Self-insuring for LTC????

[googily]

Having watched my father take care of my mother at home over the past few years with a type of non-Alzheimer's dementia that has required much non-skilled care (more like babysitting for a lot of time) , I do have a little input about the psychology of LTCI.

My father (almost 80, and not really the care-giving type) could definitely have afforded to self-insure, but he got an LTC policy a few years ago very much like the one the OP described. Looking back, as Mom got harder to handle but not impossible, I wonder how much longer he would have delayed getting help if he had had to pay for it himself. Of course, he has been paying for the insurance, but I think we all know how much it feels like "our" money when it is purely out of pocket.

Even with the insurance, my brother and I had trouble convincing him to look for home health care assistance, and then to extend the hours (still under the daily cap). I can only imagine the battle if it had been without LTCI. I also think he would have been expecting me to drop everything, leave my full-time job, etc, to help with the care. Um, no.

My mother will never be in a nursing home (the only time in her life she will save Dad any money, lol), but the assistance he has gotten to this point that his insurance has paid for has probably done as much to preserve his health as hers. And has preserved my sanity too.

None of this has anything to do with the financial value of LTCI, but just a few things to ponder. Long term care doesn't always purely mean "nursing home."

[REWahoo]

Quote:

Originally Posted by googily ...the psychology of LTCI.

A good point. Discussions of LTCI predominately focus on the financial aspect of the insurance but there are other issues that need to be considered. Googily gives a great example of why,at least for his parents, the benefits of LTCI went beyond financial considerations.

[googily]

... And, as I think about it, I also wonder: if Dad hadn't had LTC and would have gone insane trying to care for Mom himself, would she have ended up in a nursing home after all? LTCi allowed him to really think about getting home health aides and come up with a solution that has allowed her to stay at home (and she is now on hospice, so she'll remain there).

[potto0213]

Does a deferred annuity make sense as an alternative to LTCi? It seems to me that this would provide a means to fund assisted and/or long term care while still making the income stream available for other uses if not needed for LTC.

[samclem]

Quote:

Originally Posted by potto0213 Does a deferred annuity make sense as an alternative to LTCi? It seems to me that this would provide a means to fund assisted and/or long term care while still making the income stream available for other uses if not needed for LTC.

It's not a very good fit.
1) You'd have to know when you are going to need the LTC. Some folks need care early, and LTCi covers that.
2) The monthly checks would have to be big ($7000+ right now, and getting higher each year) to pay the LTC costs. That requires a very big annuity premium. Big annuity premium = happy annuity salesman but a lot of front-end cost.
3) If you are needing this care, you >probably< won't be around as long as your healthier peers. So, you'd receive those annuity checks for a shorter time period than the actuarial average--just the opposite of what we'd want as annuity customers.

For those of us worried about impoverishing a spouse, some people recommend just buying "first-to-die" joint life insurance to refill the retirement investments when the first spouse dies. It's not a perfect fit, either (the spouse in LTC can hang on for a loooong time, depleting all the saved funds before the life insurance pays off. And life insurance rates for old people are high.) But at least life insurance is a stable product with premiums that aren't escalating, there's no ambiguity about whether the payout is due, the companies have a good track record of paying off, and at least somebody will get a check.

[Dawg52]

I've always been an in between kind of guy. By that I mean I self insure a portion of my needs. For health insurance, I have a policy with $10k deductibles. For LTC, I have a policy through my former employer that is basically a supplemental policy. Right now if I were to use it, it would pay for the majority of my needs. Twenty years from now, it won't come close. The plan only had a limited number of years with a cola rider which will be running out in a few years. But the policy is very cheap so I'm fine with it. As I said, I look at it as a supplemental policy.

My policy has not had one increase in the 11+ years I have owned it. Who knows, 5 years from now it may be out the roof. If that happens, I might drop it. And if I do, I won't feel as though it was a bad deal due to the low cost and the plan did bridge a gap as Rewahoo pointed out.

Many ways to look at it.

