New LTC Study

[mickeyd]

Interesting article on new LTC study indicating that previous LTC research may have been inaccurate.

Undercutting this rationale is a new study led by senior economist Anthony Webb of the Center for Retirement Research, which sponsors this blog. He finds that U.S. nursing home stays are relatively short: 11 months for the typical single man and 17 months for a single woman. There’s some unpleasant news in the study, too, because the risk that an older person may one day need nursing home care is 44 percent for men and 58 percent for women.

Only one out of five men and 1/3 of woman benefit from LTC. Why purchase it?

But the new study added an assumption absent from previous attempts to estimate how many people might benefit from having insurance: Medicare also sometimes pays for shorter nursing home stays, accounting for about 15 percent of total long-term care spending.

Taking all of this into account, just 31 percent of women and 19 percent of men benefit from buying long-term care insurance – far fewer people than previous studies had estimated.

Fewer Need Long-term Care Insurance | Squared Away Blog

 

[candrew]

Speaking from my Dad's experience with LTC insurance; he took out a policy at age 70 and paid premiums until his death at age 90 that amounted to $70K total. Dad's demise was brought about by a massive stroke. He was hospitalized for 2 nights (Medicare paid for that) then went to hospice where he passed away 18 hours later (again, paid by Medicare). Dad never collected a dime on that policy. Granted, one could argue that in some cases, the LTC policy does pay. But looking at the statistical likelihood that a LTC policy would be of value to someone like myself leads me to the conclusion that I'll be self-insuring.

 

[samclem]

Only one out of five men and 1/3 of woman benefit from LTC. Why purchase it?

Low probability/high impact events are exactly what true insurance is supposed to be for, right? Nobody should believe that LTCI is a net money-maker for the policyholder. Instead, it should be viewed like other insurance: Something bought to cover the eventuality of a calamity that is beyond your own means to cover. A long stay in a care facility (or in need of in-home care) qualifies as such an event for most people.

The issue is with the cost and quality of the products themselves, it seems to me. They have not established a good record of holding the line on premiums because they made some bad estimates regarding lapse rates.

 

[jjquantz]

Low probability/high impact events are exactly what true insurance is supposed to be for, right? Nobody should believe that LTCI is a net money-maker for the policyholder. Instead, it should be viewed like other insurance: Something bought to cover the eventuality of a calamity that is beyond your own means to cover. A long stay in a care facility (or in need of in-home care) qualifies as such an event for most people.

The issue is with the cost and quality of the products themselves, it seems to me. They have not established a good record of holding the line on premiums because they made some bad estimates regarding lapse rates.

I agree with you on the purpose of insurance but many of the people who "benefited" from LTC in this study probably only saw a small payback relative to their premiums. It would help to see the distribution of the stays to help figure the odds. I'm guessing that longer stays have significantly fewer occurrences, and that the number of occurrences drop off pretty rapidly with length of stay, but I don't know.

And your comment on the premium increases identifies exactly what has kept me out of the market so far.

 

[REWahoo]

Low probability/high impact events are exactly what true insurance is supposed to be for, right?

+1

I know many people who spent their final months or years in a nursing home - my dad 9 months, my mom 2+ years, DW's dad 7 months and her mom 3 years. I don't personally know anyone who has lost their home to a fire or storm, but I wouldn't consider going without homeowner's insurance.

YMMV.

 

[samclem]

It would help to see the distribution of the stays to help figure the odds. I'm guessing that longer stays have significantly fewer occurrences, and that the number of occurrences drop off pretty rapidly with length of stay, but I don't know.

And your comment on the premium increases identifies exactly what has kept me out of the market so far.

From this site:New Page 2

[FONT=Arial, Arial, Helvetica] [/FONT] [FONT=Arial, Arial, Helvetica]Length of Stay[/FONT] [FONT=Arial, Arial, Helvetica]

Percent of Nursing Home Patients​

[/FONT] [FONT=Arial, Arial, Helvetica]Less than 3 months[/FONT] [FONT=Arial, Arial, Helvetica]

17.6%​

[/FONT] [FONT=Arial, Arial, Helvetica]3-6 months[/FONT] [FONT=Arial, Arial, Helvetica]

9.7%​

[/FONT] [FONT=Arial, Arial, Helvetica]6-12 months[/FONT] [FONT=Arial, Arial, Helvetica]

