Long Term Care Insurance: A Reader Responds

A while back, I wrote Why We Are Not Buying Long Term Care Insurance, a post which explained our decision to self-insure against the risk of needing long-term care.  We looked at the topic in detail and decided to NOT buy LTC insurance.  It’s a hot topic, and it generated a good debate (54 comments in that post, wow!).

One of the responses was from Scott Olson, who happens to sell Long Term Care insurance at his site LTCShop.com.  As you’d expect, Scott has strong opinions about the topic and disagreed with my conclusion.  He got pretty wound up about it, actually, as you can see from his following tweet:

The Other Side Of The Story

In fairness to my readers (and, because Scott is an expert in this field), I offered Scott the opportunity of a guest post to provide the other side of the story.  He makes some excellent points in the article below and his viewpoint is helpful in a more comprehensive look at the topic of LTC Insurance.

The important thing for each of us is to fully understand this issue and decided for ourselves if LTC insurance is worth the cost. It’s not an easy decision, and the LTC world is rapidly changing.  Seek out an expert, but make your own decision.

Hopefully, proving Scott’s insights will provide a more complete view on this topic, and allow you to make the best decision for your situation.  With that, here’s Scott….


Scott’s Reply – When LTC Insurance Makes Sense

As a licensed insurance broker, specializing in long-term care insurance since 1995, you may be surprised that I agree with much of what Fritz wrote in his post, “Why We Are NOT Buying Long-Term Care Insurance”.

Here’s why:

I would never buy a long-term care policy that increased in cost every year.

To help decide if he should buy long-term care insurance, Fritz got a quote from a local agent. Unfortunately, the policy this agent sells increases in cost EVERY YEAR by 5%. Using the rule of 72, we know the premium will more than double every 15 years. By the time Fritz reaches his early 80’s, the premium would be four times the original amount. If Fritz lived into his mid-90’s, the premium would be EIGHT TIMES the original amount.

I’ve met people who bought policies like this 20 years ago. They regret it. This is the worst type of LTCi policy. Fortunately, less than 4% of LTCi policy owners have this type of policy. I agree with Fritz’s analysis. I would rather self-insure than buy this type of policy.

If the risk was just “facility care”, I wouldn’t buy long-term care insurance.

Most people who need long-term care receive care at home. Very few people need nursing home care. Most nursing home stays are less than 90 days. Fritz references a poorly researched article on ElderLawAnswers.com. In it, the author tries to determine the probability of needing long-term care.

In his calculations, the author assumes the number of people receiving care at home is about the same as the number of people in facilities. The author’s assumption is off by about 500%.

According to the Congressional Budget Office, about 80% of the people who need long-term care receive care at home. Only 13% of the people who need long-term care are in a nursing home. For every four people in a nursing home, there are 25 people receiving care at home. In other words, for every carload of nursing home residents, there’s a busload of home care recipients.

That’s why my wife and I own long-term care policies where 100% of the benefits can be used for care at home (or a facility–it’s our choice).

If only one of us were to need care for less than three years, I wouldn’t buy long-term care insurance.

I would NOT want to withdraw hundreds of thousands of dollars from our retirement accounts to pay for three years of care, but if needed I would do that. But the real risk to our financial independence is if one of us needs care for more than three years. That’s why my wife and I have policies that share 10 years of benefits. We want to protect our assets from the worst case scenario: Alzheimer’s/dementia.

Nearly every long-term care insurance company today offers couples the ability to share 10 to 16 years of benefits. Two companies offer policies with no limit.

Also, over 40 states have Long-Term Care Partnership Programs which can protect 100% of your assets from Medicaid spend-down if your long-term care policy runs out of benefits.

If I knew we would not need care until our 80’s, I wouldn’t buy long-term care insurance.

Needing care in our eighties or nineties is not a risk. That’s pretty much a certainty. If we live long enough we’ll need some level of assistance. If, in the last few years of our lives, my wife or I use all of our assets to pay for our care, so what! We can’t take it with us.

The real risk is if one of us needs care in the first half of retirement, not the last half.

I know a couple, Paula and Zack, who retired in their fifties. Shortly after Paula turned 60, Zack was diagnosed with early-onset Alzheimer’s.

What should she do? Should she deplete their retirement accounts to pay for his care? She was only 60. She could live another 30 years. She’ll need that money just to live.

Should she give up horseback riding and all the things she loved to do in order to be his 24/7 caregiver? How would caregiving affect her own health?

