Long Term Health Care

[REWahoo]

The LTC policies my wife and I got are from CNA.

....We will be coming up on the end of 10 years with the policies, so there is the possibility of a substantial premium increase. We will reevaluate whether we are to the point of being able to self insure when we see what the increase is.

Like Grumpy, DW and I bought LTC policies from CNA. Our policies were purchased when we were a couple of years older and have less coverage (90 day waiting period, 3 years maximum coverage, etc.). The annual cost is $583 for each of us.

CNA stopped writing LTC coverage a few years ago and have initiated substantial premium increases on existing policies. And also like Grumpy, our policies have a 10 year guarantee of premium which will expire in May of 2009.

Grumpy has graciously agreed to act as my "mine canary" and give me advance warning of just how bad the hit is once his 10 years are up (I am a year or so behind him). Then I will consider whether I should pay up (don't think so), drop my policy and use the savings to help fund DW's coverage (maybe) or drop both policies and self-insure (likely).

Bottom line, LTC coverage is a crap shoot. But since any of us might wind up in diapers, maybe we should have the coverage. Guess you could say it Depends.

 

[youbet]

grumpy, REWahoo,

Thanks very much for sharing that information! I'm really on the fence on this whole issue.

 

[brewer12345]

I'm not too concerned about whether the company will be there 30 years from now. Do you worry about whether your car insurance company will be there in 30 years? LTC insurance is just like car insurance in some ways. If you don't have a claim, the premiums are $'s down the rat hole. If the company goes bust sometime in the future its only a concern if I am already receiving benefits at that point. It was my impression that state insurance commission regs protect those already receiving benefits from default - anybody know more about this?

Grumpy

I don't worry too much about my home or car insurer because these are standard products everyone sells that I can switch on short notice and if I have a claim it is short duration. In contrast, life insurance and LTC are potential claims that would likely happen in many, many years and the insurer's fortunes may well change in the interim period. So I am pretty picky about who I buy long tailed products from. In the event of default, the state insurance fund would back up the insurers' assets, but the state funds vary widely and they have the backing of nobody (unlike the FDIC which is guaranteed by the US treasury). Buyer beware.

 

[honobob]

Did they tell you why the premium increased?

There are options other than LTC insurance or medicaid!

Youbet I called cause I wasn't sure. There are no caps but I can bail at anytime. The increase was for everyone my age that signed up when I did. People signing up now at my age then and now are paying more. If I die before 75 my estate can possibly get back some or all of my premiums.

Since I signed up I've bought a couple more rentals and could probably self insure but I've only got <$8K into it and if I'm hit by a bus tomorrow I'll break even in 45days. Another ten years down the road and it's doubled I've still got only $28K into it. Probably wouldn't make sense to drop it then either but if CalPERS was shaky then I can drop it. Way easier to stop it than to start it.

People forget that they are receiving the benefit NOW even tho the odds are low. My homeowners is about the same and I don't know ANYONE that has made any major claim on theirs but I personally know alot of people that have needed LTC.

If my $600K house burned to the ground I could put a $20K yurt up and rebuild 1100sf myself without putting much of a dent in my net worth.
You have to think of what would happen to your portfolio if you needed to pull out $60K+ a year starting tomorrow and have a spouse to support.

My dad lived with me for 8 years. Without me he would have been about 4 years short on funds. When he was on his last legs he went into a nursing home. He had his 100+ medicare days but from day one all the place cared about was finances. I knew he wasn't going to make the 100 days and told them so but the need to get the finances in order for the "what if" interferred with my last bit of time with him. Then after only a couple of weeks he had to return to the hospital and they "dumped" him even tho there was money to last a while. Refused to take him back. Luckily I found a caring person at the hospital who also realized he didn't have long and she got him into a better nursing home where he died in less than 24 hours. Do you want your spouse spending time with you or in the financial office?

Three of my dad's sisters have needed care for 4-8 years. Two were cared at home by their children. I don't have children but if I did I wouldn't want to put them in the position where THEY had to deal with my care when really the cost to me is not all that much.

 

[REWahoo]

This article from the November 2006 issue of the FPA Journal may have been posted earlier but I didn't see it.


