An argument against self-insuring for long-term care

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willthrill81
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An argument against self-insuring for long-term care

Post by willthrill81 » Wed Jul 25, 2018 11:28 pm

Some of you may follow The Retirement Manifesto blog, run by a gentleman by the name of Fritz. Awhile back, he had a post discussing why he and his wife had chosen to self-insure for long-term care rather than buy LTC insurance. A fellow named Scott Olson, who has been selling long-term care insurance for many years, responded as you might imagine, in support of LTC insurance. Fritz was generous enough to allow him to run this guest post offering somewhat of a rebuttal to Fritz's argument. Some of his claims make some sense to me, and I've briefly summarized some of them below.

1. LTC insurance policies that have built-in price increases should be avoided.
2. Most of the people who need LTC receive it in their homes; only a relatively small number go to LTC facilities. This means that the likelihood of someone receiving LTC is higher than many believe.
3. LTC insurance should be to protect against situations where LTC is needed for extended periods of time, many years.
4. The greatest risk for LTC is if someone needs it relatively early in life (e.g. 60s), leaving their spouse with many years of living expenses in front of them.

He goes on to claim that appropriate LTC insurance can be purchased for around $4k annually.

What are your thoughts?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

letsgobobby
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Re: An argument against self-insuring for long-term care

Post by letsgobobby » Thu Jul 26, 2018 12:12 am

I didn’t read the guest post.

How are any of the bullet points arguments against self insuring? Maybe he is really saying, “The cost of self insuring may be higher than you think.” But that doesn’t mean self-insuring is a bad option.

jeffh19
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Re: An argument against self-insuring for long-term care

Post by jeffh19 » Thu Jul 26, 2018 12:24 am

You have to look very specifically at what the maximum benefit is, how much they pay a month and what kind of facilities are, and aren't covered. I see a lot of insurances not cover various things, and also I see a lot of older people (my grandma included) who get near that age, complain about how much it costs and think about canceling it. I almost yelled at my grandma for this. She was maybe a year away from needing LTC, and wanted to cancel it after paying for it for 30 years. :oops: I'm sure some do because they can't afford it anymore or whatever.

But just run the math. If you put the monthly premiums in an index fund, for the same time frame, how much money would you have, how long would that last and how does that compare to the max payout a LTC insurance would give you? Not to mention the flexibility to go to an ILF/ALF/Memory care etc as needed, and transition from one to the other as you wanted, or if you didn't need it at all you have a boat load of cash towards the end of your life instead of the insurance company. I'm a heavy leaner on self insuring for LTC. Will probably be more and more so as corporate greed leads companies to screw the people over more and more, I think you'll start to see little clauses/catches/fees pop up more and more as the years go on to reduce the amount they have to pay.

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 12:40 am

letsgobobby wrote:
Thu Jul 26, 2018 12:12 am
I didn’t read the guest post.

How are any of the bullet points arguments against self insuring? Maybe he is really saying, “The cost of self insuring may be higher than you think.” But that doesn’t mean self-insuring is a bad option.
I'll try to explain, but you really should read the post. It's brief.

1. When Fritz did his original analysis, the LTC policy was going to increase 5% in price every year. Scott says that this is not at all the norm, and that most policies don't have built-in price increases like this.
2. The likelihood of you needing LTC is higher than most realize. Also, it seems that Medicaid is far less likely to pay for home care than for facility care, even though home care is far more common.
3. Many view the risk of LTC as being 2-3 years in duration, yet it may last a decade, which would cost anyone a fortune.
4. Many view the risk of LTC as being greatest later in life. While it's true that that's when they're most likely to need LTC, the greatest financial risk is if they need LTC earlier in life.

I'm still not completely sold. A policy quote I got on his website out of curiosity was going to cost about $6k for a 70 and 65 year old opposite sex couple and had a maximum lifetime payout of $900k, only two-thirds of which could be used by one spouse. This seems to fly in the face of #3 above as $600k could easily be spent in six years or fewer at a good LTC facility.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

letsgobobby
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Re: An argument against self-insuring for long-term care

Post by letsgobobby » Thu Jul 26, 2018 1:00 am

willthrill81 wrote:
Thu Jul 26, 2018 12:40 am
letsgobobby wrote:
Thu Jul 26, 2018 12:12 am
I didn’t read the guest post.

How are any of the bullet points arguments against self insuring? Maybe he is really saying, “The cost of self insuring may be higher than you think.” But that doesn’t mean self-insuring is a bad option.
I'll try to explain, but you really should read the post. It's brief.

1. When Fritz did his original analysis, the LTC policy was going to increase 5% in price every year. Scott says that this is not at all the norm, and that most policies don't have built-in price increases like this.
2. The likelihood of you needing LTC is higher than most realize. Also, it seems that Medicaid is far less likely to pay for home care than for facility care, even though home care is far more common.
3. Many view the risk of LTC as being 2-3 years in duration, yet it may last a decade, which would cost anyone a fortune.
4. Many view the risk of LTC as being greatest later in life. While it's true that that's when they're most likely to need LTC, the greatest financial risk is if they need LTC earlier in life.

I'm still not completely sold. A policy quote I got on his website out of curiosity was going to cost about $6k for a 70 and 65 year old opposite sex couple and had a maximum lifetime payout of $900k, only two-thirds of which could be used by one spouse. This seems to fly in the face of #3 above as $600k could easily be spent in six years or fewer at a good LTC facility.
Yes, I agree LTC can be more expensive and more likely than some expect. But that is only an argument for better assessing the costs/risks of self-insurance. It is not an argument against self-insurance. And as you’ve pointed out, if he’s proposing that LTC is the solution to these problems, the real world analysis (rapidly rising premiums, caps on lifetime benefits, difficulty getting claims paid) does not bear him out.