Fortunately, a few years before they retired they purchased long-term care insurance. Over the past 9 years, his policy has paid over $650,000 in benefits. Zack’s received all of his care at home.

Instead of being his caregiver, Paula oversees his caregivers. Instead of deciding which account to liquidate next, she just sends the bill to the insurance company each month.

If huge premium increases were likely, I wouldn’t buy long-term care insurance.

It is true that many of the older long-term care policies had large rate increases. To prevent rate increases, 41 states have enacted strict pricing regulations for new policies.

For an insurance company to be allowed to sell a new long-term care policy today, the new policy must include all of the company’s prior rate increases in the new pricing and include an additional “cushion” (about 10%) as extra protection from rate increases.

The new regulation has also removed profit from rate increases.

However, most group policies (e.g. Federal Long-Term Care Insurance Program, CalPERS, and other self-funded groups) do not comply with these new regulations.

Smart investing and Long-term care insurance

If your portfolio is $1 million, would you alter your investment mix to gain an extra 0.4% (four-tenths of one-percent), if the new investment mix could result in you losing hundreds of thousands of dollars?

If your portfolio is $2 million, would you alter your investment mix to gain an extra 0.2%, if the new investment mix could result in you losing hundreds of thousands of dollars?

If your portfolio is $4 million, would you alter your investment mix to gain an extra 0.1%, if the new investment mix could result in you losing hundreds of thousands of dollars?

For about $2,000 per year, per spouse, a 59-year old couple in good health, can own $1.2 million of long-term care benefits. By sacrificing a little bit of your return each year (0.4% or less), you protect your capital.

It’s that simple.

65 comments

  1. First off kudos to you Fritz for allowing Scott to post and for being humble enough to admit when you might not have had the complete picture.

    Like all specific insurance types long term care can get complex to figure out, especially when there are so many ‘guesses’ and assumptions in the equation. Very timely post for me!

    1. Insurers want to complicate things. The more complicated they make it the more likely you’ll pay more in premiums than you need to.

      Just focus on these two features:
      How much will it pay for each month you need care (e.g. monthly maximum) and what’s the most it can pay in benefits over your lifetime (e.g. lifetime maximum). If the policy has inflation protection, project those values into the future.

      Then get quotes form a few different agents and compare the monthly maximum and lifetime maximum for each policy.

      Focusing on those two features in the policy will empower you to find the policy with the most bang for the buck.

  2. How exactly do those protections from Medicaid spend down work in those 40+ states? I hope this is not another example of a cottage industry charging an astronimical amount for such protections — akin to the “Medicaid Trust” lawyers created to get another stream of income. I’m quite doubtful of programs that prey on the fear of running out of money, yet come with a huge premium.

    1. @MrsGroovy,

      One of the biggest concerns people have about long-term care insurance is “What if my policy runs out of benefits?” To address that concern and to help make long-term care insurance more affordable, 44 states have approved a Long-Term Care Partnership Program.

      The first programs were “test piloted” in CA, CT, IN and NY in the early 1990’s. In 2005, the federal gov’t passed legislation allowing every state to start one.

      For every dollar your long-term care partnership policy pays in benefits, you can protect a dollar from Medicaid “spend down” and Medicaid “estate recovery”. For example, if you’ve got $400,000 of countable assets normally you’d have to spend your assets down to $3,000 before Medicaid would pay for your care. However, if you have a Long-Term Care Partnership policy, if that policy had, for example, $350,000 of benefits that it paid for your care, then you’d only have to spend down $47,000 before you could qualify for Medicaid.

      Rather than buying an expensive “unlimited” long-term care insurance policy, you only need to buy an amount of long-term care insurance that is equal to the amount of assets you want to protect from Medicaid.

      44 states have these programs, however the program needs reforming in CA, CT, NY, and IL.

      Long-term care insurance policies that meet the requirements of the partnership program cost the same as policies that do not meet the requirements of the program. So you don’t have to “pay extra for the asset protection”.

