What is Considered LTC Self-insure Safe Level?

[REWahoo]

What happened to the Genworth thread? I was looking forward to a few answers to some questions??

My guess is the mods got their fill of his not-so-veiled sales pitch and removed it to decide what to do.

 

[daylatedollarshort]

I think you are underestimating the exposure. A lot of LTCI payouts are for in home care, not NH. Also, you'd need to know readmission rates for NH care-- those who do live and check out after a year are not immunized against coming back.

The claw back period is 5 years for Medicaid to kick in, and statistically most people simply either do not need LTC or do not live that long. So there's my plan - we each have 5+ years covered from savings, plus we'd still have our SS, pension and the remaining balance of the portfolio income coming in and a house to sell. I don't know what the alternative is - save some crazy amount like $5M just for LTC on a slim chance we might both need extended care for decades? We would never have been able to retire if we had to do that.

 

[capjak]

Since the Genworth LTC thread is unavailable and I had a thought to share on self-insuring for LTC, I decided to bump this thread.

According to the American Association of Long-Term Care Insurance website (http://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php):





So, if you ignore the less than 3 months above, the expected length of stay is about 2.13 years.... I'll round that up to 2.5 years to be conservative. At $85k/year (the average annual cost in my area) the expected value of claims is ~$74k (2.5 years * $85k a year * 35% chance of making a claim).

Worst case, assuming a 100% chance of a 7.5 year stay is $638k. Best case is $0.

I can afford the worst case though it wouldn't be easy but I just don't see the value of LTC insurance when I can self-insure.

I am married so using your figures for two people that is $1276K and that assumes no inflation (or your investment keeps up with LTC inflation) over those 7 years and you go into a nursing home tomorrow 20-30 years LTC could be much more expensive (i.e.4-5% inflation rate) or much less expensive if there are significant improvements.

Of course where I like LTC at todays prices is $87,000(semi-private) to $108,000 (private room) for nursing home in private room,

If you assume your investments grow at least as fast as LTC inflation than I guess you need to have $1,276,000 to protect the worst/worst case moving forward waiting until a couple might go into LTC for 7.5 years. I would not do that but I may purchase a hedge against that case in the form of LTCi.

 

[Scuba]

Since the Genworth LTC thread is unavailable and I had a thought to share on self-insuring for LTC, I decided to bump this thread.

According to the American Association of Long-Term Care Insurance website (http://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php):





So, if you ignore the less than 3 months above, the expected length of stay is about 2.13 years.... I'll round that up to 2.5 years to be conservative. At $85k/year (the average annual cost in my area) the expected value of claims is ~$74k (2.5 years * $85k a year * 35% chance of making a claim).

Worst case, assuming a 100% chance of a 7.5 year stay is $638k. Best case is $0.

I can afford the worst case though it wouldn't be easy but I just don't see the value of LTC insurance when I can self-insure.

I feel this way too. I had read years ago that folks in the middle (don’t recall amount but think it was less than $1-2 million in assets) are the ones who really need LTC insurance. Over that, one can self-insure. And if you’re poor, Medicaid covers you.

Plus, the LTC landscape is evolving. Many traditional nursing homes are struggling financially and some have already closed. More to come I believe. Odds are, if we ever need skilled nursing, it won’t be until 25+ years from now. Who knows what services will be available then and what they’ll cost? Not all facilities accept all insurance so private pay if one can afford it gives more choices.

But insurance is not one size fits all. Some people get peace of mind by having it so YMMV.

 

[Potstickers]

Since the Genworth LTC thread is unavailable and I had a thought to share on self-insuring for LTC, I decided to bump this thread.

According to the American Association of Long-Term Care Insurance website (http://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php):



So, if you ignore the less than 3 months above, the expected length of stay is about 2.13 years.... I'll round that up to 2.5 years to be conservative. At $85k/year (the average annual cost in my area) the expected value of claims is ~$74k (2.5 years * $85k a year * 35% chance of making a claim).

Worst case, assuming a 100% chance of a 7.5 year stay is $638k. Best case is $0.

I can afford the worst case though it wouldn't be easy but I just don't see the value of LTC insurance when I can self-insure.

1. The average cost of repairs from a house fire is $11,290. Would you decide to either not carry insurance or to carry some reasonable multiple like 2.5 x that amount as insurance for your home? We could easily afford $11K or grudgingly $110K in fire repairs to our home....we pay for insurance to avoid the $500K+ problem that we would not be able to handle. Averages are a rather terrible way to consider risk, imo.

