When to Buy LTC
Long Term Care Insurance is Less Expensive Than Most Realize
I cannot tell you how many times people have told me this LTC insurance is too expensive. This is typically followed an hour later by “Wow, I can’t believe that’s all it costs”. Perhaps agents are explaining things incorrectly.
Let’s take a 50 year old couple who wisely choose to investigate this coverage while they are still healthy enough to qualify. They choose modest coverage, enough that with their available income they can pay for home care and assisted living type facilities, where 80% of all LTC is done.
The coverage gives them 10 years of care, when needed, and the daily benefit of $100/day increases automatically at 5% compound each year. This feature is absolutely essential due to the quickly rising costs of LTC. The NYTimes reported recently that by 2020 professional caregiving will overtake retail as the number one occupation in the USA. Where will those workers come from and who will pay their wages?
We determine an annual premium of less than $3000 a year to cove the both of them and the automatic annual 5% benefit increases. Over 30 years they will have paid considerably less than $90,000 of tax-deductible premiums.
By that time, at age 80, they will have $4,000,000 dollars for LTC costs between the two of them! If they had instead put those dollars in a stock market account earning 10% interest every year (wouldn’t that be wonderful), with no losses ever, they would have less than $600,000 by then. They would have had to earn a consistent and unrealistic nearly 20% every year to do as well.
Lets compare this to an auto insurance policy. If you never have an accident, it’s a big waste of money. You’re a good drive, cancel that policy! Instead, take the premiums and put them in the bank earning (today’s current rate of) 1% interest. In 30 years, you might have enough for a fender bender, assuming nobody gets hurt. Who would do that?
Back to my original example: If the couple were 60 years old instead of 50, and still healthy enough to qualify for coverage (25% are not by age 60) they would pay twice as much in premiums to have that same $4,000,000 in coverage in 30 years.
At a recent discussion at Wisconsin’s HHS offices, the following statement stuck in my memory. “In 12 years we will look back on 2014 as the ‘good old days’ of long-term-care. We have the facilities, and we have the staff, but in 12 more years as the 10,000 baby boomers turning 65 every day start hitting 80, we won’t have the people or the facilities to handle them”.
Recently, I was approached by two home care agencies in Green Bay, WI. Each one asked if I would inquire of my clients if anyone would be willing to work just 2 mornings or afternoons a week as a caregiver. They indicated they were turning away clients today as they cannot hire enough caregivers now.
Is it time for you to investigate LTC insurance? Perhaps, or perhaps not. But investigate with a professional who understands all the things that need to be taken into account to come up with an appropriate solution. More info can be found at www.TheLongTermCareGuy.com
Family History Starting To Count in LTC Insurance Qualifying
For years I’ve been asked if a person’s family history has any effect on their being able to obtain Long Term Care insurance. Up until now my answer was “not yet”!
However, the answer is changing to yes. One insurer has asked about family history but it was not a deciding factor. Now another LTC insurer will not allow the best classification for health if a parent was diagnosed with coronary artery disease prior to age 60. Likewise if a parent was diagnosed with dementia prior to age 70. If both parents were diagnosed with dementia prior to age 70 then two classes down from the best rating is the best they can qualify for.
They claim that research has shown individuals with a family history of early onset dementia or coronary artery disease are at increased risk for those disorders. So far, the health of siblings will not count against applicants.
LTC insurance is steadily becoming more difficult to qualify for. Thus it may be well advised to consider it in your 40’s instead of waiting until age 55 or 60. I still get approvals for people in their 70’s, but they best be in VERY good health to qualify, and it is more expensive.
I have focused a significant portion of my career to helping people who have been declined to find coverage. In most cases the coverage will be far more limited, and more expensive, but still better than spending down to Medicaid impoverishment if that can be avoided.
So, when should you first start investigating LTC insurance? When your health is still good, sooner if parents have chronic conditions, and at the point where the premiums are affordable without sacrificing.