  3. What about those who do not $4 million in their bank account. This is NOT a question, it is a statement. What about people who do not have $1 million in their bank account. Another statement.
    I am 77 now. Wife 67. Both of us are in good health. However, today at my cardiologist appointment my Cardio says I am having “episodes” (I hate that word) with my Pacemaker 6month readout. Shows a tiny bit of Afib several times over the past 6 months. Where no blood is going thru my heart. This could be the start of clotting. Tiny at first but “snowballing” whereby I could suffer a major stroke. Recommended a blood thinner for the rest of my life. I will do.
    The issue is do I want to live in a nursing home the rest of my life should I have a stroke or something else? Do I want to undergo treatment by a staff of minimum wage workers who do not know me or
    care about me when any family member is not present. Sorry, I have seen this issue too, too many times over the years with many family members and friends. How could my late father-in-law get a broken leg when he has been immobile in a bed with Dementia/Alzheimer’s for 20 years? And we paid $5000/month at a Premium Care Center. This was 5 years ago.
    Fortunately, I have a living will with wife, family and MD. They EACH know that if I will not have the quality of life that I had prior to “whatever” they will “put me down”.
    I have had a charmed life. We have children and in-law children who are doctors and pharmacists. Each knows how to do an injection. I will NOT be sentenced to a long term facility.
    Sorry to be so blunt but everything else is BS. And it is ALL about the money.

    1. @Jack – I wholeheartedly agree with you. What is the point of prolonging someone’s misery by keeping them alive, but not thriving, in a long-term care facility. I’m hoping that euthanasia will be and up and coming trend for those of us who would like that option… when the time comes. I think some states have laws providing for that option.

    2. Jack,

      Unfortunately, a living will can’t prevent the need for long-term care. Assisted-suicide laws can’t prevent long-term care either because assisted-suicide laws are for people who are terminally ill. People who need long-term care are NOT terminally ill.

      Assisted-suicide laws do not allow for someone who is in a vegetative state to be given a lethal medication. Nor do the laws allow for someone who has Alzheimer’s or other cognitive impairment be given a lethal medication.

      The assisted-suicide laws are designed for people who are terminally ill. They must have all of their mental faculties. And they must consult with their physician alone to request that he/she write the prescription for the lethal medication.

      In other words, there’s no assisted-suicide law (or living will) that will prevent you from needing long-term care.

      1. You are assuming I am doing this “legally”. I never said that what I have told my family is “legal”. They understand my wishes. The plans are very simple.
        They love me very much, and each medical professional family member will fulfill my wishes although over a rowdy, laugh-filled meal several have threatened to “put me down” well before I am in a vegetative state.

    3. “We have children and in-law children who are doctors and pharmacists. Each knows how to do an injection. I will NOT be sentenced to a long term facility.”

      OMG. I didn’t notice this sentence the first time I read your reply. Are you saying that you expect one of your children or children-in-law to break the law and put their medical career at risk, if you need long-term care? Gee, that’s not selfish.

      Wouldn’t it have been a lot easier to just buy a halfway decent long-term care policy 10 years ago before you started having health problems?

        1. I didn’t feel you “lost your temper”. You are a salesman for a product and like “born again Christians” have a ready sales pitch for every argument. And you probably have a very nice income and live very nicely as every other Sunday morning preacher does.
          But you are trying to put a square peg into a round hole for everyone. And as I said my family will answer my wishes. This is not going to be a public scene. And I am not jeopardizing any family members medical career. I will just have “passed”.

          1. Most reasonable people would conclude you’re putting undue pressure on your children. For the sake of your wife and your kids you should go see an elder law attorney and try to protect some of your assets for your wife.

    1. Z-man, I’m sure you won’t need extended care. But, if your health became compromised isn’t it possible that you could need help with the most basic, daily activities? As your needs progress your family would have no choice but to put their lives aside to provide for what can amount to constant care resulting in serious consequences to them, both emotionally and physically.

  4. i added links to the original and this post on my article on the gloom and doom of long term care. my issue is with the in-between income levels or retirees living on less than 60k per year combined. 4-5k in premium is a hard pill to swallow if you’re only bringing in 45k for instance. the poor will be set with medicaid and no assets and the 2 million+ folks can likely afford to go either way. there’s something nasty about another level of insurance that i can’t stomach.

    right now our house and car insurance sits around 3000 per year. health insurance goes for thousands with a giant deductible of thousands in many cases. and don’t forget the cost of care party due the astronomical insurance the physicians pay. welcome to the united states of insurance and i’m sure there are layers i’ve left out.

    1. Freddy,
      If the couple has $500,000 in countable assets to protect, isn’t it worth the $4,000 per year to protect all $500,000 with a Long-Term Care Partnership policy. The $4,000/yr is only 80 basis points of their investment portfolio.

      (Except for NY, CA, and CT. Those states have partnership programs that are ridiculously expensive.)

