Long-term care insurance vs something else

[Moleskin Moyer]

Hello! Recently my brothers and I decided against purchasing long-term care insurance for the parents. We based our decision on the inflexibility of the policies and also mainly on the fact that the insurance companies will make things difficult for the benefactor to get payouts.

So instead of a LTC insurance policy, is there any financial vehicle specifically geared to health care that I can contribute money and build a cushion in case my parents need money for health care?

 

[Options]

Here are some excellent blog posts from Wade Pfau on the subject last year:

Two Options for Funding Long-Term Care - Retirement Researcher

Examining Long-Term Care Insurance | Retirement Researcher

Hybrid *Long-Term Care Insurance Policies | RR

Costs and Incidence of Long-Term Care - Retirement Researcher

The Continuum of Long-Term Care - Retirement Researcher

Based on his posts regarding the costs/incidence of LTC, as well as the continuum of LTC available, I have decided against purchasing it as well.

 

[Moleskin Moyer]

Options, thank you for those links. They provided informative and good reading.

 

[bingybear]

Hello! Recently my brothers and I decided against purchasing long-term care insurance for the parents. We based our decision on the inflexibility of the policies and also mainly on the fact that the insurance companies will make things difficult for the benefactor to get payouts.

Were you looking at using your parents $ to pay for the LTCI or your (you and your bothers) $? If your $, are you aware that medicaid will help pay LTC expense after your parents assets are reduced to certain limits. Yes this can use most of their assets... but they will not be just kicked onto the street.

I'm not sure what your situation really is.

 

[marko]

Get hold of an attorney who specializes in "elder law". States have different look-back laws. Time is of the essence!

 

[Moleskin Moyer]

Were you looking at using your parents $ to pay for the LTCI or your (you and your bothers) $? If your $, are you aware that medicaid will help pay LTC expense after your parents assets are reduced to certain limits. Yes this can use most of their assets... but they will not be just kicked onto the street.

Yes, all of that was taken into account. I rather not depend on Medicaid especially if us kids can bear some of the costs in case parents' savings runs out.

Get hold of an attorney who specializes in "elder law". States have different look-back laws. Time is of the essence!

Thank you for the suggestion. I will add it to my list of considerations.

 

[LARS]

FWIW, my parents had LTC insurance with MetLife, and beyond the hassle (slight) of ongoing paperwork, we had ZERO problem with triggering events to start collecting. So, I wouldn't necessarily use that as a reason not to purchase LTC insurance. That having been said, and despite LTC insurance being one of the BEST "investments" my dad made, we are self insuring.


Sent from my iPad using Early Retirement Forum

 

[marko]

That having been said, and despite LTC insurance being one of the BEST "investments" my dad made, we are self insuring.

Sent from my iPad using Early Retirement Forum

Mom (86) has been paying $150 per month for LTC for 27 years now. The way she's going, she'll die bungee jumping or something.

Her brother had no LTC, went into a nursing home and died there after 3 weeks. His outlay: $8K.

I remember from somewhere that the average time in nursing homes is about 3 months.

 

[LARS]

Mom (86) has been paying $150 per month for LTC for 27 years now. The way she's going, she'll die bungee jumping or something.



Her brother had no LTC, went into a nursing home and died there after 3 weeks. His outlay: $8K.



I remember from somewhere that the average time in nursing homes is about 3 months.

Going on memory (so ball park figures): premiums paid out approx. $25,000. Insurance received approx $250,000..

Mind you, I, and they, would have far preferred to never have qualified as it meant they were 'healthy' up to the end. So the money was a comfort, albeit bittersweet.


Sent from my iPad using Early Retirement Forum

 

[imoldernu]

Ballpark number for DW and me. (combined costs)
Bought LTC ins. in 1995... no inflation adjustment... $100/day. Total premium cost approximately $48K so far. Age 80.
Insurance companies have changed hands three times and the policy isnow administered by a trust (SHIP) in Pennsylvania. We have had only one minor increase in annual costs during that time period.

I would not buy again today, but with local LTC @ approximately $80K, the $36K annual payout is too much to leave on the table, based on our current annual premium.

Though we live in a regular home in our CCRC, we get to see up close how long nursing home residents live. Many have been there in either assisted living or the regular nursing home for 5 years or more.

In planning for the future, it doesn't hurt to look at the statistics, when making the LTC decision. Some 2012 numbers here:

40 Must-Know Statistics About Long-Term Care

Here's one about the average stay for current patients.

892 days (2.44 years): Average length of stay for current nursing-home residents, 1999.

 

[LARS]

Ballpark number for DW and me. (combined costs)
Bought LTC ins. in 1995... no inflation adjustment... $100/day. Total premium cost approximately $48K so far. Age 80.
Insurance companies have changed hands three times and the policy isnow administered by a trust (SHIP) in Pennsylvania. We have had only one minor increase in annual costs during that time period.

