LTC coverage, one real life example

[CRLLS]

I want to share some real numbers DMIL experienced in her last year or so. She had a LTC insurance policy and needed assistance. She filed to collect on her policy. To start, there was an evaluation to determine she really needed assistance.

Once approved, there was a 90 day waiting period before she could begin receiving any benefits. In addition, since she was still at home, she still was required to continue paying her premiums.

Her benefit was lower than it could have been due to her selecting home care instead of a 24hr care facility.

Her 12 hr/day home care cost was around $324 per day/$9720 per month. From that $86per day/$2589 per month was covered by her LTC policy. That meant her out of pocket was $7,140 per month.

Had she chosen to go into a care facility, the average costs here run around $6,000 per month. She would have been getting 24 hr care not just 12hr care at home. Her LTC policy would have paid the higher $156 per day/$4,680 per month, leaving her out of pocket expense of only $1,320.

In her last month, she needed 24 hr care and that was still done in her home. I do not know the financial numbers for that last month. I do know she still had premiums to cover.

She was more comfortable staying in her own home until the end. I think the wanting to stay in their home is more than commonplace as we age. 12hr care per day is expensive and care time per day is lower than being in a facility. It is more personal care for certain. That is good. Fortunately DMIL had the resources to cover her share of the costs.

I share this information to show how the decisions made when LTC insurance benefits is needed might affect the overall financial picture. There are a lot of discussions on this site using "LTC Insurance" and it is often used as a general catch all term. Policies do vary as do their coverage/terms. They are not all the same. The decisions we make early on when choosing a policy can have less than anticipated coverage when the time comes.

 

[RetiredHappy]

I am in absolute agreement that policies vary as do coverage / terms. I am more than familiar with how LTCI works because I ran a business which provided care and often had to file LTCI claims on behalf of the clients. Some have 30-day waiting period and others have 90-day waiting period. Once benefits start, premiums stop. Most of the newer policies provide same amount of coverage regardless of home or facility care.

The common denominator is that in order to qualify for claims, the insured must need assistance in at least 2 Activities of Daily Living.

Back in the days, about 20 years ago a couple of insurers kept denying claims and they were caught and had to cough up hundreds of millions in fines.

My husband and I wanted to be self-insured but after starting our business, we learned very quickly that there is a behavioral component of electing to get care or not, depending on whether they have LTCI policies or not. We came across many wealthy people who did not want to pay for care and suffered through lack of assistance. The people who had LTCI were more willing to start care because it was spending mostly insurers' money.

I have a LTCI which pays equally for home and facility care but have a 90-day waiting period. My policy is dirt cheap, less than $100 per month and pays more than $10K a month when I reach 65. I have it for 12 years already and so far have not had a rate increase. My husband has a hybrid policy with a lump sum premium upfront which pays for care and if he does not fully utilize it, we get back some money as life insurance when he passes. His does not have a waiting period.

 

[pb4uski]

.... We came across many wealthy people who did not want to pay for care and suffered through lack of assistance. ...

You just described a great-uncle of mine. Definitely needed 24 care, but refused to go to a nursing home because it was "too expensive"... it didn't help that his thinking about what things should cost was anchored in the 1960s.

He lived in his feces until he died. Sad.

 

[Montecfo]

A perspective seldom explored given this is such an expensive product is this:

DW parents, both had LTC policies. Both passed in 80s and 90s. No money collected as they did not need care very long.

My parents both passed young. Did not need nursing home care. No LTC policies.

My 4 grands: one needed nursing home care. It was paid from her modest assets (LCOL area). The other 3 did not.

DW grands: one needed nursing home care. The other 3 did not.

I think a better way to fund this is via fully paid up life insurance. You can be borrow from it as needed and it always pays off, unlike LTC policy. Also no wrestling with doctors and insurer.

Also, no need to agonize over gut-wrenching rate increases, which will come.

Just food for thought.

