This is ridiculously expensive LTCi, right? Or maybe not?

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ktip
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This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 2:41 pm

My mom's LTCi premiums for the past 6 years have been a little over $17,000/year. Premium just increased to a little over $22,000/year.

She has paid 6 years of LTCi premiums, on a 10 year payment plan. So 4 more years of premiums to pay, then no more premiums.

She has a current monthly benefit of $7,665 that increases at 4% year. Her benefit period is lifetime.

I have been reading past threads and doing other research, and I understand that the lifetime benefit is now uncommon and quite valuable -- it addresses the tail risk of many years of LTC. But, this is still ridiculously expensive, right?

I believe if she cancels the policy now she gets all paid premiums returned (but no interest).

She has been wanting my advice, and I'm thinking this just seems crazy costly and would make sense to cancel. And if she wants LTCi she can visit an independent broker and get something cheaper. Or "self-insure." The one thing that gives me pause is the potential value of her lifetime benefit period.

Thoughts?

Other info:
She is 65. No known history of Alzheimers, but her dad also passed when in late 50s, so who knows if he had lived longer. Her mom died at age 90.
She bought the policy thinking it was a hybrid one with a substantial death benefit. But this is unfortunately not the case.
She has a portfolio of 2 million, with about 1/4 of that in an IRA, the rest is taxable.
No mortgage or other debt.
Expenses of around 80k, including LTCi premium, and including discretionary travel and home projects. She'd spend more on travel and projects if not paying premium.
Social security is a little less than 1k. Might increase.

[edited for additional information]
Last edited by ktip on Fri Jun 22, 2018 3:52 pm, edited 2 times in total.

ResearchMed
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ResearchMed » Fri Jun 22, 2018 2:44 pm

ktip wrote:
Fri Jun 22, 2018 2:41 pm
My mom's LTCi premiums for the past 6 years have been a little over $17,000/year. Premium just increased to a little over $22,000/year.

She has paid 6 years of LTCi premiums, on a 10 year payment plan. So 4 more years of premiums to pay, then no more premiums.

She has a current monthly benefit of $7,665 that increases at 4% year. Her benefit period is lifetime.

I have been reading past threads and doing other research, and I understand that the lifetime benefit is now uncommon and quite valuable -- it addresses the tail risk of many years of LTC. But, this is still ridiculously expensive, right?

I believe if she cancels the policy now she gets all paid premiums returned (but no interest).

She has been wanting my advice, and I'm thinking this just seems crazy costly and would make sense to cancel. And if she wants LTCi she can visit an independent broker and get something cheaper. Or "self-insure." The one thing that gives me pause is the potential value of her lifetime benefit period.

Thoughts?

Other info:
She is 65. No known history of Alzheimers, but her dad also passed when in late 50s, so who knows if he had lived longer. Her mom died at age 90.
She has a solid/good sized retirement portfolio, but not big enough that premiums of 17k and 22k don't significantly impact her current quality of life -- e.g., she'd happily travel more, fix up some stuff around her house, etc.
She bought the policy thinking it was a hybrid one with a substantial death benefit. But this is unfortunately not the case.
It would help to know what she really has, in terms of being able to afford long term care if it was needed, and she didn't have this (or any) policy.

It's almost impossible to answer questions like this in isolation.

RM
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FIREchief
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by FIREchief » Fri Jun 22, 2018 2:46 pm

It sounds like if she pays the last 4 years @ $22K/yr she'll have about $190,000 total invested. Is this correct? If so, having an $8000 per month benefit for what could be a decade or more sounds like pretty cheap insurance. Breakeven would be less than two years in SNF. Did I miss something?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 2:58 pm

It would help to know what she really has, in terms of being able to afford long term care if it was needed, and she didn't have this (or any) policy.

It's almost impossible to answer questions like this in isolation.

RM
Edited post above.
Last edited by ktip on Fri Jun 22, 2018 3:52 pm, edited 1 time in total.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 3:05 pm

It sounds like if she pays the last 4 years @ $22K/yr she'll have about $190,000 total invested. Is this correct? If so, having an $8000 per month benefit for what could be a decade or more sounds like pretty cheap insurance. Breakeven would be less than two years in SNF. Did I miss something?
Hmm interesting that you don't see it as super expensive.

Yes I had been assuming breakeven at 2 years. Particularly since a lot of the gains she could have had from investing those 6 years of premiums are already lost.

But also given the stats I have seen, it's unlikely that someone her would use 2 years of LTCi -- more likely to not use or use less than 2 years.

And then also the big issue I see is that she is mobile and healthy now, and can use those premiums to travel now, and she might not be able to travel more later. But if she kept the insurance, maybe she could also withdraw more from her portfolio now, knowing that LTC costs are covered?

delamer
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by delamer » Fri Jun 22, 2018 3:19 pm

It seems that your mother would be a prime candidate to self insure for LTC.

However, it depends on how much she needs to withdraw from her nest egg to cover her expenses.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 4:07 pm

It seems that your mother would be a prime candidate to self insure for LTC.

However, it depends on how much she needs to withdraw from her nest egg to cover her expenses.
She usually doesn't have much in the way of fixed expenses -- no debt, and she's not in a high property tax state. Her biggest fixed expense, by far, has been these LTCi premiums.