Most people find they do not need as much coverage as they might initially think. If this is approached appropriately, and income that might not be used for fun things is considered, as well as income from savings, only a small policy may be needed. This is where the knowledge of the agent assisting becomes paramount. For more information visit www.TheLongTermCareGuy.com
Help Wanted – Home Health Aides
Another article appeared in the Wall Street Journal recently about home health care workers. If you want job security, long hours and low pay, this is the career for you.
I have mentioned in prior posts about the shortage of workers caring for our elderly in the US. The turnover rate for home health care workers is 40% to 65% every year. The US Labor Department predicts this profession will grow by nearly 50%, or the equivalent of nearly a million new jobs by 2022. That is nearly five times the average of all occupations.
This also confirms the New York Times study that caregiving will overtake retail as the number on occupation in America by 2020, only 5 1/2 years from now. Where will all these workers come from? Who will want these jobs at a median wage of $20,000 a year? ResCare, one of the nations largest home care providers hires 2000 workers a month, just to replace workers who have left.
When your health changes and you can no longer manage on your own, who will care for you? Will it be your children? How many do you have, where do they live, and can they leave their careers and families to care for you?
Do you think the government will provide your care? Spend your money and let Uncle Sam take over? He can’t print it fast enough now and the baby boomers continue to turn 65 at a rate of 10,000 a DAY!
A nice assisted living facility that costs $3600 a month now (assuming your need for care is not significant) will be close to $15,000 a month when today’s 50 year olds are 80. Many 80 year olds think this is something they might not need for 10-15 years yet, when it will cost $30,000 a month.
I have Long Term Care insurance that will help pay these bills. Every year its benefits increase automatically at 5% compounded. Many insurance companies and agents are promoting LTC insurance policies that do not increase at all or do so at only 3% inflation. That will not pay the bills in the future! The only good those policies will do is to earn them a commission and leave the (woefully inadequately) insured clients to spend down to Medicaid impoverishment.
Congress wants to raise the minimum wage by a third. Caregiving providers cannot hire or retain workers at current pay grades. Wages will go up, and those with money will be able to get the care they want. I will. Will you? Long Term Care insurance is still available at reasonable rates, if it is chosen appropriately. That’s where I can help.
More information is available at www.TheLongTermCareGuy.com or call me, let’s talk. (920) 884-3030 or at (800) 213-9203 if are from out of town
Providers Sue Kids For Parents LTC Costs
From Financial Advisor magazine comes the following information: more than half the states have filial responsibility laws making adult children legally responsible for indigent parents’ bills.
I’ve known about this for years, but never thought they would be enforced. However, now nursing homes, assisted living facilities, or even a publicly funded long term care agency can go after family members to repay outstanding LTC bills. 28 states have these laws on the books and are now starting to use them.
Buried in the Omnibus Budget Reconciliation Act of 1993 are rules that “compel state agencies to collect back funds they’ve expended on Medicaid services from families if they discover the families have assets available”.
Before Medicaid benefits kick in, you’re supposed to liquidate the cash value of any life insurance policies and spend the proceeds on health or long term care. If Medicaid discovers you did not, it will essentially fine you to pay back any money it’s spent on your behalf. Even after you die and your family collects a death benefit on that insurance, Medicaid can sue the family in probate court to recover what the state spent on care. It doesn’t matter if the family intentionally deceived Medicaid or it was an accident.
Why is this happening? 10,000 Americans turn 65 every day, we are getting older as a nation. We don’t have stay at home adult children to move in with a la Harriet Nelson (of Ozzie and Harriet). LTC is expensive, and most of us did not prepare for it – ending up on government welfare called Medicaid. Our government does not have enough money for Social Security and Medicare, let alone thousands per month for a LTC facility for all of us.