14.8%​

[/FONT] [FONT=Arial, Arial, Helvetica]1-3 years[/FONT] [FONT=Arial, Arial, Helvetica]

30.3%​

[/FONT] [FONT=Arial, Arial, Helvetica]3-5 years[/FONT] [FONT=Arial, Arial, Helvetica]

13.6%​

[/FONT] [FONT=Arial, Arial, Helvetica]5+ years[/FONT] [FONT=Arial, Arial, Helvetica]

14.0%​

[/FONT] [FONT=Arial, Arial, Helvetica] Source: The 1997 National Nursing Home Survey, National Center for Health Statistics, U.S. Department of Health and Human Services (as seen in Long-Term Care: Your Financial Planning Guide, Phyllis Shelton 2003)
[/FONT] [FONT=Arial, Arial, Helvetica] [/FONT][FONT=Arial, Arial, Helvetica] There have been a lot of studies on the average length of stay in a nursing home, but it is difficult to get studies that show how long people need care in assisted living facilities or in their homes.
[/FONT][FONT=Arial, Arial, Helvetica]An important point to note is that long-term care usually starts out in the home. Therefore, it is important to consider the length of time you may need care at home BEFORE you entered a nursing home and not base your planning on only nursing home statistics.

[/FONT]
[FONT=Arial, Arial, Helvetica]“One out of four caregivers in a 1998 national home care survey reported providing care longer than five years.”[/FONT]

Now, the chart above is for those who entered nursing homes, not the whole population.

If the average length of nursing home care is about 2-3 years, and only 15% of those entering nursing homes are there longer than 5 years, then buying insurance with a 2 year exclusion period ought to be fairly inexpensive. But no companies I know of offer a policy like that. It has come up often on these boards.

 

[REWahoo]

More data on odds and duration of nursing home stays...

 

[samclem]

The conclusion of the report at the OPs link states in part (my bold added)

Although it is optimal for only a small percentage of single individuals to buy insurance,
Brown and Finkelstein show that many more would be willing to purchase a supplemental policy that could transform Medicaid into comprehensive,
non-means-tested insurance. But policymakers have yet to devise a means of permitting such policies while at the same time containing Medicaid costs.

I don't agree with the bold portion. The Long Term Care Partnership Program does a pretty good job of addressing the problem described. From this site:

The Long Term Care Partnership Program is a joint federal-state policy initiative to promote the purchase of private long term care insurance. The Partnership Program is intended to expand access to private long term care insurance policy to pay for long term care services.
Purchasing a Partnership-qualified (PQ) long term care insurance policy provides an added benefit. This benefit is described as “dollar-for-dollar” asset disregard or “spend down” protection. Individuals who purchase a PQ policy 'earn' one dollar of Medicaid asset disregard for every dollar of insurance coverage paid on their behalf.
Here's an example. Stephanie buys a PQ policy and needs care one day. Her policy pays out $150,000 of insurance claim benefits. Stephanie earns a Medicaid asset disregard that allows her to keep an additional $150,000 over the asset level she would otherwise have to meet in order to be eligible for Medicaid coverage. The Partnership Program also protects those assets after death from Medicaid estate recovery

It ain't perfect, but if a person buys a Partnership Qualified plan, they won't have to totally exhaust their assets before going on Medicaid.

 

[samclem]

More data on odds and duration of nursing home stays...

And, in addition to the data you gave, nearly 41% of long-term care is provided to people under age 65. (Source: Georgetown University Long-Term
Care Financing Project, June 2007, as quoted here ). I don't know the breakdown of the duration of care for these "youngsters", but I'd guess a disproportionate number of cases (compared to "old folks") go longer than 5 years.
That's what "insurance" is for. We just need some appropriate products. Or maybe we need to adjust our perception of what a "fair" price should be.

 

[timo2]

And, in addition to the data you gave, nearly 41% of long-term care is provided to people under age 65. (Source: Georgetown University Long-Term
Care Financing Project, June 2007, as quoted here ). I don't know the breakdown of the duration of care for these "youngsters", but I'd guess a disproportionate number of cases (compared to "old folks") go longer than 5 years.
That's what "insurance" is for. We just need some appropriate products. Or maybe we need to adjust our perception of what a "fair" price should be.

I'm imagining that a fair number of these under 65 are automobile crashes, just from the sheer quantity of these crashes every day. My anecdotal story is that a friend died 10 years ago and was buried in a relatively empty cemetery area. But it is full now, almost entirely with younger people. Car crashes has to be why. and what about the people who did not die but are seriously injured in these crashes - Long term care could be the result.