2. Costs quoted here were much below the experience of in-home caregivers in California if you do everything aboveboard and legally. That is doubly true with the new overtime laws that apply. Of my two in-laws and one parent, only one spent any significant time in a nursing home (2+ years) -- but the costs of in-home care were substantial. Many people who want in-home care can't get away with four or five hours a day, unfortunately. Getting coverage 7 days a week, including holidays, runs a bunch of bucks. Board & care homes (if available in your state) are much less expensive, but were not acceptable to any of the parents or in-laws.

3. If you're married, big issues when one of you needs a very high level of care (more than assisted living) and the other doesn't need care but isn't physically able to provide substantial care to the disabled one. We weren't able to find ANY facility that would both provide for my mom and allow my dad to live in an apartment with her. In-home care was the only option.

It is an ugly problem. MIL was spending $120K/year on her aides and luckily had some long term care insurance to pay a portion of the bills -- and we handled them as employees. A service would have been even more expensive, though we did use a service for vacations and short-term fill-ins. (And this expense was after 2+ years of FIL in a nursing home.)

 

[Huston55]

I feel this way too. I had read years ago that folks in the middle (don’t recall amount but think it was less than $1-2 million in assets) are the ones who really need LTC insurance. Over that, one can self-insure. And if you’re poor, Medicaid covers you.

Plus, the LTC landscape is evolving. Many traditional nursing homes are struggling financially and some have already closed. More to come I believe. Odds are, if we ever need skilled nursing, it won’t be until 25+ years from now. Who knows what services will be available then and what they’ll cost? Not all facilities accept all insurance so private pay if one can afford it gives more choices.

But insurance is not one size fits all. Some people get peace of mind by having it so YMMV.

Since the Genworth LTC thread is unavailable and I had a thought to share on self-insuring for LTC, I decided to bump this thread.

According to the American Association of Long-Term Care Insurance website (http://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php):





So, if you ignore the less than 3 months above, the expected length of stay is about 2.13 years.... I'll round that up to 2.5 years to be conservative. At $85k/year (the average annual cost in my area) the expected value of claims is ~$74k (2.5 years * $85k a year * 35% chance of making a claim).

Worst case, assuming a 100% chance of a 7.5 year stay is $638k. Best case is $0.

I can afford the worst case though it wouldn't be easy but I just don't see the value of LTC insurance when I can self-insure.

1. The average cost of repairs from a house fire is $11,290. Would you decide to either not carry insurance or to carry some reasonable multiple like 2.5 x that amount as insurance for your home? We could easily afford $11K or grudgingly $110K in fire repairs to our home....we pay for insurance to avoid the $500K+ problem that we would not be able to handle. Averages are a rather terrible way to consider risk, imo.

2. Costs quoted here were much below the experience of in-home caregivers in California if you do everything aboveboard and legally. That is doubly true with the new overtime laws that apply. Of my two in-laws and one parent, only one spent any significant time in a nursing home (2+ years) -- but the costs of in-home care were substantial. Many people who want in-home care can't get away with four or five hours a day, unfortunately. Getting coverage 7 days a week, including holidays, runs a bunch of bucks. Board & care homes (if available in your state) are much less expensive, but were not acceptable to any of the parents or in-laws.

3. If you're married, big issues when one of you needs a very high level of care (more than assisted living) and the other doesn't need care but isn't physically able to provide substantial care to the disabled one. We weren't able to find ANY facility that would both provide for my mom and allow my dad to live in an apartment with her. In-home care was the only option.

It is an ugly problem. MIL was spending $120K/year on her aides and luckily had some long term care insurance to pay a portion of the bills -- and we handled them as employees. A service would have been even more expensive, though we did use a service for vacations and short-term fill-ins. (And this expense was after 2+ years of FIL in a nursing home.)

I’m in the same camp as PB4 on this issue. While ‘averages’ are just that, and they certainly do vary from state to state (we’re in Cali), in the case of LTCi I think they are a realistic way to evaluate the [-]value[/-] non-value of LTCi.

The ‘home insurance’ analogy is fallacious because the products are completely different. Home insurance is widely offered, which means competition reduces premiums; it covers a defined $$$ liability; and most importantly, it covers the entire liability (minus any deductible).