So now the Medicaid agency will pay (and the providers lose on the low reimbursements) initially and claw back when and where they can. If you think there is no reason to worry, the government will take care of everything, think again. Talk to your children, perhaps they would purchase LTC insurance for you to protect a possible inheritance (if you are still healthy enough to get it). They could end up paying for your care later, whether they want to or not.
I can email the entire article, simply ask for it at [email protected] Check out www.TheLongTermCareGuy.com for more info
I’m Going To Wait Before I Buy LTC Insurance
Why should a person buy LTC insurance at age 50, when they may not need care (typically) until age 80? Why pay premiums all those years? Who wants to spend money for 30 years of premiums.
Seems like a logical viewpoint, why start paying premiums now when it could be 30 years before you might need care. As long as you stay healthy it’s a valid viewpoint. If only you could guarantee that!
If you were 24 years old, with a Camaro or other expensive to insure car, and knew that the car insurance would be much less after your 25th birthday, would you wait? It will only be a few months……..
HEALTH CAN CHANGE
Did you know that 40% of the people receiving LTC services in this country are between 18 and 64? Many people go to the doctor every year for a check up and stay in good health, until the checkup where the doctor tells you the results of a test and prescribes metformin, or fosomax, or warfarin, or prednisone, any of which might be prescribed for someone who appears healthy, able to do all their normal activities, but can no longer purchase LTC insurance.
INFLATION HAPPENS
Did you save up to pay cash for your first house? The house went up in price faster than you could save. Good LTC insurance has a built in 5% automatic annual increase in the benefits it will pay when care is needed. Every year you put off purchasing LTC insurance means a larger benefit will be needed, and you are another year older. Once you have a policy, every year your benefits increase to keep up with the increases in the cost of care. Owning a policy puts inflation on your side.
LTC INSURANCE BECOMING HARDER TO GET
Years ago most people chose lifetime benefits. Such policies were relatively inexpensive and would cover however long you needed care. Now some policies will let you purchase 10 years of care, but most limit you to just five years of care maximum. Things that used to kill us, now “wing” us necessitating much longer periods of care, its very expensive, and the insurance companies are afraid to cover us for life anymore.
Medical conditions that were acceptable to LTC insurance companies a few years ago will now cause you to be turned down. Medical research has documented the link between diabetes and dementia, causing declines for diabetes now that would have been acceptable several years ago. This is happening with many different health conditions.
So when should you investigate LTC insurance? While you are still healthy enough to get it, and it is affordable. Most people are surprised to learn that they need less of it than they initially expected – once appropriate advice is considered. Thus it is important to investigate with a specialist, rather than someone who can find a single company and give you a price.
If you purchase coverage at age 50, and paid for 40 years, you would pay less in total than if you waited until age 60 and only paid for 30 years. By 60, a fourth of us can no longer qualify to buy LTC insurance. Get it while the getting is good. For more information, go to www.TheLongTermCareGuy.com
Who Will Have The Money?
I paraphrase an article in the Tuesday, July 22nd Wall Street Journal here, on spending and entitlements. The Congressional Budget Office long- term budget outlook released July 15 shows a 40 TRILLION dollar increase in debt over the next 2o years.
The CBO simply stops projecting after 36 years as its models cannot conceive of a functioning economy. What does this have to do with Long Term Care? If you are expecting government Medicaid to pay for your LTC, you had better reconsider.
The CBO’s estimates show a typical middle class family’s income tax burden nearly doubling over the next 25 years. No, this is not a rant on taxes, it is a warning that government spending cannot continue as it is (which is increasing).
Each day, 10,000 baby boomers retire and begin receiving Medicare and often, Social Security benefits as well. While five workers supported the benefits of each retiree in 1960, only two will by 2030. We do not have the resources for 77 million retirees in the Medicare system, and it’s Medicaid, not Medicare that pays for LTC when you become impoverished (it does not take long with an assisted living facility at $4000/month and a nursing home at $8500/month and doubling every 15 years).