I would not buy again today, but with local LTC @ approximately $80K, the $36K annual payout is too much to leave on the table, based on our current annual premium.

Though we live in a regular home in our CCRC, we get to see up close how long nursing home residents live. Many have been there in either assisted living or the regular nursing home for 5 years or more.

In planning for the future, it doesn't hurt to look at the statistics, when making the LTC decision. Some 2012 numbers here:

40 Must-Know Statistics About Long-Term Care

Lot of interesting statistics, but very much long on nursing home and very light on Assisted Living, which is probably a much higher likelihood for most over nursing home.


Sent from my iPad using Early Retirement Forum

 

[Options]

Options, thank you for those links. They provided informative and good reading.

Here's a some more courtesy of a Dirk Cotton blog post:

WSJ Flash Interactive - WSJ

(note the above is from 2009, but still informative)

The 10 Least Expensive Health Insurance Markets In The U.S. | Kaiser Health News

And here's a great interactive site regarding costs of care per state, with a drop down covering showing costs by state for everything from home health aides to adult day health care and nursing homes:

U.S. Department of Health and Human Services

Other good posts from Dirk Cotton:

The Retirement Café: Long Term Care

The Retirement Café: Long Term Care Insurance

The Retirement Café: Why Retirees Let LTC Insurance Lapse

http://3.bp.blogspot.com/-rSMssx9PbvM/VhaE3kfkJqI/AAAAAAAAEzA/qpJhZs8Mhlg/s1600/Screen%2BShot%2B2015-10-08%2Bat%2B10.49.19%2BAM.png

I had forgotten that it was seeing this last chart (before seeing Pfau's work) showing actual incidence of LTC utilization that first convinced me in my case not to purchase LTC. Note Cotton states there are no easy answers to whether to buy LTC:

If you fall in between, I don’t believe there is a single clear winner in the numbers. There are several strong arguments in favor, and several against. Your decision will largely depend on your unique financial situation and your risk tolerance. For some, insuring the risk of catastrophic end-of-life medical expenses is worth a lot. It lets them sleep at night.

 

[imoldernu]

Lot of interesting statistics, but very much long on nursing home and very light on Assisted Living, which is probably a much higher likelihood for most over nursing home.

Yes... in our case, the policy covers in home and assisted living care, at reduced $$$ levels.

I think that the individual situation plays a big part in the cost of care. Situations where members of the family cannot help with in home care for the patient, but where the assisted living or nursing home is not provided for by the insurance,may find 24/7 in home care more expensive that many believe. At $18/hr... the rate in our town, a year's in home care could exceed $100K.

 

[marko]

I would not buy again today, but with local LTC @ approximately $80K, the $36K annual payout is too much to leave on the table, based on our current annual premium.
.

That's the hell of it isn't it? Once you start paying the older you get and the more you don't want to walk away from what you've already paid in.

 

[REWahoo]

That's the hell of it isn't it? Once you start paying the older you get and the more you don't want to walk away from what you've already paid in.

I don't see it that way.

I view our LTC policies the same way I viewed my term life insurance policy. Once I became FI and no longer needed life insurance to support DW if I croaked first, I dropped it. I didn't regret for a second that I "paid in" for years without collecting.

I may do the same thing with our LTC policies in the future. Depends on how much the premiums increase.

 

[Options]

Here's an excellent 2012 survey of LTC costs with continuum of care costs broke down by state and locality from Metlife:

https://www.metlife.com/assets/cao/mmi/publications/studies/2012/studies/mmi-2012-market-survey-long-term-care-costs.pdf

and for those like me interested in avoiding languishing in a nursing home, this is an excellent description of the alternatives (which, although not yet perfected, I intend to pursue when the time comes):

https://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-aging-place-study.pdf

From the report:

Many advocates and experts envision a future “Aging in Place” in which residential design, medical and home monitoring equipment, and comprehensive care services are integrated into a dynamic and efficient monitoring and management system. In this alternative system, Aging in Place 2.0 (AiP2.0), those who benefit from it can stay in the environment of their choice throughout their lives, empowered to take advantage of a system of integrated services....An AARP study which shows over 80% of those over 45 say they want to remain in their own homes even when they need assistance, is significant in focusing attention on Aging in Place. Another study, by Clarity and the EAR Foundation shows that older people fear losing independence (26%) and moving to a nursing home (13%) much more than they fear death (3%). Together these studies make our path clear; everything we can do to help people from losing independence is the right direction.

 

[iac1003]

The problem is that very few LTC policies being currently written insure a person for more than 2-3 years. So you can pay high premiums and still end up paying a lot to LTC facility if you live a long time. Since the average time people spend in a nursing home is about 2 years it depends on whether it is a wash or you want to leave that money to your spouse, children, heirs.

