LTC Poll

[Katsmeow]

There was a prior LTC poll but it didn't ask all the things I'm interested in. There have been some LTC threads recently that inspire this pot.

 

[Corporateburnout]

I have a 3 year policy with $200 daily benefits and 3% compounded inflation protection. DW was denied for health reasons.

 

[samclem]

I voted "don't have it--flawed products"
- Like some other folks here, I'd like a true catastrophic, high-deductible LTCI option, something that pays for either DW or I ("shared benefits") after we've spent about $150K (index it upwards annually for inflation) of our own funds for care.

But the truth is we can't do a very good job of self-insuring right now. If one of us needed this care (unlikely at our age--early 50's), it would be a tough road. The non-LTC spouse would have to cut back severely, and we'd probably have to shuttle assets into a trust and start the Medicaid-lookback-calendar-day-counting thing. Is that "right?"--I don't know, but this would be an in extremis case, it's legal, and if somebody wants to change the law they can.

An "in between" option would be a non-inflation protected LTCI policy on each of us--it's much cheaper than the "good" inflation protected policies. Examples (from the Federal LTCi calculator), for a 52 YO person:
1) $219K of coverage (3 years at $200/day) with 5% inflation protection = $180 per month.
2) Same as above, but without inflation protection: $53 per month.

For an unlimited coverage period and unlimited amount (but still $200/day), the rates are about 40% higher (which would be true catastrophic insurance for not a lot more--apparently the population needing care more than 39 months isn't too high)

So, it would be possible to buy some insurance now for a relatively modest fee, knowing that LTC costs are likely to outpace the policy's coverage limits. We'd self-insure for that (small but growing) annual gap between what the policy would pay and the likely costs. If we happen to get one of those "high and right" FIRECalc lines, we should be okay. Otherwise, it will be tough in 30-40 years to pay for this care, but at least the policies would pay for a part of the expense while we made other plans. And, if truly good "catastrophic" policies become available in a decade from now, we'd jump ship to that and wouldn't have nearly as much money "sunk" into this product.

The down side is that this approach does not qualify for the state Partnership Program--only inflation-protected plans qualify. That means we don't get an increased allowable asset ceiling for Medicaid qualification.

 

[Katsmeow]

I am sort of in the mid-range but think the product is flawed. I'm a little older than you are, so don't have to make money last as long. I keep thinking about it, but just don't feel confident the purchase would be a smart one. On the other hand, not sure that not purchasing is smart either....

 

[Carlos2]

I bought a policy

My wife and I are 14 years apart. I bought a policy so that she would not become impoverished or have to change her standard of living if something happened to me. I bought a CA partnership policy but only because it did not cost anymore to have and I was meeting the criteria for a policy anyway. I have a $200/day, 90 day elimination period, 4 year policy. I got the same for my wife and if we don't use it for ten years, when one of us passes the other gets to keep their policy and not have to pay any future premiums. We both make six figure incomes so the $300/month premium for BOTH policies is affordable now and if it were to increase by 100% we can handle that too. Interestingly, CA partnership policies have never received a rate hike. I know that does not guarantee the future, but it's good to know. CA has allowed rate hikes for other types of LTCi. Overall, I feel good about my purchase even with all the naysayers running around out there. I have seen what can happen to people who don't have it and it's not pretty. Even if I could self insure, I think it's prudent to have a policy because you can really go under and even with the hikes, it's not been that bad to get a small policy.

 

[Marita40]

I bought a 3-year coverage Genworth policy a couple of years ago at age 55. I'm single and anticipate there will be no dedicated person to care for me if I need nursing, so I think it was a good decision. However, I remain somewhat conflicted given all the negative news on the matter. I'm feeling pretty secure about a financially secure retirement, but I doubt I'll be rich enough to afford expensive care. So my policy provides some peace of mind.

 

[JoeWras]

I have it but not sure how long we'll keep it. It has optional inflation, but that includes a premium rise. We denied it on the last adjustment. It is also limited per day and per life.

We got it a few years ago primarily in case something happens to us when young. This would be to help the other spouse while we're still very active. We have friends going through this, and it has been hell without the added LTC coverage. It has forced them into very difficult self home care.

