An argument against self-insuring for long-term care

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

Post by marcopolo »

willthrill81 wrote: Sat Jul 28, 2018 8:48 pm
marcopolo wrote: Sat Jul 28, 2018 8:47 pm
willthrill81 wrote: Sat Jul 28, 2018 7:19 pm
marcopolo wrote: Sat Jul 28, 2018 5:36 pm
willthrill81 wrote: Sat Jul 28, 2018 5:19 pm

The 'decades of coverage' argument seems to be smoke and mirrors. I've not come across any policy that would pay $100k annually for 20+ years for a single spouse. A $1.5 million policy is likely to split so that one spouse can't consume more than $1 million of it, which is maybe 10 years at current LTC rates. I've heard of 'hybrid' policies that supposedly would pay indefinitely but haven't seen any particulars.

I've heard LTCi salespeople crowing about the risk of someone in their early 60s needing ten or more years of LTC, but I've only ever heard of one such person that that actually happened to (and that was told by an insurance salesperson). I'm not saying that it can't happen, but the likelihood seems to be remote to me. I don't choose to insure against every potential thing that could happen and that I can buy insurance for. If I have a high probability of being able to pay for that risk myself, then I will. And if the remote chance rears its head in this area, Medicaid is there, though many who sell LTCi act like it either isn't or that it's 'only for the peasants'.
Well, what do you consider "many years"? It was your original post that had that as a criteria (item 3) on the list you quoted. I view that as a decade or more.

I view this similar to umbrella insurance. Very few people ever make claims, that is what keeps rates affordable. But, there is protection for the potentially devasting, but rare occurrences. I carry multiple millions of umbrella. If I could only get a few hundred thousand of coverage, it would not be of much interest, because it would not protect against catastrophic risk. Likewise, I want to protect against the rare decade plus risk of LTC. I can afford several years my self. Insuring against that is not very helpful.
That's one of the problems with LTCi. Most of the policies will pay for maybe 5-6 years of care and no more. That's not the big risk for us or probably for most Bogleheads. It's a decade or more or LTC, and most policies don't cover that. But it appears that states don't allow for a long elimination period (e.g. 3-5 years), which would bring the cost of LTCi way down. It would be akin to buying a catastrophic health insurance plan instead of one that covers virtually all healthcare expenses.

After researching it and hearing from many weigh in on the topic, I think that LTCi is unlikely to be truly helpful for most if they realize that they can take advantage of other means of protecting assets.
I completely agree with your assessment above.
That seems almost diametrically opposed to the gist of the original post in the thread, where the suggestion was that you needed coverage for many years, and that coverage could be had for 4k/yr.
Remember that I was merely reiterating someone else's recommendations and soliciting feedback.
Understood. I think the points in the article are a bit disingenuous. I agree with your assessment above regarding the current state of LTCi.
Once in a while you get shown the light, in the strangest of places if you look at it right.
golfCaddy
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Re: An argument against self-insuring for long-term care

Post by golfCaddy »

tweetybird wrote: Thu Jul 26, 2018 8:07 pm I am Interested if know if the definition of "rich" and thus likely able to self insure for LTC is defined as 5 million per individual, and thus 10 million per couple, or 5 million per couple? I am a single person and plan to self insure and thus the interest in such detail.
With a 30 year retirement, the traditional SWR of 4% on $5M generates $200k/year in income. If you want an earlier retirement, ex. 55, and expect future investment returns to be lower, a 3% SWR on $5M generates $150k/year. At $5M, a single person could pay for LTC indefinitely.

https://www.forbes.com/sites/wadepfau/2 ... 5f1e946860
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

golfCaddy wrote: Sat Jul 28, 2018 9:56 pm
tweetybird wrote: Thu Jul 26, 2018 8:07 pm I am Interested if know if the definition of "rich" and thus likely able to self insure for LTC is defined as 5 million per individual, and thus 10 million per couple, or 5 million per couple? I am a single person and plan to self insure and thus the interest in such detail.
With a 30 year retirement, the traditional SWR of 4% on $5M generates $200k/year in income. If you want an earlier retirement, ex. 55, and expect future investment returns to be lower, a 3% SWR on $5M generates $150k/year. At $5M, a single person could pay for LTC indefinitely.

https://www.forbes.com/sites/wadepfau/2 ... 5f1e946860
And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
“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
golfCaddy
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Re: An argument against self-insuring for long-term care

Post by golfCaddy »

willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
DC3509
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

marcopolo wrote: Sat Jul 28, 2018 5:36 pm
willthrill81 wrote: Sat Jul 28, 2018 5:19 pm
marcopolo wrote: Sat Jul 28, 2018 4:06 pm
WoW2012 wrote: Sat Jul 28, 2018 3:07 pm
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.
The cost of long-term care insurance policy depends upon several factors:
1) your age at the time you apply for a policy
2) your health history
3) if you live alone or if you have a spouse/partner
4) the amount of benefits you buy
5) the company you buy it from (in some cases, some companies can cost 75% to 100% MORE than other companies)

The average cost of a new long-term care policy in 2017 was $2,596. But the average age for buying a policy is 59 years old.

