Long Term Care, Real Cost , Real Inflation

[Lakewood90712]

Just got the care facility yearly " Due to increasing costs , bla,bla,bla" letter, the rates went up 5.5%, about the same increase as in the last 4 years. The CPI is irrelevant to me in real world things.

5.5% seems about what the real inflation rate is overall.

 

[samclem]

I wonder what the underlying costs of the LTC business are. I would guess labor costs are the biggie, and costs for semi-skilled labor shouldn't be very high if we have high unemployment. Food costs have gone up, sothere's that.

I suspect LTC prices are like everything else--they are the result of market forces. They'll go up when demand is high relative to supply. "Supply" will be affected by their costs, so their costs are an underlying factor, but not the most proximate one.

 

[Lakewood90712]

I wonder what the underlying costs of the LTC business are. I would guess labor costs are the biggie, and costs for semi-skilled labor shouldn't be very high if we have high unemployment. Food costs have gone up, sothere's that.

I suspect LTC prices are like everything else--they are the result of market forces. They'll go up when demand is high relative to supply. "Supply" will be affected by their costs, so their costs are an underlying factor, but not the most proximate one.

Total Mo. cost is just short of $10,000 now, when you add in adult diapers , etc.

This is one of the Belmont Village facilities, with both assisted living apts and a dementia unit. High cost, premium surroundings. The Dementia unit is usually nearly full, but the quite a few apts. are vacant. This site also was sold to an investor last year ( the property) but Belmont still operates and manages the facility.

Maybe half labor is low skill , min wages, and half med to high skill/pay employees.

Unemployment is about 17% in the county.

 

[target2019]

Probably $9-10K in the northeast, or more. It's a business, what more can I say?

The facility has three levels of care, starting with independent living. The facility was new, administrators very good, and place is well-cared for.

Still, it's a shock to go from two living in a 2-bedroom apartment to 2 living in separate apartments with increasing care and increasing expenses.

 

[bmcgonig]

Huge increase in LTC

This just in: Huge increase requested.

LTCI carrier seeks 45.9% rate increase | LifeHealthPro

 

[samclem]

This just in: Huge increase requested.

LTCI carrier seeks 45.9% rate increase | LifeHealthPro

For everyone: The linked story is about John Hancock requesting a 46% rate increase in Connecticut.

This kind of thing still happens a lot (too often). And they know they have the regulators over a barrel: "Don't approve the increase and we'll just abandon this line of business in your state. You'll get to explain that to the voters, and also support a fair number of these people on Medicaid in later years."

 

[Gearhead Jim]

Our State Farm LTC coverage is good: 90 days elim, 5 year payout, compounded inflation increase. Total coverage per person is now over $600k.

Purchased at age 56, premium was about $100/mo for each of us. Ten years of no increases, then last year a ~40% increase and this year another ~30%.

This looks like the situation is in the same "death spiral" that some of my disability insurance went into many decades ago: good initial price that held for years, then frequent big increases. With each premium increase, more of the healthy people drop out and the loss ratio keeps going up. Eventually, that policy wanted premiums which were just about equal to the benefits it would pay!

We will consider self insuring if the LTC premiums go up much more, and I suspect they will.

 

[ziggy29]

All these increases defeat the purpose of locking it in early while you are young, as their marketing literature urges younger people to do. It makes me more and more inclined to take my chances and just hope it's not needed.

 

[panacea]

All these increases defeat the purpose of locking it in early while you are young, as their marketing literature urges younger people to do. It makes me more and more inclined to take my chances and just hope it's not needed.

+1
It seems like an expensive proposition to pay premiums for potentially 30-40 years that will very likely increase significantly for a policy that we may never need. Better to save a lot and minimize spending.

 

[Fermion]

+1
It seems like an expensive proposition to pay premiums for potentially 30-40 years that will very likely increase significantly for a policy that we may never need. Better to save a lot and minimize spending.

