New LTC Study

[ggbutcher]

In the Kitces post, I very much like his "Principles of Insurance" section. I do risk management at w*rk, and the fundamental principle of 'each risk has an independent likelihood and consequence rating' is continually forgotten or muddled by the participants. I had that very conversation in a meeting yesterday. Risk is something we encounter, evaluate, and mitigate every day, but we don't usually decouple the likelihood and consequence when we consciously do so.

Insurance is about folks pooling their money to allow those who encounter the egregious 'undesired outcome' to weather it, and the others who do not to finance it. So, what you want to insure against are calamities that have a low probability of occurrence, but could deplete your assets if they occur. Auto accidents are such a risk.

The risk associated with LTC is a muddier proposition, as most have pointed out. A not-so-remote probability of eventually needing some kind of assisted living, but not so debilitating an outcome on assets. Thus, a lot of self-insurers, including me.

 

[meierlde]

LTC costs vary considerably by state. Here's a website where you can view the average annual cost of various levels of care on a state-by-state basis:

https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html

I suspect that you would also find that LTC costs vary greatly within states being higher in the metro areas and lower in the rural areas. This of course raises the question of where to retire to, LTC costs might become a factor influencing the decision.

 

[REWahoo]

Couldn't you do a self-executed 'exclusion' period of not filing for LTC benefits for however long you want up front?

Perhaps. But if you are paying the premiums for something with a shorter exclusion period, what benefit would waiting provide? It could easily result in the total payout being less if the insured expired before the policy benefit limits were reached.

 

[samclem]

Couldn't you do a self-executed 'exclusion' period of not filing for LTC benefits for however long you want up front?

No, because what you want to gain with a long exclusion period is lower premiums.

The exclusion period is like a deductible on your homeowners insurance. You get a much lower premium if you have a $10K deductible rather than a $500 deductible. But you don't gain anything by buying a policy with a $500 deductible and then just don't make a claim unless the damage exceeds $10K. As far as the insurance company knows, you're planning to make a claim starting at $501 in damage, and they charge an appropriate insurance premium.

 

[ExFlyBoy5]

Oye. My head aches after reading all these posts. I am of the mindset of the "smother plan" as well...nothing a big bottle of nitrogen wouldn't take care of. Of course there is the slight issue if my DW is with me in a debilitating accident!

 

[BBQ-Nut]

No, because what you want to gain with a long exclusion period is lower premiums.

The exclusion period is like a deductible on your homeowners insurance. You get a much lower premium if you have a $10K deductible rather than a $500 deductible. But you don't gain anything by buying a policy with a $500 deductible and then just don't make a claim unless the damage exceeds $10K. As far as the insurance company knows, you're planning to make a claim starting at $501 in damage, and they charge an appropriate insurance premium.

So, isn't this really just a limited term 'self-insurance' strategy?

If LTCI pays out a limited benefit, then couldn't one determine a self-insurance 'term' (aka the exclusion) and how much in LTCI benefits to cover a given situation, which would result in a lower premium, but lower benefit because of the self-imposed/self-insured period?

 

[MichaelB]

$16K a month and she still needed extra care provided by DM?

One would think for $200,000 a year that these private facilities would do everything for you.

Do the LTC policies pay out whatever absurd rate the facility of your choice charges?

That's the thing. It's not $16K to a facility. It's $7.5K to her assisted living home, and $8.5K to the skilled nursing home once Medicare stops paying. The skilled NH is not a home, it's an extension of the hospital stay, you can't live there. She can't return home (ALF) as long as whe needs the skilled nursing care, but has to keep paying, or she loses it.

The point, which others are making more clearly, is lots of things can happen that can deplete a portfolio and leave a surviving spouse in hardship. LTCI isn't great but it is the best thing available today to help the spouse avoid an extreme outcome.

 

[W2R]

Nords has a great post on the subject What I won't buy Long-Term Care insurance.

Everything he says is true and if anything, understated IMO. My mother's experience with the same LTC insurance was probably worse, if anything. After years and years of paying through the nose on her premiums, when she was in her mid 90's the time came for her to make a claim. She had a number of very upsetting phone conversations with them. She couldn't get a dime out of them until she had her grandson (a forceful and high powered NYC attorney) contact them. According to him and my brother, the grandson/attorney said the exact same things she had been saying, but they paid attention to him, not her.