LTCi is none of those things & performs none of those functions. It is not widely offered, premiums are neither competitive nor typically even known in advance; and, most importantly, LTCi covers a defined period/amount, not the entire LTC liability (which cannot be known in advance).

So, when deciding whether to buy LTCi, using an average (or what PB4 calls a “worst case”) is precisely what should be compared to the fixed (time and/or $$$ limited) benefit that today’s LTCi policies provide.

Of course, this addresses only the financial aspects of LTC, not the personal & emotional challenges described by Nords in his link above.

Below is a link to an excellent article on the financial aspects of LTCi.

https://www.caniretireyet.com/long-term-care-insurance-why-we-arent-buying-it/

 

[pb4uski]

Yes, the home insurance analogy is silly... the fire part of my home insurance is ~$500/year... negligible compared to the risk of loss.

Also, with LTC there is a significant chance that the insurer will jack up the premiums if their experience is unfavorable... my home insurance might go up a little each year but nothing compared to some LTC insurance premium hikes.

 

[pb4uski]

I am married so using your figures for two people that is $1276K and that assumes no inflation (or your investment keeps up with LTC inflation) over those 7 years and you go into a nursing home tomorrow 20-30 years LTC could be much more expensive (i.e.4-5% inflation rate) or much less expensive if there are significant improvements.

Of course where I like LTC at todays prices is $87,000(semi-private) to $108,000 (private room) for nursing home in private room,

If you assume your investments grow at least as fast as LTC inflation than I guess you need to have $1,276,000 to protect the worst/worst case moving forward waiting until a couple might go into LTC for 7.5 years. I would not do that but I may purchase a hedge against that case in the form of LTCi.

Nah. If one person's likelihood of making a claim is 35%, then the likelihood of two people making a claim is only 12.25%. I'll take may chances thank you very much. If DW or I were to need extended nursing home care we would just divorce and each take our half and eventually would end up on Medicaid.

 

[athena53]

Here's my simplistic approach. Right now I spend about 140% of the average annual cost of skilled nursing home care in my area. It's funded partly by SS and a couple of small pensions and partly by withdrawals from my investments. My net worth has increased by about 2.3% annually in the 4 years since I retired, so this looks sustainable, and can be adjusted downwards in a bad market if necessary since my basic needs aren't that much.

Assuming that my investment returns keep pace with the increases in the costs of LTC, I should be fine. I know that the costs of an LTC facility will eat into my estate but leaving an estate is Priority #3, behind providing for my own LTC and paying for my grandkids' educations.

It also occurred to me that state partnership plans, while they're an excellent incentive to get people to take responsibility for at least some of their own LTC costs, are no incentive at all for me. Under any reasonable scenario (both my simplistic Excel projections and my financial advisor's fancy Monte Carlo simulations), I'l have too many assets to qualify for Medicaid when the LTC runs out, so Medicaid will never pick up. I guess that's a good problem to have.

 

[wmc1000]

Like some here we consider our home equity as our LTC self-insurance program. One thing noted by athena53 on partnership programs at least in Indiana is that they shield your assets from Medicaid qualification to the extent you carry LTC insurance that is at or over the set dollar amount designated by the state. You then have total asset protection and all of your assets are disregarded by Medicaid to determine eligibility. Currently the Indiana amounts are $372,000 in asset coverage.

While we haven't taken this route it would appear to cover the event of multi-year care over the purchased coverage amounts.

 

[athena53]

Like some here we consider our home equity as our LTC self-insurance program. One thing noted by athena53 on partnership programs at least in Indiana is that they shield your assets from Medicaid qualification to the extent you carry LTC insurance that is at or over the set dollar amount designated by the state. You then have total asset protection and all of your assets are disregarded by Medicaid to determine eligibility. Currently the Indiana amounts are $372,000 in asset coverage.

While we haven't taken this route it would appear to cover the event of multi-year care over the purchased coverage amounts.

Thanks for that clarification- a better deal than I thought.

 

[capjak]

Nah. If one person's likelihood of making a claim is 35%, then the likelihood of two people making a claim is only 12.25%. I'll take may chances thank you very much. If DW or I were to need extended nursing home care we would just divorce and each take our half and eventually would end up on Medicaid.

God Speed with your plan!