I’m planning to self-insure and I am extremely familiar with the costs (at least locally) of LTC as well as the risks of needing it. If I end up needing LTC for a decade, so be it, our estate will be smaller upon my death - but needing LTC for a decade is extremely rare.

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Re: An argument against self-insuring for long-term care

Post by msj16 » Thu Jul 26, 2018 1:26 am

LetsgoBobby (and others who self-insure): What is your targeted range for self-insurance? Plus do you set it aside in a separate fund or is it just part of expected expenses?

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Re: An argument against self-insuring for long-term care

Post by Cruise » Thu Jul 26, 2018 3:35 am

The overwhelming odds are that you will either not use you ltci or not expend nearly the amount you paid in premiums. After all, that is how w insuraurance componpanies make profits.

True story: My BIL sold ltci for many years, was a true believer in the product, and had his own policy. He got ill a few years ago, and he could have qualified to receive benefits. Whether due to pride, stupidity, or miscalculation, he refused to file a claim until just very recently. Is a shame, because those benefits would have made his life and my sister’s a lot easier. His life expectancy now is very short, and he will never recover his payments.

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Re: An argument against self-insuring for long-term care

Post by indexonlyplease » Thu Jul 26, 2018 5:17 am

I read somewhere that you should purchase long term care insurance at 60 years old. Not before.

Also, I live in south florida and have had 2 relatives that lived in adult living facilities (cost $5000.00) month and one was in the VA nursing home that cost him ($6000.00) a month. So, yes very expensive. Also, $6000.00 is cheap for a nursing home. If you want a nice home.

But I can tell you at both places the people taking care of you are not what I would expect. So, I would state if possible care at home would be best if possible.

So when you retire make health your new job. I have 2 parent that will be 86 yrs old this year. They became health nuts when they retired at 65 yrs old. This has kept them out of the adult living facilities.

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Re: An argument against self-insuring for long-term care

Post by JoeRetire » Thu Jul 26, 2018 6:40 am

willthrill81 wrote:
Wed Jul 25, 2018 11:28 pm
He goes on to claim that appropriate LTC insurance can be purchased for around $4k annually.
My wife and I have LTCi for less than $4k each annually. My wife pays more than I do, since she was pre-diabetic at the time we purchased. Together our combined premiums are about $5200/year.

We don't have automatic premium cost increases. (I didn't even know that was a thing.) So far, we haven't had any increase to the premiums at all. Our policy covers at-home care.

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Re: An argument against self-insuring for long-term care

Post by 10YearPlan » Thu Jul 26, 2018 6:51 am

indexonlyplease wrote:
Thu Jul 26, 2018 5:17 am
I read somewhere that you should purchase long term care insurance at 60 years old. Not before.

Also, I live in south florida and have had 2 relatives that lived in adult living facilities (cost $5000.00) month and one was in the VA nursing home that cost him ($6000.00) a month. So, yes very expensive. Also, $6000.00 is cheap for a nursing home. If you want a nice home.

But I can tell you at both places the people taking care of you are not what I would expect. So, I would state if possible care at home would be best if possible.

So when you retire make health your new job. I have 2 parent that will be 86 yrs old this year. They became health nuts when they retired at 65 yrs old. This has kept them out of the adult living facilities.
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between. However, if the industry did pay well, we likely would have not been able to afford the care for the length of time we needed it. Catch 22.

If you only need someone to come in a few hours a day or week, that is a bit easier than finding full-time, round the clock care.

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Re: An argument against self-insuring for long-term care

Post by marcopolo » Thu Jul 26, 2018 7:21 am

I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: An argument against self-insuring for long-term care

Post by marcopolo » Thu Jul 26, 2018 7:24 am

JoeRetire wrote:
Thu Jul 26, 2018 6:40 am
willthrill81 wrote:
Wed Jul 25, 2018 11:28 pm
He goes on to claim that appropriate LTC insurance can be purchased for around $4k annually.
My wife and I have LTCi for less than $4k each annually. My wife pays more than I do, since she was pre-diabetic at the time we purchased. Together our combined premiums are about $5200/year.

We don't have automatic premium cost increases. (I didn't even know that was a thing.) So far, we haven't had any increase to the premiums at all. Our policy covers at-home care.
Does it provide coverage for decades long care? If so, was it purchased recently?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: An argument against self-insuring for long-term care

Post by marcopolo » Thu Jul 26, 2018 7:24 am

JoeRetire wrote:
Thu Jul 26, 2018 6:40 am
willthrill81 wrote:
Wed Jul 25, 2018 11:28 pm
He goes on to claim that appropriate LTC insurance can be purchased for around $4k annually.
My wife and I have LTCi for less than $4k each annually. My wife pays more than I do, since she was pre-diabetic at the time we purchased. Together our combined premiums are about $5200/year.

We don't have automatic premium cost increases. (I didn't even know that was a thing.) So far, we haven't had any increase to the premiums at all. Our policy covers at-home care.
Does it provide coverage for decades long care? If so, was it purchased recently?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: An argument against self-insuring for long-term care

Post by fourwheelcycle » Thu Jul 26, 2018 7:26 am

I don't think any insurance company sells a product that is not actuarily viable. If they do, as some of the early LTC insurers did, they risk the viability of their product or even of their entire insurance company. To be viable, an insurance product must cover the true actuarial cost of the risk (claim payouts) plus all costs of marketing, issuing, and servicing the product, including the company's costs for facilities, employees, executive salaries, and net income. My sense is that, at a minimum, overhead costs in excess of actual claim payouts run from 20% to 40%.

For this reason, I think the standard BH advice that people should self-insure for any risk they can easily afford to pay for themselves is valid. In making this comment I do not mean to address questions like "Why should I insure my house if I can afford to self-insure if it burns down?", or "Why should I self-insure for LTC even if I can afford to do so, since LTC costs would chew up my children's inheritance?". These are questions each person must answer for themselves.