She likes to travel and would travel more if her budget allowed, and spend more on house projects.

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FIREchief
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by FIREchief » Fri Jun 22, 2018 4:16 pm

ktip wrote:
Fri Jun 22, 2018 4:07 pm
She likes to travel and would travel more if her budget allowed, and spend more on house projects.
If giving up travel and home rennovations meant that I would have some assurance that, in the worst case scenario, I would wind up in a nice LTC facility for more than two years instead of a medicaid only home, I would gladly make that choice. When it comes to insurance, it is very dangerous to think of "averages." The average person never gets sued. Does that mean they should drop their liability coverages to the minimums?
Last edited by FIREchief on Fri Jun 22, 2018 7:04 pm, edited 1 time in total.
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FIREchief
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by FIREchief » Fri Jun 22, 2018 4:19 pm

ktip wrote:
Fri Jun 22, 2018 2:41 pm
She has been wanting my advice, and I'm thinking this just seems crazy costly and would make sense to cancel.
I would never advise a parent to drop this type of coverage unless I was willing and able to pay the costs for SNF if/when the other assets dried up. If she reaches the decision on her own, then that's another matter. Sure, that $2M would last quite awhile; but there are certainly scenarios where it wouldn't be enough.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by 2b2 » Fri Jun 22, 2018 4:22 pm

OP,

What are your Mom's feelings on this. I know you said she has asked for your advice, but what is your sense of what she will be comfortable with?

2b2

WillRetire
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by WillRetire » Fri Jun 22, 2018 4:23 pm

Lifetime benefits with 4% increase per year, with no premium payments after 10 years? Sounds like a bargain, as LTCi policies go. And she is clearly financially able to finish the payments.

The beneficiaries are her heirs, since such a policy saves her from having to spend her assets in the event that she needs long-term care.

Check if the policy pays for home care and assisted living benefits. If yes, keeping the policy seems like the obvious choice. If no, it may still be worthwhile for just skilled nursing care, just not as versatile.

It is nice that she is sharing this information with you. Children can help their parents with LTCi keep-or-drop decisions, and maybe even help them pay premiums in cases where help is needed.

delamer
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by delamer » Fri Jun 22, 2018 4:50 pm

ktip wrote:
Fri Jun 22, 2018 4:07 pm
It seems that your mother would be a prime candidate to self insure for LTC.

However, it depends on how much she needs to withdraw from her nest egg to cover her expenses.
She usually doesn't have much in the way of fixed expenses -- no debt, and she's not in a high property tax state. Her biggest fixed expense, by far, has been these LTCi premiums.

She likes to travel and would travel more if her budget allowed, and spend more on house projects.
In her position, I’d set aside/invest $1 million for self-insured LTC and invest the other $1 million to fund my regular expenses.

But that only works if she could cover her expenses with about $40,000 to $50,000 in annual withdrawals (inflation adjusted) plus her Social Security.
Last edited by delamer on Fri Jun 22, 2018 4:50 pm, edited 1 time in total.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 4:50 pm

If giving up travel and home rennovations meant that I would have some assurance that, in the worst case scenario, I would wind up in a nice LTC facility for more than two years instead of a medicaid only home, I would gladly make that choice. When it comes to insurance, it is very dangerous to think of "averages." The average person never gets sued. Does that mean they should drop their liability coverages to the minimums?
I would assume with her portfolio she could pay for at least a couple years of quality care out of pocket, I would guess many years -- how many years, I don't think we can know.

It does seem like LTCi is a bit different then other types insurance since you can't insure against, and only against, the more rare and catastrophic events (in this case, many years of LTC). You also have to insure against the more likely event of 1-2 years of LTC. So LTC is a particularly expensive type of insurance, and thus many people choose to self-insure.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 4:51 pm

I would never advise a parent to drop this type of coverage unless I was willing and able to pay the costs for SNF if/when the other assets dried up. If she reaches the decision on her own, then that's another matter. Sure, that $2M would last quite awhile; but there are certainly scenarios where it wouldn't be enough.
Fair point!

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by delamer » Fri Jun 22, 2018 4:54 pm

ktip wrote:
Fri Jun 22, 2018 4:50 pm
If giving up travel and home rennovations meant that I would have some assurance that, in the worst case scenario, I would wind up in a nice LTC facility for more than two years instead of a medicaid only home, I would gladly make that choice. When it comes to insurance, it is very dangerous to think of "averages." The average person never gets sued. Does that mean they should drop their liability coverages to the minimums?
I would assume with her portfolio she could pay for at least a couple years of quality care out of pocket, I would guess many years -- how many years, I don't think we can know.

It does seem like LTCi is a bit different then other types insurance since you can't insure against, and only against, the more rare and catastrophic events (in this case, many years of LTC). You also have to insure against the more likely event of 1-2 years of LTC. So LTC is a particularly expensive type of insurance, and thus many people choose to self-insure.
This is an important point. It isn’t the couple years stay in a facility that is worrisome, it is the extended stay.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 4:55 pm

OP,

What are your Mom's feelings on this. I know you said she has asked for your advice, but what is your sense of what she will be comfortable with?