For better or worse we have decided to self-insure.

In my long career in geriatric psychiatry I saw all sorts of shenanigans from these LTC companies refusing to pay for both assisted living and nursing home care and frankly I don't trust any of them.


Sent from my iPhone using Early Retirement Forum

 

[marko]

The problem is that very few LTC policies being currently written insure a person for more than 2-3 years.


Sent from my iPhone using Early Retirement Forum

Now, THIS is news to me! Thanks.

 

[bingybear]

Now, THIS is news to me! Thanks.

When I looked at LTCI 2 years ago at 52/3 I found the same thing. First quote I got was for 4 years with 90 day elimination period. Later in the year I rechecked was offered a 3 year with 180 day elimination. They had a premium increase so they ended the old policy and came out with a new one. This new policy was for a fair bit less $ in benefit. In the list of options in the proposal, unlimited was not an option. Now if you spent the $ slow enough, they would extend the time until all is spent.
Look at the stats on LTC needs and the time people stay if returning to the community and if not returning. Many are done in 2 or maybe 3 years (many actually in the first 6 months).
Look at this like an investment. Do you see LTCI as a better investment than saving and investing the amount. The real catch is that LTCI will pay if you need LTC early in retirement/life where your dedicated savings may not be adequate. For me I'll risk the early LTC need
Now if you are in Illinois or New York, look at the option of a partnership plan with unlimited asset protection as this really can be worth the $. While you pay for a few years (3 or 4) at a bit higher rate. You pay with LTCI help for those covered years and then you get expanded medicaid without the need to spend down assets. Also look at the restrictions on these accounts. I would seriously look at these plans if I lived in one of these states. Well maybe not IL as I would be concerned with the state's ability to cover the expanded medicade.

 

[REWahoo]

The problem is that very few LTC policies being currently written insure a person for more than 2-3 years.

Looking at the average length of stay chart below, 2-3 years coverage should be adequate for almost everyone.

 

[bingybear]

Looking at the average length of stay chart below, 2-3 years coverage should be adequate for almost everyone.

looking at this plot one would think you could get unlimited coverage with a 2 year elimination period rater cheap. Unfortunately I have not seen it. That would be "buying insurance" instead of prepaying LTC expenses.

 

[Banned LTC Salesman]

The problem is that very few LTC policies being currently written insure a person for more than 2-3 years. So you can pay high premiums and still end up paying a lot to LTC facility if you live a long time.

There are 2 competing philosophies amongst insurance agents and financial planners about LTC insurance. One is called "short and fat". The other is called "long and thin".

The "short and fat" theory says that the best LTC policy is one that covers the full cost of care for 2 years.

The "long and thin" theory believes that the best LTC policy is one that covers most, not all, of the cost of care for a long period of time (10 years or so).

From what I understand, most insurance agents are taught that the "short and fat" theory is the best. I disagree. That's why DW and I bought policies with 10 years of benefits. For about the same premium as a "short and fat" policy we were able to get a "long and thin".

Personally, I'm not concerned about one of us needing care for 2 years. That would not be a major blow to our financial security. In my own family I've seen people need care for 6 years and even longer, most of that being care received at home.

It's true that the policies we own won't cover the full cost of care. But they'll pay about $90,000 per year for 10 years, so that should cover most of the cost. What it doesn't cover, we're comfortable paying the difference out of our retirement savings.

So, to make my point, it's not that companies only sell policies that have 2 or 3 years of benefits. I believe it's just that insurance agents are taught to only quote the policies with 2 or 3 years of benefits. They're trained to show "short and fat". If you google it I'm sure you can find companies that sell policies with 10 years or more of benefits, even lifetime/unlimited policies.

 

[braumeister]

Personally, I'm not concerned about one of us needing care for 2 years. That would not be a major blow to our financial security. In my own family I've seen people need care for 6 years and even longer, most of that being care received at home.

+1
A friend's mother needed 24/7 care for eight years until she died. My friend lived very close, and it amounted to him and his wife essentially putting their lives on hold for those eight years to handle it. His mom was 103 when she finally passed away, something nobody ever expected.

 

[Big_Hitter]

most nursing home stays are short. I'm looking at LTCI for us but there is a 90 day elimination period.

 

[target2019]

Have experience with two LTC policies of the 5 year kind. A thinner payout was not available when the policy was invoked.

Also consider how things might progress. In laws have gone from independent, to one in memory unit, and then the other into assisted. The yearly cost is now 4x's what it was, just 4 years ago. For another 1.5 to 3 years, much of the cost will be reimbursed by their policies, which are of the type uou cannot find anymore.