Who will pay for your care when you can no longer manage on your own? Can your children afford to retire early and become your caregivers? Your children may be saving less than you, and you probably did not save enough for your retirement.
We are going to be on our own for our LTC. I bought LTC insurance for myself years ago, when the policies were less expensive, and the insurance companies accepted people that today are often declined. They learned that diabetes leads to cognitive impairment, and heart disease can lead to strokes. Both of these afflictions can require years of care.
Some of the LTC insurance companies have had rate increases, due to accepting people they have now learned to avoid. Some still plan to raise rates regularly, and I avoid those companies. As an independent agent, I am able to pick and chose the best deal for each client, and I work long and hard to find the best deals.
Some LTC insurance companies do not offer their products in every state, but residents of those states can come to Wisconsin to purchase them from me and they are good anywhere in the USA. It may well be worth a $250 plane ticket to get a good deal and save $1200 a year on premiums. If your agent has only one choice, ask why. If a car dealer had only one car on his lot, would that be the appropriate one for you?
If you are still healthy enough to qualify for an LTC insurance policy, you best start investigating, now! Get while the getting is still good. They are actually very inexpensive, when one person of a couple can recoup 30 years of premiums paid by two people in less than one year on claim. I will be well taken care of, who will take care of you?
More information is available at www.TheLongTermCareGuy.com
Dear Carolyn: Inlaws Want Their Mom To Move In With Us
Dear Carolyn • Five years ago, my mother became unable to continue living alone, so she came to live with me, my husband and two young children. As she physically declined, she paid for upgrades to our home that allowed her to stay with us longer. However, in the last year she began to fail and I was diagnosed with a chronic illness, so we made the difficult decision for her to move into assisted living.
Now, my mother-in-law is unable live to alone. Unbeknownst to us, my husband’s sisters put her house on the market and told her, since we have a “senior-citizen-ready” house, she would live with us!
We only found out when my husband called his mother for Mother’s Day. To his credit, my husband said this was not going to happen due to my health issues; he travels for his job and the primary responsibility for her care would fall to me.
His sisters’ response was to call us “selfish” and state that caring for their mother does not suit their lifestyles since they are raising young families. They won’t speak to us and will not let our children contact their cousins.
My mother-in-law told my husband she is “hurt beyond words” that we will not do for her what we did for my mother. How do we handle this?
Dear Selfish • That’s the appeal of chutzpah, for its practitioners at least; it doesn’t leave you with a whole lot to handle. Either you cave, and pay dearly for it, or stand tall — and pay dearly for it. These steep consequences are the meager leavings that you and your husband get to discuss and manage.
Even then, you’ve already decided the consequences to your health rule out caregiving; that seems rock-solid to me, except perhaps if turning away your mother-in-law meant consigning her to the streets. The hypocritical bullying of two siblings hardly rises to that level of emergency.
The consequences of your other choice — sticking to “no” — are largely in your in-laws’ hands, since silent treatments cut your options nearly to nil. (It’s another appealing weapon among the punitive.) You all have a right to be firm. To stand out in this crowd, though, you apparently need to be kind.
You would be surprised how often this type of problem occurs. Would have a Long Term Care insurance policy on Mom, purchased in her 50’s while she was healthy, have prevented this situation? Mom (or mother-in-law) could choose a wonderful assisted living facility with her peers, and family could visit regularly in her new “home”.
TheLongTermCareGuy.com comment: Have you planned ahead so this does not happen to you? Why not? At least investigate! There are solutions that con work even after care is needed, in addition to insurance that pays for LTC purchased while still healthy. How long do you plan to wait, hoping health does not change?
What We Don’t Know About Long Term Care – Is A Lot
Americans over 40 — in other words, us — are dangerously unaware of our likely need for long-term care when we age and woefully ignorant about the costs, according to a new poll of adults in midlife and beyond.