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 9:45 am

Cruise wrote:
Thu Jul 26, 2018 3:35 am
The overwhelming odds are that you will either not use you ltci or not expend nearly the amount you paid in premiums.
The same can be said of homeowners insurance. Do you refuse to insure your home for that reason?

The expected value of any insurance is negative. If it wasn't, insurance companies would go bankrupt. The point of insurance is to protect against financially catastrophic events, and that is something that LTC insurance is at least potentially capable of doing.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 9:46 am

letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: An argument against self-insuring for long-term care

Post by smitcat » Thu Jul 26, 2018 9:51 am

willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html

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Re: An argument against self-insuring for long-term care

Post by smitcat » Thu Jul 26, 2018 9:54 am

smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
And Wade Pfau...
https://www.forbes.com/sites/wadepfau/2 ... b350484ceb

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Re: An argument against self-insuring for long-term care

Post by randomguy » Thu Jul 26, 2018 10:01 am

marcopolo wrote:
Thu Jul 26, 2018 7:24 am
JoeRetire wrote:
Thu Jul 26, 2018 6:40 am
willthrill81 wrote:
Wed Jul 25, 2018 11:28 pm
He goes on to claim that appropriate LTC insurance can be purchased for around $4k annually.
My wife and I have LTCi for less than $4k each annually. My wife pays more than I do, since she was pre-diabetic at the time we purchased. Together our combined premiums are about $5200/year.

We don't have automatic premium cost increases. (I didn't even know that was a thing.) So far, we haven't had any increase to the premiums at all. Our policy covers at-home care.
Does it provide coverage for decades long care? If so, was it purchased recently?

To some extent this about cost. 2k/year for lifetime benefits is one thing. 2k/year for say 5 years of coverage is another. I got to admit the using % gains at the end comes accross as a salesman pitch type approach. I have a FA that tells me it is only 1%, that isn't going to add up to anything right? As far as automatic increases I think that is the wrong way of looking at it. Does the policy prevent rate increases period or are you at the mercy of the insurance company and the state regulators.

I think there is a niche of incomes and situations where it makes a ton of sense. And a bunch where it doesn't. My portfolio is supposed to be throwing off 200k/year when I retiree. LTGC can be covered pretty easily out of that. Drop my income to 30k, and paying 2k/year for insurance is a huge percentage of my money. In between it becomes an interesting choice. And again pricing and coverage matter a lot. You see people posting policies bought in the 90s and early 00s and they are orders of magnitude better than some of the other ones that get posted.

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Re: An argument against self-insuring for long-term care

Post by Kompass » Thu Jul 26, 2018 10:06 am

10YearPlan wrote:
Thu Jul 26, 2018 6:51 am
indexonlyplease wrote:
Thu Jul 26, 2018 5:17 am
I read somewhere that you should purchase long term care insurance at 60 years old. Not before.

Also, I live in south florida and have had 2 relatives that lived in adult living facilities (cost $5000.00) month and one was in the VA nursing home that cost him ($6000.00) a month. So, yes very expensive. Also, $6000.00 is cheap for a nursing home. If you want a nice home.

But I can tell you at both places the people taking care of you are not what I would expect. So, I would state if possible care at home would be best if possible.

So when you retire make health your new job. I have 2 parent that will be 86 yrs old this year. They became health nuts when they retired at 65 yrs old. This has kept them out of the adult living facilities.
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between. However, if the industry did pay well, we likely would have not been able to afford the care for the length of time we needed it. Catch 22.

If you only need someone to come in a few hours a day or week, that is a bit easier than finding full-time, round the clock care.
+1
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Re: An argument against self-insuring for long-term care

Post by midareff » Thu Jul 26, 2018 10:17 am

My situation is different to a very large degree. I'm 70.5 now and wife, who is Thai, is 55. Her cultural and religious (Buddhist) upbringing would have her care for me regardless. Should assistance ever be needed we would move to Bangkok where live in help is very inexpensive.

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Re: An argument against self-insuring for long-term care

Post by keystone » Thu Jul 26, 2018 10:31 am

randomguy wrote:
Thu Jul 26, 2018 10:01 am
I think there is a niche of incomes and situations where it makes a ton of sense. And a bunch where it doesn't. My portfolio is supposed to be throwing off 200k/year when I retiree. LTGC can be covered pretty easily out of that. Drop my income to 30k, and paying 2k/year for insurance is a huge percentage of my money. In between it becomes an interesting choice. And again pricing and coverage matter a lot. You see people posting policies bought in the 90s and early 00s and they are orders of magnitude better than some of the other ones that get posted.
I think you're right. I suspect more than a handful of posters on this site can pretty easily absorb a few years worth of long term care expenses, so a typical policy isn't going to be of much use in that case. I think that coverage for the worst case scenario (say 10+ years) would be of considerable interest to those that fall in that same group, but I have not seen any evidence that there are worthwhile polices with such extended coverage.

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Re: An argument against self-insuring for long-term care

Post by GAAP » Thu Jul 26, 2018 10:42 am

willthrill81 wrote:
Wed Jul 25, 2018 11:28 pm
1. LTC insurance policies that have built-in price increases should be avoided.
2. Most of the people who need LTC receive it in their homes; only a relatively small number go to LTC facilities. This means that the likelihood of someone receiving LTC is higher than many believe.
3. LTC insurance should be to protect against situations where LTC is needed for extended periods of time, many years.
4. The greatest risk for LTC is if someone needs it relatively early in life (e.g. 60s), leaving their spouse with many years of living expenses in front of them.
1. Haven't priced this in years, but the cost for that increase was at least double -- and the rates were rising much faster.

2. If it's done at home, it costs less and therefore changes the breakeven analysis.

3. Sort of -- it should protect against situations where the cost of LTC puts a strain on the resources to pay for it. Bill Gates will never need LTC insurance...