 

[Sunset]

I want to share some real numbers DMIL experienced in her last year or so. She had a LTC insurance policy and needed assistance. .....

Her 12 hr/day home care cost was around $324 per day/$9720 per month. From that $86per day/$2589 per month was covered by her LTC policy. That meant her out of pocket was $7,140 per month.

Had she chosen to go into a care facility, the average costs here run around $6,000 per month. She would have been getting 24 hr care not just 12hr care at home. Her LTC policy would have paid the higher $156 per day/$4,680 per month, leaving her out of pocket expense of only $1,320.

....I do know she still had premiums to cover.

...

Great to see some real numbers.

Do you know how much was her premiums that she paid each month ? Just wondering what the net benefit was in this case.
It seems like the LTC covered her for 9 months, a value of $23,301.
Her out of pocket for the year was: $114,840 (85680+(3x9720)).

This case shows even with LTC, one needs to have a bucket of cash.

How fortunate she didn't have to fight to get accepted, perhaps she could have been accepted earlier or was it a sudden event that caused the need for assistance ?

 

[RetiredHappy]

Great to see some real numbers.

Do you know how much was her premiums that she paid each month ? Just wondering what the net benefit was in this case.
It seems like the LTC covered her for 9 months, a value of $23,301.
Her out of pocket for the year was: $114,840 (85680+(3x9720)).

This case shows even with LTC, one needs to have a bucket of cash.

Hence you need to buy enough LTC coverage and have some more savings to cover the shortfall.

When I bought mine in 2009, it was for $6,000 per month with a 3% compound inflation rider. At that time, a day's care was about $300 for both (24hr) home care and facility care. Home care costs have since sky rocketed due to removal of overtime exemption in wage and hour law. I was planning on covering the balance of $100 through investments. As of today, my coverage is $8,555 per month. It covers for a maximum of $515K and also growing at 3% compound. Many people do not realize how expensive is home or facility care and buy so little that it ends up being insignificant compared to actual costs. In my case, not bad for $97 per month in premium.

 

[chassis]

@RetiredHappy thanks for sharing your experience. What insurer and policy do you have? Is there a brand name for example Acme Long Term Care Gold Super?

 

[RetiredHappy]

@RetiredHappy thanks for sharing your experience. What insurer and policy do you have? Is there a brand name for example Acme Long Term Care Gold Super?

I bought mine through AARP group rate. MetLife was the carrier before 2008. Genworth was the new carrier in 2009. At that time Genworth was the number 1 LTCI carrier in terms of total benefits paid out per year. Also, since we were in the home care provider business, both from industry wide and our experience, Genworth had the best reputation in terms of ease of filing and approval of claims. I was thrilled that AARP was offering Genworth.

I don't know if you can get it through AARP anymore. At that time, I requested AARP to assign a local insurance agent to talk to me. The person who got my business was a top LTCI producer locally. He started showing me individual rates and I asked him about AARP rate as shown on their website. He said there was no way individual rates could come close to AARP group rates, and he went straight to AARP rate. The transaction was very smooth. I have read from this forum about Genworth increasing their LTCI rates, but that has not been my experience for my policy.

 

[Chuckanut]

Also, no need to agonize over gut-wrenching rate increases, which will come.

Those increases are one of the main reasons I have chosen not to purchase LTC insurance. As one gets older and the likelihood of using it increases, they start to price you out of keeping it.

My first term insurance policy had high and low limits on the premiums. The low limit was so low, it did not bother me I never paid that rate. And the high limit meant that I could never be priced out of keeping the insurance, thought the weekend jaunts for dinner in Paris might not happen.

 

[RetiredHappy]

Also, no need to agonize over gut-wrenching rate increases, which will come.

I am absolutely anticipating rate increases. I am very familiar with CalPERS LTCI increases, and they did not come gradually.