$120,900: Maximum amount of assets that a healthy spouse can retain for the other spouse to be eligible for long-term care benefits provided by Medicaid, 2017. (Actual amounts vary by state.)

46.7%: The expected percentage of men turning 65 who will have a long-term care need during their lifetimes.

57.5%: The expected percentage of women turning 65 who will have a long-term care need during their lifetimes.

$0: Median household wealth for people who have lived in a nursing home for six years or more.

Here are some stats reported by Morningstar.

75 Must-Know Statistics About Long-Term Care

 

[COcheesehead]

Not so sure I would want my home equity to be my LTC piggy bank. That sounds like it would create a lot of chaos at a time when there will be little clarity. What if only one needs LTC? The other has to move? How do you tap it, HELOC? Can you cash flow a HELOC? Do you need to sell it? Moving is a pain when you are well and of clear mind. Couldn’t imagine selling at an advanced age. Removes options for in home care, maybe, maybe not. Reverse Mortgage? Devil is in the details.

 

[Mdlerth]

Both buyer and seller are in the wrong business

Also, with LTC there is a significant chance that the insurer will jack up the premiums if their experience is unfavorable...

All by itself this is sufficient reason to avoid LTCi. You might as well replace "significant chance" with "the same probability that the sun will rise in the east tomorrow".

We buy insurance so we can manage risk at a price which we know to bear some relationship to that risk. If you don't know what the price will be, you can't evaluate its relationship to the risk.

And I'm not trying to disparage insurers. For the same reason you shouldn't buy it, they shouldn't sell it. They can't tell you the price because they don't know what their cost will be.

Of course, eventually a technology will probably arise which will transform the long term care industry, reducing its cost by orders of magnitude, thus obviating the insurance question:

 

[Independent]

Of course, eventually a technology will probably arise which will transform the long term care industry, reducing its cost by orders of magnitude, thus obviating the insurance question

I think this deserves a thread of its own, not a tangent here.

We retire early thinking we'll have long, healthy lives. After enough years, the reality of declining health starts to settle in.

I've given this some thought. If the perfect suicide pill could be purchased over the counter, I believe I'd buy one and put it in a home safe just for the peace of mind.

 

[aja8888]

I've given this some thought. If the perfect suicide pill could be purchased over the counter, I believe I'd buy one and put it in a home safe just for the peace of mind.

As long as you remember the safe's combination or where you wrote it down.

 

[Independent]

Not so sure I would want my home equity to be my LTC piggy bank. That sounds like it would create a lot of chaos at a time when there will be little clarity. What if only one needs LTC? The other has to move? How do you tap it, HELOC? Can you cash flow a HELOC? Do you need to sell it? Moving is a pain when you are well and of clear mind. Couldn’t imagine selling at an advanced age. Removes options for in home care, maybe, maybe not. Reverse Mortgage? Devil is in the details.

I think the married/single variable is a big deal.

If I were single, I'd have no problem assuming I'd sell (or my children would sell) my house when I needed a facility. My house is worth almost two years of nursing home care in my area. Also, if I were single, I don't think I'd be too excited about home care (unless I had a strong desire to die at home, like my MIL and one of my aunts). An ALF would look pretty enticing pretty quickly.

But, married means the house is the last asset you tap, not the first.

 

[Independent]

As long as you remember the safe's combination or where you wrote it down.

Yep. I'm sure I'd write it down in a couple places. But the paper would not say "combination for safe with suicide pill".

If I'm too far gone to remember/find the combination, then I'm probably too far gone to make a decision on my own.

 

[Huston55]

I think the married/single variable is a big deal.

If I were single, I'd have no problem assuming I'd sell (or my children would sell) my house when I needed a facility. My house is worth almost two years of nursing home care in my area. Also, if I were single, I don't think I'd be too excited about home care (unless I had a strong desire to die at home, like my MIL and one of my aunts). An ALF would look pretty enticing pretty quickly.

But, married means the house is the last asset you tap, not the first.

Not necessarily. If you (as a couple) choose a CCRC, then “the house” is handled like any other asset...in the appropriate manner at the appropriate time.

 

[Scuba]

If one isn’t concerned about leaving their home to heirs, I don’t see why a reverse mortgage isn’t an excellent LTC solution. The current value of our home, net of debt, would cover many years of LTC. If only one of us needed it, the other could continue to live in the home and the reverse mortgage payments would cover LTC costs for the other. Am I missing something?