4. Again, sort of -- needing it early, but in home could be cheaper than needing it later in a specialty facility.
10YearPlan wrote:
Thu Jul 26, 2018 6:51 am
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between.
My experience exactly matches this.

I did find it interesting that group policies aren't compliant with the LTCI rate increase regulations.

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Re: An argument against self-insuring for long-term care

Post by indexonlyplease » Thu Jul 26, 2018 10:53 am

GAAP wrote:
Thu Jul 26, 2018 10:42 am
willthrill81 wrote:
Wed Jul 25, 2018 11:28 pm
1. LTC insurance policies that have built-in price increases should be avoided.
2. Most of the people who need LTC receive it in their homes; only a relatively small number go to LTC facilities. This means that the likelihood of someone receiving LTC is higher than many believe.
3. LTC insurance should be to protect against situations where LTC is needed for extended periods of time, many years.
4. The greatest risk for LTC is if someone needs it relatively early in life (e.g. 60s), leaving their spouse with many years of living expenses in front of them.
1. Haven't priced this in years, but the cost for that increase was at least double -- and the rates were rising much faster.

2. If it's done at home, it costs less and therefore changes the breakeven analysis.

3. Sort of -- it should protect against situations where the cost of LTC puts a strain on the resources to pay for it. Bill Gates will never need LTC insurance...

4. Again, sort of -- needing it early, but in home could be cheaper than needing it later in a specialty facility.
10YearPlan wrote:
Thu Jul 26, 2018 6:51 am
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between.
My experience exactly matches this.

I did find it interesting that group policies aren't compliant with the LTCI rate increase regulations.
The biggest problem is you may have long term care insurance but do you know what you really get when you need it. Do you know who will be coming to your house. I can tell you in South Florida you will not be happy with who shows up. I believe we were paying $200.00 a day for 24 our care until we put my father in law in the adult living family that cost us him around $5000 a month and went up the 2 years he was there. I can tell you even at $200 a day you still don't get someone coming to you house that you will like. We went through 3 people in the one year he was at home.

Hopefully in the future assisted death will be a choice in all states. Then you won't have to worry about the elder suffering and being mistreated. So we believe our portfolio will take care of us. I also plan on building a ramp out the back door into the pool. Now that's cheap long term care insurance.
Last edited by indexonlyplease on Thu Jul 26, 2018 11:00 am, edited 2 times in total.

letsgobobby
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Re: An argument against self-insuring for long-term care

Post by letsgobobby » Thu Jul 26, 2018 10:56 am

smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
I don't know if these numbers are precisely correct, but they match my experience. I have worked with geriatric patients for almost twenty years and supervise physicians who provide care in nursing homes. The number of folks who've needed care for as long as ten years is close to zero.

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Re: An argument against self-insuring for long-term care

Post by bsteiner » Thu Jul 26, 2018 11:09 am

marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?

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Re: An argument against self-insuring for long-term care

Post by marcopolo » Thu Jul 26, 2018 11:17 am

bsteiner wrote:
Thu Jul 26, 2018 11:09 am
marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: An argument against self-insuring for long-term care

Post by Broken Man 1999 » Thu Jul 26, 2018 11:38 am

Some seniors can secure some funds via reverse mortgages. Of course that solution must be carefully considered. For someone with a mortgage-free home, with no intent of passing home to others, a reverse mortgage might be ideal. At any rate, a reverse mortgage does provide a chunk of money that could be used by ONE member of a couple to pay for long-term care outside of home. One member must live in home though.

Just another tool in the toolbox.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 12:23 pm

marcopolo wrote:
Thu Jul 26, 2018 11:17 am
bsteiner wrote:
Thu Jul 26, 2018 11:09 am
marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Such a policy would indeed be an excellent product for those who are somewhere between the folks who have very little in their portfolios and will rely on Medicaid and those who have $5+ million and don't need to worry about LTC.

I wonder what aspect of state regulations would prohibit this kind of policy.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 12:25 pm

10YearPlan wrote:
Thu Jul 26, 2018 6:51 am
indexonlyplease wrote:
Thu Jul 26, 2018 5:17 am
I read somewhere that you should purchase long term care insurance at 60 years old. Not before.

Also, I live in south florida and have had 2 relatives that lived in adult living facilities (cost $5000.00) month and one was in the VA nursing home that cost him ($6000.00) a month. So, yes very expensive. Also, $6000.00 is cheap for a nursing home. If you want a nice home.

But I can tell you at both places the people taking care of you are not what I would expect. So, I would state if possible care at home would be best if possible.

So when you retire make health your new job. I have 2 parent that will be 86 yrs old this year. They became health nuts when they retired at 65 yrs old. This has kept them out of the adult living facilities.
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between. However, if the industry did pay well, we likely would have not been able to afford the care for the length of time we needed it. Catch 22.

If you only need someone to come in a few hours a day or week, that is a bit easier than finding full-time, round the clock care.
So do you believe that there is a significant quality difference between facilities that accept Medicaid and those who don't?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: An argument against self-insuring for long-term care

Post by JoeRetire » Thu Jul 26, 2018 12:27 pm

marcopolo wrote:
Thu Jul 26, 2018 7:24 am
Does it provide coverage for decades long care?
No. Not decades of expensive care.

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 12:51 pm

smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
Thanks. Christine Benz provides excellent content.

From that article, here are some relevant statistics. The second seems particularly relevant.
22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care need of two years or longer.
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.
15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.
$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in premiums by age 82.
It seems that if one is capable of paying for five years of LTC, that may be sufficient to head off most of the financial risk of LTC. Women are much more likely than men to need more than five years of LTC, but the risk is still low. And of course, there are the safety nets of Medicaid compliant annuities and Medicaid itself.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: An argument against self-insuring for long-term care

Post by smitcat » Thu Jul 26, 2018 1:04 pm

willthrill81 wrote:
Thu Jul 26, 2018 12:51 pm
smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
Thanks. Christine Benz provides excellent content.

