Christine Benz: "75 Must-Know Statistics About Long-Term Care"

[gkaplan]

In her latest column, Christine Benz talks about the sobering data on usage, cost, insurance products, and the toll on unpaid caregivers.


http://news.morningstar.com/articlenet/ ... ?id=823957

[RadAudit]

Thanks for the link. Some of those % don't sound so encouraging.

[gilgamesh]

Fantastic information, thank you!

[Tamales]

Thanks for posting this. I really appreciate when articles like this give links to the sources for all the stats they are presenting.

Life is really a series of decisions requiring use of probability and statistics, isn't it?

I wonder how long-term care insurance would stack up if included in a chart like this showing various goods and services:


The graph shows health care more generally, but it seems that LTC has eclipsed that.

(Source for graph: http://www.aei.org/publication/thursday ... -links-27/ )

[Watty]

Thanks for posting that link.

Here is a link that might also be of interest if you have not seen it. It shows the long term care costs by state and city.

https://www.genworth.com/about-us/indus ... -care.html

One statistic that I have never been able to find is a measure of how many people that need long term care for a significant length of time have a living spouse.

The reason that would be interesting to know is that when someone goes into long term care then many of their other costs may stop to you will only need to have extra funds for the increased amount. For example if your retirement budget is $60K a year and you go into a $80K a year nursing home then only need to fund $20K a year plus any other expenses that don't decline. The problem is if you need long term and your spouse is still living then your other expenses might not decline when you go into long term care.

[JBTX]

This kind of explains a lot

99%: Percentage of new long-term care policies that cover nursing home and in-home care, 2014.

37%: Percentage of new long-term care policies that cover nursing home and in-home care, 2000.

$2,772: Average annual premium, long-term care policies being sold, 2014.

$1,677: Average annual premium, long-term care policies being sold, 2000.

Actually, $2800 a year doesn't seem like a bad deal for long term care, but understandably that probably isn't affordable to most people with little savings getting by on social security.

[Top99%]

Thanks for sharing a sobering set of statistics. Insurance generally works best for protecting one from low probability high impact scenarios like house fires, law suites etc. Long Term care is very unfortunately high probability *and* high impact which makes insurance very expensive and in some cases of questionable value. Basically if the insurance company is very likely to need to pay out high amounts of claims the only way they can make a profit is to collect high amounts of premiums. Plus, as pointed out by others in this thread since the cost of health care is rising faster than inflation most long term care policies cap how much they will pay out which is a business necessity but further reduces the value for the people buying the insurance. Big I (inflation) and big H (healthcare) are definitely two of the biggest concerns for retirees.

[Random Walker]

Top99%,
That makes total sense! I just took a look at LTC insurance with my advisor, and we came to the conclusion that way better to self insure.

Dave

[carolinaman]

I considered LTC years ago but agent advised against it for us (not sure why). So we are self insure. We will never be medicaid eligible due to pension and SS income. The threshhold for qualifying for medicaid is really low and many with just SS will not qualify.

[meowcat]

With statistics like this, why do so many Bogleheads frown on LTC insurance?

[cas]

With statistics like this, why do so many Bogleheads frown on LTC insurance?

Christine summarizes the general, high level outlines of the debate on LTC in the article. (If you really want extensive boglehead commentary on the question, just type Long Term Care into the search box, and you will be rewarded with a reading list that will keep you busy for probably hours.)

People have lots of questions about long-term care: Is the insurance worth it, given how insurers have been jacking up premiums? If you're going to raid your own coffers to pay for long-term when and if you need it, how much money do you need to have saved? And people have plenty of experiences to share, too--horror stories of insurers haggling over claims and foisting premium increases on seniors living on fixed incomes, as well as more positive tales of parents' long-term care policies that paid for themselves many times over.

The most frustrating part of long-term care decision-making is that the long-term landscape is changing so quickly. Given their difficult claims experiences, many insurers are throwing in the towel on this market altogether. Soaring premiums have also contributed to the confusion about whether the products are worth it--even if you can find one that's affordable at the outset.