A 70-year old buying a new policy today pays 150% MORE than a 60-year old buying the exact same policy.
Is the $2596 average for a policy that provides unlimited or at least a couple of decades of coverage. That was the original article was recommending.
The 'decades of coverage' argument seems to be smoke and mirrors. I've not come across any policy that would pay $100k annually for 20+ years for a single spouse. A $1.5 million policy is likely to split so that one spouse can't consume more than $1 million of it, which is maybe 10 years at current LTC rates. I've heard of 'hybrid' policies that supposedly would pay indefinitely but haven't seen any particulars.

I've heard LTCi salespeople crowing about the risk of someone in their early 60s needing ten or more years of LTC, but I've only ever heard of one such person that that actually happened to (and that was told by an insurance salesperson). I'm not saying that it can't happen, but the likelihood seems to be remote to me. I don't choose to insure against every potential thing that could happen and that I can buy insurance for. If I have a high probability of being able to pay for that risk myself, then I will. And if the remote chance rears its head in this area, Medicaid is there, though many who sell LTCi act like it either isn't or that it's 'only for the peasants'.
Well, what do you consider "many years"? It was your original post that had that as a criteria (item 3) on the list you quoted. I view that as a decade or more.

I view this similar to umbrella insurance. Very few people ever make claims, that is what keeps rates affordable. But, there is protection for the potentially devasting, but rare occurrences. I carry multiple millions of umbrella. If I could only get a few hundred thousand of coverage, it would not be of much interest, because it would not protect against catastrophic risk. Likewise, I want to protect against the rare decade plus risk of LTC. I can afford several years my self. Insuring against that is not very helpful.
Would you still buy umbrella insurance if there was a government program that backstopped the truly unexpected things that umbrella insurance covers?

The difference of course with LTCI insurance is that, in fact, there is a government program that would cover you for decades in a nursing home -- it is called Medicaid.
DC3509
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

golfCaddy wrote: Sat Jul 28, 2018 10:34 pm
willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
So let's say they this 85 year old couple has $500k in an IRA. What makes more sense -- paying for -- likely 20-30 years of LTC premiums at anywhere from $2-5K a year -- assuming they bought a LTCI policy when they were young, healthy, and eligible?

Or assuming the IRA is in the institutionalized spouse's name -- transferring the max to the community spouse (currently around $120K) -- buying a Medicaid complaint annuity -- reinvesting the extra from the annuity -- qualifying for Medicaid immediately -- and using the extra money you just shielded to supplement Medicaid with private rooms, aides, and geriatric care managers?

It is hard for me to see how the first option is tremendously better for most people. It might be better for people who have the most amount of resources. Or people who live in HCOL areas and you must private pay in order to get a bed at anywhere halfway decent. Or for people who can qualify for LTCI. But that's hardly everyone, the premiums can be expensive, and many people would be better off or just as well off with the second strategy.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

DC3509 wrote: Sat Jul 28, 2018 10:42 pm
golfCaddy wrote: Sat Jul 28, 2018 10:34 pm
willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
So let's say they this 85 year old couple has $500k in an IRA. What makes more sense -- paying for -- likely 20-30 years of LTC premiums at anywhere from $2-5K a year -- assuming they bought a LTCI policy when they were young, healthy, and eligible?

Or assuming the IRA is in the institutionalized spouse's name -- transferring the max to the community spouse (currently around $120K) -- buying a Medicaid complaint annuity -- reinvesting the extra from the annuity -- qualifying for Medicaid immediately -- and using the extra money you just shielded to supplement Medicaid with private rooms, aides, and geriatric care managers?