I am all for saving, but I don't think you should live 30 or 40 years of your life saving to prepare for 10 years of very low quality living with dementia and diapers.

 

[kevink]

10K a month in today's dollars, with the potential for, what, double or more that cost when and if I'm old enough to need it? No thanks:

Continuous Care Facilities in Mexico

Near-perfect climate, good food, good care, ~$1200 a month for a good place.

 

[ripper1]

+1
It seems like an expensive proposition to pay premiums for potentially 30-40 years that will very likely increase significantly for a policy that we may never need. Better to save a lot and minimize spending.

Exactly. I wonder if many people here are self insuring. We have decided to self insure. I did a firecalc for 10 years out when we are 70 and it looks like we are in pretty good shape. The only thing is there may not be much of a legacy.

 

[imoldernu]

Current costs in our CCRC. We live in a freestanding home in the community.

Cost for apartment 2BR,2BA including all utilities except telephone, and two meals a day plus light housekeeping... $25K/yr, plus $5K second person.

Assisted living basic cost $46K plus special costs (varies) Nominal probably about $53K for moderate add ons.

Nursing Home $75K to $85K.

Bought $100/day insurance in 1993... current cost $2100/yr. for two of us. Hasn't gone up in 5 yrs. Total invested about $50K. At the time we bought, Nursing Home Insurance was about $50K/yr. We did not take the inflation clause.

As of now, we'll keep the insurance. Have gone through three different companies, and now managed by a Trust in Pennsylvania.

Would not buy now. To upgrade to $200/day would cost about another 4K/yr.

 

[dtbach]

I am all for saving, but I don't think you should live 30 or 40 years of your life saving to prepare for 10 years of very low quality living with dementia and diapers.

When I have dementia I doubt if I'll worry much about my quality of living. No body in either of my or my wife's family has any history of dementia. I'll roll the dice on LTC and won't buy it.

 

[Fermion]

When I have dementia I doubt if I'll worry much about my quality of living. No body in either of my or my wife's family has any history of dementia. I'll roll the dice on LTC and won't buy it.

Exactly. I don't have any kids so the only one I would need to worry about is my wife having large bills for my care.

Perhaps while I still have my wits I should build a necklace that requires me to enter a long code once a year or it electrocutes me. Then if I get dementia and forget to enter the code each year I will be dead.

 

[Gearhead Jim]

I've had four relatives who needed LTC in their final years but didn't have it, and only one of them was so addled as to not know or care about the conditions. The other three were acutely aware of their situation and absolutely hated the conditions they were living under.

For married couples, the biggest danger seems to be that the non-ill spouse will end up in poverty. States are becoming very aggressive about getting money from any relative who is "able" to pay, and using ever-longer lookbacks to claim assets which people thought were secure. Trying to protect assets is rather like buying LTC coverage- you have no way of knowing what the costs/rules will be by the time a problem comes up, and by then it may be too late to change things.

 

[Independent]

I've had four relatives who needed LTC in their final years but didn't have it, and only one of them was so addled as to not know or care about the conditions. The other three were acutely aware of their situation and absolutely hated the conditions they were living under.

For married couples, the biggest danger seems to be that the non-ill spouse will end up in poverty. States are becoming very aggressive about getting money from any relative who is "able" to pay, and using ever-longer lookbacks to claim assets which people thought were secure. Trying to protect assets is rather like buying LTC coverage- you have no way of knowing what the costs/rules will be by the time a problem comes up, and by then it may be too late to change things.

And, if you are going to buy LTC insurance, it makes sense to look at the "partnership" rules in your state.

FLTCIP Frequently Asked Questions - Miscellaneous - Partnership Program

 

[meierlde]

When the premiums on my LTC increased they provided some options to decrease the payment per day, or the duration. If you chose to cancel they would take what you had paid and divide it by the cost per day and provide that number of days of coverage. If they do that then cancelling does not mean completely throwing money down the drain.
(I did take the option to pay the new 50% higher premiums however).