From that article, here are some relevant statistics. The second seems particularly relevant.
22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care need of two years or longer.
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.
15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.
$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in premiums by age 82.
It seems that if one is capable of paying for five years of LTC, that may be sufficient to head off most of the financial risk of LTC. Women are much more likely than men to need more than five years of LTC, but the risk is still low. And of course, there are the safety nets of Medicaid compliant annuities and Medicaid itself.
Yes - dependent upon when you get the LTC policy and what you believe the overall purpose is having insurance coverage for 3-5 years would be of value.
We did not look at LTC insurance only for its value when we were "old" because it can affect folks at any age.

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Re: An argument against self-insuring for long-term care

Post by delamer » Thu Jul 26, 2018 1:13 pm

10YearPlan wrote:
Thu Jul 26, 2018 6:51 am
indexonlyplease wrote:
Thu Jul 26, 2018 5:17 am
I read somewhere that you should purchase long term care insurance at 60 years old. Not before.

Also, I live in south florida and have had 2 relatives that lived in adult living facilities (cost $5000.00) month and one was in the VA nursing home that cost him ($6000.00) a month. So, yes very expensive. Also, $6000.00 is cheap for a nursing home. If you want a nice home.

But I can tell you at both places the people taking care of you are not what I would expect. So, I would state if possible care at home would be best if possible.

So when you retire make health your new job. I have 2 parent that will be 86 yrs old this year. They became health nuts when they retired at 65 yrs old. This has kept them out of the adult living facilities.
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between. However, if the industry did pay well, we likely would have not been able to afford the care for the length of time we needed it. Catch 22.

If you only need someone to come in a few hours a day or week, that is a bit easier than finding full-time, round the clock care.

Completely agree. Institutional care has pros and cons, but assuming that at-home care is going to be superior is wrongheaded.

Taking good care of your health is important. But so is choosing the right parents. My mother and her siblings all had very few health problems as they aged until they all ended up with dementia in their late 80’s/early 90’s — just like my grandmother who was very overweight and sedentary.
Last edited by delamer on Thu Jul 26, 2018 1:14 pm, edited 1 time in total.

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Re: An argument against self-insuring for long-term care

Post by randomguy » Thu Jul 26, 2018 1:14 pm

willthrill81 wrote:
Thu Jul 26, 2018 12:51 pm
smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
Thanks. Christine Benz provides excellent content.

From that article, here are some relevant statistics. The second seems particularly relevant.
22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care need of two years or longer.
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.
15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.
$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in premiums by age 82.
It seems that if one is capable of paying for five years of LTC, that may be sufficient to head off most of the financial risk of LTC. Women are much more likely than men to need more than five years of LTC, but the risk is still low. And of course, there are the safety nets of Medicaid compliant annuities and Medicaid itself.
Note that doesn't include in home care.
https://www.aarp.org/content/dam/aarp/p ... rvices.pdf has the odds of men needing help for over 5 years up at 10% and woman 18%.

It would be interesting to look at the numbers for a bunch of cases. For example how many people would need to go to the home years earlier if they don't have a spouse to help out? And of course you want to match your situation to the average (how do nonsmokers who aren't obese do compare to average?) and your personal guesses (I have a great grand parent and a grand parent who have spend 10+ years in these places. Living to 101 and 95+ isn't statisically likely but when it happens you have to decide how much the averages apply to you).

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Re: An argument against self-insuring for long-term care

Post by MnyGrl » Thu Jul 26, 2018 1:27 pm

randomguy wrote:
Thu Jul 26, 2018 1:14 pm
willthrill81 wrote:
Thu Jul 26, 2018 12:51 pm
smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
Thanks. Christine Benz provides excellent content.

From that article, here are some relevant statistics. The second seems particularly relevant.
22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care need of two years or longer.
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.
15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.
$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in premiums by age 82.
It seems that if one is capable of paying for five years of LTC, that may be sufficient to head off most of the financial risk of LTC. Women are much more likely than men to need more than five years of LTC, but the risk is still low. And of course, there are the safety nets of Medicaid compliant annuities and Medicaid itself.
Note that doesn't include in home care.
https://www.aarp.org/content/dam/aarp/p ... rvices.pdf has the odds of men needing help for over 5 years up at 10% and woman 18%.

It would be interesting to look at the numbers for a bunch of cases. For example how many people would need to go to the home years earlier if they don't have a spouse to help out? And of course you want to match your situation to the average (how do nonsmokers who aren't obese do compare to average?) and your personal guesses (I have a great grand parent and a grand parent who have spend 10+ years in these places. Living to 101 and 95+ isn't statisically likely but when it happens you have to decide how much the averages apply to you).
+1. We know from many Boglehead threads that many kids attempt to help their parents as they age - financially, or with housing or physical care - so that seems to be a huge factor as well.

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Re: An argument against self-insuring for long-term care

Post by delamer » Thu Jul 26, 2018 1:30 pm

willthrill81 wrote:
Thu Jul 26, 2018 12:25 pm
10YearPlan wrote:
Thu Jul 26, 2018 6:51 am
indexonlyplease wrote:
Thu Jul 26, 2018 5:17 am
I read somewhere that you should purchase long term care insurance at 60 years old. Not before.

Also, I live in south florida and have had 2 relatives that lived in adult living facilities (cost $5000.00) month and one was in the VA nursing home that cost him ($6000.00) a month. So, yes very expensive. Also, $6000.00 is cheap for a nursing home. If you want a nice home.

But I can tell you at both places the people taking care of you are not what I would expect. So, I would state if possible care at home would be best if possible.

