Alternatives to Long Term Care Insurance

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Lbill
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Alternatives to Long Term Care Insurance

Post by Lbill » Tue May 01, 2012 10:00 am

The costs of elderly healthcare (including assisted living and nursing home care) may be the greatest single challenge faced by retirees affecting their financial planning. One approach is to purchase long term care insurance, but many don't feel comfortable with this option because of high premiums, especially if LTCI isn't purchased at an age well in advance of when it might be needed. This creates other worries, such as concern about whether the insurance company will be there to deliver 20-25 years in the future and the uncertainty of rapidly rising premium rates, which has recently been happening. The vast majority of retirees have either passively or actively decided to "self insure" or hope that they won't have to incur huge end-of-life healthcare expenses. I find myself in this situation, and am interested in learning what options others may have considered to fund their their latter-year healthcare needs.

I recently ran across this article that mentions some possibilities, including:

> Establish a separate account with funds earmarked for long-term care. These should include conservative vehicles, such as bond funds or individual bonds.

> Designating one's primary or secondary residence as a long-term care asset.

> Purchasing life insurance or annuity-type products that offer both a death benefit and a rider that allows cash withdrawals to pay for long-term care.
There are several types of asset-based products with a life insurance or annuity chassis that offer both death benefits and cash values, should the client ever need long-term care, funded with a single premium. Life-based products provide a death benefit that the policyholder can put toward qualifying LTC expenses. At death, any unused benefits pass income-tax-free to heirs, and tax-qualified long-term-care benefits are also income-tax free. Because of the Pension Protection Act of 2006, clients can withdraw money from annuity-based products income-tax-free as long as those funds are used for long-term care.
I don't know much about this option, but it sounds interesting. I'd like to learn what alternatives to LTCI others have considered or are pursuing, as I don't consider LTCI to be a viable option for me at this point.
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dhodson
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Re: Alternatives to Long Term Care Insurance

Post by dhodson » Tue May 01, 2012 10:15 am

The hybrid products are just plain horrible. I think the agents we have here will tell you that its better to purchase the life insurance (even if permanent) and LTCi seperately and that is assuming you want/need the non ltci product. It currently seems to appeal to those folks who buy return of premium life insurance thinking that this is a better deal then vanilla term. It isnt but some people cant get beyond the idea of spending/losing money.

I actually anticipate that eventually a better LTCi product will come out which will just cover the tail after a certain number of years (lets say 2 or 5) and that this will be much more affordable and desireable. Im going to guess that it willl take many yearsto decades for this to happen though and this is just my non insiders guess. My guesses arent always so valuable.

I do think its best to just consider this a cost you should plan for like retirment. I plan to have sufficient assets to cover 3-5 years of ltc besides what i am doing for retirement.

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Re: Alternatives to Long Term Care Insurance

Post by dhodson » Tue May 01, 2012 10:22 am

also im not sure why the fund should be so conservative. I feel it should be aged based risk similar to retirement. Of course one could require services "early" but then there is so little money in there that it probably doesnt matter how it was invested.

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nisiprius
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Re: Alternatives to Long Term Care Insurance

Post by nisiprius » Tue May 01, 2012 10:48 am

Lbill wrote:...many don't feel comfortable with this option because of high premiums
It is what it is. The premiums are high because the costs of long-term-care are high, and the chances of needing it are high. One doesn't need to accept insurance-company propaganda on this point, it's patently obvious from personal observation, at least if you're over fifty or are an adult child of parents in their seventies. Think of it this way. How many people have you known well enough to have ever exchanged greeting cards with who have had to replace a house destroyed by fire, hurricane, or earthquake? How many have you known who have been in nursing homes for longer than a couple of months? In my case, the numbers would be "0" and "about a dozen."

There can't be any magic in these hybrid products. They can't magically provide comparable protection to a long-term-care policy at a fraction of the cost. They have got to be silly things like "dread disease insurance" or "accidental death and dismemberment" or whatever it was that Art Linkletter used to natter about that was going to provide you "Tax-free cash! And it's to you, not to your doctor or hospital."

Great, some nice little benny that kicks in so you get something rather nothing. A sweetener. Dear insurance agent, if you can't sell the customer LTCi, after you've softened him up and made him feel all worried and rotten about it, you can at least sell him this. No, I'm too lazy to check it out, if you see something that actually looks like a viable substitute for LTCi you post a pointer to it. I'll bet it has some fatal flaw, like no annual benefit increases.