2b2
She is mainly upset now, because she thought she had been paying for a policy with a significant death benefit. I think it's hard for to think about this with some distance now. I think her views will become clearer after she's adjusted to this fact.

So actually I think another benefit to keeping the LTCi is that I could say, "wow mom, this is a good policy! You should definitely consider keeping it!"

goodenoughinvestor
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by goodenoughinvestor » Fri Jun 22, 2018 4:56 pm

If this policy covers home care then she might very well use it for 2-plus years.

delamer
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by delamer » Fri Jun 22, 2018 4:58 pm

delamer wrote:
Fri Jun 22, 2018 4:50 pm
ktip wrote:
Fri Jun 22, 2018 4:07 pm
She usually doesn't have much in the way of fixed expenses -- no debt, and she's not in a high property tax state. Her biggest fixed expense, by far, has been these LTCi premiums.

She likes to travel and would travel more if her budget allowed, and spend more on house projects.

In her position, I’d set aside/invest $1 million for self-insured LTC and invest the other $1 million to fund my regular expenses.

But that only works if she could cover her expenses with about $40,000 to $50,000 in annual withdrawals (inflation adjusted) plus her Social Security.
EDIT: On the other hand, she can withdraw about $80,000 to $100,000 from her current portfolio. So with the premium at roughly $20,000, she can still have roughly $60,000 to $80,000 for other costs.

Which makes me wonder why she feels so constrained by the premium if her fixed expenses are low?
Last edited by delamer on Fri Jun 22, 2018 5:00 pm, edited 2 times in total.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 5:00 pm

Lifetime benefits with 4% increase per year, with no premium payments after 10 years? Sounds like a bargain, as LTCi policies go.
This is very good and helpful to know.
The beneficiaries are her heirs, since such a policy saves her from having to spend her assets in the event that she needs long-term care.
Yes this is partly why I have been wondering if she should cancel it and travel more instead.
Check if the policy pays for home care and assisted living benefits. If yes, keeping the policy seems like the obvious choice. If no, it may still be worthwhile for just skilled nursing care, just not as versatile.
Yes it does cover these things.
It is nice that she is sharing this information with you. Children can help their parents with LTCi keep-or-drop decisions, and maybe even help them pay premiums in cases where help is needed.
That is a nice perspective and good point about helping with premiums.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by Dottie57 » Fri Jun 22, 2018 5:03 pm

FIREchief wrote:
Fri Jun 22, 2018 2:46 pm
It sounds like if she pays the last 4 years @ $22K/yr she'll have about $190,000 total invested. Is this correct? If so, having an $8000 per month benefit for what could be a decade or more sounds like pretty cheap insurance. Breakeven would be less than two years in SNF. Did I miss something?
+1 I pay 2.7k For basically 3 years of benefits for a total amount of 270k max. Your mom’s s for life which is really good.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 5:06 pm

EDIT: On the other hand, she can withdraw about $80,000 to $100,000 from her current portfolio. So with the premium at roughly $20,000, she can still have roughly $60,000 to $80,000 for other costs.

Which makes me wonder why she feels so constrained by the premium if her fixed expenses are low?
I should clarify that she doesn't feel terribly constrained by the premium -- she wasn't complaining about the premium. She just wasn't sure if it was worth it, given that (1) the premium is rising significantly, and (2) she thought she had bought something different (a policy with a substantial death benefit).

And in responding to your comment, I'm realizing that she might also be concerned about withdrawing too much from her portfolio. I think she is a little worried about that.

EDIT: By "too much," I mean I think she might be worried about taking even 60k or 80k out of the portfolio.

All of this is quite helpful in talking to her about this.
Last edited by ktip on Fri Jun 22, 2018 5:10 pm, edited 1 time in total.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 5:08 pm

If this policy covers home care then she might very well use it for 2-plus years.
Good point.

ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 5:11 pm

+1 I pay 2.7k For basically 3 years of benefits for a total amount of 270k max. Your mom’s s for life which is really good.
Thanks, this is a helpful benchmark.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 5:16 pm

So, wow, this has been a very helpful discussion.

In sum it seems like this policy is not ridiculously expensive, just expensive.

It seems like there are lots of good reasons to keep it, and now I can tell my mom that she didn't make a stupid decision (as she fears) but in fact a good decision.

And I might mention that another very reasonable option is setting aside half the portfolio for LTC.

And I should also thank her for thinking of my sibling and I both in getting this policy and in making this decision.

Thanks all!

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ResearchMed » Fri Jun 22, 2018 5:19 pm

ktip wrote:
Fri Jun 22, 2018 5:00 pm
Lifetime benefits with 4% increase per year, with no premium payments after 10 years? Sounds like a bargain, as LTCi policies go.
This is very good and helpful to know.
The beneficiaries are her heirs, since such a policy saves her from having to spend her assets in the event that she needs long-term care.

Yes this is partly why I have been wondering if she should cancel it and travel more instead.

Check if the policy pays for home care and assisted living benefits. If yes, keeping the policy seems like the obvious choice. If no, it may still be worthwhile for just skilled nursing care, just not as versatile.
Yes it does cover these things.
It is nice that she is sharing this information with you. Children can help their parents with LTCi keep-or-drop decisions, and maybe even help them pay premiums in cases where help is needed.
That is a nice perspective and good point about helping with premiums.
[emphasis added]

I interpreted the bolded section quite differently... that she should KEEP the policy, and then she can spend away (prudently, obviously) and travel/etc., now... with a comfortable portfolio... because she does NOT need to keep a large stash "in case of LTC is needed".