So when you retire make health your new job. I have 2 parent that will be 86 yrs old this year. They became health nuts when they retired at 65 yrs old. This has kept them out of the adult living facilities.
Sadly, I have lots of experience with both in-home care and assisted living/quasi nursing home. Both are really less than ideal and mostly for the same reason: it is very hard to find someone who will provide excellent, quality, loving care to your loved one at a reasonable price for an extended period of time. The industry does not pay well, and therefore attracts less than stellar candidates. Sure you can find a few gems (we did) but they are few and far between. However, if the industry did pay well, we likely would have not been able to afford the care for the length of time we needed it. Catch 22.

If you only need someone to come in a few hours a day or week, that is a bit easier than finding full-time, round the clock care.
So do you believe that there is a significant quality difference between facilities that accept Medicaid and those who don't?
I don’t think it is binary.

The facility that my mother was in — where she received very good care — accepted Medicaid patients but had many private pay patients also. It was part of a CCRC, but took outside patients too.

But I’d expect that there is an inverse relationship between the percentage of Medicaid patients and the quality of care. About 60% of patients in nursing homes are covered by Medicaid, so my guess (I couldn’t find any data) is that not too many nursing homes have no Medicaid patients.

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Re: An argument against self-insuring for long-term care

Post by GAAP » Thu Jul 26, 2018 1:55 pm

willthrill81 wrote:
Thu Jul 26, 2018 12:51 pm
From that article, here are some relevant statistics. The second seems particularly relevant.

22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care need of two years or longer.

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.

15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.

$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in premiums by age 82.

It seems that if one is capable of paying for five years of LTC, that may be sufficient to head off most of the financial risk of LTC. Women are much more likely than men to need more than five years of LTC, but the risk is still low. And of course, there are the safety nets of Medicaid compliant annuities and Medicaid itself.
My initial thoughts on those statistics:
  • Is there a difference in need across income quintiles -- or just a difference in ability to pay that limits options?
  • A hair less than 9% chance that one of two spouses will need LTC for more than 5 years.
  • A couple would pay $104K by age 82 to get a 15.2% chance of saving more than $250K.
  • I would really like to see some charts of probability of LTC vs age/gender, age/cost breakdown, etc. There really doesn't seem to be much information out there to make an informed decision.
Medicaid as a safety net means willingness to use the lowest-paid of the low-paid workers in the industry -- and in the lowest-cost facilities.

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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 2:30 pm

randomguy wrote:
Thu Jul 26, 2018 1:14 pm
willthrill81 wrote:
Thu Jul 26, 2018 12:51 pm
smitcat wrote:
Thu Jul 26, 2018 9:51 am
willthrill81 wrote:
Thu Jul 26, 2018 9:46 am
letsgobobby wrote:
Thu Jul 26, 2018 1:00 am
but needing LTC for a decade is extremely rare.
Do you have any sources that show the likelihood of needing LTC for a specific period of time, including home care?

One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
Thanks. Christine Benz provides excellent content.

From that article, here are some relevant statistics. The second seems particularly relevant.
22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care need of two years or longer.
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.
15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.
$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in premiums by age 82.
It seems that if one is capable of paying for five years of LTC, that may be sufficient to head off most of the financial risk of LTC. Women are much more likely than men to need more than five years of LTC, but the risk is still low. And of course, there are the safety nets of Medicaid compliant annuities and Medicaid itself.
Note that doesn't include in home care.
https://www.aarp.org/content/dam/aarp/p ... rvices.pdf has the odds of men needing help for over 5 years up at 10% and woman 18%.

It would be interesting to look at the numbers for a bunch of cases. For example how many people would need to go to the home years earlier if they don't have a spouse to help out? And of course you want to match your situation to the average (how do nonsmokers who aren't obese do compare to average?) and your personal guesses (I have a great grand parent and a grand parent who have spend 10+ years in these places. Living to 101 and 95+ isn't statisically likely but when it happens you have to decide how much the averages apply to you).
That's a good point, though from what I've seen home care seems to usually be significantly less expensive. In our area, a home health aid costs about 60% of a semi-private room in a nursing home. So the lower costs may roughly balance out the higher risk.
Last edited by willthrill81 on Thu Jul 26, 2018 3:42 pm, edited 1 time in total.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 2:37 pm

GAAP wrote:
Thu Jul 26, 2018 1:55 pm
Is there a difference in need across income quintiles -- or just a difference in ability to pay that limits options?
Almost certainly there is a need difference. Those with higher income tend to be in better health than those with lower income.
GAAP wrote:
Thu Jul 26, 2018 1:55 pm
A couple would pay $104K by age 82 to get a 15.2% chance of saving more than $250K.
Without knowing what the dollar amount above $250k is, it's hard to evaluate that risk.
GAAP wrote:
Thu Jul 26, 2018 1:55 pm
I would really like to see some charts of probability of LTC vs age/gender, age/cost breakdown, etc. There really doesn't seem to be much information out there to make an informed decision.
I agree. The actuaries aren't very forthcoming.
GAAP wrote:
Thu Jul 26, 2018 1:55 pm
Medicaid as a safety net means willingness to use the lowest-paid of the low-paid workers in the industry -- and in the lowest-cost facilities.
Possibly. We were discussing that above. Medicaid doesn't seem to doom someone to poor care, nor does it appear that private pay guarantees quality care. But at least with private care you likely have more options.

I agree that Medicaid shouldn't be the first line of defense for the typical Boglehead. But it's a far more effective stop-gap measure than nothing.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: An argument against self-insuring for long-term care

Post by TomatoTomahto » Thu Jul 26, 2018 2:46 pm

willthrill81 wrote:
Thu Jul 26, 2018 12:23 pm
marcopolo wrote:
Thu Jul 26, 2018 11:17 am
bsteiner wrote:
Thu Jul 26, 2018 11:09 am
marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Such a policy would indeed be an excellent product for those who are somewhere between the folks who have very little in their portfolios and will rely on Medicaid and those who have $5+ million and don't need to worry about LTC.