The Financial Desirability of Long-Term Care Insurance Versus Self-Insurance

"Based on the figures from the 1999 NNHS and estimated probabilities of 65-year-olds needing nursing home care at some time in the future, our estimates indicate that buying long-term care insurance appears to be quite desirable for women and moderately so for men. The NPV of buying an LTC insurance policy is positive up to a relatively high return that one could earn from investing the premiums rather than using them for an LTC policy. In addition, because the LTC premiums are the same regardless of gender, and women have a higher probability of needing nursing home care, LTC insurance appears to be a much better choice for women than for men."

This is why I am considering dropping my coverage and keeping DW's LTC policy if our premiums go up as much as I fear they will when our guarantee of premium expires.

 

[perinova]

According to my own browsing the current average cost of stay is $160k to $250k.
I am too young to think about that but the risks of paying into something that will not be needed because the rules change, or the provider goes under or I won't get sick is very high.
How well are you out of a stay like that? I am guessing you might need less money to live after. Few would need extravagant entertainment or otherwise expenses so paying $250K out of an ERed networth might not be that bad. Specially if you made the point of self funding it in your budget. A reduction of $250k is a reduction of $10k income.

That's is the rich point of view. Now if you have no assets (ie not FIREd) that's another story, you might need this insurance or ? declare bankrupcy or what would happen if you need care and can't afford it?

I didn't read this document yet:
http://www.cbo.gov/ftpdocs/54xx/doc5400/04-26-LongTermCare.pdf

 

[W2R]

According to my own browsing the current average cost of stay is $160k to $250k.
I am too young to think about that but the risks of paying into something that will not be needed because the rules change, or the provider goes under or I won't get sick is very high.
How well are you out of a stay like that? I am guessing you might need less money to live after. Few would need extravagant entertainment or otherwise expenses so paying $250K out of an ERed networth might not be that bad. Specially if you made the point of self funding it in your budget. A reduction of $250k is a reduction of $10k income.

My mother, an elderly widow, had the very finest of LTC policies with a good insurance company (was it BCBS? I don't recall). When she moved into the skilled nursing section of her continual care facility a few years ago in her mid-90's, the insurance company refused to pay a dime. She was mentally still very competent (and still is), so she called and talked to everyone but to no avail. My nephew, who is a high powered NYC attorney finally called and engaged them in extensive phone/mail battles, and funny thing, NOW they are finally paying the part of her expenses that were promised. They could/would bully her, but not him. I dread to think would have happened if she had been battling this alone, or if she had been mentally vague.

So, I am not thrilled with LTC policies. Instead, I have a small Roth that I plan to allow to grow for a few decades. It will be dedicated to any additional uncovered expenses in my declining years.

 

[Rich_by_the_Bay]

"Based on the figures from the 1999 NNHS and estimated probabilities of 65-year-olds needing nursing home care at some time in the future, our estimates indicate that buying long-term care insurance appears to be quite desirable for women and moderately so for men. The NPV of buying an LTC insurance policy is positive up to a relatively high return that one could earn from investing the premiums rather than using them for an LTC policy. In addition, because the LTC premiums are the same regardless of gender, and women have a higher probability of needing nursing home care, LTC insurance appears to be a much better choice for women than for men."

This is why I am considering dropping my coverage and keeping DW's LTC policy if our premiums go up as much as I fear they will when our guarantee of premium expires.

I wonder what the effect of one spouse (usually the wife) outliving the husband by a good 5-7 years is, these being the years that nursing home care is most likely. The whole estate is then available for nursing care.

This whole issue is almost too complex and speculative for any logical decision. I guess you just do your due diligence, go with your gut and hope for the best. We've decided to revisit it at age 65 when we have a little better sense of our finances, health, and situation. Higher premiums and insurability risk, to be sure, but at least we'll be leaving less wasted premiums on the table all those years.

Who knows. Best of all would be able to self-insure by then.

 

[perinova]

My mother, an elderly widow, had the very finest of LTC policies with a good insurance company (was it BCBS? I don't recall). When she moved into the skilled nursing section of her continual care facility a few years ago in her mid-90's, the insurance company refused to pay a dime. She was mentally still very competent (and still is), so she called and talked to everyone but to no avail. My nephew, who is a high powered NYC attorney finally called and engaged them in extensive phone/mail battles, and funny thing, NOW they are finally paying the part of her expenses that were promised. They could/would bully her, but not him. I dread to think would have happened if she had been battling this alone, or if she had been mentally vague.

