Sustitutes for a LTC policy

[Chuckanut]

The current situation with LTC is not acceptable to many of us including me. Premiums are high and may go higher, benefits are more limited, and then there is always the chance the existing health problems may make getting LTC insurance problematic.

We are not poor enough that government programs would step in and pay the costs from the beginning, but we are not rich enough to be able to afford more than a year or two of LTC expenses before it greatly affects the rest of our financial situation.

I am looking for ideas on substitutes for LTC insurance plans.

I have read articles recommending buying an ordinary (not the hybrids that include LTC insurance) single premium deferred annuity that starts at 75. (The average age of admittance to LTC is about 79 so there is a four year fudge factor in case one is below average.)


I imagine I have not anticipated various pitfalls in the above plan. The biggest I see is that at today's interest rates a few hundred grand does not buy a lot of income, even 10 years from now.

Any other ideas for reasonable substitutes for LTC insurance in today's market?

 

[Scrapr]

Typical stays in LTC are not long. A couple years IIRC. But there are outliers. Mom & Dad were <3 years between AL & Memory care. One of the residents of Memory care was 13 years. Another was 7 or 8 years. Her husband would visit every day for a few hours at meal times.

I think the big danger is one spouse goes in and uses all the household assets up to Medicade limits. Leaving little or nothing for the surviving spouse. I don't know how you get around that

I do like the deferred annuity for later life stages

 

[razztazz]

I and a few others have mentioned this before. I still a haven't found better way to cover it for those with less-than-unlimited wealth.

The median time in LTC is something on the order of 24 months. Others will come up with a different number from a different sources but clearly this is something with a limit on it.

Most nursing homes will accept Medicaid after you are in there as a "retail paying customer." My mother was in a 5 star one for 28 months and she got in right from Day#1 with nothing but SS and Medicaid.

I am making sure I have at least three years of retail-rate funding up-front.

If I outlive that I will submit to things as they are and let Medicaid cover the difference between by pension+Social Security and the retail rate. How long can that last? If I end up being one of those who hang on for 10-15 years in LTC unable to do anything for myself..... Oh well...

As someone I knew once said: "It's called management. You do the things you can do and don't waste time trying to do what you can't do."

This works in my case, i.e. a single with no legacy or inheritance requirements.

Those worried about leaving a spouse destitute due to LTC costs have to solve that Rubic's Cube in their own context.

 

[marko]

Typical stays in LTC are not long. A couple years IIRC. But there are outliers. Mom & Dad were <3 years between AL & Memory care. One of the residents of Memory care was 13 years. Another was 7 or 8 years. Her husband would visit every day for a few hours at meal times.

I think the big danger is one spouse goes in and uses all the household assets up to Medicare limits. Leaving little or nothing for the surviving spouse. I don't know how you get around that

I do like the deferred annuity for later life stages

This has come up here a few times recently. I've personally become quite close to this issue over the past 2 years.

One person suggested taking out a life insurance policy so that when the LTC spouse died, there'd be some 'reimbursement'.

What I've seen is a trend away from LTC and more toward home-care which cuts costs dramatically. As a result, mostly the sickest of sick end up in LTC which shortens the 'residence time' and changes the historical average.

As you say, it's generally a <3 year issue IOW, a $400K problem. (Yes, there's always someone who knows someone who knows someone who's been in LTC for 10 years, but....) I like to play the averages. Many here could swing a $500K hit in such a life-altering situation.

My view is that the spending profile of both spouses changes such that the LTC cost is not over and above what one is currently spending but a portion thereof. Instead of spending big money on travel, dining, cars and other things the healthy spouse ends up spending a few hours each day at the NH. He/she has fewer opportunities to spend big money; it's not ALL on top of current spending.

Our personal case has it that our current healthy spending is higher than LTC, so if one of us were to need it, our additive cost might be $50K over and above what we spend now simply because both our lives, and spending, would have changed dramatically.

 

[Sunset]

.....
I think the big danger is one spouse goes in and uses all the household assets up to Medicare limits. Leaving little or nothing for the surviving spouse. I don't know how you get around that
...

Divorce would be an answer to save the surviving spouse financially.

An agreeable quick divorce, not the normal fight to the death type most folks get.

 

[TwoByFour]

Divorce would be an answer to save the surviving spouse financially.

An agreeable quick divorce, not the normal fight to the death type most folks get.

That will only work in a non-community property state.

 

[pb4uski]

Why wouldn't divorce result in saving 1/2 of marital assets for the spouse and heirs? 1/2 is better than not much

 

[athena53]

Divorce would be an answer to save the surviving spouse financially.

An agreeable quick divorce, not the normal fight to the death type most folks get.