One of the things that's disturbing about the current situation is that so many insurers have been issuing huge rate increases, higher than the "20%" warned against in your policy sign-off paperwork, and so many have quite issuing it. Barring some far-fetched conspiracy theory, the only explanation I can think of is that long-term-care is even more expensive and more likely be used than the insurance companies thought. The failure of the CLASS act seems to be similar: they couldn't make the numbers work, because it was going to be more expensive than they'd thought.

End-of-life is just a really unpleasant subject, but the need is real and the costs are real.
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Cut-Throat
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Re: Alternatives to Long Term Care Insurance

Post by Cut-Throat » Tue May 01, 2012 4:05 pm

Hemlock Society.

I don't care what the cost of LTC is, I don't want to go.

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nisiprius
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Re: Alternatives to Long Term Care Insurance

Post by nisiprius » Tue May 01, 2012 5:19 pm

I'm guessing Cut-Throat meant to say "I don't want to go into a nursing home." Or, more specifically, doesn't want to live in a situation where one needs help with two or three "activities of daily living."

Casual Googling indicates:

The U. S. death rate is about 800 per 100,000 per year.
The U. S. nursing home residency rate is about 500 residents per 100,000 population (1.6 million total).
Patients served by hospice care is about the same.
The U. S. suicide rate is about 12 per 100,000 per year.

Hemlock society or no Hemlock society, when it actually comes down to decision time, suicide doesn't seem to be an option that many people elect.

Of course, hospice care is in a funny sort of grey area--probably the rules vary by state--I believe a doctor has to certify that the patient has less than six months to live, and I don't know what the figures are but I think it's all but certain that hospice care shortens it. It's not suicide, and it's not not suicide, and it is very relevant to long-term-care discussions because it's (currently) covered by Medicare. And it's becoming more and more common.

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Re: Alternatives to Long Term Care Insurance

Post by yobria » Tue May 01, 2012 5:44 pm

nisiprius wrote:Hemlock society or no Hemlock society, when it actually comes down to decision time, suicide doesn't seem to be an option that many people elect.
I think more would if assisted suicide weren't illegal in 49 states, and it were socially acceptable. Managed death should be a basic human right. It's certainly something I'm planning on, if the time comes. My great great uncle took care of things by falling on a knife when he was 97. I'm hoping for a more elegant solution.

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Re: Alternatives to Long Term Care Insurance

Post by Lbill » Tue May 01, 2012 6:34 pm

LTCI isn't all you need - you need to be sure there's someone who can activate it in the event you need LTC because your marbles fall out of your head. How ironic if you planned and paid and never got the benefits because there was no-one around to call the insurance company, eh? I'm sure they'd be broken-hearted.
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Re: Alternatives to Long Term Care Insurance

Post by VictoriaF » Tue May 01, 2012 6:38 pm

yobria wrote:
nisiprius wrote:Hemlock society or no Hemlock society, when it actually comes down to decision time, suicide doesn't seem to be an option that many people elect.
I think more would if assisted suicide weren't illegal in 49 states, and it were socially acceptable. Managed death should be a basic human right. It's certainly something I'm planning on, if the time comes. My great great uncle took care of things by falling on a knife when he was 97. I'm hoping for a more elegant solution.
I don't think I could successfully fall on a knife even now. I suppose when the time comes I should move to Portland or Amsterdam.

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Re: Alternatives to Long Term Care Insurance

Post by cycleProf » Tue May 01, 2012 6:46 pm

I suspect that most who at end of life choose when to die are not classified suicides. I've limited data, but this is true of the handful of specifics I'm aware of. It has to be way more than 12 in 100,000. Trusted medical professionals and family members help out.

Re LTCI - seems to me like dental pre-payment plan "insurance" LTCI isn't a true insurance product. With limits of how much and for how long it doesn't protect against the most catastrophic events . I'd reserve insurance for circumstances where the pooled risk protects perticipating parties against uncommon but possible calamities - like a house fire, a debilitating accident or big time medical expenses. In a recent thread someone posted the suggestion of a LTC insurance product that covered all expenses after some amount paid by insured - say $200K. That seems like real insurance to me, not a pre-payment plan.

David

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Re: Alternatives to Long Term Care Insurance

Post by ScottW999 » Tue May 01, 2012 7:43 pm

I have elected to try to keep on working until age 70 (I am now 66) and postpone taking social security until age 70. Even though this does not replace LTCi at least there will be more money coming in annually during my retirement years. Also by working the 4 extra years between 66 and 70 I will have the extra funds to pay for old age care if that becomes necessary.