So, I am not thrilled with LTC policies. Instead, I have a small Roth that I plan to allow to grow for a few decades. It will be dedicated to any additional uncovered expenses in my declining years.

Humm yes if you need an attorney to get your benefits thta definitelly a problem. Specially it is easy to get bullied in old age I saw that with my own relatives.
The Roth approach is a sensible one IMO.

 

[grumpy]

My mother, an elderly widow, had the very finest of LTC policies with a good insurance company (was it BCBS? I don't recall). When she moved into the skilled nursing section of her continual care facility a few years ago in her mid-90's, the insurance company refused to pay a dime.

Want2,

I guess your mom's "continuing care" facility was not like the ones I'm familiar with. My parents and my wife's parents both went into CCC's where, after the big upfront payment and the monthly fee, ALL care was covered, up to and including skilled nursing. Only my dad had a LTC policy which we canceled the day they moved into the CCC because, at that point it was redundant. That was the big draw of a CCC, the costs were fixed, up front, no matter what level of care was required. That gave us all great peace of mind.

Grumpy

 

[youbet]

Probably wouldn't make sense to drop it then either but if CalPERS was shaky then I can drop it. Way easier to stop it than to start it.

It sounds like your CalPERS program eliminates the biggest problem I'm having with the whole issue: finding a company I feel very, very secure will be there financially in the future and will operate with absolute integrity (no loopholes in the rules, etc.)

People forget that they are receiving the benefit NOW even tho the odds are low.

Agree. In fact, I am starting to look at LTC this way.......the value has to be there for this year when I pay this year's premium. That is, if I pay $5K for 2007, I must feel satisfied I'm getting $5K of value in 2007. Not, that I'm securing some future value such as lower premiums when I'm older, etc. That's how I buy home, auto and liability insurance and I think it should hold true for LTC insurance as well.

You have to think of what would happen to your portfolio if you needed to pull out $60K+ a year starting tomorrow and have a spouse to support.

I have and we could afford to self-insure under the scenario you describe without impoverishing the other. A nursing home stay of many years coupled with years of poor market performance could get a little taxing. That's part of what's making my decision so tough

Do you want your spouse spending time with you or in the financial office?

I'll disagree slightly on that premise. If I went to a nursing home because I was critically ill and having time together was an issue, that means we're talking about a few months or a couple years of nursing home care. DW would simply write a check. That would probably be less time spent in the finance office than with insurance where she'd have to understand the EOB's and make sure she was paying only her share. If I was going to be there for years, then she'd have plenty of time to work with the finance office........

Three of my dad's sisters have needed care for 4-8 years. Two were cared at home by their children. I don't have children but if I did I wouldn't want to put them in the position where THEY had to deal with my care when really the cost to me is not all that much.

I wonder why your dad's sisters weren't placed in a nursing home? If they had money, they could pay. If they didn't, it would be a medicaid issue. Perhaps upon investigation, nursing homes that accepted medicaid were crappy? Or the kids were trying to preserve mom's estate for their inheritance? Or because the kids felt they could provide a better quality of life for their parents than a nursing home (under their specific circumstances) and did so irregardless of cost.

Well...... It's a tough decision filled with factors that were relatively easy to sort out with life, home, auto and liability insurance but difficult to sort out with LTC insurance.

Thanks very much for all the inputs. This is a very interesting discussion.

 

[perinova]

I have to admit I don't understand LTC too well.
I am thinking thta some LTC in nursing homes could be replaced by an extended stay at a child's home. That would renew family relationship. It doesn't have to be thought of a burden necessarily and you can "gift" soime money to your child(ren) at the same time with the money you would save.
Some LTC might actually involve medical equipment, constant nurse attention... But what the % of people really needing the heavy artillery? I would like to know.

DW's grandma spent many years in a nursing home but that was more like a place to live, someone to come clean once a week and a cafeteria for lunch. She moved to the assisted living area at some point where medical support was needed but thta was only a stay of less that 1 year I believe.

 

[Rich_by_the_Bay]

There are apparently single premium life insurance policies that permit early benefit payout for nursing home care. I'll check that out if either of us is healthy enough; at least there is something for the estate when you die, and a couple hundred thousand should more than cover the average nursing home in today's dollars (less than 3 years). Probably doesn't cover home care, but it seems like a good safety net.