It's complicated. Here's a good link on the subject. I had thought that it would be ignored for 5 years as part of the "lookback" period but apparently you can structure a divorce that leaves a disproportionate share of the assets to the healthy spouse so the infirm one will qualify for Medicaid. You really need a competent attorney, though.

https://www.helsell.com/helsell-news/medicaid-divorce-an-overview/

I'll be able to fund my own LTC, even under the scary Memory Care scenario, but I live in a LCOL area and my current spending (most of which would go to zero if I enter LTC) is at a level that would pay for it. It does, however, mean I'll probably never remarry unless it's to a guy who can fund his own.


There's also the option of entering as self-pay for X years, then they keep you even though you spent everything and they have to accept Medicaid after that. A few caveats, as I saw this with my Uncle: you're typically put in a "Medicaid bed" immediately (he had one half of a room with a curtain separating his area from his neighbor's) even though you're paying full freight. They suddenly started to jack the rates up to an unpalatable level just before my Aunt was getting close to spending down to the max Medicaid allowed her to keep. So she moved him to another place. The new place decided soon after that there was little to do for him other than palliative care (he did have Alzheimer's- not sure what his other problems were) and he didn't last long in the new place. The cynical side of me wonders if both places milked the situation for all it was worth until they were close to having to take Medicaid as payment.

 

[TwoByFour]

Why wouldn't divorce result in saving 1/2 of marital assets for the spouse and heirs? 1/2 is better than not much

Debts as well as assets are split so you will end up with less than 1/2. Devil is in the details of course, but you won't necessarily come out ahead.

I have to say that the whole thing makes me a little uneasy. If you manage to worm out of the debt incurred by LTC, somebody else ends up paying your obligation. I don't know what the answer is but I don't think I could do the divorce thing.

 

[pb4uski]

I would only consider it if our assets were depleted by LTC costs to the extent that 1/2 of what we have left, along with pension and SS was insufficient for the surviving spouse to live reasonably well. IOW, it's acceptable to use our assets for LTC as long as it shortchanges our kids inheritance but not when it causes the remaining spouse to be poor. BTW, I think that is extremely unlikely.

 

[Dtail]

It's complicated. Here's a good link on the subject. I had thought that it would be ignored for 5 years as part of the "lookback" period but apparently you can structure a divorce that leaves a disproportionate share of the assets to the healthy spouse so the infirm one will qualify for Medicaid. You really need a competent attorney, though.

https://www.helsell.com/helsell-news/medicaid-divorce-an-overview/

I'll be able to fund my own LTC, even under the scary Memory Care scenario, but I live in a LCOL area and my current spending (most of which would go to zero if I enter LTC) is at a level that would pay for it. It does, however, mean I'll probably never remarry unless it's to a guy who can fund his own.


There's also the option of entering as self-pay for X years, then they keep you even though you spent everything and they have to accept Medicaid after that. A few caveats, as I saw this with my Uncle: you're typically put in a "Medicaid bed" immediately (he had one half of a room with a curtain separating his area from his neighbor's) even though you're paying full freight. They suddenly started to jack the rates up to an unpalatable level just before my Aunt was getting close to spending down to the max Medicaid allowed her to keep. So she moved him to another place. The new place decided soon after that there was little to do for him other than palliative care (he did have Alzheimer's- not sure what his other problems were) and he didn't last long in the new place. The cynical side of me wonders if both places milked the situation for all it was worth until they were close to having to take Medicaid as payment.

Bolded - I brought up this concept on another thread and @Cocheesehead I believe had stated that the nursing homes have ways of getting around continuing to provide one with "non Medicaid" treatment.
Nevertheless, a "Medicaid" type divorce can still work for some relief, leaving out any ethical type reservations.

 

[samclem]

I have read articles recommending buying an ordinary (not the hybrids that include LTC insurance) single premium deferred annuity that starts at 75. (The average age of admittance to LTC is about 79 so there is a four year fudge factor in case one is below average.)

I don't think I follow you.

- Why buy the annuity at 75? If you don't otherwise need the annuity, you could wait until you You could wait until the person starts needing care to buy it (the annuity provider shouldn't care that the person is sick, they should be happy).
- Why buy a lifetime annuity when you know your lifetime is likely to be shorter than average?

I imagine I have not anticipated various pitfalls in the above plan.

- Could the income from such an annuity make a person inelligible for Medicaid?


In the case of a couple, putting nearly everything into a trust and paying the LTC bill during the 5 year Medicaid lookback period for the first to need LTC is one approach. Unless the person goes directly to high-cost care (a NH, etc), the costs might not be super high. At some point, check into a NH as self-pay, then let Medicaid take over at the 5 year point while the "outside" spouse uses the remaining assets to live.


I am not an expert on this--at all.