But we may drop it as we become more strong FI. Especially if we increase the war fund due to continued OMY.

 

[Jack_Pine]

Good poll. I selected the second to last category for now but may move into the first category at some point. Or may be the self insure if I can get comfortable with a dollar amount that is enough for two.............

 

[MichaelB]

We don't have any, the products aren't suitable for us, so we self insure. The costs are very high so I realize we may have affordability issues if that time comes.

 

[pb4uski]

I looked at it about 12 months ago, but cost, potential premium increases, potential of benefits lagging NH costs, etc have caused me to not pull the trigger so we are self insuring even though we are probably on the bubble as to whether or not we should self-insure based on our wealth.

 

[ER Eddie]

I picked "Other," because I don't have LTC insurance, and the reasons is that I believe I am too young to have to consider that right now ... the advice I've gotten has been that I don't need to worry about it until I'm in my 60's. So I'll revisit the subject in another 10 years.

 

[Ready]

I'm a relative novice on LTC, but my father does not have it, and now we spend $3K per month for him to live in a nursing home. From what I've researched, there are limits on how much coverage you purchase (number of years of coverage before it expires), as well as limits on how much per day they will cover.

If $3K per month is the worst case scenario for not having LTC, it seems like a relatively low risk to me. However, seeing what the nursing facility he's at looks like, it's a dreadful place to live. If I wanted to stay at home and have full time nursing care, would most LTC policies cover that, or a portion of it?

What do you think is the worst case cost per month if you get really sick and don't have LTC?

 

[samclem]

I have it but not sure how long we'll keep it. It has optional inflation, but that includes a premium rise. We denied it on the last adjustment. It is also limited per day and per life.

A note to those in a similar situation: If you've got a policy that allows you to buy inflation coverage "as you go" and you have any idea that you might keep the policy and that you'll need to have the increasing dollar amounts, it's likely a good idea not to skip any opportunities to buy more coverage in the early years of the policy. The "inflation catchup" gets >very< expensive as the policyholder ages (because it's really just buying more LTCI on a now older person). So, based on my back-of-the-envelope figuring it appeared the best approach for us would be to keep up with the optional upgrades, if needed, until the premiums get unaffordable, and to not consider buying upgrades after that point. Caveat: I'd go back to buying the additional coverage later if, for some reason, it looked highly likely we'd use the policy.

 

[samclem]

What do you think is the worst case cost per month if you get really sick and don't have LTC?

Here's a web site that shows approximate nursing home costs for the US. For most of the US, average costs are about $200-$250 per day, or about $6000-$7500 per month (twice the $3000 per month you are paying). That approx $200-$250/day is average, not the nicest nursing homes.

Federal LTC Insurance: Cost of Care Near You

 

[Corporateburnout]

I'm a relative novice on LTC, but my father does not have it, and now we spend $3K per month for him to live in a nursing home. From what I've researched, there are limits on how much coverage you purchase (number of years of coverage before it expires), as well as limits on how much per day they will cover.

If $3K per month is the worst case scenario for not having LTC, it seems like a relatively low risk to me. However, seeing what the nursing facility he's at looks like, it's a dreadful place to live. If I wanted to stay at home and have full time nursing care, would most LTC policies cover that, or a portion of it?

What do you think is the worst case cost per month if you get really sick and don't have LTC?

Most policies cover home care up to the coverage amount. As for the worst case cost it depends on the state you live in. In MA where I live the monthly cost range between 8K to 10K per month.

 

[Ready]

Here's a web site that shows approximate nursing home costs for the US. For most of the US, average costs are about $200 per day, or about $6000 per month (twice the $3000 per month you are paying). That approx $200/day is average, not the nicest nursing homes.

Federal LTC Insurance: Cost of Care Near You

Thanks, very helpful. Is there a typical (or average) age that one should consider signing up if they are going to do so? I'm 46, and I can't imagine making LTC payments for the next 20-30 years just in case I need the coverage.

 

[samclem]

Is there a typical (or average) age that one should consider signing up if they are going to do so? I'm 46, and I can't imagine making LTC payments for the next 20-30 years just in case I need the coverage.