She was lucky that she had a grandson in that occupation who was willing to go to bat for her. What good is insurance if you need to hire an expensive attorney as advocate? Pfft. Plus, it didn't really pay that much anyway IIRC.

I'm self insuring and I will be able to come up with more than the total amount the insurance company would promise to pay (which often isn't much). This way I can avoid dealing with [-]CROOKS[/-] LTC insurance companies when I am at my weakest and most vulnerable.


YMMV but I just don't personally happen to care for these policies.

 

[karen1972]

I've been Leary of LTC ever since they hosed my grandma.. wonder if there is a study of those that actually get the benefit they pay for...as I've even heard financial advisors mentioned fighting them for their parents.

I'm going with two years of full care and assume 5 years of assisted living...if something major happens..oh well I am not leaving money to anyone but charities...and if I'm at that point I guess I'm the worthiness charity I know.

 

[rodi]

I suspect that you would also find that LTC costs vary greatly within states being higher in the metro areas and lower in the rural areas. This of course raises the question of where to retire to, LTC costs might become a factor influencing the decision.

This is absolutely true. I did an exercise 3 years ago of pricing nursing homes in 3 areas:
Lexington, Kentucky
Philadelphia, PA
San Diego, CA

Those are the 3 cities that family was available to visit, etc.

Philadelphia was SIGNIFICANTLY higher than the rates listed on the Genworth list for Pennsylvania. Like 25% higher.
San Diego - as long as you were inland (think Escondido vs La Jolla) - was pretty much in line with the Genworth survey.
Lexington was pretty much in line with the survey.

One BIL suggested we put FIL in a facility in State College (middle of PA and quite a drive from Philly)... it was pretty much in line with the Genworth data... although still more expensive than San Diego and significantly more expensive than Lexington.

Family members need to consider more than price alone... Convenience/access for family is VERY important.

I'm starting the process of pricing memory care units in the three areas again. Once again - the prices are falling in the same order - Lexington is the cheapest, Philadelphia is far and away the more expensive. I'm not sure why - since CA is more expensive in most other stuff - but Philly is over $100k/year for assisted living w/ memory care.

 

[JoeWras]

So what happens to someone when they cannot pay to stay in the LT care facility and there is no family (or no family money) to pay or take them in and benefits under Medicare/Medicaid is used up? Can they dump someone at their house (if they have one) that cannot take care of themselves?

Once they spend down all their assets Medicaid will pay for the nursing home.

They will pay for a nursing home.

The home you are in may not take medicaid. In the case you describe, they'll call up the state of which you are now a ward, and ask the state to take you to a medicaid assigned home.

There, you will get very spartan service.

Of course, if you are in a home that accepts medicaid, then you stay. I'm giving the example of someone who lived in a non-medicaid place first.

I'll just say that many (but not all, but you may have to look really hard) medicaid homes are pretty spare in accommodations and service. There are hybrids where you pay an a lot each month -- more than you would at another nice place that doesn't accept medicated -- and then when you run out of cash, they'll take you. Those can work for some people.

But I don't mean to be harsh, but the pure medicaid places I've been to have been pretty hellish.

All this stuff gets really complicated and depends on state laws, so your mileage may vary.

 

[W2R]

Okay, so it is the EU or Louisiana then for lower nursing home care costs.

I don't really know the details, but from what people here tell me, Louisiana nursing homes are pretty awful compared with those in other states. Apparently some of the worst things that Edwin Edwards* did for Louisiana is what he did to nursing home regulation here. Or so I'm told. I wasn't here then, so all I can do is report what I have been consistently told.

Anyway, one of the reasons I have been wanting to move out of state, is the nursing home situation here. I'd advise looking someplace else. Looks like nursing homes are pretty cheap in Missouri.


* (Edwin Edwards is a charming but very corrupt former Louisiana governor who was incarcerated for 8+ years for racketeering)

 

[Fermion]

Is prison better than the horrible conditions at a Medicaid LTC facility? I could always wheel myself into a bank...