 

[grumpy]

I have to admit I don't understand LTC too well.
I am thinking thta some LTC in nursing homes could be replaced by an extended stay at a child's home. That would renew family relationship. It doesn't have to be thought of a burden necessarily and you can "gift" soime money to your child(ren) at the same time with the money you would save.
Some LTC might actually involve medical equipment, constant nurse attention... But what the % of people really needing the heavy artillery? I would like to know.

DW's grandma spent many years in a nursing home but that was more like a place to live, someone to come clean once a week and a cafeteria for lunch. She moved to the assisted living area at some point where medical support was needed but thta was only a stay of less that 1 year I believe.

Perinova,

What you described, "more like a place to live ... she moved to assisted living..." sounds more like a "retirement home" than a nursing home and it is not what LTC insurance pays for. Most LTC policies only provide benefits when the insured person requires assistance with two or more of the "activities of daily living" such as dressing, bathing, toileting, eating, etc. Most of the time people who need that much help are not in assisted living but are in skilled nursing facilities. While some children may be capable of providing that level of care to an aging parent, I, for one, would not expect or want my children to assume that kind of burden for me. Therefore, we have LTC insurance.

Grumpy

 

[perinova]

Perinova,

What you described, "more like a place to live ... she moved to assisted living..." sounds more like a "retirement home" than a nursing home and it is not what LTC insurance pays for. Most LTC policies only provide benefits when the insured person requires assistance with two or more of the "activities of daily living" such as dressing, bathing, toileting, eating, etc. Most of the time people who need that much help are not in assisted living but are in skilled nursing facilities. While some children may be capable of providing that level of care to an aging parent, I, for one, would not expect or want my children to assume that kind of burden for me. Therefore, we have LTC insurance.

Grumpy

OK I didn't think right. Yes that was a retirement home (or assisted living, not sure about vacab. here) with a "graduation" to nursing home. I understand that LTC would have paid for the nursing home part (she didn't have it though).
It seems common to have graduated care sometimes 3-levels

 

[2B]

I'll join in with an update on my in-laws. FIL (Alzheimer's) is in assisted living. MIL is in skilled nursing. Their combined annual income (pensions +SS) is around $45K. That covers my FIL with a little left over. My MIL requires about $60K/yr from their savings. The financial question is how long will she live and how soon will my FIL move into Memory Care and then die.

My MIL will be coming up on two years in skilled nursing this June. She has a broken hip,Parkinsons' and more crap than you'd let a dog live with. She's still going strong despite losing weight and being in constant pain. She's prone to infections which will probably be her cause of death. When she dies, their income will only drop be her SS -- $8K (half of his).

My FIL may outlive me but I expect him to be in the Memory Care Unit within two years based on his rate of memory loss. His current assisted living would not be paid for by some policies but everyone I've heard of would cover the Memory Care Unit. His death would cut the total income to about $26K based on how the survivor benefits are set up. That's not as likely but possible.

Why all the details? Well, it shows that a "normal" couple can both be in a pretty nice place for about $150K/yr. A FIRE portfolio of $1MM should be able to be self-annuitized to cover this for 8 years or more (4%). Most people won't live that long and most insurance won't cover anywhere near that length of time. Pensions and SS lengthen this time. If I put in their SS but no pension, it stretches to about 10 years. If we were only talking about one of them, the number of years would go up even farther. They didn't plan very well for there present state but they fortunately have enough assets for about another decade for both of them.

I'm in the self-insured camp. My father paid for LTC for decades and got regular rate increases as he aged. He died peacefully in his townhome without ever seeing the inside of a LTC facility.

 

[mykidslovedogs]

Something else to think about....part of the reason HSAs were invented was to help younger people plan for long term care by saving tax-free dollars, so that they will have money available in their senior years when it is most needed that they can use for medical expenses on a tax-free basis. I know many of you were older when HSAs first came out, but for younger people, HSAs might hold some promise as a savings mechanism to save for long term care.

 

[Brat]

My parents purchased a "nursing home" policy many, many years ago. It paid out only for nursing home care. The policy was purchased by a division of GE. Although the policy was narrow (the only type available at the time) when they met the criteria in the policy there was no hassle. Mom exhausted her benefits and has been in a nursing home for 6 years. Still chugging along.

 

[TargaDave]

Here is another data point. My MIL paid $11k in total LTC premiums over a period of ~14 years. I think it was a middle of the road policy. She was a lifelong heavy smoker. She spent a year in assisted living (don't remember the level) and just 2 months in a nursing home before passing on. DW received $35k in benefits paid out within about 8 months. No real resistance from the insurer other than loosing paperwork all the time and constantly assigning different people to the handle the claim.