It is hard for me to see how the first option is tremendously better for most people. It might be better for people who have the most amount of resources. Or people who live in HCOL areas and you must private pay in order to get a bed at anywhere halfway decent. Or for people who can qualify for LTCI. But that's hardly everyone, the premiums can be expensive, and many people would be better off or just as well off with the second strategy.
I entirely agree. Plus, data have shown that the majority of retirees aren't going to spend 50-75% of their portfolio within their lifetimes.
“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
golfCaddy
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Re: An argument against self-insuring for long-term care

Post by golfCaddy »

DC3509 wrote: Sat Jul 28, 2018 10:42 pm
golfCaddy wrote: Sat Jul 28, 2018 10:34 pm
willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
So let's say they this 85 year old couple has $500k in an IRA. What makes more sense -- paying for -- likely 20-30 years of LTC premiums at anywhere from $2-5K a year -- assuming they bought a LTCI policy when they were young, healthy, and eligible?

Or assuming the IRA is in the institutionalized spouse's name -- transferring the max to the community spouse (currently around $120K) -- buying a Medicaid complaint annuity -- reinvesting the extra from the annuity -- qualifying for Medicaid immediately -- and using the extra money you just shielded to supplement Medicaid with private rooms, aides, and geriatric care managers?

It is hard for me to see how the first option is tremendously better for most people. It might be better for people who have the most amount of resources. Or people who live in HCOL areas and you must private pay in order to get a bed at anywhere halfway decent. Or for people who can qualify for LTCI. But that's hardly everyone, the premiums can be expensive, and many people would be better off or just as well off with the second strategy.
You might be right on the Medicaid planning. I'm not an expert in that. What I do object to is the OP's view $500k isn't much money for a couple with $2M in net worth when they start retirement. If they have $1.5M in investments, a $500k paid off house, and carve out $500k from their investments for a LTC bucket, that reduces their income in retirement by 33%. No one would tell them they don't need to insure their home against a fire, since it's only 25% of their net worth, and probability wise, one of them needing LTC is way more likely than their house burning down.
DC3509
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

golfCaddy wrote: Sat Jul 28, 2018 11:35 pm
DC3509 wrote: Sat Jul 28, 2018 10:42 pm
golfCaddy wrote: Sat Jul 28, 2018 10:34 pm
willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
So let's say they this 85 year old couple has $500k in an IRA. What makes more sense -- paying for -- likely 20-30 years of LTC premiums at anywhere from $2-5K a year -- assuming they bought a LTCI policy when they were young, healthy, and eligible?

Or assuming the IRA is in the institutionalized spouse's name -- transferring the max to the community spouse (currently around $120K) -- buying a Medicaid complaint annuity -- reinvesting the extra from the annuity -- qualifying for Medicaid immediately -- and using the extra money you just shielded to supplement Medicaid with private rooms, aides, and geriatric care managers?

It is hard for me to see how the first option is tremendously better for most people. It might be better for people who have the most amount of resources. Or people who live in HCOL areas and you must private pay in order to get a bed at anywhere halfway decent. Or for people who can qualify for LTCI. But that's hardly everyone, the premiums can be expensive, and many people would be better off or just as well off with the second strategy.
You might be right on the Medicaid planning. I'm not an expert in that. What I do object to is the OP's view $500k isn't much money for a couple with $2M in net worth when they start retirement. If they have $1.5M in investments, a $500k paid off house, and carve out $500k from their investments for a LTC bucket, that reduces their income in retirement by 33%. No one would tell them they don't need to insure their home against a fire, since it's only 25% of their net worth, and probability wise, one of them needing LTC is way more likely than their house burning down.
I completely agree. And $500K for what? Again, perhaps in some areas, with private pay only facilities, the LTC can buy you something better. But in lots of areas, it is not going to buy you something better. It will buy you a bed in the same place where Uncle Sam is paying for your neighbor. Would you give 1/4 of your portfolio to any other type of insurance where the government basically backstops the worst case loss?
randomguy
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Re: An argument against self-insuring for long-term care

Post by randomguy »

golfCaddy wrote: Sat Jul 28, 2018 10:34 pm
willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
Sure but that is a bottom ~10% outcome. The more normal case is that 2 million dollars has turned into 3+ million and paying for LTC is even easier. And of course since you are not paying for LTCi, your SWR is lower. A 3.6% SWR (i.e. for the 1 million dollar couple) versus 4% (actually it will probably be a bit more since this is assuming zero taxes) is a huge difference when looking at sequence of return risks. 4% is right at the level that has some failure cases (depending on what you use for bonds and stocks) while 3.6% is at the level that hasn't failed. Even 3.8% versus 4% is pretty noticeable.
randomguy
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Re: An argument against self-insuring for long-term care