  5. My wife and I have had LTCi since our early 50’s. Some people may question why we bought it so early, but even with the recent premium spike from a couple of years ago, our new rate is still significantly lower than if we waited until today (early 60’s) to buy.

    We could self-insure, like Fritz opted to do. But we have a son with special needs we need to provide for after we’re gone, and part of our plan is to account for that.

    Whether to buy or not buy LTCi is a complex and involved decision, but it is always a personal decision, since no two family’s circumstances are the same. Everyone must do their own homework to decide what’s best for them.

  6. I think the best argument against artificially making yourself poor (or helping your aging parent(s) in that process) is to go a nursing home that accept state medicaid.

    The other argument is that I will take my own life (or have a family member arrange it) so I don’t need LTC. Really – you are going to put that burden on your spouse and children?

    Buying LTC is a tough pill. The people who need it the most are those with assets between $1 and $2 million, give or take a few 100k.

  7. So, for a just a few tens of thousands of dollars I can protect my capital to be sure it is all there after I’m dead. When I can’t use it. No thanks. I’ll live it up while I live and be broke when I’m dead.

  8. Scott you indicate that the policy Fritz was considering was not a good policy due to price hikes. LTC sounds like annuities in some ways – the salesperson makes a commission and therefore may not be selling the best policy for the buyer. What (or who) should people look for to get fair LTC advice?

    1. Hi Kevin,
      That’s a great question. One chapter in my book is entitled, “YOU MAY NOT WANT TO BUY YOUR LONG-TERM CARE COVERAGE FROM YOUR…”
      1. Investment advisor
      2. Auto & home insurance agent
      3. Someone who has the name of one insurance company on their business card
      4. An association (e.g. professional, alumni, retirement, etc.)
      5. Your employer

      The main reason these are not the ideal entities to buy LTCi from is that they are likely to show you only one policy/company.

      In Fritz’s case, it was #3, someone who has the name of one insurance company on their business card (otherwise known as a “captive agent”.) When an insurance company has tens of thousands of “captive agents” they don’t need to price their policies competitively because their “captive agents” have to sell that specific policy.

      It’s ideal to work with someone who is independent, represents a lot of difference insurance companies, and has a lot of experience with long-term care insurance.

  9. My husband and were determined to find some solution to this. Self insurance sounds fine in theory, but right now my husband has BOTH parents in a nursing home after we cared for them in our home for almost 5 years – we just couldn’t do it anymore, and now they are 90 and 92 and have medical issues and cognitive decline with no reason to think they wont still be alive in 10 years! Needless to say, They will both be on Medicaid soon, since the cost is about $14,000 a MONTH right now. So we have seen/lived the worst case situation, but we used their life savings to get them into and expensive nursing home that will keep them when medicaid kicks in. Our plan: We decided to by life insurance with a rider for “chronic illness” care. With this type of rider on our life insurance, If we need help with two activities of daily living, or have cognitive decline, (the same criteria as LTCI) we can get and use monthly (tax free) money for us to use for help in our home or at an institution. We can even pay our own children to care for us and/or use the money for what ever is needed (ie: lawn mowing, gutter cleaning, cleaning lady, etc)! If needed, we could even use it short term and just use part of the benefits for a short term crisis like being laid up with a broken hip for 6 months. Bonus: If we never need that kind of care, our children will benefit at our deaths, even though that is not the goal – this is unlike LTCI that is normally use-it-or-lose it. This life insurance is not cheap either because we are 60+ BUT the premiums can never increase, and it is about the same cost as life insurance without the rider – because the company will have to pay out one way or the other as long as you pay the premiums. (In other words, the company knows they will pay at your death or before then – it is the same risk to them.) I wish I had bought this kind of life insurance years ago when we bought other policies! It is not a perfect solution, and we can not afford to insure for a worst case situation (like 10 years in a nursing home for both of us!) but it will cover help at home, or part of the cost of a nursing home, for 3 years, and so hopefully would give us (or our family) time to plan if more care is needed after that. I hope this helps someone else find a solution to this problem, because this is the best solution we could come up with after a lot of research. If you have life insurance, check and see if that is part of your coverage, and/or if you can add that rider with out a lot of cost.

    1. I currently have an IUL policy for $1 million Increasing through TransAmerica. It has LTC insurance with it tied to 2 activites of daily living. While the IUL itself is increasing, the LTC component is fixed at $1 million total value and this comes out of the value of the policy if it is ever used, which is like accessing our life insurance policy tax free while I am still alive. I have thought of cancelling the policy and self insuring but my assets are just under a million and I am still way too young so I see a situation where something can happen and I am stuck with no LTC insurance.