The point about the heirs is that IF she has this insurance, she won't need to spend her money down, which would leave some for heirs.

I'd argue that she has an amazing LTC insurance policy (we'd buy this in a moment, assuming the benefits are as we'd expect, and there are no unexpected gotchas), so she can enjoy her money now more, and perhaps still not leave a lot for heirs :wink:
But that obviously depends upon HER wishes about whether she wants to use the money "for herself" or if she prefers not to spend as much and leave to heirs (= you).

RM
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ktip
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Fri Jun 22, 2018 6:01 pm

I interpreted the bolded section quite differently... that she should KEEP the policy, and then she can spend away (prudently, obviously) and travel/etc., now... with a comfortable portfolio... because she does NOT need to keep a large stash "in case of LTC is needed"..
I see... yes I missed that.

One of the reasons this whole discussion was helpful, I have to say, is that I realized that it might be me, not her, that is concerned that she have plenty of money for travel right now -- she didn't bring it up when we talked about her renewing her LTCi. My bad.

And after delamer's point about having to keep 1 million in reserve, I realized she wouldn't necessarily have more extra money right now for living expenses if she drops the LTCi.

I guess this is why the perspective of independent and not emotionally involved parties can be really useful.
I'd argue that she has an amazing LTC insurance policy (we'd buy this in a moment, assuming the benefits are as we'd expect, and there are no unexpected gotchas)
This is good to know, and I'm sure she will be very happy to hear.
so she can enjoy her money now more, and perhaps still not leave a lot for heirs :wink:
Since I'm a boglehead, that should be okay. :sharebeer

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by WillRetire » Fri Jun 22, 2018 6:11 pm

ResearchMed wrote:
Fri Jun 22, 2018 5:19 pm
ktip wrote:
Fri Jun 22, 2018 5:00 pm
Lifetime benefits with 4% increase per year, with no premium payments after 10 years? Sounds like a bargain, as LTCi policies go.
This is very good and helpful to know.
The beneficiaries are her heirs, since such a policy saves her from having to spend her assets in the event that she needs long-term care.

Yes this is partly why I have been wondering if she should cancel it and travel more instead.

Check if the policy pays for home care and assisted living benefits. If yes, keeping the policy seems like the obvious choice. If no, it may still be worthwhile for just skilled nursing care, just not as versatile.
Yes it does cover these things.
It is nice that she is sharing this information with you. Children can help their parents with LTCi keep-or-drop decisions, and maybe even help them pay premiums in cases where help is needed.
That is a nice perspective and good point about helping with premiums.
[emphasis added]

I interpreted the bolded section quite differently... that she should KEEP the policy, and then she can spend away (prudently, obviously) and travel/etc., now... with a comfortable portfolio... because she does NOT need to keep a large stash "in case of LTC is needed".

The point about the heirs is that IF she has this insurance, she won't need to spend her money down, which would leave some for heirs.

I'd argue that she has an amazing LTC insurance policy (we'd buy this in a moment, assuming the benefits are as we'd expect, and there are no unexpected gotchas), so she can enjoy her money now more, and perhaps still not leave a lot for heirs :wink:
But that obviously depends upon HER wishes about whether she wants to use the money "for herself" or if she prefers not to spend as much and leave to heirs (= you).

RM
My original comment about beneficiaries was overly concise. Of course, the policyholder is the main beneficiary in every sense: she gets the care benefit, and the lifetime benefits basically give her the freedom to enjoy spending her investment assets as she wishes. Her heirs are potential secondary beneficiaries of the LTC policy in 2 ways: (1) They are unlikely to be financially impacted paying for her long term care, and (2) might benefit from inheriting assets that remain after her death. Though it does not apply in this case, spouses are a major beneficiary of LTC policies because if the money runs out, medicaid rules severely limit the amount of assets that the healthy spouse can keep.

Put differently, LTC policies PROTECT the financial future of family members, healthy spouses and children who would otherwise have to help pay for very expensive care.

This is what I meant in the context of "who benefits" from keeping an LTCi policy vs. self-insuring.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by Miriam2 » Fri Jun 22, 2018 6:24 pm

ktip wrote: . . . she wasn't complaining about the premium. She just wasn't sure if it was worth it, given that (1) the premium is rising significantly, and (2) she thought she had bought something different (a policy with a substantial death benefit).
Have you checked to make sure there isn't a death benefit with the policy, meaning that it's not one of the hybrid policies that are becoming more popular?

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by jalbert » Fri Jun 22, 2018 7:08 pm

Hmm interesting that you don't see it as super expensive.

Yes I had been assuming breakeven at 2 years. Particularly since a lot of the gains she could have had from investing those 6 years of premiums are already lost.
Covering a variable liability with a fixed present cost eliminates two sources of variance in the outcome of your mother covering expenses for the rest of her life: any needed LTC care is now a fixed cost instead of a random liability, and the funds to cover it are no longer subject to investment return variance.

