indicates there will downward pressure on pay rates for those who help oldsters to take the meds on time, keep them fed, etc. But, it seems likely that the likelihood of needing care and the duration of care required could go up due to advances in treatments for various illnesses, leaving us prey to the many chronic maladies of old age.

The hope, of course, is that the technologies that extend life also extend the years of healthy life. From the company's point of view, even pushing back the onset of disability a few years provides an extra few years of premiums.

Yes, lapse assumptions were a big deal in terms of mis-pricing. I have a theory that companies that came at LTCi from a health insurance background assumed higher rates than companies that came from the life insurance side - because their frames of reference were different. But, both were too high. I think they were amazed by the persistency they got even when they raised premiums.

Northwestern Mutual had some of the highest premiums. I assume a lot of that was inherent conservatism, but they also had some of the lowest lapse rates in the industry on their life business. They had to carry that over to LTCi.

All of this could have been avoided if regulators had said "Look at this - companies are selling level premiums for an increasing risk. We've seen that movie before. This product needs non-forfeiture benefits." But, they didn't and we got a mess.

And then, as they got the lapse assumptions (and claims assumptions) more in hand, interest rates dropped...

 

[daylatedollarshort]

The only online premium calculator I've found so far is the Federal program. Did you find another?

I googled "long term care calculator" and used the one from Genworth that came up.

 

[wmc1000]

Part of an Oblivious Investor article today at
Should I Buy Long-Term Care Insurance? — Oblivious Investor

According to a 2016 report from the National Association of Insurance Commissioners (with credit to Christine Benz’s excellent “75 Must-Know Statistics About Long-Term Care” for directing me to the report), for people turning age 65 in 2015-2019:

48% are expected to have no long-term care costs during their lifetimes,
15.4% will have costs of up to $50,000,
9.7% will have costs of $50,000-$100,000,
11.7% will have costs of $100,000-$250,000, and
15.2% will have costs that exceed $250,000.
Another noteworthy point: people with lower incomes are more likely to have an extended need for long-term care. (See Table 5 on page 35 of the NAIC report.) This isn’t surprising, since people with lower incomes are often in worse health than people with higher incomes. But it certainly makes planning even more challenging for lower-income people.
----------

BTW we are self-insuring as neither of our parents or our immediate relatives have incurred LTC facility costs.

 

[gayl]

I am self insuring. My mother never needed a day (90+ yrs old) & my dad was there for 3 weeks in 2003 before he insisted we take him home. That home cost 7k a month. So my plan includes in today's $$s:
♤ $2300 current net DBP ($2885 gross)
♡ $2316 projected SSA @ 70 (corrected)
◇ $2500 projected RMD @ 70
♧ 4 BD / 3 BA home rented out in SF Bay Area less 10% to son for handling

This is without depleting assets