Thanks for letting me know about this thread, Friar! I'm on travel with limited bandwidth but I'm happy to discuss the issues.
I read the Nord article. And although, the level of effort he had to put out was high, the fact is expenses were paid. How would his family have fared without it? My dad has a policy that is now being used for my mom. I need to ask him how it is working out. I do know it ends up only covering about half of what it costs for the facility that she is in.
Yes, the expenses were paid-- and in the most excruciatingly administratively and bureaucratically painful (and stressful) way possible for a caregiver to tolerate. John Hancock had (and perhaps still has) some of the most cumbersome systems I've ever encountered from an enterprise-level corporation. My father had to spend nearly $4000 on a neuropsych evaluation to even get Hancock to agree with the Denver probate court that his Alzheimer's was severe enough to no longer live independently. It was 18 months before they even offered electronic payments. I was faxing monthly bills to Hancock because they couldn't seem to figure out how to upload documents to a secure website.
Let's remember that they also couldn't keep track of their own payout math and tried to short my father's policy by $6175. It's less than a month of reimbursement, but it really scales when you do that to a few hundred stressed-out caregivers per year. I'm a fairly smart & persistent guy, and my caregiver stress has been extremely far below the average, but it was still painful and frustrating. I can only imagine how many others have just given up.
My father won the long-term care lottery with more than a 25:1 payout on his premiums. If I remember correctly (away from my spreadsheet) it paid for over three years of his care. It gave me time to work on his portfolio (and the rest of his finances), and it insulated him from a potential bear market.
But if it was so painful to deal with the world's best LTC policy from one of the world's most financially stable insurers, then how much nastier will it be to get a LTC payout today? If Hancock has to keep jacking up the premiums when we're in our 50s or 60s, then how survivable will the payouts be in our 70s or 80s?
Traditional LTC policies are only financially sustainable when the premiums are much higher. How much longer are you going to subsidize Hancock's business model? Would it be better to go with a hybrid life-insurance/LTC policy, or to trust that care needs will be shorter (as shown by recent research), or to invest in your own high-equity passive index portfolio instead of Hancock's bond portfolio? These questions don't have easy answers.
I don't want to inflict this caregiver pain on a third generation of our family. My spouse and I have the assets (and cash flow from our military pensions) to self-insure.
Those retirees with a low net worth (or low cash flow) will probably be unable to pay years of LTC premiums and will spend down to Medicaid. The real gray area for LTC insurance considerations is probably in the $1M-$2M range of net worth, or perhaps around $5000/month retirement income. At those numbers, rising LTC premiums extract a high price for the peace of mind.
Those who are considering keeping their policies because "we've paid so much already" need to review the behavioral financial psychology behind the sunk costs fallacy. Be sure that you understand how it impacts your ability to make the best decision for your situation.