If your mom someday needs LTC at all, having the policy is a win even if it turns out to be for a shorter time than the break-even because she won’t feel a need to economize on care wondering if she will have enough to cover it. So she is basically taking on the risk of paying for LTCi and not needing it in exchange for shedding the risk of having to cover an LTC time period longer than average.
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Rob5TCP
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by Rob5TCP » Fri Jun 22, 2018 7:20 pm

Since you have paid most already (I don't think you can get returns of any principal);
the balance owed $88,000 would be a steal. Looked at it this way; it would not be wise
when 60% of the payments have already been paid.

I don't know enough about actuarial tables to know if this is a good risk adjusted insurance
policy - but I do now that what the balance is would make an incredible "deal". I wouldn't
stop at this point; whether it was a great or bad "deal".

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by JoeRetire » Fri Jun 22, 2018 7:58 pm

ktip wrote:
Fri Jun 22, 2018 2:41 pm
My mom's LTCi premiums for the past 6 years have been a little over $17,000/year. Premium just increased to a little over $22,000/year.
She has paid 6 years of LTCi premiums, on a 10 year payment plan. So 4 more years of premiums to pay, then no more premiums.
So $88,000 to go.

Seems reasonable to me for what appears to be a pretty comprehensive lifetime plan (assuming home care is covered). What is the elimination period?

It's a plan I wish I had. I wouldn't trade it in if I were her.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by AlwaysWannaLearn » Fri Jun 22, 2018 10:11 pm

.....
Last edited by AlwaysWannaLearn on Wed Jul 18, 2018 11:20 pm, edited 1 time in total.

capjak
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by capjak » Fri Jun 22, 2018 10:30 pm

I purchased a similar policy called Asset Care I from One America with 3% inflation but cover 2 people and does have a death benefit (whole life with LTC rider unlimited benefit).

You need to check her policy and verify the information. If she has everything you reported than I would keep the policy.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by HereToLearn » Fri Jun 22, 2018 10:58 pm

Agree with AlwaysWannaLearn that you must review the policy. I would call the carrier also. They may not speak to you without your mother being present and/or authorizing you to ask questions on her behalf.

My parents both had LTC policies, but very different from the one your mother has. My father received reimbursement for six days of in-home care before he died. My mother has just satisfied the policy's 100 day elimination periods, so she will now receive 80% of the cost of her in-home care.

In order to be considered eligible to even satisfy the elimination period, the insured has to be certified to be unable to perform at least two of the Activities of Daily Living (Dressing, Eating, Transferring, Toileting, and Continence--their words, not mine). The LTC carrier will either send their own nurse out to conduct an evaluation or will rely on doctors' notes. The first way is easier/cleaner.

During the time that the insured is satisfying the elimination period, care must be provided by a licensed home aid, nurse, PT, etc, and is paid for by the insured. (As in, she cannot hire the retired nurse off the books.) Everything must be documented thoroughly, so generally another person is needed to file the paperwork. As in, by the time the insured is unable to complete two+ ADLs, she probably needs assistance in managing her LTC policy.

Now that my mother is 'in benefit', the policy will pay the cost of in-home or in-patinet care for five years at up to $400/day, or approximately $750K. If she uses less than $400 of care per day, the policy will last longer. In-patient care will be covered at 100%, but since she wants to remain in her home with help, that is what we are doing. She stopped driving nearly two years ago, so there has been a long period where she has been paying out of pocket for helpers and/or taxi rides, but was not yet considered unable to complete ADLs. None of that care counted toward the elimination period. She could not begin to satisfy the elimination period until the LTC carrier confirmed that she was unable to complete two ADLs.

I have gone into such detail here, hoping that it will help you know what to ask when you contact her carrier, specifically does her policy have an elimination period and how do they define benefit eligibility? Also, does her policy reimburse for in-home care?

My mother has been paying premiums for 20 years, but will stop now that she is in benefit. Original daily benefit was $150 with annual premium of $1600. Current daily benefit is $421, but will increase to $442 in a week. Annual premium has only gone up to $2400, so she has been very fortunate that the premium increases have been reasonable. I am estimating that she has paid approximately $40K in premiums. It remains to be seen if she will live long enough to realize more than $40K in benefits.

I assume that your mother's current monthly benefit of $7,665 is increasing 4%/year now? You may want to check around to find out the daily cost of in-patient care. The facilities in my mother's area charge significantly more than that, but fortunately my mother's plan will cover up to $13K/month.

Good luck with your analysis.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Sat Jun 23, 2018 1:02 pm

Have you checked to make sure there isn't a death benefit with the policy, meaning that it's not one of the hybrid policies that are becoming more popular?
Yes, I have checked -- she thought she had one of these hybrid policies, but that's not the case.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Sat Jun 23, 2018 1:06 pm

Since you have paid most already (I don't think you can get returns of any principal);
the balance owed $88,000 would be a steal. Looked at it this way; it would not be wise
when 60% of the payments have already been paid.

I don't know enough about actuarial tables to know if this is a good risk adjusted insurance
policy - but I do now that what the balance is would make an incredible "deal". I wouldn't
stop at this point; whether it was a great or bad "deal".
I do think she can get the premiums back, actually, from the 2 pages of the policy that I have seen. It appears that's one of the "benefits" of this particular policy. (I'm wondering, actually, if my mom thought she was buying the death benefit but actually bought the premium return benefit instead. Who knows.) Although from this whole discussion, it sounds like it makes sense for her to keep it.