Post by randomguy »

coincollector wrote: Sat Jul 28, 2018 6:21 pm An HSA is a great insurance policy for all health care needs including long term care. Let's say at 30 you begin saving the current max of $3,450 each year until age 45 in an S&P 500 index. 10% is a reasonable rate of return for that type of investment. At 65 you'll have $834k, $1.3M at 70, $2.1m at 75 and $3.4m at 80. Hopefully that will be plenty of money for long term care and any other health needs that might crop up. Inflation is a tricky beast to predict but the above is decent chunk of change.
Nothing magical about HSA (well other than some of the tax treatment). Hitting retierment with another 800k does wonders for handling all sorts of problems especially if it makes 10%/year for your first 20 years of retirement:)
marcopolo
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

DC3509 wrote: Sat Jul 28, 2018 10:36 pm
marcopolo wrote: Sat Jul 28, 2018 5:36 pm
willthrill81 wrote: Sat Jul 28, 2018 5:19 pm
marcopolo wrote: Sat Jul 28, 2018 4:06 pm
WoW2012 wrote: Sat Jul 28, 2018 3:07 pm

The cost of long-term care insurance policy depends upon several factors:
1) your age at the time you apply for a policy
2) your health history
3) if you live alone or if you have a spouse/partner
4) the amount of benefits you buy
5) the company you buy it from (in some cases, some companies can cost 75% to 100% MORE than other companies)

The average cost of a new long-term care policy in 2017 was $2,596. But the average age for buying a policy is 59 years old.

A 70-year old buying a new policy today pays 150% MORE than a 60-year old buying the exact same policy.
Is the $2596 average for a policy that provides unlimited or at least a couple of decades of coverage. That was the original article was recommending.
The 'decades of coverage' argument seems to be smoke and mirrors. I've not come across any policy that would pay $100k annually for 20+ years for a single spouse. A $1.5 million policy is likely to split so that one spouse can't consume more than $1 million of it, which is maybe 10 years at current LTC rates. I've heard of 'hybrid' policies that supposedly would pay indefinitely but haven't seen any particulars.

I've heard LTCi salespeople crowing about the risk of someone in their early 60s needing ten or more years of LTC, but I've only ever heard of one such person that that actually happened to (and that was told by an insurance salesperson). I'm not saying that it can't happen, but the likelihood seems to be remote to me. I don't choose to insure against every potential thing that could happen and that I can buy insurance for. If I have a high probability of being able to pay for that risk myself, then I will. And if the remote chance rears its head in this area, Medicaid is there, though many who sell LTCi act like it either isn't or that it's 'only for the peasants'.
Well, what do you consider "many years"? It was your original post that had that as a criteria (item 3) on the list you quoted. I view that as a decade or more.

I view this similar to umbrella insurance. Very few people ever make claims, that is what keeps rates affordable. But, there is protection for the potentially devasting, but rare occurrences. I carry multiple millions of umbrella. If I could only get a few hundred thousand of coverage, it would not be of much interest, because it would not protect against catastrophic risk. Likewise, I want to protect against the rare decade plus risk of LTC. I can afford several years my self. Insuring against that is not very helpful.
Would you still buy umbrella insurance if there was a government program that backstopped the truly unexpected things that umbrella insurance covers?

The difference of course with LTCI insurance is that, in fact, there is a government program that would cover you for decades in a nursing home -- it is called Medicaid.
Sure, there is such a back stop, welfare, Medicaid, soc sec, etc. But, I buy umbrella to protect my nest egg and a better standard of living.
Once in a while you get shown the light, in the strangest of places if you look at it right.
SQRT
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Re: An argument against self-insuring for long-term care

Post by SQRT »

I don’t think LTC insurance is very common in Canada as Govt supported nursing homes are generally the norm and not very expensive. If you can’t pay support is provided. Having said that I am very glad we could easily afford almost any amount of LTC. My mother is 93 and incurs about $8,000/month in assisted living expenses. This will drop to about $3,000 if she moves into a govt supported LTC facility. She has about 4 years of cash left( at the higher cost) and it’s certainly possible ( albeit unlikely) she runs out. In this case we will pay for her. I can certainly see how this would be big concern for many people.