      For full disclosure, I work in the medical field full time and also do financial planning with Primerica now part time. I bought this policy while I was with World Financial Group (WFG) and it is very tempting to drop and buy separate policies for term life and LTC as I am just 47. The price of the LTC within my IUL is only $19 a month, so its not impacting much of the cost of the IUL itself which I pay the minimum $980 for monthly and look at more of a diversification account for the free money it will provide on the cash value about 20 years or more from now. Any thoughts?

      1. The problem with most IUL/LTC policies is how they “re-calculate” the death benefit if you need to make a claim for long-term care. The longer you’re expected to need care, the more they “adjust” your death benefit and the smaller the long-term care benefit is.

        If I were you, I’d get a half-million in LTCi for about $140/month, then for about $140/month get $1,000,000 of 20-year level term, then I’d dump that IUL as fast as possible and invest the other $700 you’ve been putting into the IUL into a growth fund. Runaway from IUL’s! R.U.N.A.W.A.Y.

        1. I was laughing at the runaway component of your response. My Primerica Vice President tried to convince me to drop the IUL and get level terms but the ones we looked at was charging me $230 or so for a level 20 year term (or was it 30 year term). With the LTC separate for 4 years and then investing about $550 left over, I did not see it as an adequate replacement. I will have had the IUL for 3 years by January coming up and dropping it means basically losing everything I have put into it. The “cash value” now is about $20k as of Jan. 2018 and will jump to over $34k on the January anniversary that marks the 3rd year so its at least almost $30k in cash value now. Of course, I cannot get it out. Are you still recommending dropping it and going the route of separating all other insurance and investing the rest? This is the Primerica approach that I have been shown by the way.

          One caveat is that I did mention that the LTC portion of the IUL and LTC policy is fixed at $1 million so accessing it reduces the value of the insurance total by the equivalent amount accessed from the policy i.e. using $480k in 2 years reduces the insurance value by $240k while the cash value stays the same. It pays 2% a month or up to $20k which is a whole lot more than regular LTC policies pay. I am really okay with the reduction of the value of the insurance as I do have other assets and I am not depending on the insurance to pass on something to my five kids. I also have a stand-alone term policy with TransAmerica which has $500k and has Living benefits added to it – combines critical care, hospitalization for accidents, ICU care, etc.

          Now my spouse has an $800k IUL policy she pays $880 on but intends to hold on to it, although she doesn’t really like it. She looks at the total we pay into the three policies (her IUL and mine plus my term policy) as a little bit too much. I have stopped my 403B and Roth IRA (through my company and up to the max $18500) just this month after amasing almost $28k total for the year and do not need any more tax deductible withdrawals for now. Does it not make sense to keep the IUL as a hedge that will also transfer the money in the cash value portion tax free to anyone in the future?

          1. NB: I meant to say: using $480k in 2 years reduces the insurance value by $480k – not by $240k – while the cash value stays the same.

          2. Dr Phil: My Primerica Vice President tried to convince me to drop the IUL and get level terms but the ones we looked at was charging me $230 or so for a level 20 year term (or was it 30 year term).

            SAO: Primerica has always had some of the most expensive term policies on the market.

            Dr. Phil: I will have had the IUL for 3 years by January coming up and dropping it means basically losing everything I have put into it.

            SAO: Why throw good money after bad.

            Dr. Phil: The “cash value” now is about $20k as of Jan. 2018 and will jump to over $34k on the January anniversary that marks the 3rd year so its at least almost $30k in cash value now.

            SAO: Cash value is irrelevant. Cash surrender value is what matters.

            Dr. Phil: Of course, I cannot get it out.

            SAO: Exactly. Such a great “investment” that you can’t even access your own money.

            Dr. Phil: Are you still recommending dropping it and going the route of separating all other insurance and investing the rest? This is the Primerica approach that I have been shown by the way.

            SAO: Yes. Why throw good money after bad. The Primerica advice is good. The Primerica products are “not so good”.

            Dr. Phil: One caveat is that I did mention that the LTC portion of the IUL and LTC policy is fixed at $1 million so accessing it reduces the value of the insurance total by the equivalent amount accessed from the policy i.e. using $480k in 2 years reduces the insurance value by $480k while the cash value stays the same.