Would that protect a spouse's assets?

 

[audreyh1]

One of the arguments I read on M* for LTC insurance was how difficult it might be to manage your money and cash flow to pay for your care if self-insured. And all I could think of was that sounded way easier than riding herd on the LTC insurance company to pay claims.

 

[HFWR]

Data point, but my LTC with Genworth is $129/mo, covers up to $4500/mo until $270k is exhausted, i.e. five years, and has a 3% inflation adjustment.

Mostly worried about a catastrophic illness or accident. I hope someone puts me out of my misery long before I've spent five years in a nursing home...

Just crank up that morphine drip!

 

[Katsmeow]

Who cares about assets if you are in LTC for more than 5 years and have to go on Medicaid. What % of people come out of LTC and go back to taking cruises or mowing their home lawn after 5+ years? Less than 0.01%?

The spouse of the person in care who doesn't want to be impoverished.

 

[daylatedollarshort]

There are a lot of loopholes in getting Medicaid to pay for LTC beore the healthy spouse becomes impoverished and currently a 5 year limit on the look back period.

My LTC insurance is having enough saved and kept in reserve for 5 years or so of LTC plus my books on all the loopholes and, when the time comes, a good elder care attorney.

 

[athena53]

After years and years of paying through the nose on her premiums, when she was in her mid 90's the time came for her to make a claim. She had a number of very upsetting phone conversations with them. She couldn't get a dime out of them until she had her grandson (a forceful and high powered NYC attorney) contact them. According to him and my brother, the grandson/attorney said the exact same things she had been saying, but they paid attention to him, not her.

Jim Cramer on CNBC lost his father just before Thanksgiving. He did NOT have nice things to say about the LTC insurer (which, unfortunately, he did not name). After years of paying the premiums and suffering a stroke in his 90s, he was denied nursing home benefits because they didn't think he was disabled enough. Cramer took them to court but said most of what they were able to collect went to attorney fees.

 

[Amethyst]

There are a lot of (I hope) jokes in this threadabout assisted suicide via smothering, morphine, and other things I never heard of (nitrogen?). Are certain people seriously expecting a family member to perform this "service"? What protects the family member from being prosecuted for murder?

Amethyst

 

[REWahoo]

Shoot, I think some of them are dead serious - but many will choke if hung with the responsibility.

 

[jim584672]

My mother had dementia, she could not talk, eat, go to the bathroom on her own. She would try to take walks on her own, she was a danger to herself and had to be watched 24/7. The few places that took dementia patients were horrible. It is bad enough to need a regular nursing home, but dementia units are the worst. Literally a ward of zombies, who can get violent for no reason. The experience was horrible for all involved.

 

[mpeirce]

Just to add an example where LTC insurance worked out pretty well.

My Grandma had LTC insurance and it made a big difference for her during her last few years.

She always lived frugally, especially after my Grandfather died (30 years ago). She had a modest set of assets including a small house. As she got older she moved to a condo so she didn't have to keep up the yard.

At some point, the condo was too much for her so she sold that and she moved into assisted living. Her LTC insurance kicked in after 6 months and paid for, I believe it was, three years.

She lived there for about 3 years, with one stint in the associated nursing care facility when she had pneumonia.

The coverage of the assisting living was just about right. It would have run out a few months after she died. Her assets would have run out soon thereafter. (A few of us grandkids had agreed we'd step in and pay for her care if need be, but it never came to that - she was pleased she had provided for herself right up until the end)

 

[mpeirce]

Oh, also meant to mention that while we had LTC insurance before FI through work, we dropped it and now self insure.

 

[Fermion]

Are certain people seriously expecting a family member to perform this "service"? What protects the family member from being prosecuted for murder?

Amethyst

Well, this accomplishes two birds with one stone.

Spouse A takes out spouse B, then Spouse A gets LTC coverage at a state prison. Children get max inheritance as the state can't go after assets to recoup prison costs. Everybody wins!

No need for paying those nasty premiums!

 

[jim584672]

Your luck, the Governor gives you a pardon.