Having ample resources to self insure really provides peace of mind. We are all going to get there, sooner or later.
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

Dandy wrote: Sat Jul 28, 2018 3:39 pm
I'd much rather insure this potential expense if the market/premiums/costs were more stable.
Fortunately new long term care policies won't experience the big rate increases older policies had due to new regulations in effect in 41 states.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

If your plan is to self insure for long-term care you must do these things:

1. Decide which asset you will liquidate first to pay for care.
2. Decide which asset you'll liquidate 2nd, 3rd, 4th, 5th, 6th, etc...
3. Put the list in writing
4. Share the list with your loved ones and make sure they understand you don't want them to sacrifice their health (or careers) to become your caregiver.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
DC3509
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

WoW2012 wrote: Sun Jul 29, 2018 11:39 am If your plan is to self insure for long-term care you must do these things:

1. Decide which asset you will liquidate first to pay for care.
2. Decide which asset you'll liquidate 2nd, 3rd, 4th, 5th, 6th, etc...
3. Put the list in writing
4. Share the list with your loved ones and make sure they understand you don't want them to sacrifice their health (or careers) to become your caregiver.
Is it really better for your heirs to liquidate all of your assets down to zero and hope you are dead or should you at least explore what options you may have with Medicaid? And if the answer is the former, then what happens at $0? What if you are still alive? Do your kids pay then?

I know I have posted in a few threads about this lately, but it is a subject that has interested me lately. A lot of people on here post all sorts of questions about how to structure estates so as to minimize taxes, how to contribute to HSAs and back-door IRAs (which are designed to minimize taxes), how maximize social security benefits even when they have 7 figure portfolios -- but on long term care questions, it seems to be LTCI, or private pay, and private pay even when that means exhausting everything so your heirs get nothing. That seems to me to be a curious choice when there is a government program that we all pay for through taxes that is available to assist with nursing home care, and there are lawful ways to shield assets and still qualify for the program. Is it a moral objection? That people don't fully grasp the nuances?
goaties
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Re: An argument against self-insuring for long-term care

Post by goaties »

DC3509 wrote: Sun Jul 29, 2018 12:02 pm That seems to me to be a curious choice when there is a government program that we all pay for through taxes that is available to assist with nursing home care, and there are lawful ways to shield assets and still qualify for the program. Is it a moral objection? That people don't fully grasp the nuances?
I think it has neither to do with "nuances" or "moral objections". I think it has more to do with fear of the changes being made to our healthcare system. No one really knows how goest Medicare/Medicaid, but I think it's safe to say that such fears are feeding our interest in LTCI and so on.

There is one main difference between LTCI and homeowners' and auto insurance: once you use LTCI, it is quite certain that you will continue to cost the insurance company big money every year thereafter until dead (or the policy hits its limits). Homeowner and auto catastrophes tend to be one-offs. Most people only cause one or two auto accidents in their lifetimes. A tree only falls once on a house.
delamer
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Re: An argument against self-insuring for long-term care

Post by delamer »

golfCaddy wrote: Sat Jul 28, 2018 11:35 pm
DC3509 wrote: Sat Jul 28, 2018 10:42 pm
golfCaddy wrote: Sat Jul 28, 2018 10:34 pm
willthrill81 wrote: Sat Jul 28, 2018 10:25 pm And considering that the overwhelming majority of people who need LTC need it for fewer than five years, the 'reasonable upper limit' to the risk at today's prices may be around $500k. Even for a couple with a $2 million portfolio, that's manageable. And that assumes that they pay for it out of pocket, rather than using trusts to shield assets from Medicaid or a Medicaid-compliant annuity.
I would look at it differently. A couple may retire at 60 with a $2M portfolio. By the time they're 85 and one of them needs LTC, that $2M portfolio may have been spent down to $1M or $500k.
So let's say they this 85 year old couple has $500k in an IRA. What makes more sense -- paying for -- likely 20-30 years of LTC premiums at anywhere from $2-5K a year -- assuming they bought a LTCI policy when they were young, healthy, and eligible?

Or assuming the IRA is in the institutionalized spouse's name -- transferring the max to the community spouse (currently around $120K) -- buying a Medicaid complaint annuity -- reinvesting the extra from the annuity -- qualifying for Medicaid immediately -- and using the extra money you just shielded to supplement Medicaid with private rooms, aides, and geriatric care managers?