The telephone survey of 1,019 boomers over age 40 was conducted by the Associated Press-NORC Center for Public Affairs Research and financed by the non-profit SCAN Foundation, which supports research and other initiatives on aging and health care. It found that many older Americans had barely begun to think about their long-term care needs, nevermind put aside money to cover them. For example, nearly 31 percent of respondents said getting older was something they’d rather not think about.
Following are other highlights from the poll, along with advice available on Next Avenue to help you avoid falling short when the time comes.
Only 16 percent of those surveyed said they had done a great deal of planning for their long-term living assistance needs; two-thirds admitted they’d barely started preparing. Looking deeper, only 8 percent of respondents between age 40 and 54 — and just 30 percent of those over 65 — said they’d begun long-term care planning. In addition, just 47 percent said they had created an advance directive (or living will) to designate someone to make decisions for them in the event that they can’t.
The survey found that even many of us who have been caregivers for our own parents have taken no steps to prepare for the day our children may need to look after us. Fifty-three percent of people responding to the survey said they had provided care for a family member or close friend, yet only 24 percent said they thought it was very likely that they’d ever require ongoing living assistance themselves.
And while 77 percent said they were confident their spouse or partner would help them as they aged, if need be, only 46 percent said they were sure they could count on their children. Maybe that hesitancy reflects the fact that nearly 60 percent of respondents had not talked to loved ones about the possibility. That’s surprising, considering 95 percent who had been family caregivers say the role was fulfilling and 72 percent say it was stressful.
Almost half of respondents – 48 percent – said they thought “just about everyone” will need ongoing living assistance at some point, even if they never become seriously ill. The federal government estimates that 70 percent of American adults will require long-term care at some point after age 65, on average for at least three years.
In the survey, 58 percent of people over 40 guessed that living in a nursing home cost less than $6,000 a month, but nursing homes actually average $6,700 per month nationwide. Respondents’ estimates of assisted-living facility and home health aide costs were more encouraging: Only 31 percent underestimated the average monthly cost of the former ($3,000 to $4,000) and 14 percent underestimated the average monthly cost of the latter ($1,000 to $2,000).
Still, when it comes to long-term care savings, many of us have not faced reality. Only 33 percent of those surveyed said they doubted they’d have the financial resources to cover their care needs as they age, which makes sense when you consider that only about a third of respondents said they’d begun setting money aside. As for the rest of us, it’s time to take financial action.
Our knowledge of what’s covered by Medicare and Medicaid is also fairly remedial. For example, 44 percent thought Medicare, the national health insurance program for seniors, paid for care by home health aides; 37 percent thought the program covered nursing home fees. But Medicare does not cover nursing home costs and it covers home aides only in certain cases. As for Medicaid, the federal program for Americans with low or no income, only 39 percent of respondents thought they might ever need to rely on it to cover long-term living costs. The reality is that Medicaid pays the bulk of the nation’s long-term care costs, usually after people have spent their retirement savings. However, there is zero chance that Medicaid will have the funds to pay for the baby boomer’s LTC needs as they begin requesting assistance. For more information visit www.TheLongTermCareGuy.com
These Are The Good-Old-Days of Long Term Care
I heard this at a panel discussion featuring speakers from Wisconsin’s Health and Human Services department in Madison, the state capital, two weeks ago. We have the facilities, we have the staffing, we have the home care agencies to care for our older Americans – yet.
The baby boomers are turning 65 at a rate of 10,000 a day. Have been for a few years now and will continue to for 18-19 more years. In 12 more years those baby boomers will be hitting 80 in large numbers. Where will the caregivers come from to handle this tidal wave of elderly needing assistance with activities of daily living or cognitive impairments?We will look back on 2014 as being the good-old-days, when providers were available with room and staff to take care of whomever needed it.
Alzheimer’s alone will cause one out of seven to need care by 65 and nearly half of us by 85. In the past month I’ve been approached by several home care agencies asking me to inquire if my clients would be willing to work a few hours a week as they already have more clients seeking their services than they have staff to provide it.