I just find it hard to imagine how insurers can spread the risk on these types of policies in order to make money. Maybe that's the reason rates are increasing so rapidly and few insurers are in this market.

 

[chinaco]

We purchased LTC through DW company as a benefit. It is convertable when she retires or leaves the company.

You are correct... There are few guarantees that the insurance company will stay in the LTC game for 40 years or longer. This is a big problem for those of us trying to protect assets if something catastophic occurs.

I am viewing LTC right now as protection against some sort of health problem in the early years. Late in life, I am OK if Medicaid picks up the tab (we intend to spend most of our money early in ER). The rules for Medicaid vary from state to state so you need to study and monitor changes. Bottom line, most nursing homes are about the same (if you pull out the outliers... real problems) no matter who pays the bill. Even if you pay for it the first few years, when you run out of money they can kick you out. There are rules where they are not supposed to be able to do that, but the NH has techniques. The ones that want private money limit the number of Medicaid and Medicare certified beds (they can shift the number of beds). If you run out of money and they do not have a Medicaid bed... adios. This is a strategy that is used to maximize profits. The higher end NH do not want beds to go empty (lose $), but they do not want a bunch of low paying medicaid people either. Therefore, they use Medicaid patients as backfill and keep the number of beds low.


My point of view: All bets are off when you get very old and ill. Unless you are wealthy and can afford a private nurse, the NH is a likely stop.

Fortunately, states are getting on the bandwagon to pay for assisted living for elderly as an alternative to a NH because it is less expensive.

Few of us are very wealthy... You should consider how you will handle LTC... and Medicaid is a viable option. You just need to understand how you shield the surviving spouse... The rules are different from state to state.

 

[roger r]

There are exceptions, but the vast, vast majority are over 70 and many are over 80. The exceptions don't prove the rule.

This is probably the most revealing article that I've read on a person's odds of needing LTHC. It is from a well known journal for financial planners and seems to debunk some of the concepts about what portions of the populations are most likely to end up in nursing homes and for how long. I've printed it out and shared with a number of friends that have mentioned it in discussion. http://www.fpanet.org/journal/articles/2004_Issues/jfp0904-art8.cfm

 

[Brat]

I recall reading this article several years ago. Note the discussion about the population needing nursing home care. Patients who were residents in a nursing home in years past are in assisted living/alzheimer's/dementia facilities today. Different licensure.

 

[Joss]

From the article: "The new drugs kept people alive, but often in physical circumstances that did not permit them to live independently."

It seems that this entire LTC situation is based upon everyone simply agreeing that we are obligated to accept being warehoused, at incredibly high cost, as quality of life drops toward zero.

Fortunately, old age, with its incapacitations, is voluntary. That is, unless you become imprisoned in a Shivo or Christopher Reeves situation, and living wills can address this unfortunate possibility.

Aside from that, the biggest fear I have is losing my awareness of when it is time to depart.

 

[mrbill]

It seems to me LTC insurance is more for the young than the old. In my case if I had a debilitating accident or illness now (at 54) my FI plan is insufficent to self-insure, and LTC would quickly deplete my half of it. On the other hand when I'm 90, I would expect that my assets (assuming I haven't withdrawn too much over the years) would be more than adequate to self-insure for my remaining years. I would rather buy LTC insurance now and in 20 years drop it when I decide I'm old enough/have enough assets to self insure...and the cost is relatively cheaper now than waiting 10 years.

Any thoughts?

 

[REWahoo]

It seems to me LTC insurance is more for the young than the old.

Actually, I view it as more for the middle aged. Odds are you won't need it when you are young and when you are long in the tooth, you are hopefully in a position to self-insure as you point out. But in between those to ages you are vulnerable because your odds of needing LTC have increased (still pretty low) and you and/or your spouse could be in a world of financial hurt if you aren't able to self-insure.

We bought LTC policies at age 52 with a 10 year guarantee of premium. When that guarantee expires, depending on the increase in premium (I anticipate big $), we may drop coverage entirely, or keep coverage on DW only.

Although I didn't view it this way when we purchased it, I've come to view it like term life - to bridge a gap and provide income/coverage when we are most financially vulnerable.