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Re: Alternatives to Long Term Care Insurance

Post by Rubirosa » Tue May 01, 2012 7:58 pm

To each his own, but for me, there is no good alternative for LTCI. My wife and I are happily and reasonably covered by TIAA-CREF/MetLife. It's the best asset protection around, in our opinion.

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Lbill
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Re: Alternatives to Long Term Care Insurance

Post by Lbill » Tue May 01, 2012 8:05 pm

cycleProf wrote:I suspect that most who at end of life choose when to die are not classified suicides. I've limited data, but this is true of the handful of specifics I'm aware of. It has to be way more than 12 in 100,000. Trusted medical professionals and family members help out.

Re LTCI - seems to me like dental pre-payment plan "insurance" LTCI isn't a true insurance product. With limits of how much and for how long it doesn't protect against the most catastrophic events . I'd reserve insurance for circumstances where the pooled risk protects perticipating parties against uncommon but possible calamities - like a house fire, a debilitating accident or big time medical expenses. In a recent thread someone posted the suggestion of a LTC insurance product that covered all expenses after some amount paid by insured - say $200K. That seems like real insurance to me, not a pre-payment plan.

David
Some good points here. I wonder if anyone can estimate the amount the insured would typically pay out in premiums until the likely age they might be able to start collecting and the max amount they can collect. How much of your "coverage" is the return of your own premium payments vs. something extra. Who actually benefits the most from LTCI? On the one hand, those who end up needing LTC at an early age seem likely to outlive their term of coverage and still have to pay the bills after that. Those who need LTC at a more advanced age, when they are less likely to outlive their coverage, will have paid a lot more in premiums by then. How much of what they get in coverage represents what they paid in? If you put the "premiums" in TIPs instead, at what age would you have enough in there to cover a year or two of nursing home care if you live long enough?
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard | | "You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs

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Re: Alternatives to Long Term Care Insurance

Post by FrugalInvestor » Tue May 01, 2012 8:16 pm

After recently going through this with my mother-in-law all I can say is, make sure the person(s) making end-of-life decisions for you knows your desires. When it's obvious that you have little to no ability to make decisions on your own there is quite a bit of leeway for the family but the family needs to be certain of what you want. It's much easier to make the hard decisions, and much more likely that they will be made, if desires have been clearly communicated in advance. It is also much fairer to those who need to make those decisions if you've communicated your desires.
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Re: Alternatives to Long Term Care Insurance

Post by ps56k » Sun May 06, 2012 3:47 pm

I seem to recall reading that in certain cases, LTCi may not be warranted
based upon overall ability to pay vs the insurance premiums.
Just some random numbers off the top of my head.

let's say - from age 65 -> 80 you buy/pay for the LT insurance, that's 15 years.
Just swag below, without any supporting data :)
What's the going annual premium for what coverage ? $2,500
What's the projected daily rate for the LTC facility ? $150/day
What's the expected time at the LTC facility ? 3 years

So - premiums = 15 yrs x $2,500 = $37,500
Expected outlay = 3 yrs x $150/day = $164,000

I seem to recall that as your net worth goes above $1mil, $2mil, $3mil
that these $164k expenses become easier to handle out of pocket,
while below the $1mil they are a killer - and you really need to protect with LTCi.

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Re: Alternatives to Long Term Care Insurance

Post by tc101 » Sun May 06, 2012 4:00 pm

LTCI isn't all you need - you need to be sure there's someone who can activate it in the event you need LTC because your marbles fall out of your head. How ironic if you planned and paid and never got the benefits because there was no-one around to call the insurance company, eh?
You will need someone to do more than just ask the insurance company. My wife is a lawyer and she had a very hard time getting the insurance company to pay for her parents
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Re: Alternatives to Long Term Care Insurance

Post by tc101 » Sun May 06, 2012 5:24 pm

There has been a lot posted here over the years about LTCI. Some things I read here years ago made me decide not to get it. I don't want to repeat all those ideas now, but do a search of old discussions.
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Re: Alternatives to Long Term Care Insurance

Post by ourbrooks » Sun May 06, 2012 6:20 pm

There's a great deal of self-serving misinformation propagated about long term care.
First, let's start with the definition: (http://www.longtermcare.gov/LTC/Main_Si ... Index.aspx)
It's any kind of assistance in performing the activities of everyday life. Have you gotten to the point at which you need to hire someone to help clean your house? You're receiving long term care!! (Some of us need long term care earlier than others of us.)