I wonder what aspect of state regulations would prohibit this kind of policy.
I don’t know, but I would not be surprised if this claim of “state regulations” is abject nonsense. The premiums would be too low for the agent’s windfall that they’re angling for. What conceivable public interest would there be in prohibiting such a policy?

Fwiw, and this is not a humble brag, and I acknowledge our good luck, but if I were in a nursing facility, there would be offsetting savings because I’d no longer need a car, take expensive vacations, dine at fancy restaurants, etc.

We self insure.

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Re: An argument against self-insuring for long-term care

Post by LadyGeek » Thu Jul 26, 2018 3:37 pm

I removed an off-topic comment related to diet and a reply, the discussion was getting derailed.

Please stay on-topic.
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Re: An argument against self-insuring for long-term care

Post by nova1968 » Thu Jul 26, 2018 3:46 pm

LTC depends on the situation, If you want to leave a large inheritance to your heirs LTC may be worth considering, If you're solo with no heirs and end up in a nursing home with Alzheimer's you're probably not going to have the mental capacity to realize that your life savings have been wiped out.

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Re: An argument against self-insuring for long-term care

Post by GAAP » Thu Jul 26, 2018 4:01 pm

willthrill81 wrote:
Thu Jul 26, 2018 2:37 pm
GAAP wrote:
Thu Jul 26, 2018 1:55 pm
Is there a difference in need across income quintiles -- or just a difference in ability to pay that limits options?
Almost certainly there is a need difference. Those with higher income tend to be in better health than those with lower income.
The problem with that statistic is that it only has value to people in that quintile -- granted, a large portion of people here, but not all of them.

If it doesn't apply to someone, how could they even evaluate their need. If they're in worse health, does that mean an increased need for LTC, or is it decreased due to early mortality?
willthrill81 wrote:
Thu Jul 26, 2018 2:37 pm
GAAP wrote:
Thu Jul 26, 2018 1:55 pm
Medicaid as a safety net means willingness to use the lowest-paid of the low-paid workers in the industry -- and in the lowest-cost facilities.
Possibly. We were discussing that above. Medicaid doesn't seem to doom someone to poor care, nor does it appear that private pay guarantees quality care. But at least with private care you likely have more options.

I agree that Medicaid shouldn't be the first line of defense for the typical Boglehead. But it's a far more effective stop-gap measure than nothing.
In practical terms, to qualify for Medicaid, much of the Boglehead emphasis is no longer meaningful. You're pretty much stuck with whatever you can get.

I know that I could certainly tell the difference between Medicaid and private pay when my mom and MIL had to spend time in those facilities after surgery. My mom had the resources for private-pay, my MIL didn't.

marcopolo
Posts: 1028
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Re: An argument against self-insuring for long-term care

Post by marcopolo » Thu Jul 26, 2018 5:32 pm

willthrill81 wrote:
Thu Jul 26, 2018 12:23 pm
marcopolo wrote:
Thu Jul 26, 2018 11:17 am
bsteiner wrote:
Thu Jul 26, 2018 11:09 am
marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Such a policy would indeed be an excellent product for those who are somewhere between the folks who have very little in their portfolios and will rely on Medicaid and those who have $5+ million and don't need to worry about LTC.

I wonder what aspect of state regulations would prohibit this kind of policy.
Not sure what the exact regulations are, but I think they were designed to protect consumers. Here is an interesting article from Kitces discussing this exact issue (https://www.kitces.com/blog/can-increas ... ing-again/).

From the article:

The problem is that, in an effort to “protect” consumers, most states actually require all long-term care insurance sold in the state to have an elimination period of no more than 365 days, a remnant of laws passed several decades ago when long-term care insurance was cheap enough that ultra-long elimination periods were never anticipated as being likely/necessary. Yet as long-term care insurance has evolved, these state laws today are requiring elimination periods so “low” that it is rendering long-term care insurance unaffordable for many, which limits the pool of participants, forces industry consolidation, and potentially amplifies the challenges. Imagine a world where state laws prevented anyone from buying automobile insurance with a more-than-$50 deductible, then imagine how expensive automobile insurance would get, and how many people would decide to skip the coverage… and you have an understanding of how originally-well-intended laws have produced a similar effect for long-term care insurance.
Once in a while you get shown the light, in the strangest of places if you look at it right.

marcopolo
Posts: 1028
Joined: Sat Dec 03, 2016 10:22 am

Re: An argument against self-insuring for long-term care

Post by marcopolo » Thu Jul 26, 2018 5:35 pm

TomatoTomahto wrote:
Thu Jul 26, 2018 2:46 pm
willthrill81 wrote:
Thu Jul 26, 2018 12:23 pm
marcopolo wrote:
Thu Jul 26, 2018 11:17 am
bsteiner wrote:
Thu Jul 26, 2018 11:09 am
marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Such a policy would indeed be an excellent product for those who are somewhere between the folks who have very little in their portfolios and will rely on Medicaid and those who have $5+ million and don't need to worry about LTC.

I wonder what aspect of state regulations would prohibit this kind of policy.
I don’t know, but I would not be surprised if this claim of “state regulations” is abject nonsense. The premiums would be too low for the agent’s windfall that they’re angling for. What conceivable public interest would there be in prohibiting such a policy?

Fwiw, and this is not a humble brag, and I acknowledge our good luck, but if I were in a nursing facility, there would be offsetting savings because I’d no longer need a car, take expensive vacations, dine at fancy restaurants, etc.