But I clearly need to get the whole policy and read all of it carefully.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Sat Jun 23, 2018 1:07 pm

So $88,000 to go.

Seems reasonable to me for what appears to be a pretty comprehensive lifetime plan (assuming home care is covered). What is the elimination period?

It's a plan I wish I had. I wouldn't trade it in if I were her.
This is good to know. The policy does have an explicit "home care" benefit, so it looks like that is covered. I clearly need to read the whole thing though.

The elimination period is 12 weeks, which sounds common.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Sat Jun 23, 2018 1:14 pm

I agree, OP, with one caution: All of the advice in this thread was based on your OP re. the benefits, i.e. to use your words:
"She has paid 6 years of LTCi premiums, on a 10 year payment plan. So 4 more years of premiums to pay, then no more premiums. She has a current monthly benefit of $7,665 that increases at 4% year. Her benefit period is lifetime.... I believe if she cancels the policy now she gets all paid premiums returned (but no interest).

Please please please - for your own benefit and peace of mind; I gain nothing by telling you this - READ the policy documents to ensure that they actually confirm her rights as you've described, i.e. no more premiums after 4 years from now, benefit increases at 4% guaranteed over her lifetime, etc. And if your head is spinning as you try to parse through the legalese of the documents, engage a lawyer who specializes in this area to review the documents and advise you. Trust me, it will be money well-spent.

Bottom-line: For reasons I won't bore you with, I've been looking into LTC policies and their history over time. It's very rare for LTC policies as you've described to be issued in the current climate, although I do know that such things existed in the past. It's quite possible that your Mom got one before the insurance companies had figured out their mistakes. If so, Yay her!! You should keep it. However, it's also quite possible that she got a later policy that was trying to "look" like what had been offered in the past.

You and your sibling owe it to yourselves to make sure that the actual documents say what you think they say. Sidebar: I don't need to lecture you or any other BH on the yawning gap between what sales/marketing people and brochures say, vs. what the legal documents actually say...

Fingers crossed that your Mom got in before the window closed on the rest of us....!!! :happy
That is really good to know that there are these sorts of imitation policies. I'm definitely convinced I need to get my hands on the policy and read all of it carefully! And I am now persuaded that if her policy has what it sounds like it has, it makes sense for her to keep it. Hopefully it's the real deal.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Sat Jun 23, 2018 1:15 pm

I purchased a similar policy called Asset Care I from One America with 3% inflation but cover 2 people and does have a death benefit (whole life with LTC rider unlimited benefit).

You need to check her policy and verify the information. If she has everything you reported than I would keep the policy.
I'll be verifying, for sure. Thanks for the recommendation.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by ktip » Sat Jun 23, 2018 1:23 pm

Agree with AlwaysWannaLearn that you must review the policy. I would call the carrier also. They may not speak to you without your mother being present and/or authorizing you to ask questions on her behalf.

My parents both had LTC policies, but very different from the one your mother has. My father received reimbursement for six days of in-home care before he died. My mother has just satisfied the policy's 100 day elimination periods, so she will now receive 80% of the cost of her in-home care.

In order to be considered eligible to even satisfy the elimination period, the insured has to be certified to be unable to perform at least two of the Activities of Daily Living (Dressing, Eating, Transferring, Toileting, and Continence--their words, not mine). The LTC carrier will either send their own nurse out to conduct an evaluation or will rely on doctors' notes. The first way is easier/cleaner.

During the time that the insured is satisfying the elimination period, care must be provided by a licensed home aid, nurse, PT, etc, and is paid for by the insured. (As in, she cannot hire the retired nurse off the books.) Everything must be documented thoroughly, so generally another person is needed to file the paperwork. As in, by the time the insured is unable to complete two+ ADLs, she probably needs assistance in managing her LTC policy.

Now that my mother is 'in benefit', the policy will pay the cost of in-home or in-patinet care for five years at up to $400/day, or approximately $750K. If she uses less than $400 of care per day, the policy will last longer. In-patient care will be covered at 100%, but since she wants to remain in her home with help, that is what we are doing. She stopped driving nearly two years ago, so there has been a long period where she has been paying out of pocket for helpers and/or taxi rides, but was not yet considered unable to complete ADLs. None of that care counted toward the elimination period. She could not begin to satisfy the elimination period until the LTC carrier confirmed that she was unable to complete two ADLs.

I have gone into such detail here, hoping that it will help you know what to ask when you contact her carrier, specifically does her policy have an elimination period and how do they define benefit eligibility? Also, does her policy reimburse for in-home care?

My mother has been paying premiums for 20 years, but will stop now that she is in benefit. Original daily benefit was $150 with annual premium of $1600. Current daily benefit is $421, but will increase to $442 in a week. Annual premium has only gone up to $2400, so she has been very fortunate that the premium increases have been reasonable. I am estimating that she has paid approximately $40K in premiums. It remains to be seen if she will live long enough to realize more than $40K in benefits.