This is a WORLD wide problem as the baby boomers were caused by WORLD war II. Germany’s “Medicaid” type program has a 10 year look-back for people who have divested assets. England limits the “at home” spouse to the equivalent of $38,000 of assets, not the $814,000 house, Mercedes, and $117,240 of cash the US allows – yet.
I suppose we could import third world workers to staff our facilities and provide care at home, but they have the same aging population problems we have. Cities and states are raising minimum wages, which will make LTC services more expensive. The New York Times tells us that professional caregiving will overtake retail as the number one occupation in America in 6 more years. Where will the staff come from to fill the need of facility care and home care providers?
I have a very healthy LTC insurance policy that I purchased 13 years ago. LTC insurance was less expensive then, they accepted health concerns that will cause declines today. They offered richer benefits back then. Now less companies offer shorter duration coverage, with tighter health qualifications to get it, at higher prices as they know they will be paying the bills.
How will you pay your bills when you cannot manage on your own anymore? Will your 401K and IRA accounts continue growing throughout your retirement as your Social Security check also gets larger each year? Is the premium on LTC insurance affordable now, or will it be easier to spend $200,000 per person per year 20 years from now? I didn’t ask if you want to buy a LTC insurance policy, I asked if it was affordable. Car insurance is expensive too, but it’s less expensive than replacing one out of pocket. Statistically, you are 120 times more likely to need LTC than have a car accident. 70% of us will need care per Health and Human Services in Washington DC. I’m covered, thank goodness!
For more information try the free LTC cost calculator at www.RetirementChoices.net/rraabeLTC1.html
Is It Too Late To Get Long Term Care Insurance?
For many it is too late. By 60 years old, approximately 25% of us are not healthy enough to be accepted for this insurance. It gets more expensive the longer you wait as well. For each year you wait in your fifties, you will pay 3% to 4% more, while in your sixties, waiting a year will add 6% or more to the premium.
I am taking some of these statistics from two excellent articles published recently, one from a USA Today insert on Sunday, April 13, 2014 and the other from the Wall Street Journal on Monday, April 14th, 2014. The first one stated that eight out of every 10 couples will have an individual who requires long term care (LTC).
The WSJ listed mistakes people make when buying LTC insurance. The first is waiting too long. The second is buying on price alone. There are a number of moving parts in LTC insurance, how much, for how long, deductible, inflation, etc. It is easy for an agent who is not intimately familiar with all the things one needs to consider to offer an inexpensive policy that does not address inflation. Purchasing a daily or monthly benefit today that does not grow, and may not be needed for 30 or 40 years, will give a low price, but may be completely useless when needed. If you had set aside $0.29 for a gallon of gasoline while in high school back in 1965, and tried to buy that gallon of gasoline with it now, you would be very disappointed.
This is not a product to be purchased without some expert guidance. There are features that may be very important to you and others that may not matter much at all. Each person’s situation may be different making what is unimportant to one, very important to another.
The new hybrid policies were also addressed in the article. These are typically life insurance or annuities with a LTC feature. While it is great to have life insurance to claim if LTC is never needed, some have no inflation on the amount paid for LTC services. Thirty or forty years from now when this problem becomes apparent it will be too late to go back and make corrections. If the cash flow at time of claim is not enough, along with your other available cash flow, then spending down to Medicaid impoverishment may be inevitable. If this happens, one must generally cash in any life insurance to obtain Medicaid, and all is lost.
If you have saved well and are ready for retirement, wonderful. Have you also planned for unforeseen expenses? If 80% of couples will have one person needing LTC, and the number of Wisconsin seniors is expected to double by 2035, there will be a lot of unprepared people hoping the government will still be able to pay for their LTC. Good luck with that! I got my LTC insurance at age 52. When will you consider investigating it for yourself? More information is available at www.TheLongTermCareGuy.com