I figure at some point, they will offer me reduced total benefits or significant rate increase. So far I have seen from other policies on how benefits were reduced. Say, original policy is $X in total (years) benefits and the company offers $X/2, still keeping monthly/yearly benefits intact or to keep original benefits then a significant premium increase. On average, LTCI claims last for less than 2 years before someone passes. At that point, I will review the options. If I can afford the premium increase, I will keep my benefits as is.

 

[CRLLS]

Great to see some real numbers.

Do you know how much was her premiums that she paid each month ? Just wondering what the net benefit was in this case.
It seems like the LTC covered her for 9 months, a value of $23,301.
Her out of pocket for the year was: $114,840 (85680+(3x9720)).

This case shows even with LTC, one needs to have a bucket of cash.

How fortunate she didn't have to fight to get accepted, perhaps she could have been accepted earlier or was it a sudden event that caused the need for assistance ?

Sure enough on the bucket of cash part if you are underinsured. I'm not sure how long she had the policy. I do know she also had a cancer policy. For whatever reason, when she was diagnosed with her terminal condition, she did not cancel the cancer policy. These are things we did not know.

I had looked at LTC policies some time back. The amount of coverage vs the actual cost of LTC itself was not persuasive for us to buy LTCI. If LTCI benefit of a policy we thought was fair priced was 1x and the actual cost of LTC was 3x, it was not for us. We chose to self insure with our retirement nut and filing SS at age 70. That may not be fore everybody.

She didn't have to fight for coverage, She was that dependent. She did have some in-home care expenses not covered. It was only after some time that she realized the LTCI covered in home care. By the time she actually filed for the benefits, the LTCI company would only go back 3 months, thus eliminating her "waiting period" but not from the beginning. She was very secretive about her medical & financial situation. We just learned about the cancer insurance while going thru her papers the week.

Her financial guy (over her IRAs and taxes)who sold her the LTCI policy told us he didn't like it and quit selling that policy after selling it to her. From what I can tell, he never suggested changing to a better policy in spite of him having full view of her finances and expenses.

What is past is past. We cannot change it. We can only share this experience for others and move forward.

 

[Dtail]

Here is another example.
My father is currently receiving 24/7 home care. 60 hours per week is executed through a service, while my mother hired caregivers for the other hours. He has 2 LTC policies. Only one of the policies' premiums stopped when he started care. One pays per day, the other one pays a maximum per month.
The total out of pocket cost is about 130k yearly.
When he had partial care at home, they actually were receiving reimbursement which was more than the premiums and care believe it or not.

If he went to a nursing home, it would theoretically be less cost, but then I don't believe the nursing at a facility would cover all his needs and thus the hiring of some extra assistance would still be needed.

OTOH, they have an irrevocable trust which takes effect in Feb 2023.

 

[ncbill]

Here is another example.
My father is currently receiving 24/7 home care. 60 hours per week is executed through a service, while my mother hired caregivers for the other hours. He has 2 LTC policies. Only one of the policies' premiums stopped when he started care. One pays per day, the other one pays a maximum per month.
The total out of pocket cost is about 130k yearly.
When he had partial care at home, they actually were receiving reimbursement which was more than the premiums and care believe it or not.

If he went to a nursing home, it would theoretically be less cost, but then I don't believe the nursing at a facility would cover all his needs and thus the hiring of some extra assistance would still be needed.

OTOH, they have an irrevocable trust which takes effect in Feb 2023.

Are you referring to a Medicaid trust that was funded back in 2018, so the 5-year "look-back" on asset transfers expires in 2023?

 

[phil1ben]

My mother in law just passed at 85. She went into assisted living in June. She did not live past the 100 day elimination period (waiting period). She paid about $1,700/year for 16 years and got no use of the policy.

 

[skyking1]

My mother in law just passed at 85. She went into assisted living in June. She did not live past the 100 day elimination period (waiting period). She paid about $1,700/year for 16 years and got no use of the policy.

I hear that far more often.^
My employer's mother used hers up, and the father is doing the same now.
My sister and her late husband were able to use some of their benefits.
My mom? 8 days at home in her bed.
Dad died in my arms while grocery shopping.