Unfortunately, the "right" answer to the vexing long-term care question is pretty individual-specific, and depends on the individual's level of wealth, age, desire to leave a bequest, and need for peace of mind, among other factors.

(Source: Christine Benz, "75 Must-Know Statistics About Long-Term Care", August 31 2017, http://beta.morningstar.com/articles/82 ... -care.html

[trueblueky]

http://news.morningstar.com/articlenet/ ... ?id=823957

The numbers in her article are useful for planning.

For instance, I have about 50% chance of needing LTC, but only 22% chance that it will last two years and only 2% chance it will last more than five years. DW's chances are higher overall and increase with time, so that she has 7% chance of more than five years.

[LadyGeek]

^^^ I merged trueblueky's post into here. The combined thread is in the Personal Finance (Not Investing) forum (insurance).

To keep this actionable, please focus on your own situation.

[neilpilot]

I'm 67 & retired and, as I look back, have made both good & bad financial decisions. One of the decisions I put into the "good" category was the purchase of LTCI way back in 1999, when I was 49. It was a group policy with a fixed annual premium that in theory will not rise, but also with a 5% inflation rider.

If I we make it to 85, each of our policies will provide total max coverage of $1.5M, with limits of $600 (Nursing home) or $300/day in-home assistance. At that point, in 2035, our out of pocket premiums have been $800/yr*38=$30,400 each. I consider that money well spent to protect our assets for our heirs.

[baw703916]

With statistics like this, why do so many Bogleheads frown on LTC insurance?

The problem is most policies being sold today don't cover the tail risk. They only cover 5 years of LTC or so. A good Boglehead should be able to afford 5 years, if that's the worst outcome. The article says that the median assets after 6 years in LTC is $0. What is the point of insurance that covers everything but an unaffordable really bad outcome?

[Watty]

With statistics like this, why do so many Bogleheads frown on LTC insurance?

The problem is most policies being sold today don't cover the tail risk. They only cover 5 years of LTC or so. A good Boglehead should be able to afford 5 years, if that's the worst outcome. The article says that the median assets after 6 years in LTC is $0. What is the point of insurance that covers everything but an unaffordable really bad outcome?

And the premiums can often be increased significantly.

[daveydoo]

The graph shows health care more generally, but it seems that LTC has eclipsed that.

(Source for graph: http://www.aei.org/publication/thursday ... -links-27/ )

Kind of impressed that TVs are virtually 100% cheaper than they were 20 years ago. Where can I find all the free TVs? maybe this refers to the used CRT sets?

[Chip]

The problem is most policies being sold today don't cover the tail risk. They only cover 5 years of LTC or so. A good Boglehead should be able to afford 5 years, if that's the worst outcome. The article says that the median assets after 6 years in LTC is $0. What is the point of insurance that covers everything but an unaffordable really bad outcome?

Very true. I would likely buy a policy that covered only that tail risk. Say a three or five year elimination period. Because the probabilties of payout are much lower the premiums should be much more reasonable. But I don't think I've ever seen a policy like that.

I wonder why that is. Is it just such a small market that it's not worth pursuing? Or are insurers worried this would be another underwriting debacle, as 80s LTC policies were?

[VictoriaF]

With statistics like this, why do so many Bogleheads frown on LTC insurance?

The problem is most policies being sold today don't cover the tail risk. They only cover 5 years of LTC or so. A good Boglehead should be able to afford 5 years, if that's the worst outcome. The article says that the median assets after 6 years in LTC is $0. What is the point of insurance that covers everything but an unaffordable really bad outcome?

Excellent point, Brad,

I'd also add that at the time when a person needs to cover the tail risk he or she is mentally and physically weakened and may not be able to effectively argue with the insurance company to get the coverage, even if it's purchased.

Victoria

[pintail07]

With statistics like this, why do so many Bogleheads frown on LTC insurance?