            SAO: Your understanding is incorrect. When the death benefit is accelerated to pay for long-term care (or critical illness or whatever) the death benefit is re-calculated based upon your life expectancy at that time. The “new” death benefit is the present value of the $1,000,000 death benefit based upon your new life expectancy.

            Dr. Phil: It pays 2% a month or up to $20k which is a whole lot more than regular LTC policies pay. I am really okay with the reduction of the value of the insurance as I do have other assets and I am not depending on the insurance to pass on something to my five kids.

            SAO: Your understanding of how the benefits are calculated is incorrect. It will NOT pay $20,000 per month. It will pay 2% per month of the present value of the death benefit.

            Dr. Phil: I also have a stand-alone term policy with TransAmerica which has $500k and has Living benefits added to it – combines critical care, hospitalization for accidents, ICU care, etc.

            SAO: These life insurance policies with “living benefits” sound great. But when you read the fine print (e.g. how the death benefit is re-calculated at the time of claim) you realize they are not as good as they seem.

            Dr. Phil: Now my spouse has an $800k IUL policy she pays $880 on but intends to hold on to it, although she doesn’t really like it. She looks at the total we pay into the three policies (her IUL and mine plus my term policy) as a little bit too much.

            SAO: OMG, Dr. Phil. Why are you throwing so much money into these IUL’s? Your wife is right.

            Dr. Phil: I have stopped my 403B and Roth IRA (through my company and up to the max $18500) just this month after amasing almost $28k total for the year and do not need any more tax deductible withdrawals for now. Does it not make sense to keep the IUL as a hedge that will also transfer the money in the cash value portion tax free to anyone in the future?

            SAO: The problem with IUL policies is that the insurer gives “big returns” with one hand then takes the returns away with the other hand through expenses and fees. If you’ve already maxed out your 403B and your Roth IRAs for both you and your wife then put the extra money into growth stocks NOT an IUL.

  10. Kudos to you, Mary, for being a caregiver for so long. My caregiving experience lasted 18 months and it was the toughest 18 months of my life.

    A long-term care rider (or a chronic illness rider) can’t be added to a life insurance policy that is already in-force. It has to be added at the same time the life insurance policy is purchased.

    The downside to some of these life insurance policies with a chronic illness rider is that they can lapse, even if the premium is paid on time every year. Ask the insurer to send you an in-force illustration and tell you how long the policy is guaranteed to remain in-force.

    Recently a woman asked me to look at her policy and the policy was only guaranteed to stay in-force until age 72. In order to keep the policy in-force after that age, she would have to pay A LOT more premium.

    1. You are right, but I made sure our policies are good until after age 100! Even if we are still kicking, I cant believe we won’t need care before that age 🙂

  11. I bought my LTC policy many years ago. The idea was that it would cover 6 years of care in an assisted living facility (ALF), but that 6-year period could be stretched farther by opting for home health care instead.

    Fast forward 20 years. According to Genworth’s data from 2017, the average monthly cost for an ALF is $3,750. (Based on my mother’s experience, I’d say that’s pretty accurate). However, today’s home health care costs come in almost $300 per month HIGHER.

    I think this has been an “interesting” change. For me, that pot of money would now last longer if I entered an ALF!

    Another thing I worry about, frankly, is just how many competent, caring people are going to be available to provide care (either in an ALF or at home). The field isn’t noted for high pay, and staff turnover is a major problem nationwide. If pay rates rise, then obviously so will our costs–whether we have policies or self-insure.

    1. My MIL’s LTCi policy is covering the full cost of her ALF every month. She’s banking her social security check and both pensions every month. If she ever needs full blown nursing home care, the policy plus the SS and pensions will cover the full cost.

  12. I wish that there was no mention of the availability of Medicaid-compliant annuities as an option for protecting loved ones, mainly spouses. They certainly aren’t a panacea, but they appear to be a plausible option for some.

        1. They seem to be a good option to create an income capable of supporting the spouse not receiving LTC, converting the annuitized assets into income that is not considered for Medicaid eligibility. For those with well under $1 million in investable assets, this seems to potentially be a better option than buying LTCI.

          1. Thank you for your reply. In theory it sounds great. In practice there are two big problems with Medicaid-annuities:

            1) The “rate of return” is pitiful. The first 13 years or so of payments is nothing but the insurer giving you your deposit back. You’re not earning anything on that money for 13 years.