 

[RetiredHappy]

Like tontine, you lose if you die without fully utilizing what you have paid into. For those who manage to use it for far more that have been paid into win big. Oh, that is also called insurance.

 

[Retired Expat]

We elected to self insure on this. One reason is we don’t know if we will move back to the US or not and those policies don’t work here. But what we did do in the purchase of a new home last year was to future proof it. Master bedroom on the ground floor with both s tub and easy access shower snd there is a guest apartment that can work for live in home health aides….

Although my real plan is to not get old need help!

 

[RetireeRobert]

Bought a hybrid LTC/whole Life policy that covered both DW and me in same policy. 3% inflation rider. If none or not all LTC benefits are ever used, than policy pays death benefit, which is a multiple of the single premium we paid, to kids.

Solved two problems for us: There will be (can not be) any premium increase ever.
We know a multiple of our single premium will be paid
out--as LTC benefits for us, or as death benefit to kids.

 

[skyking1]

We elected to self insure on this. One reason is we don’t know if we will move back to the US or not and those policies don’t work here. But what we did do in the purchase of a new home last year was to future proof it. Master bedroom on the ground floor with both s tub and easy access shower snd there is a guest apartment that can work for live in home health aides….

Although my real plan is to not get old need help!

We did that as much as possible with this home too. Since we are too late to get any decent rates, we are self insuring as well.

 

[Badger]

We don't have LTC insurance. I never looked into it but now at 72 it would probably not be worth it compared to the cost of assisted living care. We should easily be able to be self insured at this time. I would rather stay in my home but not pay more for 12 hr care than a nice assisted living facility. My only fear is that one or both of us will have to deal with memory problems in the future. If it is me and I am happy then assisted living at a nice facility will have to suffice. If I am sad, depressed, and unhappy then I would just as soon call it a day than spend the rest of my life miserably marking time and leave the rest of our investments to insure my wife is well taken care of. I have nobody but my wife but she has a daughter that lives 45 minutes away that will make sure she is comfortable and given the best care.


Cheers!

 

[Out-to-Lunch]

Like tontine, you lose if you die without fully utilizing what you have paid into. For those who manage to use it for far more that have been paid into win big. Oh, that is also called insurance.

Exactly! In fact, I would like to have the option of a LONGER elimination period (and commensurately lower premiums) to make LTCI more like "insurance," and less like prepaying LTC expenses: https://www.kitces.com/blog/can-increasing-the-long-term-care-insurance-elimination-period-make-coverage-appealing-again/

 

[Chuckanut]

Exactly! In fact, I would like to have the option of a LONGER elimination period (and commensurately lower premiums) to make LTCI more like "insurance," and less like prepaying LTC expenses: https://www.kitces.com/blog/can-inc...ination-period-make-coverage-appealing-again/

a big +1 to the above idea.

This is a huge opportunity for some new creative thinking on the part of an insurance company.

 

[JT90505]

This is a great thread. I had no idea that even with LTC insurance out of pocket costs could be so high. And increasing the elimination period seems like an obvious solution to the cost of LTC insurance, and hopefully would end the obscene rate increases that appear to be common as the need for care approaches. Thank you for sharing.

 

[CRLLS]

Exactly! In fact, I would like to have the option of a LONGER elimination period (and commensurately lower premiums) to make LTCI more like "insurance," and less like prepaying LTC expenses: https://www.kitces.com/blog/can-increasing-the-long-term-care-insurance-elimination-period-make-coverage-appealing-again/

It surely makes more sense than reducing benefits or increasing premiums over the life of a policy IMO. I would like to see a 3rd option for policy owners when it becomes time for an existing policy to be, ummm, updated.

 

[brokrken]

I've been thinking about LTCI lately and wanted to ask the group when the right time to buy is.

DW and I are 49 and 44, respectively. Is that too young, meaning the reduced premiums will not make up for the longer time I'd be paying? Do I need to buy before I FIRE; does employment matter?