The problem is most policies being sold today don't cover the tail risk. They only cover 5 years of LTC or so. A good Boglehead should be able to afford 5 years, if that's the worst outcome. The article says that the median assets after 6 years in LTC is $0. What is the point of insurance that covers everything but an unaffordable really bad outcome?

This is the reason the asset based policies have become so popular, high deductible and lifetime benefit, premiums and benefits guaranteed. Not available in all states.

[baw703916]

In thinking about it a little more, I'm wondering if the median assets of $0 after 6 years is partly a consequence of the Medicaid planning industry--since the lookback period is 5 years.

[inbox788]

I wouldn't put too much faith in these statistic. It's important to consider the trends, but market forces, like gravity, eventually pull in reality. The very existence of LTCI creates a demand pull inflation. https://en.wikipedia.org/wiki/Demand-pull_inflation

We see this in the inflation graph where education and healthcare (in part due to tax deductability) has outpaced other goods and services. However, I'm skeptical of the accuracy of the graph when it shows nearly zero nominal inflation on new cars, and about 50 points below their 20 year rate, implying deflation. With computer and electronics, there is a deflationary effect, but we've upgraded much of what we use, so the actual total price deflation paid isn't as much. This effect is also in other goods and services to varying effect.

How Much things cost in 1996
Yearly Inflation Rate USA 2.93% Year End Close Dow Jones Industrial Average 6448 Interest Rates Year End Federal Reserve 8.25% Average Cost of new house $118,200.00 Average Income per year $36,300.00 Average Monthly Rent $554.00 Cost of a gallon of Gas $1.22 US Postage Stamp 32 cents Average cost of new car $16,300.00 Loaf of Bread $1.15 Minimum Hourly Wage Raised To $5.15
Below are some Prices for UK guides in Pounds Sterling
Average House Price 69,453 Gallon of Petrol 2.70 Yearly Inflation Rate UK 2.4% Interest Rates Year End Bank of England 5.94% FTSE 100 Average 3800

http://www.thepeoplehistory.com/1996.html

Average new car price zips 2.6% to $33,560

https://www.usatoday.com/story/money/ca ... /26690191/

Where did the 200% increase in prices in education go? Book publishers? Professors? Dorm rooms? Boarding at schools shouldn't have risen 200% when food prices go up only 50%, right?

Is the inflation because were consuming higher priced goods or consuming more goods? What steps can we take to consume less LTC and reduce demand?

[trueblueky]

Where did the 200% increase in prices in education go? Book publishers? Professors? Dorm rooms? Boarding at schools shouldn't have risen 200% when food prices go up only 50%, right?

Part of the increase in higher education prices is illusory. Many colleges have sticker prices much higher than what is actually paid.

The following are from NCES.ed.gov (National Center for Education Statistics:

Vanderbilt total cost 2016-17 school year $64,654
64% received grant or scholarship aid averaging $39,081
This does not include "loan aid" (hate that term).

Rice $60,518 55% $36,192

Stetson $59,766 100% $31,082
Average net price for students with income over $110,000 was $27,229.

Nobody is paying list price there. Like the $60,000 trucks with signs saying $6,000 off MSRP, the sticker price is selling prestige. You want your progeny to go to a $60,000 school; you just don't want to pay $60,000 for it.

Book prices have increased greatly; recent trends toward e-books and borrowing, rather than buying, are mitigating that.

The prices of dorms reflect that the dorms are much nicer. They even have air conditioning.

With the use of adjuncts, I doubt the cost of teaching staff has increased very rapidly. I didn't have an adjunct in four years at State U, and had graduate assistants only in chem lab and the like. Now, one can take an entire semester of courses without seeing a tenured professor.

[afan]

Well, according to those stats on college cost, 36% of students at Vanderbilt are paying full price. Less than half, but hardly "nobody".

On LTC, we budget that as part of our retirement planning. Since we can afford the cost without insurance it does not seem worth it to convert fungible investment dollars into something that can only be used for one expense.

Although I can see the appeal of catastrophic LTCI that only kicks in after several years of LTC expenses, documenting those costs to meet the elimination conditions sounds like it could be a nightmare. If someone does end up using conventional LTC insurance that preserves assets at the front end, rather than picking up costs later on. Either could be valuable for a family that would be in trouble without the help.

