One has to perform an honest self-assessment of one's health risks, in view of what LTCi costs vs [your area] cost of senior healthcare in the three major scenarios: home healthcare aides, Asst Lvg, Skilled Care Nursing/Memory Care.
I worked in insurance in several segments and judged both my and Spouse's LT health risks to be moderate-high to high. We live in a HCOL area. We are childless and altho some family is near, they have serious concerns about their own parents/children so little time to spare.
Spouse suffered a haemorrhagic stroke at age 50 and although his recovery was 95+%, as he has aged I am starting to see a few instances of senility - recall difficulties, and what I call "phantom memories", where he thinks of something he believes has occurred recently....but it hasn't.
We have had LTCi policies sponsored through the state's pension fund for 24 yrs. The premiums are now markedly higher, but we were expecting such increases. I felt they had vastly underestimated premiums but it took the insurers another 10 yrs to substantiate it from actual data.
Fortunately our income in retirement is twice what it was when he was working so we can easily afford the premiums. Are they high? Yes, slightly over $1K/mo total for both policies.
However, it is less than $14K per year total for both. It should be noted this is the most recent price increase, July 2023. The carrier has said these premiums will be good for a minimum of two years, which is reasonable in view of the above-inflation rise in overall healthcare costs and labor. Please keep in mind, for over 15 yrs we paid premiums that were well under what they should have been.
The cost for a licensed, bonded home healthcare aide, 40 hrs a week, is $26.00/hour. As of November 2023, the average base rate for a home care in San Francisco, CA is $26.00 per hour. The weekly cost for a home care working a 40-hour week in San Francisco, CA is $1,040 while the monthly cost is approximately $3,380 for 130 hours of work.*
* per Genworth's most recent national study.
The cost for a good AL facility, with a Level 1 assistance (meds, showering) is $5,000+/monthly. We investigated local senior facilities when my MIL needed one, and have 3 specific facilities in mind for ourselves, one of which is a non-profit we regularly donate to and is one of the top three facilities in the state.
The cost for SCN/Memory Care is between $13,000/mo to $15,000/mo, depending upon facility.
Every year in July, all facilities raise their prices - all of them. There was not a single facility we investigated that did not do this, whether for-profit or non-profit.
Essentially, our LTCi policies for both of us for a year's time, are the same as a one-month stay for ONE of us for SCN/Memory Care.
As our policies are tax-qualified, paid benefits are tax-free and do not count as income by the IRS or state.
Many of us, as we age, view the prospect of declining mental ability with anxiety and fear. And that is justifiable: there are some types of dementia that cause a relatively quick decline and death, but there are many people who can linger for years.
I myself have two friends who (separately) had a parent with dementia where one lived 15 years and the other lived 12 years.
$15K monthly is $180K annually; throw in an inflationary annual increase of 3-5%, and it's easy to see that the total can inevitably grow to 7 figures.
If we self-insured, our portfolio and other assets would easily cover one of us in care. BUT, liquidating that much $$$$ annually out of the portfolio raises our tax bracket as well as the dreaded Medicare premium increase.
And that is assuming just a moderate inflation increase in facility costs, as well. The facility cost does not include many other costs - medications, clothing (from sweaters to slippers, etc.), Depends, et. al.
Sooooo......at this point, even with premium increases, the LTCi policies remain worth the cost. That may change as we age, since we have an unlimited benefit period, and past age 80 that option might no longer be worthwhile. But we shall see.
FYI, fighting with insurers is definitely not easy. One advantage to our policies is that the state pension fund employs a healthcare mgmt firm to act as ombudsman for every policyholder who files an LTCi claim. So we don't deal with the insurer, the mgmt firm acts on our behalf.