It is hard for me to see how the first option is tremendously better for most people. It might be better for people who have the most amount of resources. Or people who live in HCOL areas and you must private pay in order to get a bed at anywhere halfway decent. Or for people who can qualify for LTCI. But that's hardly everyone, the premiums can be expensive, and many people would be better off or just as well off with the second strategy.
You might be right on the Medicaid planning. I'm not an expert in that. What I do object to is the OP's view $500k isn't much money for a couple with $2M in net worth when they start retirement. If they have $1.5M in investments, a $500k paid off house, and carve out $500k from their investments for a LTC bucket, that reduces their income in retirement by 33%. No one would tell them they don't need to insure their home against a fire, since it's only 25% of their net worth, and probability wise, one of them needing LTC is way more likely than their house burning down.

Assuming a 33% drop in income assumes that the couple has no income other than that provided by their investments.

Also, a carve out may mean that they choose not to spend any of the $500K capital, but does not mean that they couldn’t be taking some income from the $500K.
DC3509
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

goaties wrote: Sun Jul 29, 2018 12:53 pm
DC3509 wrote: Sun Jul 29, 2018 12:02 pm That seems to me to be a curious choice when there is a government program that we all pay for through taxes that is available to assist with nursing home care, and there are lawful ways to shield assets and still qualify for the program. Is it a moral objection? That people don't fully grasp the nuances?
I think it has neither to do with "nuances" or "moral objections". I think it has more to do with fear of the changes being made to our healthcare system. No one really knows how goest Medicare/Medicaid, but I think it's safe to say that such fears are feeding our interest in LTCI and so on.

There is one main difference between LTCI and homeowners' and auto insurance: once you use LTCI, it is quite certain that you will continue to cost the insurance company big money every year thereafter until dead (or the policy hits its limits). Homeowner and auto catastrophes tend to be one-offs. Most people only cause one or two auto accidents in their lifetimes. A tree only falls once on a house.
There is not a single governmental entitlement program that once instituted has ever been abolished. So, yes, there can be changes to the programs, it is extremely unlikely that the programs will ever face extinction. SS has been around for 70 years now in pretty much the same form. If anything, there has been an expansion of Medicaid and other government programs, not a contraction.

And, while government programs are at least part of a larger structure that is very slow to change and ultimately accountable to voters, who are insurance companies accountable to? If they raised your LTCI premiums by 50% tomorrow, would anyone notice? It seems to me like you run the same risk with LTCI.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

golfCaddy wrote: Sat Jul 28, 2018 11:35 pmWhat I do object to is the OP's view $500k isn't much money for a couple with $2M in net worth when they start retirement. If they have $1.5M in investments, a $500k paid off house, and carve out $500k from their investments for a LTC bucket, that reduces their income in retirement by 33%. No one would tell them they don't need to insure their home against a fire, since it's only 25% of their net worth, and probability wise, one of them needing LTC is way more likely than their house burning down.
For the record, I said "portfolio" not "net worth."

Considering that (1) few retirees actually spend down their portfolio to any significant degree, (2) most people who need LTC are in their 80s, (3) retirees' spending is nearly always less in their 80s (certainly apart from LTC) than in their 60s, for instance, and (4) death is virtually always the outcome after years of LTC, a 25% cut in a $2 million starting value portfolio is "manageable" (the wording I carefully used) for the surviving spouse. And that is of course apart from other options, such as Medicaid-compliant annuities, Medicaid trusts, and, if necessary, downsizing a home to gain access to equity.

Even if we assumed no portfolio growth in real dollars, $1.5 million would easily produce $75k-$100k in income for a surviving spouse who is well into their 80s (doesn't have a long life expectancy remaining), and that's aside from Social Security and any other income sources.
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Re: An argument against self-insuring for long-term care

Post by anil686 »

From my experience with patients using LTC - it seems to be similar to FSA money in that you go through an organization (such as a home health or other agency) and they setup services and bill with the insurance company paying either the company directly or reimbursing the beneficiary. Of course, there is significant markup with this system - for example the home health company often recruits hospital patient care technicians/associates who are often paid $10-12/hr and states that their cost is $20/hr (similar to temp agencies). In addition, there is no guarantee of the same person all the time, nor the same competency all the time. I have seen several patients who do not have LTC be able to find caregivers through social media contacts (i.e. facebook), religious groups, hospitals (Where they sometimes ask patient care associates they like if they do home care when not at the hospital) and be able to pay cash to those individuals at half the cost of LTC rates for in home personal care.