[trueblueky]

Well, according to those stats on college cost, 36% of students at Vanderbilt are paying full price. Less than half, but hardly "nobody".

On LTC, we budget that as part of our retirement planning. Since we can afford the cost without insurance it does not seem worth it to convert fungible investment dollars into something that can only be used for one expense.

Although I can see the appeal of catastrophic LTCI that only kicks in after several years of LTC expenses, documenting those costs to meet the elimination conditions sounds like it could be a nightmare. If someone does end up using conventional LTC insurance that preserves assets at the front end, rather than picking up costs later on. Either could be valuable for a family that would be in trouble without the help.

Sorry. Nobody referred to Stetson, not Vandy or Rice.

[dia]

$97,455 Median annual nursing-home cost, private room, 2017.

I wonder what quality of care you get for $97k. I'm not expecting over the top. That's the real troubling part for me.

[JBTX]

not sure why this got bumped, but to me the message is not nearly as dire, at least for Boglehead types who save a lot for retirement.

Like I said above $2800 per year doesn't seem THAT bad.

But on the flip side, what would concern me is a very long term expensive stay. Hopefully we will have saved up enough to whether a few years stay, at least.

2%: Probability of needing more than five years in a nursing home, men.
7%: Probability of needing more than five years in a nursing home, women.

That is a fairly low percent, especially for men.

[rgs92]

neilpilot, those premiums seem incredibly low. Is that true? $800 a year? Even for those in their 30s or 40s, that's more like a monthly premium for that level of coverage ($1.5 million per person). And this is for large corporate group policies with companies like J Hancock.
I'm just curious. Thank you very much for any confirmation or elaboration on that.

[neilpilot]

neilpilot, those premiums seem incredibly low. Is that true? $800 a year? Even for those in their 30s or 40s, that's more like a monthly premium for that level of coverage ($1.5 million per person). And this is for large corporate group policies with companies like J Hancock.
I'm just curious. Thank you very much for any confirmation or elaboration on that.

What I posted above, over a year ago, was absolutely true except our annual premium is a bit higher, at $800.10/yr for each policy When I purchased the LTCI back in 1999, it seemed like a lot of money to pay but now I realize what a relative bargain this coverage is. You can be sure I plan to continue to pay the annual premiums and not let this coverage laps.

For the past few years, based on the premium increases that other's have reported, I half expect our annual premium to increase and/or some other aspect of the policy to change. But so far it remains in effect.

one additional comment; if you had quoted my post from almost a year ago my response would have been more assured. As it is, I just happened to see the thread had reopened and that you had a question.

[FBN2014]

Sobering statistics. I surely don't want to burden my children with taking care of us if we become too frail or ill to live independently. I have been looking at purchasing a hybrid LTCi policy from three carriers: Nationwide, One America, or Lincoln Financial. All have a return of premium if you want to cancel at anytime or a death benefit to beneficiaries if you never need it for long term care. Another option is to buy a universal life policy with living benefits that can be used for long term care expenses. Money withdrawn from policy is deducted from the death benefit. My attorney said to buy enough benefits to last 2-3 years in LTC since that is the typical stay in a facility before death. That also gives you time to give away assets so that you can qualify for Medicaid if you last past the 5 year look back period. Of if you have Alzheimer's or dementia then all bets are off since you can live a lot longer than 2-3 years with those diseases. Attorney told me that if you make it to 75 then he suggests to start to do Medicaid planning at that time.

[beardsworth]

Note that this thread was started by gkaplan a year ago, went dormant, but has now been revived.

It might be more appropriate instead to add new comments to the following thread, started within the past week, discussing the latest edition of Christine Benz's now-annual article about LTC statistics:

viewtopic.php?f=10&t=256938

[LadyGeek]

Good point. This thread is locked to continue the discussion at: "75 Must Know Statistics About Long-Term Care: 2018 Edition"