We self insure.
I think the regulation do actually exist. See article from Michael Kitces:
https://www.kitces.com/blog/can-increas ... ing-again/

That is a good point about many expenses going away. While not nearly as well situated as your family, our current plan is also to self-insure.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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willthrill81
Posts: 5332
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Location: USA

Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 5:39 pm

marcopolo wrote:
Thu Jul 26, 2018 5:32 pm
willthrill81 wrote:
Thu Jul 26, 2018 12:23 pm
marcopolo wrote:
Thu Jul 26, 2018 11:17 am
bsteiner wrote:
Thu Jul 26, 2018 11:09 am
marcopolo wrote:
Thu Jul 26, 2018 7:21 am
I completely agree with point 3. Insurance is for long tail risk. I can easily afford a few years. A couple of decades is what I want to protect against. Where can you get such a policy for 4k/ yr? I don't think such a beast exists. I think he is being a bit dis-engineous in saying you need X, but then throwing out an attractive price that does not provide X. I would love to be proven wrong.
I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Such a policy would indeed be an excellent product for those who are somewhere between the folks who have very little in their portfolios and will rely on Medicaid and those who have $5+ million and don't need to worry about LTC.

I wonder what aspect of state regulations would prohibit this kind of policy.
Not sure what the exact regulations are, but I think they were designed to protect consumers. Here is an interesting article from Kitces discussing this exact issue (https://www.kitces.com/blog/can-increas ... ing-again/).

From the article:

The problem is that, in an effort to “protect” consumers, most states actually require all long-term care insurance sold in the state to have an elimination period of no more than 365 days, a remnant of laws passed several decades ago when long-term care insurance was cheap enough that ultra-long elimination periods were never anticipated as being likely/necessary. Yet as long-term care insurance has evolved, these state laws today are requiring elimination periods so “low” that it is rendering long-term care insurance unaffordable for many, which limits the pool of participants, forces industry consolidation, and potentially amplifies the challenges. Imagine a world where state laws prevented anyone from buying automobile insurance with a more-than-$50 deductible, then imagine how expensive automobile insurance would get, and how many people would decide to skip the coverage… and you have an understanding of how originally-well-intended laws have produced a similar effect for long-term care insurance.
Thanks. As usual, Kitces summed up the issue quite well with a good illustration.

During his most recent podcast episode, Jim at White Coat Investor briefly discussed his view that those with $2 million or more in their portfolio should just self-insure. I'm inclined to agree.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

delamer
Posts: 5778
Joined: Tue Feb 08, 2011 6:13 pm

Re: An argument against self-insuring for long-term care

Post by delamer » Thu Jul 26, 2018 5:52 pm

marcopolo wrote:
Thu Jul 26, 2018 5:35 pm
TomatoTomahto wrote:
Thu Jul 26, 2018 2:46 pm
willthrill81 wrote:
Thu Jul 26, 2018 12:23 pm
marcopolo wrote:
Thu Jul 26, 2018 11:17 am
bsteiner wrote:
Thu Jul 26, 2018 11:09 am


I agree that the policy should provide coverage for life, except not for the first 3 years. If it doesn't pay for the first 3 years, the cost should be affordable. Is anyone aware of any such policies?
That is my thinking exactly. The policies available today are really pre-paid service, not insurance. There must be a market for a policy with a long (3-5yrs?) exclusion period, then full coverage for life. The vast majority of policies would never pay out (that is how insurance is supposed to work). That should make the policies more affordable, and actuarialy sound.

I have asked this before, and the answer I got on this board from some of the LTC salesmen is that state regulations prohibit such policies. Too bad, I would probably buy such a product.
Such a policy would indeed be an excellent product for those who are somewhere between the folks who have very little in their portfolios and will rely on Medicaid and those who have $5+ million and don't need to worry about LTC.

I wonder what aspect of state regulations would prohibit this kind of policy.
I don’t know, but I would not be surprised if this claim of “state regulations” is abject nonsense. The premiums would be too low for the agent’s windfall that they’re angling for. What conceivable public interest would there be in prohibiting such a policy?

Fwiw, and this is not a humble brag, and I acknowledge our good luck, but if I were in a nursing facility, there would be offsetting savings because I’d no longer need a car, take expensive vacations, dine at fancy restaurants, etc.

We self insure.
I think the regulation do actually exist. See article from Michael Kitces:
https://www.kitces.com/blog/can-increas ... ing-again/

That is a good point about many expenses going away. While not nearly as well situated as your family, our current plan is also to self-insure.
As half of a married couple, my biggest concern is that one of us needs extended institutional care while the other is healthy. So expensive institutional care for one spouse is required, but the other spouse has to have money to pay for his/her lifestyle/expenses. We have sufficient LTCI to cover 2.5 to 3 years of care for each of us (depending on the facility).

The worst case is both of us requiring a long period of institutional care, but we would have to be so snake-bit to have that occur that I just don’t see the point in worrying about it.

golfCaddy
Posts: 693
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Re: An argument against self-insuring for long-term care

Post by golfCaddy » Thu Jul 26, 2018 6:46 pm

I think he has an extremely important point. If you're rich, which I'll define as $5M+ in net worth, you can self insure for almost anything. If you retire with less than $500k and no pension, you can't afford the LTC premiums. However, that leaves an extremely broad middle, where extended LTC can be one of the largest risks in retirement.

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willthrill81
Posts: 5332
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Location: USA

Re: An argument against self-insuring for long-term care

Post by willthrill81 » Thu Jul 26, 2018 8:00 pm

delamer wrote:
Thu Jul 26, 2018 5:52 pm
As half of a married couple, my biggest concern is that one of us needs extended institutional care while the other is healthy. So expensive institutional care for one spouse is required, but the other spouse has to have money to pay for his/her lifestyle/expenses. We have sufficient LTCI to cover 2.5 to 3 years of care for each of us (depending on the facility).
If one is able to get into a good facility that takes Medicaid, a Medicaid-compliant annuity might be a good option in that instance.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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