I assume that your mother's current monthly benefit of $7,665 is increasing 4%/year now? You may want to check around to find out the daily cost of in-patient care. The facilities in my mother's area charge significantly more than that, but fortunately my mother's plan will cover up to $13K/month.

Good luck with your analysis.
Yes her benefit is increasing at 4%/year right now. Both I and her live in relatively LCOL areas where it appears the nice facilities would be about 8.5k/ month, so her benefit wouldn't quite cover all of it, but definitely most of it.

It is a 12 week elimination period, and I know it has the 2 ADL requirement, and has a home care benefit -- but I clearly need to read the whole policy carefully and look for the details on all of these things, and follow up with the carrier.

This is all helpful information. Best wishes to you and your mom.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by Christine_NM » Sat Jun 23, 2018 2:11 pm

I am in the same situation as your mom regarding age, portfolio, and ltci. I bought a lifetime benefit policy with 5% inflation rider almost 20 years ago. It cost less than a tenth of your mom's policy. However, 3 years ago the company no longer would insure for a lifetime benefit, so now I have a 5 year policy w/ inflation that is even cheaper.

My thinking when I bought the policy was that if I paid premiums till age 90 they would total only one year of long-term care.

Compare the new 22k premium paid till age xx (mom's life expectancy) with how many years of care that would buy without insurance.

I probably would cancel my policy if the premium rose (roughly) to more than $12k/yr with more than 12 years of life expectancy, and count on self-insurance in the event of long-term illness. But I can't be sure what I'd really do until faced with the real numbers.
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by FIREchief » Sat Jun 23, 2018 2:27 pm

Christine_NM wrote:
Sat Jun 23, 2018 2:11 pm
I am in the same situation as your mom regarding age, portfolio, and ltci. I bought a lifetime benefit policy with 5% inflation rider almost 20 years ago. It cost less than a tenth of your mom's policy. However, 3 years ago the company no longer would insure for a lifetime benefit, so now I have a 5 year policy w/ inflation that is even cheaper.
Are you saying that 3 years ago your insurance company just unilaterally cancelled the lifetime benefit?? :confused
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by Christine_NM » Sat Jun 23, 2018 3:06 pm

FIREchief wrote:
Sat Jun 23, 2018 2:27 pm
Christine_NM wrote:
Sat Jun 23, 2018 2:11 pm
I am in the same situation as your mom regarding age, portfolio, and ltci. I bought a lifetime benefit policy with 5% inflation rider almost 20 years ago. It cost less than a tenth of your mom's policy. However, 3 years ago the company no longer would insure for a lifetime benefit, so now I have a 5 year policy w/ inflation that is even cheaper.
Are you saying that 3 years ago your insurance company just unilaterally cancelled the lifetime benefit?? :confused
Pretty much. The company notified me that lifetime-benefit policies would not be honored and were no longer sold. I was offered a variety of other options. I chose the 5 yr w/ inflation. Good reminder that everything comes with risk.

Edit: The notification was for policies with no claim yet, that is, for policies with premiums still being paid on. I certainly hope that a claim would be honored for a lifetime benefit even if that type of policy was no longer being offered. Short of extreme bankruptcy of course, like bankrupt reinsurance.
Last edited by Christine_NM on Sat Jun 23, 2018 4:09 pm, edited 1 time in total.
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by FIREchief » Sat Jun 23, 2018 4:06 pm

Christine_NM wrote:
Sat Jun 23, 2018 3:06 pm
FIREchief wrote:
Sat Jun 23, 2018 2:27 pm
Christine_NM wrote:
Sat Jun 23, 2018 2:11 pm
I am in the same situation as your mom regarding age, portfolio, and ltci. I bought a lifetime benefit policy with 5% inflation rider almost 20 years ago. It cost less than a tenth of your mom's policy. However, 3 years ago the company no longer would insure for a lifetime benefit, so now I have a 5 year policy w/ inflation that is even cheaper.
Are you saying that 3 years ago your insurance company just unilaterally cancelled the lifetime benefit?? :confused
Pretty much. The company notified me that lifetime-benefit policies would not be honored and were no longer sold. I was offered a variety of other options. I chose the 5 yr w/ inflation. Good reminder that everything comes with risk
Wow. This could certainly alter the advice many of have been offering to the original poster in this thread. If insurance companies can charge huge premiums for years and then just decide they aren't going to continue the policy, then why even bother?
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by delamer » Sat Jun 23, 2018 5:35 pm

FIREchief wrote:
Sat Jun 23, 2018 4:06 pm
Christine_NM wrote:
Sat Jun 23, 2018 3:06 pm
FIREchief wrote:
Sat Jun 23, 2018 2:27 pm
Christine_NM wrote:
Sat Jun 23, 2018 2:11 pm
I am in the same situation as your mom regarding age, portfolio, and ltci. I bought a lifetime benefit policy with 5% inflation rider almost 20 years ago. It cost less than a tenth of your mom's policy. However, 3 years ago the company no longer would insure for a lifetime benefit, so now I have a 5 year policy w/ inflation that is even cheaper.
Are you saying that 3 years ago your insurance company just unilaterally cancelled the lifetime benefit?? :confused
Pretty much. The company notified me that lifetime-benefit policies would not be honored and were no longer sold. I was offered a variety of other options. I chose the 5 yr w/ inflation. Good reminder that everything comes with risk
Wow. This could certainly alter the advice many of have been offering to the original poster in this thread. If insurance companies can charge huge premiums for years and then just decide they aren't going to continue the policy, then why even bother?
This surprised me too. I’d have thought there woukd be more in the way of consumer protections.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by randomguy » Sat Jun 23, 2018 5:52 pm