[Katsmeow]

Quote:

Originally Posted by samclem It's not a very good fit. 1) You'd have to know when you are going to need the LTC. Some folks need care early, and LTCi covers that. 2) The monthly checks would have to be big ($7000+ right now, and getting higher each year) to pay the LTC costs. That requires a very big annuity premium. Big annuity premium = happy annuity salesman but a lot of front-end cost. 3) If you are needing this care, you >probably< won't be around as long as your healthier peers. So, you'd receive those annuity checks for a shorter time period than the actuarial average--just the opposite of what we'd want as annuity customers.

The deferred annuity isn't a perfect fit and I don't like having to buy it now. Still, I think some of those issues could be handled.

For example, you don't necessarily need a check big enough to pay the entire cost of LTC. It just has to be big enough to pay the cost of LTC that wouldn't be covered by the person's SS check and any pension.

Can deferred annuities be joint like immediate annuities? If so, that would take care of point 1. That is, if the person who needed LTC needed it earlier, it could be paid for by portfolio and then the survivor would get payment later from the annuity.

OTOH, I wonder if an immediate annuity might not work better. That is wait until one spouse needs care, then buy an immediate joint life annuity. It probably wouldn't be enough to cover the entire cost of LTC but might help some.

[Katsmeow]

I have really been struggling on the LTC issue.

We fall within that range of people who have enough that we could preserve something by buying insurance but not necessarily enough to really self-insure (closer to 1 million than to 2 million in net worth).

DH's mother spent 8 years in a nursing home and so we know it could happen.

We didn't buy it when younger (I'm 59 and he is 65) so even if we qualify (I think we would), it would be expensive.

The thing is that the product has so much wrong with it. I am worried that we would sacrifice to pay premiums and then would not be able to afford it 10 years from now and would have to drop it. Yes, we would have had the benefit of it for the 10 years but at that point - having no LTCI - I would wish that I had set aside the premium cost for the 10 years instead. And of course, if premium are substantial and keep going up it could get to a point where more than 10% of our spending was just on LTCI premiums which would affect quality of life. And, if we then had to drop the coverage because it became too expensive well that would cut very closely. And, if coverage is kept in place I worry about the carrier going under and about the policy of the carrier trying to get out of paying.

On the other hand, I have run numbers and we could manage if one of us (probably DH since he is older) was in a nursing home for 3 years. We live in one of the less expensive states for LTC. What scares me though is the possibility (unlikely but it could happen as with DH's own mother) is DH being in a nursing home for 8 years. That would impoverish me. The amount of money that a spouse can keep for the other spouse to be eligible for Medicaid is not that much. In this state, it currently appears to be $115,920 + home equity up to a specified amount. That isn't much when you consider that all I would have as a survivor would be SS plus those assets. And, of course, the law could easily change in the future. Maybe 10 years from now I wouldn't even get that amount.

[Animorph]

One of the things that had me self insuring was the pricing of LTCi. It's clear that you are building some "equity" with your early payments. Payments are roughly constant, without predetermined age related steps, for a lifetime policy. Not something you'd want to start paying for at 40 and then bail out of because of price increases when you reach 65.

That said, the insurance companies should have a pool of money for a given set of LTC policies. If lots of people in that pool drop out, the remaining insured may not see rising premiums. Sort of like SPIA mortality credits.

[FIYes]

Katsmeow, you have stated my concerns exactly. I too worry about one of us becoming an impoverished spouse if the other went into a nursing home. I also am concerned about paying Ltc premiums for years and then being unable to keep up with ever increasing premiums just at the time one of us may start to need Ltc. For now I am looking at "walling off" an amount each year for Ltc instead of paying premiums.

[REWahoo]

Quote:

Originally Posted by Dawg52 My policy has not had one increase in the 11+ years I have owned it. Who knows, 5 years from now it may be out the roof. If that happens, I might drop it. And if I do, I won't feel as though it was a bad deal due to the low cost and the plan did bridge a gap as Rewahoo pointed out. Many ways to look at it.

+1

We've owned our policies for 14+ years and also have never seen an increase. I'm fully aware that can change - and change dramatically - at any time.

Should the premiums increase to the point it no longer makes sense to keep the policies, one strategy I have considered is dropping the policy on DW and keeping mine in force. DW would probably have a far more difficult time living on a significantly reduced income if I required prolonged nursing home care than if the situation were reversed.