            2) Secondly, this approach makes Medicaid your first choice. Why would anyone, with money, choose to limit themselves to the care choices that only Medicaid will pay for?

            My MIL is in an awesome assisted-living facility. She loves it. It’s beautiful. They don’t take Medicaid. The best facilities don’t.

            Home care is everyone’s preferred option. Most states allot a very small portion of their Medicaid budget to home care.

            The middle-class is better off getting an affordable LTC Partnership policy which will protect most of their assets if they ever have to go on Medicaid. Medicaid should be your last resort, not your first resort.

            The Medicaid waiting lists will only get longer and longer as Congress slows the growth of Medicaid (substantially) and the Boomers start turning 80 only 8 years from now.

        2. From an actuarial perspective, the SPIAs are reasonable, but that’s not the big advantage of these.

          Your point about Medicaid not covering the best LTC facilities and potentially home care is well taken. But based on a recent quote I received for a 70/65 year old opposite sex couple, premiums paid annually on a LTC policy would run about $6k a year yet only provide a maximum lifetime benefit of $900k, only two-thirds of which could be used by a single spouse. That’s six years or fewer at many (most?) quality LTC facilities. That seems to fly in the face of the example you provided in the post about needing LTC for a decade or more.

          1. Thank you, Doc, for your reply. In 2017, less than 4% of the new long-term care policies purchased were for people age 70 and over.

            Over 64% of new long-term care policies are purchased by people between the age of 50 and 64. Zack and Paula were in that age range when they purchased their policies.

            The younger someone is when they apply for long-term care insurance, the more options they will have and the lower their premium will be.

            If a 70-year old and a 60-year old bought the exact same benefits from the exact same company, and the 60-year old’s premium was $2,000 per year, the 70-year old’s premium would be almost $5,000 per year. Age is the single biggest factor in determining the cost of a long-term care insurance policy.

            For most people in their 70’s it does not make sense to buy long-term care insurance. You would probably be better off with a hybrid policy. And there are hybrids that have long-term care benefits that can never be exhausted. You could need care for decades and the long-term care benefits would never stop.

  13. Nice article – thanks for presenting a different opinion. Two questions:

    Scott – you mention having a policy for ~2k per year, Can you be more specific? Who are the providers out there who offer a policy at that cost? According to my research, there are only ~15 providers that offer this care today. I’m curious (from your perspective), who are the top ones?

    Fritz – just curious, are you going to pursue LTC or stay with the self-insure option?

    Thanks!

    1. Hi Greg,

      The cost of long-term care insurance policy depends upon several factors:
      1) your age at the time you apply for a policy
      2) your health history
      3) if you live alone or if you have a spouse/partner
      4) the amount of benefits you buy
      5) the company you buy it from (in some cases, some companies can cost 75% to 100% MORE than other companies)

      You ask, “Who are the providers out there who offer a policy at $2k?”

      The answer is everyone of them. The average cost of a new long-term care policy in 2017 was $2,596. But the average age for buying a policy is 59 years old. If you’re 70 you can buy a long-term care policy for $2,000 per year in premium, but it won’t have much in terms of benefit.

      Here are the companies currently selling most of the LTCi policies in most states. Auto Owners Life Ins. Co., Bankers Life & Casualty, Genworth Life Ins. Co., LifeSecure, Massachusetts Mutual Life Ins. Co., Mutual of Omaha Ins. Co., National Guardian Life Ins. Co., New York Life Ins. Co., Northwestern Mutual, OneAmerica/State Life, Thrivent Financial, and Transamerica.

      I try to match each client to the company/policy that’s best for them. I’ve recommended everyone of these companies to at least one client over the past 10 years. Each company has their competitive niche.

    2. Greg, you’re clearly an intelligent reader – the first to ask if I’ll reconsider given Scott’s post!! To be fair to Scott, I HAVE asked him to provide 1-2 of his suggested policies to me for my review. I’ll have a look as time permits, and hope to write another article in the coming months with my findings.

      BTW, apologies for my absence during the GREAT exchange in the comments on this post!! My wife and I were on a Midwest Camping Tour, and I stayed away from computer screens! (I did get in a few great swims, some kayaking and some hiking, so I’m doing what I can to avoid the need for LTC insurance!!).

  14. This is really Thought-provoking. I definitely got a lot from this article. When you are getting older, you need to prepare for it, but I didn’t know you shouldn’t buy long-term care insurance.