 

[wmc1000]

Not so sure I would want my home equity to be my LTC piggy bank. That sounds like it would create a lot of chaos at a time when there will be little clarity. What if only one needs LTC? The other has to move? How do you tap it, HELOC? Can you cash flow a HELOC? Do you need to sell it? Moving is a pain when you are well and of clear mind. Couldn’t imagine selling at an advanced age. Removes options for in home care, maybe, maybe not. Reverse Mortgage? Devil is in the details.

Yes I should have been more clear when I talked about our house equity as the LTC insurance vehicle. We would use it in the sense of a reverse mortgage where it would pay for probably 3+ years of "care" in a facility or many more for assisted in-home care.

The benefit to the surviving spouse is the home remains until they pass or decides to move out depending on their health, desires, etc. Obviously the remaining spouse has a greater likelihood of reaching Medicaid limit in this scenario.

Since none of our parents or grandparents were ever in a LTC situation we are rolling the dice, so to speak, we see our probability for LTC as lower than average. Will re-evaluate the LTC partnership possibility around 70-75 and see what premiums are like at that point vs our reverse mortgage plan.

Everything remains the same until it changes in life.

 

[youbet]

How does the lookback thing work on 401k and IRA assets as well as future SS income?

If you and your spouse are 60 and have a million in one 401K plus a few hundred thousand in Roths, plan to take SS at 70, can they make you start SS early to pay for LTC or make you tap the 401K or IRA of either spouse?

Our plan is to exhaust almost all of our money in taxable accounts by the time we are 60, leaving all remaining assets in Roth and 401K. The Roth IRAs by then will be large enough to replace our yearly spending needs until we draw SS.

So there would be no big nest egg outside of those funds. This also provides some level of bankruptcy protection and legal protection.

Not sure how it would work elsewhere, but in Illinois having your stash in tax deferred accounts such as an IRA or 401k does not remove it from your asset base in qualifying for Medicaid.

Too bad. That would be a really easy work-around.

OTOH, in smallish amounts, having your stash in an IRA can help you fib to the authorities about your financial status. For example, a close buddy in Florida lives on a very tight budget, just his SS. He has about $100k in an IRA but hasn't started RMA's yet. He applied for and receives state aid to pay for his Part B and Part D Medicare based on his low income and lack of assets. When applying, he just omitted that he has the IRA and since there is no tax reporting of IRA unearned income until withdrawn, the state hasn't figured it out in several years. IOW, the IRA dollars are sort of "hidden" since they don't show up on your tax return which is the main instrument most states use in checking on your income and asset status. Of course, you have to feel comfortable fibbing to the gov't folks who may or may not be pissed if/when they catch you.

 

[COcheesehead]

I think this deserves a thread of its own, not a tangent here.

We retire early thinking we'll have long, healthy lives. After enough years, the reality of declining health starts to settle in.

I've given this some thought. If the perfect suicide pill could be purchased over the counter, I believe I'd buy one and put it in a home safe just for the peace of mind.

Having spent many times in LTC facilities visiting folks, I can unequivocally say that they are the last place I want to spend our final days. Maybe a suicide pill isn’t the answer, but something that gives us a choice, whatever that may be.

 

[athena53]

If one isn’t concerned about leaving their home to heirs, I don’t see why a reverse mortgage isn’t an excellent LTC solution. The current value of our home, net of debt, would cover many years of LTC. If only one of us needed it, the other could continue to live in the home and the reverse mortgage payments would cover LTC costs for the other. Am I missing something?

One caveat although the people on this Board are probably sharp enough to avoid this pitfall. I saw a really sad story about a woman thrown out of her house because her husband had gone into LTC. They'd taken out a reverse mortgage and because she was younger, they could get more $$$ of her name wasn't on it. So- when he entered LTC the reverse mortgage became due.

You'd also need to make sure that the spouse at home has the resources to maintain it, pay property taxes, etc. Reverse mortgage companies want to protect their interests (don't blame them for that) and I think they can actually terminate the agreement if you let the house fall apart or stop paying property taxes.

 

[COcheesehead]

I just think about the mental/ emotional side too. If your spouse has advanced to the point of needing care, you’re probably not in great shape either. Do you want or can you even start a reverse mortgage process? Having cared for parents at this point, even locating documents can be challenging.