New Strategies for Covering Long-Term Care Costs

[MachineGhost]

[quote=http://news.morningstar.com/articlenet/ ... ?id=689417]You've heard the scary statistics: About two thirds of Americans will need long-term care. The average annual cost of a private room in a nursing home is $87,600; the length of stay can run three years or more.

Do a few quick calculations, and it's easy to get very worried about the potential financial impact on your retirement plan. But recent research is shedding new light on the risks. The key finding: The odds of needing nursing-home care may be higher than previously thought, but the length of needed care is shorter. The new data has experts talking about the implications for revamping our current approach to insuring against the risk of high long-term care expenses.[/quote]

Moda, what's the quick rundown on a hybrid life insurance/LTCI policy?

[Libertarian666]

I'm not Moda, but I did buy a Prudential term life policy that has accelerated benefits for nursing home care. It was amazingly cheap, in my opinion, but a significant reason for that is that I happen to be in the best risk class; the standard risk class premium for my age and sex is almost exactly twice as much.

[WildAboutHarry]

Start early with an HSA.  Invest wisely.  Pay medical expenses after tax as you go, if you can.  End up with a big chunk of change that can be used for medical expenses or LTC (worst case) or a pile of money that is an IRA equivalent when you are old.

[Reub]

I believe that the reason that the length of stay for these nursing homes has decreased is because the care there is so abysmal and demeaning. Personally I will do all that I can to avoid them like the plague.  I'm hoping that personal home robots and internet services will be enough to sustain me in dignity in my home.  Even a personal butler might be a better option if I must rely on other humans to sustain me.

[Pointedstick]

I agree 100% with Reub. Those places are horrible. You're paying a shocking amount of money for degrading care and no meaningful intellectual stimulation. For the same amount of money you can pay the salary of a live-in nurse and more!

[MachineGhost]

Cute movie!

[align=center][img width=800]http://ecx.images-amazon.com/images/I/8 ... L1500_.jpg[/img][/align]

[Reub]

PS the way that the system seems to force you into these hell holes is through our medical system and social workers. When one is hospitalized and elderly  we are not allowed to go home again by the all-knowing all-caring medical system. It's for our own good of course!

[Pfanni]

In the long run we're all dead, as Keynes said.
The sooner or later we all gonna end up in a terrifying situation, filled with pain, regrets and imminent death.
That's the price we humans pay for being so goddamn clever - knowing about the inevitability of our own, forthcoming death.

So it is kind of futile to "save" money or have care plans for these last moments of your journey, what's the point?
You have to live and enjoy life whilst you can, better blow your money on vacations in your 30s than save for the best elderly care for the last six months of your life.

As a sidenote, a dude called Mackenroth stated that the individual can save money, but society as a whole cannot save money. Welfare, caretaking etc. has always, will always and must always be financed by present activity/GDP.

Psychologically, saving money for a nursing home might be a way for some to cope with their fears of death. So ask yourself (no offense), if your goal is really to save for later or to suppress/cope with fears of death.

Death is actually, when you think about it, not an event of life.
When we are here, death is not, and when death is here, we don't care anymore.
Philosophy offers way more comfort to me than a savings plan

[EdwardjK]

Although we have substantial assets, my wife and I decided to purchase LTC insurance about 3 years ago.  We opted for the Genworth 10-year pay plan with a 5% annual inflation rider starting at $150,000 coverage per person.  At the current level, we will pay about $75,000 in premiums over the 10-year period.

Like all insurance, you hope that you will never use it.  Part of our decision process was the notion that we buy auto and homeowner's insurance, so why not insure our most important asset - our health.  I guess we could have invested the premium money and earned a better return.  But with our luck the market will have crashed the day before we needed it.

At the end of the day, we sleep better knowing we have LTC insurance.

[Libertarian666]

Although we have substantial assets, my wife and I decided to purchase LTC insurance about 3 years ago.  We opted for the Genworth 10-year pay plan with a 5% annual inflation rider starting at $150,000 coverage per person.  At the current level, we will pay about $75,000 in premiums over the 10-year period.

Like all insurance, you hope that you will never use it.  Part of our decision process was the notion that we buy auto and homeowner's insurance, so why not insure our most important asset - our health.  I guess we could have invested the premium money and earned a better return.  But with our luck the market will have crashed the day before we needed it.