 

[Lakewood90712]

I've had four relatives who needed LTC in their final years but didn't have it, and only one of them was so addled as to not know or care about the conditions. The other three were acutely aware of their situation and absolutely hated the conditions they were living under.......................................................................................
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Jim, Thanks for the post.

Yes , IMHO, very true for a lot of our elders . Many different levels of Dementia, Disability or a combo of both. Even with fairly advanced Dementia, fear, physical pain, frustration , etc. Trapped in a body or mind that doesn't work right. Some in our family think " Well , your Dad is just "out of it" like he is no longer human , like the it doesn't matter if he can't express himself or speak much, in addition to physical disability or pain.

I've never been very close to my Dad, but I know he still has some of his witts , and is miserable. He has been in life threatining , but manageable situations, from a medical standpoint a number of times in the last few years........... Modern medicine can be a blessing or a curse. For myself, I sure don't want to live on if I ever get in his situation. Important to plan for " What if " and what you do or don't want done.

 

[Gearhead Jim]

And, if you are going to buy LTC insurance, it makes sense to look at the "partnership" rules in your state.

FLTCIP Frequently Asked Questions - Miscellaneous - Partnership Program

I wouldn't ignore this, but...

Unfortunately, like everything else the government does to extract money from citizens, I don't think that you can count on the rules staying the same. Especially once they decide you have "more than your fair share" of wealth.

 

[Chuckanut]

I wish we could specify a waiting period of at least a year. That might reduce premiums.

 

[Ready]

The basic concept of LTC makes no sense to me. You start off buying it in your 50's when you are very unlikely to need it, but you buy it then because they scare you into thinking it won't be affordable if you wait until your 70's. But it has to cost more if you wait, because you didn't spend money for the last 20 years investing into the fund.

But what makes even less sense to me is that if you do start to take it in your 50s under the theory that it will cost less, why would you then agree to a contract where the insurance company can raise rates as much as they want at any time? They have all the leverage and you can only choose to continue to pay the high rates or drop out and lose all the money you spent so far. It seems very lopsided toward the insurance companies to me. I would never agree to a deal where the company I'm doing business with can raise rates any time they wish and my only options are to suck it up or forfeit everything.

 

[Badger]

Exactly. I wonder if many people here are self insuring. We have decided to self insure. I did a firecalc for 10 years out when we are 70 and it looks like we are in pretty good shape. The only thing is there may not be much of a legacy.

The legacy is that you will be taken care of and the children will not have to worry that you will become destitute.

That was worth more to me than any inheritance I could have received.

Cheers!

 

[Walt34]

I would never agree to a deal where the company I'm doing business with can raise rates any time they wish and my only options are to suck it up or forfeit everything.

That's the problem I have with it too. That's also one of the attractions to a CCRC that won't throw you out if resources become exhausted.

 

[ProGolferWannabe]

Our experience

So, we decided to purchase LTC insurance at a relatively young age--I think we made the purchase when we were in our mid 40's.--we are in our early 50's now. In short, our plan costs about $2000 per year and provides a total of up to 8 years of coverage for both my wife and myself (so if I use 1 year of coverage and croak, she has 7 years of coverage remaining). I forget the exact terms with regard to waiting periods, total $ coverage, inflation protection, etc. but suffice it to say we felt the coverage was adequate. So far our rates have remained the same, but I do wonder if/when rates will increase and by how much. I think we could have effectively self insured given our net worth, but I am pretty conservative by nature and felt more comfortable buying the insurance. I don't regret buying the insurance---I may well feel differently if they raise rates beyond what I am willing to pay or can afford. I guess time will tell. I don't think buying the LTC insurance was the worst financial move I have ever made, but I can see where maybe it wasn't the shrewdest either. Given the nature of the coverage, there are not a lot of options---either self insure, or buy coverage and take your chances that rates will be manageable in the future. I can see why people choose not to buy it.