If necessary, I can do fine living out my remaining days in an RV out in someone's cow pasture...

[samclem]

Quote:

Originally Posted by FIYes For now I am looking at "walling off" an amount each year for Ltc instead of paying premiums.

For those who are self-insuring (or on the fence, and self-insuring unti lthey decide), buying LTCi without the inflation rider might make sense. Buy a policy slightly bigger than you need right now, but accept that it will be way too small in 20-30 years. Especially for "younger" people, LTCi without the inflation provision is a LOT less expensive. In effect, what you'd be doing is buying decreasing coverage--If the unexpected happens and someone needs care early, the policy would cover the vast majority of the costs. As time goes by it would cover less and less, but your own savings would be building up to make up the difference. Then, we just have to spend less and hope that we end up on one of those FIRECalc lines that goes up high and to the right . . .

[grasshopper]

Quote:

Originally Posted by REWahoo If necessary, I can do fine living out my remaining days in an RV out in someone's cow pasture...

You are welcome to use the RV hook-up on the ranch.

[grasshopper]

Quote:

Originally Posted by Amethyst I sometimes hear men say this (including Mr. A. who doesn't even own a gun). I always wonder at what point, before total dementia, that somebody would "know" all hope is lost, it's time to pull the trigger, and would still be able to do so. Gruesome line of thinking! Amethyst

Yea, I may have to rethink this, maybe pick a shade tree closer to the homestead. I do love that old Alligator Juniper an awful lot.

[Katsmeow]

What I really want is a LTC policy that acts like an excess policy where I have a self-insured retention of something like $150,000 or $200,000. The policy only kicks in after I've spend that much. I am not that worried long term about the average nursing home stay. OK with paying for the first 2 or 3 years and would without question self-insure if that was all I need we would ever look at.

But, not everyone is average. As I mentioned, DH's mother was in a nursing home for about 8 years. It is the 8 year stay that would impoverish me and that is what I want to insure against.

But you can't buy what I want. Instead you buy coverage for 3 years (or whatever) and then once it is paid out if you are facing paying for the rest of the stay out of your own funds or having the spouse needing LTC going on Medicaid and then back to the impoverishment issue.

[samclem]

Quote:

Originally Posted by Katsmeow What I really want is a LTC policy that acts like an excess policy where I have a self-insured retention of something like $150,000 or $200,000. The policy only kicks in after I've spend that much. I am not that worried long term about the average nursing home stay. OK with paying for the first 2 or 3 years and would without question self-insure if that was all I need we would ever look at.

Yes. There are a number of us here who want such a policy--true, high-deductible LTCi (from a reliable company). But apparently no one sells it.

[FIYes]

Some good food for thought in this thread....Sam Clem's idea about an Ltc plan with no inflation rider and Googily's suggestion that his parents Ltc plan led to getting in home help sooner rather than later. As you can tell from my posts this issue has been a concern for me. Thanks to the OP for starting the thread and for the good replies.

[mickeyd]

LTCi seems to be one of our most reoccurring topics.

We are not fans of this insurance~too costly, not enough claims paying experience, easy enough to cover with your own retirement stash (in many situations). This is commonly called self-insurance or non-insurance.

[Katsmeow]

Quote:

Originally Posted by mickeyd easy enough to cover with your own retirement stash (in many situations). This is commonly called self-insurance or non-insurance.

And, there's the rub. Sure if I was certainI could cover it from our portfolio no problem. And I'm not even that averse to - if I was the last one alive - to use my portfolio to pay for my care until depleted and then be on Medicaid.

What I am afraid of is covering DH's care from our portfolio, leaving me broke with nothing left but SS, home equity and whatever amount Medicaid let's the spouse keep at the time. If DH (or I) needed care for 2 or 3 years, it is "easy enough" to do so from our own resources. But, if one of us is the person who needs care for much longer than average then "easy enough" means severely worsening the quality of life of the spouse not receiving LTC.

[daylatedollarshort]

There are many Medicaid exempt asset classes and income streams where money can legally be moved to prior to the five year look back period. I don't see needing to insure or self insure for more than 5 years plus some planning time. Plus the average nursing home stay is less than 3 years.