At the end of the day, we sleep better knowing we have LTC insurance.

I hope that plan has better terms than the one I saw a couple of years ago, which was extremely unfavorable to the purchaser. After reading the plan documents in detail, I couldn't figure out why anyone would buy it.

[Lonestar]

What is to keep these insurance companies from waking up one day and greatly increasing policy premiums or reducing benefits?  What is to keep them from deciding they no longer want to participate in these types of policies and just cancelling the outstanding policies?

I've also heard horror stories on policy holders having to fight to receive their benefits.  Years ago when I could have bought this coverage reasonably I was scared off by the above possibilities.  Maybe I made a mistake..................

[Libertarian666]

What is to keep these insurance companies from waking up one day and greatly increasing policy premiums or reducing benefits?  What is to keep them from deciding they no longer want to participate in these types of policies and just cancelling the outstanding policies?

I've also heard horror stories on policy holders having to fight to receive their benefits.  Years ago when I could have bought this coverage reasonably I was scared off by the above possibilities.  Maybe I made a mistake..................

The answer to your first question is answered in the plan documents. Overly simplifying the one I read, they can raise the premium as much as they want, but if they raise it more than a certain amount, you have the option not to pay it without having to give up all the benefits. So what happens in that case? They are then obligated only to pay out as much as you paid in, if you ever qualify to use the policy!

In other words, heads they win, tails you lose.

That was the main reason I decided not to bother, but instead to buy a Prudential term life policy for MUCH less money, that is actually life insurance with a fairly generous accelerated "living benefit" clause. Of course, if I survive the 20 year term, then I don't get anything, and there are limits on the living benefit clause too, but overall it seemed to be a much better deal than the LTCI policy.

[EdwardjK]

I hope that plan has better terms than the one I saw a couple of years ago, which was extremely unfavorable to the purchaser. After reading the plan documents in detail, I couldn't figure out why anyone would buy it.
[/quote]

I suspect that if you read the exclusions in your homeowner's insurance policy, you will come to the same conclusion.

[Pointedstick]

Solution: build a house that is impervious to all the risks that it faces and therefore does not need insurance.

[Libertarian666]

I hope that plan has better terms than the one I saw a couple of years ago, which was extremely unfavorable to the purchaser. After reading the plan documents in detail, I couldn't figure out why anyone would buy it.

I suspect that if you read the exclusions in your homeowner's insurance policy, you will come to the same conclusion.
[/quote]

Does homeowner's insurance state that I have to pay in for many years against an event that grows much more likely with age, then if they decide to raise the rates a lot, they only have to pay back at MOST what I paid in, if I ever qualify to use any of the benefits? I'm pretty sure it doesn't say that.

[Pfanni]

The primary goal of an insurance company is to make money.
So, on average, as PPer are obessed with averages, the average plan holder has to pay in say 5% more than he will get out (that's the markup of the company).

Is it therefore financially justified to buy insurance for unlikely, but devastating events (early/sudden death when you have kids in your 40s/50s)?
YES.

Does it make sense to buy insurance for very likely events (partial disability, nursing home fees)?
NO. The insurance company knows that huge payouts for vast amounts of plan holders loom, therefore the structure of the contract and the amount of payouts will always be very skewed in favor of the insurance company.

So get clean and insure only
-mandatory stuff (car, house)
-very unlikely but devastating stuff

That way you gonna get the best deal.

[EdwardjK]

So get clean and insure only
-mandatory stuff (car, house)
-very unlikely but devastating stuff

That way you gonna get the best deal.

Sounds like a great plan until the unlikely stuff happens to you.

[LC475]

Go on a never-ending series of cruises.

[moda0306]

You've heard the scary statistics: About two thirds of Americans will need long-term care. The average annual cost of a private room in a nursing home is $87,600; the length of stay can run three years or more.

Do a few quick calculations, and it's easy to get very worried about the potential financial impact on your retirement plan. But recent research is shedding new light on the risks. The key finding: The odds of needing nursing-home care may be higher than previously thought, but the length of needed care is shorter. The new data has experts talking about the implications for revamping our current approach to insuring against the risk of high long-term care expenses.