I've read that people should consider buying it between their mid-fifties and their mid sixties. I think Consumer Reports gave an estimate, you might want to check there (or in our threads here) if you'd like more info. Costs do start to go up very dramatically with age. I'm in my early 50's, and if I buy I probably won't wait until I'm past 60.

 

[Ready]

I've read that people should consider buying it between their mid-fifties and their mid sixties. I think Consumer Reports gave an estimate, you might want to check there (or in our threads here) if you'd like more info. Costs do start to go up very dramatically with age. I'm in my early 50's, and if I buy I probably won't wait until I'm past 60.

I pulled up the Consumer Reports article...it suggests buying before you turn 60. So I guess I don't need to think about this for a while.

It also suggests that people with more than $2.5M in liquid assets can feel comfortable self insuring, while people with less than $500K in liquid assets should not purchase LTC because they will likely qualify for Medicaid.

And, it appears some companies have been increasing premiums almost 100% recently. This is really where LTC makes no sense to me. What kind of insurance is that if they can raise their prices that much?

 

[Carlos2]

Thanks, very helpful. Is there a typical (or average) age that one should consider signing up if they are going to do so? I'm 46, and I can't imagine making LTC payments for the next 20-30 years just in case I need the coverage.

The sweet spot for buying LTC is in the early to mid 50's. However, it is important to remember that this is insurance. You are leveraging the risk. I had a friend who had a stroke at age 42. She had a lifetime LTC policy. The stroke left her not being able to walk and bathing herself. The reason she had the policy was because her husband who was in his mid fifties had bought one and together that reeceived a discount so she had on too.

My point is that one never knows when they may need the policy so you're covered if something does occur. You could have a car accident and need extended care, health insurance won't cover what long term care doees.

Also remember that as you get older more health issues could arise to prevent you from gettting coverage. Things like high blood pressure, high cholestrerol, stroke, heart attack or something could make you ineligibile for the insurance when you are in your 60's or make the premiums much more expaensive.

 

[samclem]

It also suggests that people with more than $2.5M in liquid assets can feel comfortable self insuring, while people with less than $500K in liquid assets should not purchase LTC because they will likely qualify for Medicaid.

That "qualifying for Medicaid" idea is a tough one. You've got to spend almost all your liquid assets to get to that point, so a spouse could be in a bad spot. I think CR's advice may consider the fact that a person with a smaller nest egg (or retirement income from various sources) would likely have to significantly reduce their standard of living just to make the LTCI premium payments, so CU is recommending they roll the dice. If they lose they'll be in a bad spot, but at least they'll have Medicaid (when they are destitute). True enough, but it's a bad situation for the spouse.

There are no good answers for those of us in the middle.

 

[Carlos2]

Look at this line of thinking

I think those of us who are considering not buying or self insuring should consider this line of thinking below. I thought it made sense.



People who "self insure" are usually fooling themselves and think that they will never need LTC.

LongTermCare.gov states that 70% of people turning 65 can expect to use some form of LTC in their lifetime.
So the majority WILL need it to some extent.

But insurance is about leveraging your money. And imo it is best to leverage your money for the large risks, not the small risks.
Example:
It is easy & practical to self insure your car and just have liability coverage. Just save up a decent replace/repair amount over the course of a year or two and your good.

It is not easy or practical to self insure a home. Since you would need a very large amount saved. It would take the average person many many years to self insure a house.


So lets look at LTC and its financial risk.
National average for a private room in a nursing home is $80k
National average for community based care is $40k
Length of stay averages 3 years.

So you will need $120k-$240k to pay for LTC.
Basically what a small house costs.

How many people with $240k homes do you think have homeowners insurance? Probably over 90%.

But they only have a 1 in 10 chance of loosing that house to a fire.

They have a 7 in 10 chance of needing that $240k for LTC.

So if you are going to be forced to come up with that $240k, does it not make sense to only pay a fraction of that cost via LTCI?

Would you rather pay $240k over 3 years or $50k over 10-15 years? Which is the better deal

 

[Chuckanut]

I would buy LTC if I could get a very high deductable, say $60,000, to help keep the premium down. I just want to avoid being wiped out.

Also, it must come with premium caps so that I know I can always afford it, even if the cost goes up and I have to cut some other optional spending. The current situation allows insurance companies to effectively 'cancel' my policy by making it unaffordable. Not so good.