Not surprisingly, something like 70% of long term care is provided by family members.

Now, how much of what kind of care are you likely to need? Here's some more answers: http://www.longtermcare.gov/LTC/Main_Si ... _Much.aspx

One third of 65 year olds will never need long term care.
35% will need nursing home care for an average of 1 year.
(from other sites) 4% of men and 7% of women who enter a nursing home will stay for more than 5 years.
Alzheimer's disease is one of the leading causes of long stays.

The distribution of costs has a very long tail; most people don't spend that much; a few spend a lot.
This would seem to be the ideal situation for high deductable long term care policies. These would behave much more like car or fire insurance; making a claim would be a rare event. Costs should be much lower than current policies and they might have the unusual characteristic that rates actually started dropping beyond a certain age, because fewer people would live long enough to make the deductable. Alas, I haven't heard of an insurer who offers that kind of policy.

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Re: Alternatives to Long Term Care Insurance

Post by tc101 » Mon May 07, 2012 10:47 am

35% will need nursing home care for an average of 1 year.
(from other sites) 4% of men and 7% of women who enter a nursing home will stay for more than 5 years.
The thing to be clear on when you hear statistics like this is that the person will go into the nursing home, stay X amount of time, and then die. You are not usually going into the nursing home for a while to get better and then come out, you are going there to die. It is a long drawn out expensive dying process. How much money do you want to put into that long drawn out expensive dying process?
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Re: Alternatives to Long Term Care Insurance

Post by BYUvol » Mon May 07, 2012 11:59 am

nisiprius wrote:Think of it this way. How many people have you known well enough to have ever exchanged greeting cards with who have had to replace a house destroyed by fire, hurricane, or earthquake? How many have you known who have been in nursing homes for longer than a couple of months? In my case, the numbers would be "0" and "about a dozen."
Funny you would mention this. My grandfather just underwent surgery to repair a pinched spine, and it didn't go well, he is now paralyzed. His wife (not my grandmother) was debating between purchasing a hospital bed to bring home and a nursing home. Her decision was complicated today by a call from the fire department informing her that a truck had run into their house, taking out some important load-bearing beams. They now have a tarp as a roof.

Incidentally, I am young, so I don't know many people that have had to consider nursing homes,but my mother and sister both had houses in Kentucky destroyed by a tornado (they lived close, it was the same tornado). I have also had a few friends whose basements have severely flooded, and they didn't realize until after the fact that their homeowner's insurance policy didn't protect against floods.

Moral of the story for me is to insure against things that you can't afford to replace, and self-insure against everything else.

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Re: Alternatives to Long Term Care Insurance

Post by jebmke » Mon May 07, 2012 12:17 pm

VictoriaF wrote:
yobria wrote:
nisiprius wrote:Hemlock society or no Hemlock society, when it actually comes down to decision time, suicide doesn't seem to be an option that many people elect.
I think more would if assisted suicide weren't illegal in 49 states, and it were socially acceptable. Managed death should be a basic human right. It's certainly something I'm planning on, if the time comes. My great great uncle took care of things by falling on a knife when he was 97. I'm hoping for a more elegant solution.
I don't think I could successfully fall on a knife even now. I suppose when the time comes I should move to Portland or Amsterdam.

Victoria
or Switzerland I think.

This is only an issue if you are physically unable to reach your supply of nembutal or in a mental state where you can't remember where you put it.

I agree, the fall on the knife solution seems like a challenge.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Alternatives to Long Term Care Insurance

Post by VictoriaF » Mon May 07, 2012 2:23 pm

jebmke wrote:
VictoriaF wrote:
yobria wrote:
nisiprius wrote:Hemlock society or no Hemlock society, when it actually comes down to decision time, suicide doesn't seem to be an option that many people elect.
I think more would if assisted suicide weren't illegal in 49 states, and it were socially acceptable. Managed death should be a basic human right. It's certainly something I'm planning on, if the time comes. My great great uncle took care of things by falling on a knife when he was 97. I'm hoping for a more elegant solution.
I don't think I could successfully fall on a knife even now. I suppose when the time comes I should move to Portland or Amsterdam.

Victoria
or Switzerland I think.

This is only an issue if you are physically unable to reach your supply of nembutal or in a mental state where you can't remember where you put it.

I agree, the fall on the knife solution seems like a challenge.
If I forget where I put my Nembutal will I still remember to fly to Switzerland? (A rhetorical question.)

Victoria
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