Moda, what's the quick rundown on a hybrid life insurance/LTCI policy?

Just noticed this.  I've done next to no research on the term hybrids (didn't even know they existed), although the have "chronic illness" benefit-accelerations in some cases that could be seen as LTC policies in a way.

With regards to permenent policies, they are alright, but you're not really "Transferring" the risk in a traditional way, and they usually don't qualify for partnership protection, which to me is good deep catastrophic protection to be providing to your family.

Essentially, LTC/Permanent policies are taking money from what WOULD HAVE been paid out to your heirs.  Usually your premium stops, which is nice, and you're getting the money sooner than later, which has a time-value element to it, but it is coming $ for $ out of your family's eventual death-benefit, so in a way you're still self-funding your own long-term care rather than truly transferring it.

LTC Insurance companies are terrified of increased rates of LTC... so the standalone policies are expensive, and can get moreso... however it serves to understand that if everyone's chances of having a LTC event rise, so, probably, do yours/ours. 

Also, I'd recommend everyone here to at least sit down and talk to an "elder-law attorney."  There's some work you can do with trusts, and if they know how counties/LTC-facilities in your area operate, they can do a HUGE amount of good planning and pre-strategizing to create a contingency for such an event.

I hope this helps, in-spite of it being all generalities and no specifics.

[MachineGhost]

Also, I'd recommend everyone here to at least sit down and talk to an "elder-law attorney."  There's some work you can do with trusts, and if they know how counties/LTC-facilities in your area operate, they can do a HUGE amount of good planning and pre-strategizing to create a contingency for such an event.

Are you're referring to the Qualifying Trusts where you give everything away to be broke for purposes of Medicaid coverage?  AFAIK, Medicaid does not cover LTC.

[Libertarian666]

Also, I'd recommend everyone here to at least sit down and talk to an "elder-law attorney."  There's some work you can do with trusts, and if they know how counties/LTC-facilities in your area operate, they can do a HUGE amount of good planning and pre-strategizing to create a contingency for such an event.

Are you're referring to the Qualifying Trusts where you give everything away to be broke for purposes of Medicaid coverage?  AFAIK, Medicaid does not cover LTC.

I believe that Medicaid does cover nursing home stays, which is a main reason for those trusts and LTC policies that protect assets from Medicaid claims.

However, I could be wrong, do your own due diligence, etc.

[LC475]

Seriously, cruise ships are better than retirement homes in every way.  Don't know why more people don't choose the perpetual cruise option.

[Reub]

Seriously, cruise ships are better than retirement homes in every way.  Don't know why more people don't choose the perpetual cruise option.

They are germ factories, though. Maybe even more so than LTC facilities. The medical care is also much worse.

[MachineGhost]

Well, I'm not sure a nursing home is exactly what LTC is.  There's many different levels of LTC and a nursing home is at the bottom of the totem pole.  In my view, the point of LTC is to avoid that specific situation where you lose your dignity and die within six months from the shame and abandonment.

But if you think a cruise ship is bad, you haven't seen a Medicaid-funded nursing home.  I feel so sorry for the prisoners patients there. 

I really don't think the Baby Boomers are going to take this kind of future laying down.  The government is going to have to come up with a plan to deal with the LTC situation unless the robots beat them to it first.

[Libertarian666]

Well, I'm not sure a nursing home is exactly what LTC is.  There's many different levels of LTC and a nursing home is at the bottom of the totem pole.  In my view, the point of LTC is to avoid that specific situation where you lose your dignity and die within six months from the shame and abandonment.

But if you think a cruise ship is bad, you haven't seen a Medicaid-funded nursing home.  I feel so sorry for the prisoners patients there. 

I really don't think the Baby Boomers are going to take this kind of future laying down.  The government is going to have to come up with a plan to deal with the LTC situation unless the robots beat them to it first.

I think the BBs are indeed going to take it lying down. That's why they will be in the nursing home in the first place!
And I know you weren't replying to me, but I have seen a mostly-Medicaid-funded nursing home, and it wasn't a pretty sight.
I think the solution for those who aren't fabulously wealthy is expatriation to a country that has much cheaper labor costs, so they (the non-fabulously wealthy) can afford good care.