 

[samclem]

Carlos, I respect your decision to buy insurance. Still,the information you've provided below just isn't correct.

People who "self insure" are usually fooling themselves and think that they will never need LTC.

I see no reason to think the majority of people who reject LTC insurance are "fooling themselves", and that definitely doesn't appear to be the case on this board. I see a lot of careful consideration: of the possible need for coverage, and of the glaring problems with LTCI as it exists today.

But insurance is about leveraging your money. And imo it is best to leverage your money for the large risks, not the small risks.

Right. And where is the LTCI policy that lets me buy the catastrophic insurance I really need for those "large risks"? I don't need coverage starting at Day 91, and I don't want to pay for it anymore than I'd have an auto policy that has a ten dollar deductible.

Length of stay averages 3 years.

Misleading and incorrect. Most people never go into a nursing home. Of those who do go in, the average stay is a less than 2 years. But, a few people do stay a long time.

From the excellent NOLO site on LTCI " . . .Risks and Benefits" :

The Odds of a Long Nursing Facility Stay

Most people will not spend years and years in a nursing facility.

• Two-thirds of all men, and one-third of all women, age 65 and older will never spend a day in a nursing facility.
• Most nursing facility stays are brief -- only about 10% of men and 25% of women age 65 and older spend more than a year in a nursing facility.
• Only 10% of all nursing facility residents will stay longer than three years.
• More than half of all nursing facility stays last six months or less. The average stay of those who enter a custodial care facility is about 18 to 20 months.

So, a little public math from the stats above: If we assume 70% of those over 65 are women, then 46% of people will enter a nursing home. If the average stay of those who do check in (both genders) is 20 months, then the average stay for >all< people over 65 (both genders, and including those who never go to a nursing home) is about 10 months. Subtract 3 months for the elimination period before insurance starts to pay and it looks like the average nursing home bill (today's costs) that the LTCI would have to pay is 210 (days) x $225 (dollars per day) = $47,250.
Now, this disregards other non-nursing home costs that the insurance might pay (home health care, etc), but it also disregards all those "long tail" costs for people who stay in the nursing home for 10 years, but they only have a 3 year LTCI policy. And we should remember the money the insurance companies make due to lapsed policies. While a rough estimate, this $47,000 of coverage is probably not wildly off what we should expect their average payout to be.
We shoudn't insure for "averages," instead we care about insuring against our own improbable risks. But averages do matter to the insurance companies, and they should matter to us when we are deciding if LTCI is a good product.

So you will need $120k-$240k to pay for LTC.

Some will, some won't pay a dime.

They have a 7 in 10 chance of needing that $240k for LTC.

Absolutely not true. There's no way that 70% of people pay $240K or more for a their long-term care.

Would you rather pay $240k over 3 years or $50k over 10-15 years? Which is the better deal

For the reasons above,this isn't an accurate question. Most people won't pay $240K for their care. And, of those who buy insurance, there's no telling what their premiums will actually be, since they truly aren't guaranteed to stay the same.

But even if it were true, we figured above that the insurance company should expect to pay out, on average, $47,000 (today's dollars) for each policy they write. Is it a good deal to give them $50K today for $47K in expected benefits 20-30 years from now? "Which is the better deal"?

Did you find this stuff posted by a government source on the OPM's LTCI site, or is this a user comment? Again, this isn't meant to call you out, but people are looking for solid information on a hard topic.

 

[REWahoo]

There are no good answers for those of us in the middle.

+1

I sure don't have the answers as there is no way to know the "right" way to address LTC concerns. We opted to take out LTCI policies in 2000 when we were in our early 50's. We each have 3 years coverage after a 90 day waiting period, paying $100/day increasing at 5%/yr compounded - that works out to $188/day currently. The initial premiums weren't bad, under $600/year for each of us.

The policies had a 10 year guarantee of premium and I was bracing for a big hit when the guarantee expired...[edited to avoid tempting fate]

 

[Mmm Rrr]

But they only have a 1 in 10 chance of loosing that house to a fire.

I would question this statistic too, I have only met 2 people in my whole life who have told me they lost their house to a fire. One was my mother, the fire was in 1933, the other was a friend who lost her house in the Oakland Hills fire.