Of course the medical durable equipment is expensive - but again Amazon sells most of it at about 25% of the cost of the medical durable equipment stores in our area. And they sell everything from walkers to hospital beds to compression stockings. And there is free shipping with reviews from real patients who have used the equipment. I am not saying that LTC is or is not a good plan, what I am saying is that the estimates of cost thrown around are probably higher by at least a factor of 2 - maybe more for a variety of reasons. Some are listed above and some are because the benefit is portrayed as for 24 hour care. Very few individuals need another second person for 24 hours per day. For example, one spouse can take care of another at night many times because they both sleep for that time. I am not referring to acute illness times, but for months of the year, it is not necessary for many individuals to have a second, third or fourth person around at night. LTC benefits try to show the maximum cost one could pay - but that may be very rare and would probably indicate not a debilitating condition but a very severe condition that was so severe it was bordering on being in an acute medical setting.

Lastly, I have seen some of my patients have a difficult time getting reimbursed for LTC claims despite it being part of their policy. When I describe difficult, we are talking about filing claims and arguing for weeks to get reimbursed. Most have been reimbursed, but it was nothing like health insurance which can also be bad - just my perspectives on the subject and hope it helps...
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Re: An argument against self-insuring for long-term care

Post by ChrisC »

DC3509 wrote: Sun Jul 29, 2018 12:02 pm That seems to me to be a curious choice when there is a government program that we all pay for through taxes that is available to assist with nursing home care, and there are lawful ways to shield assets and still qualify for the program. Is it a moral objection? That people don't fully grasp the nuances?
There's a bit of moral objection for some; there's a bit of ignorance for some; and there's perhaps a bit of misunderstanding of services and care provided in skilled nursing facilities, whether paid by Medicaid or by private pay. Perhaps, there are also some who believe that whatever program the government might provide has got to be worse than doing it without government assistance if you can afford it. Nonetheless, Medicaid is not the panacea to funding LTC for many others. For one thing, Medicaid might not cover home care in some States, which could be the most desirable type of care in many instances. Medicaid might not cover care in assisted living facilities in some States, as well. We know Medicaid covers skilled nursing care, but the range of LTC situations is not completely exhausted by residency at a nursing home.

Even with using the most skillful Elder Care Lawyer, Medicaid planning itself is fraught with significant risks that could result in one shooting himself in the foot -- and I'm not talking about political or legislative risks. For instance, what if you need LTC in an assisted living facility within the 5 year look back period, after you divested your assets in an irrevocable trust adminstered by a trustee who has second thoughts about playing with the grantor? Or what if after divesting your assets in an irrevocable trust, you now want to seek residency and care in a CCRC, which might not find you eligible for admission in the CCRC because of your irrevocable trust.
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

Very difficult decision. In the last 2 years I have seen the following:
1. Lifetime friend, 61, had stroke 2 years ago, no insurance and little savings, in hospital and rehab 6 months, at home wife with MS and other family are caring for him, total nightmare.
2. My brother, 60, had massive stroke a year ago, has LTC, home care monthly costs 15,000, insurance covers 10,000.
3. Sister in law, 59, had massive stroke 2 weeks ago, only options will be medicaid wherever a bed is available or home care by family and friends.

Strokes are one of the main causes of LTC.
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Re: An argument against self-insuring for long-term care

Post by andypanda »

DC3509 wrote:
"That seems to me to be a curious choice when there is a government program that we all pay for through taxes that is available to assist with nursing home care, and there are lawful ways to shield assets and still qualify for the program. Is it a moral objection? That people don't fully grasp the nuances?"

Have you made a tour of the local nursing homes that will accept what little Medicaid pays? More to the point, have you made a local tour of the places that have vacancies and accept Medicaid?

If you have made the rounds and seen the nursing homes, are they honestly your first choice of places to live? Now, some are obviously much better than others, but getting in is the constant problem.
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Re: An argument against self-insuring for long-term care

Post by golfCaddy »

golfCaddy wrote: Sat Jul 28, 2018 11:35 pmWhat I do object to is the OP's view $500k isn't much money for a couple with $2M in net worth when they start retirement. If they have $1.5M in investments, a $500k paid off house, and carve out $500k from their investments for a LTC bucket, that reduces their income in retirement by 33%. No one would tell them they don't need to insure their home against a fire, since it's only 25% of their net worth, and probability wise, one of them needing LTC is way more likely than their house burning down.
For the record, I said "portfolio" not "net worth."

Considering that (1) few retirees actually spend down their portfolio to any significant degree,

This strikes me as implausible. At death, 46% of Americans will have less than $10k in financial assets. At death, most Americans are almost broke, excluding their home equity. Even heading into retirement, "The median household headed by someone age 55 to 64 has little more than $100,000 in retirement savings."