Based upon some of the statistics for the end of life LTC, maybe the current structure of LTC policies is really better for people under 65, like disability insurance is for employed people under 65. Then end of life insurance would be a different product.

 

[audreyh1]

Low probability/high impact events are exactly what true insurance is supposed to be for, right? Nobody should believe that LTCI is a net money-maker for the policyholder. Instead, it should be viewed like other insurance: Something bought to cover the eventuality of a calamity that is beyond your own means to cover. A long stay in a care facility (or in need of in-home care) qualifies as such an event for most people.

The issue is with the cost and quality of the products themselves, it seems to me. They have not established a good record of holding the line on premiums because they made some bad estimates regarding lapse rates.

Except LTC insurance doesn't cover those extremely long stays. You'll have maxed out and be on your own.

 

[audreyh1]

Kitces recently wrote an article on LTC that incorporates some of the info cited in the OP.

And Samclem's 2 year exclusion idea to make it much more affordable.

https://www.kitces.com/blog/can-inc...rm=0_4c81298299-80baf2cf40-57016373#more-5601

 

[samclem]

Except LTC insurance doesn't cover those extremely long stays. You'll have maxed out and be on your own.

Yes, almost always true (the Federal program used to offer an "unlimited term" plan, maybe others did, too).

People may argue about the propriety of this, but having a 5 year LTCI plan would allow the user to get assets into a trust, use the insurance until it is finished, then go on Medicaid (which has, IIRC, a 5 year lookback period for for assets).

 

[Fermion]

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%?

 

[razztazz]

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%?

That's how I see it. Without the complication of surviving spouses possibly living in poverty the way I see it is all I have to do is be able to privately fund about two years in a nursing home. Anything after that and I will be in no position to worry about "THE MONEY" that I have been worrying about my whole life. Anything over 2 yrs will in all likelihood be short and get shorter with each passing day. If I end up busted and have to go my final year or two on Medicaid...oh well.

 

[Options]

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%?

+1
My 95 year old neighbor doesn't even want to be still alive, let alone take a cruise. The stories about people dancing in their 90's is the exception, not at all the rule.

 

[samclem]

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%?

Spouse. Destitute. Dog Food.

 

[Fermion]

We were snowmobiling the other day and met a spry lady who was 87 (and proud of it to reveal her age!) on a newish Polaris mountain sled with a chainsaw attached to the tunnel. She wasn't a loner, very talkative and told us about the club rides but that day she was riding alone. We were 20 miles up in the mountains from the parking area when we met her!

THIS is what my assets are for. Not for buying the next 500 piece puzzle in a LTC facility.

 

[Fermion]

Spouse. Destitute. Dog Food.

Please. If you delay SS to age 70 that is all the LTC insurance you need in order to never have to eat dog food. Also Medicaid will not take a house away from a spouse until they die.

I get so tired of the "you are going to eat cat food/dog food responses...

 

[clifp]

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

 

[audreyh1]

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 surviving spouse probably cares a great deal.

 

[REWahoo]

The surviving spouse probably cares a great deal.

Yep.

 

[Senator]

My father was in a nursing home for 5+ years due to a brain stem stroke. Medicare pays the first 30 days, then the next ~60 days are passed on to the patient at like $100 per day.

He fell at the nursing home, went to the hospital for a day, then back to the nursing home, so he had another 90+ days worth of Medicare.

I private paid his care for 12 months until he could be into a VA nursing home. The VA only goes back 12 months for asset look backs. I believe VA LT care is open to any veteran.

When I visited him in the private facility, there were both young and old people. Younger people from car accidents and some surgery recoveries.

There was one roommate of my Dad's that had a surgery accident that left him without oxygen and he was a vegetable. He was 45 and in great health until the accident. He owned a trucking company. He was just curled up in a fetal position all day/night. I spoke with his mother quite a bit who was there every day, all day.

 

[audreyh1]

In a few discussions on M* it became clear to me that several folks maintained LTC policies because they saw that as protecting their assets to go to their heirs. It may only protect $250-$350K in today's dollars (most had inflation riders) as long as they didn't hit a very long stay.

I got the impression this was a major marketing point?

 

[REWahoo]

I don't recall any discussion of preserving assets for heirs when we purchased. We bought our LTC policies to protect the assets of the surviving spouse.