FIREchief wrote:
Fri Jun 22, 2018 2:46 pm
It sounds like if she pays the last 4 years @ $22K/yr she'll have about $190,000 total invested. Is this correct? If so, having an $8000 per month benefit for what could be a decade or more sounds like pretty cheap insurance. Breakeven would be less than two years in SNF. Did I miss something?
20+ years of gains that push the break even out to say 6 years. Most people die well before then. But there are some outliers that live 10+ years.

Personally I think this is a poor choice. Better to self insure and if the kids get less on an inheritance, oh well. I would rather she spend the money on herself. I know other people feel differently about this

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by FIREchief » Sat Jun 23, 2018 7:38 pm

randomguy wrote:
Sat Jun 23, 2018 5:52 pm
FIREchief wrote:
Fri Jun 22, 2018 2:46 pm
It sounds like if she pays the last 4 years @ $22K/yr she'll have about $190,000 total invested. Is this correct? If so, having an $8000 per month benefit for what could be a decade or more sounds like pretty cheap insurance. Breakeven would be less than two years in SNF. Did I miss something?
20+ years of gains that push the break even out to say 6 years. Most people die well before then. But there are some outliers that live 10+ years.

Personally I think this is a poor choice. Better to self insure and if the kids get less on an inheritance, oh well. I would rather she spend the money on herself. I know other people feel differently about this
I don't believe that most of us in this thread have placed any focus on what is good for the kids. Based upon the OP's original post, his mother is right at the brink of a 4% SWR, without covering the expenses of LTC. You're right, most people would not break even on this type of insurance. Isn't that true of all insurance?? You insure against the extreme case, understanding that you'll likely never take "maximum" advantage of your coverage. That's not why we buy insurance.
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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by celia » Sat Jun 23, 2018 8:13 pm

ktip wrote:
Fri Jun 22, 2018 2:41 pm
She has a current monthly benefit of $7,665 that increases at 4% year. Her benefit period is lifetime.
$7,665*12 = $91,980 per year benefit

That would be able to support a VERY nice LTC facility. How much do the nice facilities in her area cost? It may be that she will be eligible for better care than is available. And that 4% annual increase could also make it grow faster than inflation.

I have a policy that will pay out something like $3,000 or $4,000 per month, knowing that it may cover most but not all of the cost. But my savings could cover the gap. But in your mom's case, she might never be able to take advantage of benefits she is paying for.

It is also worth considering how long people need assisted living or nursing care:
But for How Long?
So, is the lifetime benefit really needed?

One thing to inquire about is if there is a way to convert her current paid-up balance into a paid-up policy for a lower monthly benefit. Then she would have the insurance for catastrophic events, be able to pay the difference if she needed care, and save money for the next 4 years.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by celia » Sat Jun 23, 2018 8:28 pm

HereToLearn wrote:
Fri Jun 22, 2018 10:58 pm
Agree with AlwaysWannaLearn that you must review the policy. I would call the carrier also. They may not speak to you without your mother being present and/or authorizing you to ask questions on her behalf.
I think they WILL talk to you since someone needing the care may not be able to speak for themselves. Besides you are only inquiring about a standard insurance policy, not asking/sharing about a particular person's health.

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Re: This is ridiculously expensive LTCi, right? Or maybe not?

Post by Katietsu » Sat Jun 23, 2018 8:47 pm

celia wrote:
Sat Jun 23, 2018 8:13 pm
ktip wrote:
Fri Jun 22, 2018 2:41 pm
She has a current monthly benefit of $7,665 that increases at 4% year. Her benefit period is lifetime.
$7,665*12 = $91,980 per year benefit

That would be able to support a VERY nice LTC facility. How much do the nice facilities in her area cost? It may be that she will be eligible for better care than is available. And that 4% annual increase could also make it grow faster than inflation.

I have a policy that will pay out something like $3,000 or $4,000 per month, knowing that it may cover most but not all of the cost. But my savings could cover the gap. But in your mom's case, she might never be able to take advantage of benefits she is paying for.

It is also worth considering how long people need assisted living or nursing care:
But for How Long?
So, is the lifetime benefit really needed?

One thing to inquire about is if there is a way to convert her current paid-up balance into a paid-up policy for a lower monthly benefit. Then she would have the insurance for catastrophic events, be able to pay the difference if she needed care, and save money for the next 4 years.

I checked out all the facilities in the county my parents lived in. It is a medium cost area. Self pay for the cheapest skilled nursing facility was almost $7000 a month. This is the home with predominately Medicaid patients. The VERY nice facility was $13,000 a month. Most were around $9000.

Assisted living facilities are significantly cheaper. But they all required the prospective residents be evaluated before being accepted. The potential resident had to be able to complete all sorts of tasks like transferring with only minor assistance, walking the length of a hallway, etc.

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