 

[imoldernu]

I can't begin to tell the story of our LTC policies (Jeanie and I separate policies), that began in 1990, because it is too confusing.
We started with policies from Travellers, which were transferred to Conseco, and then to Met Life. They finally ended up with SHIP... a non profit company in Pennsylania. Here's the website.
https://www.shipltc.com/
We pay virtually the same that we paid when we took out the policies,, $1,000 for me, $1100. for jeanie.
Benefits are supposed to be $100/day for three years as well a the same amount for home care.

We trust that this is all valid, but don't know.

Seems like 25 years ago, this was good deal for the insurance companies, until it wasn't. With 57K invested so far,we'll stick it out.

 

[athena53]

In the case of a couple, putting nearly everything into a trust and paying the LTC bill during the 5 year Medicaid lookback period for the first to need LTC is one approach.

The trust would have to be irrevocable, right? I have my assets in a revocable trust and I don't think that shields them from Medicaid (and that wasn't my objective).

 

[COcheesehead]

Bolded - I brought up this concept on another thread and @Cocheesehead I believe had stated that the nursing homes have ways of getting around continuing to provide one with "non Medicaid" treatment.
Nevertheless, a "Medicaid" type divorce can still work for some relief, leaving out any ethical type reservations.

The concept was introduced to me by an elder care lawyer who said a facility can state a patient is “beyond their care” for some type of sickness and have the patient transferred to for example a hospital. If treatment is successful, they have no obligation to take the patient back. Slimey, but real.

 

[Dtail]

The trust would have to be irrevocable, right? I have my assets in a revocable trust and I don't think that shields them from Medicaid (and that wasn't my objective).

Correct, it definitely must be in an irrevocable trust and thus one loses all control of the assets to the trustees of the trust.

 

[joeea]

The current situation with LTC is not acceptable to many of us including me.

We all get to decide our acceptability limit, I guess.

I have read articles recommending buying an ordinary (not the hybrids that include LTC insurance) single premium deferred annuity that starts at 75. (The average age of admittance to LTC is about 79 so there is a four year fudge factor in case one is below average.)

Of course the devil is in the details. Like:
- at what age are you giving your assets to the insurance company?
- how much are you receiving back starting at 75?
- what percent of your retirement assets are you giving away in this purchase?
- I assume it's not inflation-protected?
- Do you have any coverage at all for the pre-75 years?
- If you have a spouse, are they also taking this route?

 

[athena53]

Correct, it definitely must be in an irrevocable trust and thus one loses all control of the assets to the trustees of the trust.

Thanks- I thought so. I remember a poster awhile back whose parents were about to close on a nice unit in an Assisted Living Community except that their assets were all in a trust- irrevocable, and thus couldn't be liquidated to buy a new place. Oops.

 

[pb4uski]

Yeah, I remember that one too. They were trying to figure out ways to unwind the trust.

 

[harllee]

As an alternative to LTCI we are considering a Continuing Care Community Type A where you pay a (fairly substantial) entrance fee and then your monthly fee is the same even if you have to move to skilled nursing or memory care. The CCRC we are looking at states that you don't need LTCI, in fact even encourages against it.

 

[Montecfo]

I had previously suggested life insurance. You can buy a "first to die" policy.

Unlike a LTC policy, you get a payoff for certain with a life insurance policy. I like this better than LTC and the ethics-challenged options.

It is a tough issue for sure. Policies should be getting cheaper with higher interest rates but of course more expensive as we age.

As others have pointed out, a key is determining how much coverage you need above and beyond then-current spending. Which means you have to predict LTC rates, how much you time you need, etc.

At least with life it will eventually pay off.

 

[Newventurer]

Life expectancy of someone with Alzheimer’s is 8-10 years. At 80 yo Mom is on year 3, we expect at least a few more. She was blessed with an unlimited term LTC plan that reimburses $3k per month, cost of facility is $4500 per month in the Midwest (low cost of living area). Her husband was killed in a car wreck and he had been providing some of her in home care. She will likely go into a memory care unit before long and the cost goes up from there. All this is to say, be careful of having any confidence in the 3 year ‘rule’. Go ask some people that work at your local assisted living facility and see what they have to say.

 

[marko]

All this is to say, be careful of having any confidence in the 3 year ‘rule’. Go ask some people that work at your local assisted living facility and see what they have to say.

Sure. I don't think it's a rule however but your story also implies that to bring a 3 year average some people last only a few months. There will always be people at both ends of the average.

My uncle for one was in LTC for only 2 months before he passed. Another friend was in LTC for 6 months.

 

[REWahoo]

This is a few years old but illustrates the distribution of length of stay.

 

[marko]

This is a few years old but illustrates the distribution of length of stay.

Great chart!

If these were casino numbers I'd be playing those odds.