    1. Tiana….I don’t think the message is you SHOULDN’T by LTCi, but that you should evaluate your own personal situation based on expected longevity, health history, and asset levels. I do t believe there’s one golden rule about buying or not buying this insurance. It’s an individual decision.

      Others: am I right?

      1. Hi Rick,

        We can all agree that asset levels are an important factor in deciding if someone should buy long-term care insurance. Someone with little or no assets can apply for Medicaid if they need long-term care and therefore they don’t need long-term care insurance.

        Why, in your opinion, should expected longevity and health history be considered when making this decision? Exactly how would a good or bad health history factor into this decision? How would “expected longevity” factor into this decision? Should someone buy long-term care insurance if their “expected longevity” is high or if it’s low?

        1. Hi Scott…good question about why in my opinion, longevity and health history be considered. As I said in both my posts on this story, to buy or not to buy (that is the question) is a personal decision.

          In my case, my family has a long history of long life (both my parents passed in their mid-90’s; my aunts and uncles passed in late 90’s and early 100’s), and their physical health was generally good for their ages. They obviously needed help with many of the daily activities that triggers LTC payments. With this backdrop, I can reasonably expect that I too (in good health today) will love a long time and will eventually need LTCi.

          If I had a family history of bad health (ie parents, aunts/uncles) who passed quickly from sudden heart attacks or aggressive cancer, and all other things being equal, I would not make the decision to buy LTCi precisely because that history would suggest there is no “long term” in my future.

          For these reasons, this is how I evaluated the decision to buy LTCi. Again, it’s a personal decision with more than just asset level as the sole determinant. My approach may not be right for everybody, but my wife and I sleep well at night knowing we believe we made a thorough, well-informed decision.

          Rick

          1. Thanks, Rick, for your reply.

            The only counter point would be that we survive health conditions today that caused our parents/grandparents to die suddenly.

            Cancer, strokes, heart attacks, etc… that caused our relatives to die young, are things we survive today.

  15. My wife and I bought LTCi through our megacorp in our early-fifties, about 10 years ago. The premiums have not gone up much but it was not cheap to begin with. Our reason for buying it included providing a level of assurance to the surviving spouse, my being adopted and not knowing my family longevity, being in generally good health and our asset levels. Ive recently found out information about birth family which indicates there is longevity into the late 80’s and beyond so that has helped validate the decision. Our asset levels are high enough however that we could arguably self-insure so I do occasionally revisit the decision. I view LTCi as one more tool to protect against longevity, along with delaying SS, delaying pensions, partial Roth conversions and a QLAC, amongst others. We are also considering a CCRC for later in life.

  16. I made the decision when I was 40/spouse/38 (15 years ago) to go with an LTC policy. I also signed up my Mother/Mother in law after seeing an uncle with a stroke and the cost for his care at that time. The policy for my Mother has been very helpful, she is currently in a memory care facility and the policy is paying about 80% of the costs and much more than the premiums have cost. The policy 15 years ago were about $80/month for myself and spouse ($200/day Nursing and lower per day for Assisted living, home care, etc.) I have added inflation and premium increases to todays coverage amount ($120/month for both of us) that will now pay $305/day nursing, $230/day assisted living and $183/day home care for max benefits of about $1.2 million each and if you pass away before age of 70, most of the premiums are returned. I don’t think you could ever get this type of policy today and happy we have this as part of our retirement planning and made that decision. I have figured that I will have paid ~$50-60k into this policy by the time we are 75, which would be about a year in a facility at current LTC costs.

  17. Excellent article and something I’ve been contemplating for a while now. I am a Federal worker living overseas with my German wife and son. Both of them have a LTC through a German insurance company but it seems like I’m stuck with “Federal Long-Term Care Insurance Program” or is there other options. My plan is to retire over here in Germany, any suggestions?

  18. The federal long-term care insurance program has the best “international coverage” of any policy today. If you’re planning on living the rest of your life in Germany, then that’s the policy you should own.

  19. Scott this oldsoldier 🙂 Enjoyed the discussion here. But you present very compelling arguments and I applaud that. Kind of unfortunate with Laurel’s childish argument. Thanks for the presentation as you do make sense.

  20. Scott, you mention that the real danger is becoming disabled the first half of retirement. So would it make sense to only buy and pay for the policy from ages 60-80?

  21. That’s an excellent question Susan. I don’t plan on cancelling my LTCi policy at age 80. I can cancel it at anytime if I wanted to. Each year you should assess the benefits in the policy and the premium and determine if it’s worth it.

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