Even if true, over a certain time period, so what's the lesson relevant to today? Maybe if you looked at a particular generation, you might find they didn't spend down their portfolio because they had generous DB pensions, which no longer exist for the most part. Or they lucked out and retired at the right time in the right country with a good sequence of investment returns?

(2) most people who need LTC are in their 80s, (3) retirees' spending is nearly always less in their 80s (certainly apart from LTC) than in their 60s, for instance, and (4) death is virtually always the outcome after years of LTC, a 25% cut in a $2 million starting value portfolio is "manageable" (the wording I carefully used) for the surviving spouse. And that is of course apart from other options, such as Medicaid-compliant annuities, Medicaid trusts, and, if necessary, downsizing a home to gain access to equity.

Even if we assumed no portfolio growth in real dollars, $1.5 million would easily produce $75k-$100k in income for a surviving spouse who is well into their 80s (doesn't have a long life expectancy remaining), and that's aside from Social Security and any other income sources.
This makes no sense. If you assume a 0% investment return, a $100k spend, and a $1.5M starting portfolio, the portfolio is exhausted in 15 years. If you retire at 60, you would be broke by 75.
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Re: An argument against self-insuring for long-term care

Post by ThereAreNoGurus »

randomguy wrote: Sat Jul 28, 2018 8:59 pm
marcopolo wrote: Sat Jul 28, 2018 4:06 pm
WoW2012 wrote: Sat Jul 28, 2018 3:07 pm
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.
The cost of long-term care insurance policy depends upon several factors:
1) your age at the time you apply for a policy
2) your health history
3) if you live alone or if you have a spouse/partner
4) the amount of benefits you buy
5) the company you buy it from (in some cases, some companies can cost 75% to 100% MORE than other companies)

The average cost of a new long-term care policy in 2017 was $2,596. But the average age for buying a policy is 59 years old.

A 70-year old buying a new policy today pays 150% MORE than a 60-year old buying the exact same policy.
Is the $2596 average for a policy that provides unlimited or at least a couple of decades of coverage. That was the original article was recommending.
And does a 70 year old paying 150% more for 10 years less come out ahead/behind or about the same? I think for this discussion to be remotely productive we need to add in some details
a) What coverage does this 2596 policey provide
b) how much rate increase has this 2596 policey had over say the past 5 or 10 years
With those 2 estimates you can start running numbers for various cases (needing it in 10,20,30,.. years and for say 1,2,5,10 year stays) and you can see how often you come out ahead.
Good questions, randomguy. I too would like to see the answers.

To me, so far, the LTCi skeptics have the better argument.
Trade the news and you will lose.
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

Self insuring is great until you have a claim. Premiums are typically recovered in the first 6 months of claims.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

golfCaddy wrote: Sun Jul 29, 2018 6:55 pmThis strikes me as implausible. At death, 46% of Americans will have less than $10k in financial assets. At death, most Americans are almost broke, excluding their home equity. Even heading into retirement, "The median household headed by someone age 55 to 64 has little more than $100,000 in retirement savings."
It's surprising but true at least of those who have a portfolio worth talking about in the first place, which I should have specified. Those with virtually no investible assets are very likely to rely almost exclusively on Medicaid and are a moot point for this thread.
detroitbabu wrote: Sun Jul 08, 2018 10:35 am https://www.ebri.org/pdf/FF.300.AssetPr ... 3Apr18.pdf
https://www.blackrock.com/investing/ret ... retirement

TLDR:
The researchers found that after 18 years of retirement, the wealthiest group, those with $500,000 or more of savings, had retained 83% of their assets. But even those with $200,000 to less than $500,000 of savings had retained 77% of their assets, and those with less than $200,000 retained 80%.
--------------------------------------------
May not be true going forward with employee pensions disappearing, future of SS unknown etc. Interesting nonetheless.
golfCaddy wrote: Sun Jul 29, 2018 6:55 pmEven if true, over a certain time period, so what's the lesson relevant to today? Maybe if you looked at a particular generation, you might find they didn't spend down their portfolio because they had generous DB pensions, which no longer exist for the most part. Or they lucked out and retired at the right time in the right country with a good sequence of investment returns?
Look at the data and argue with them, not me.
golfCaddy wrote: Sun Jul 29, 2018 6:55 pm
Even if we assumed no portfolio growth in real dollars, $1.5 million would easily produce $75k-$100k in income for a surviving spouse who is well into their 80s (doesn't have a long life expectancy remaining), and that's aside from Social Security and any other income sources.
This makes no sense. If you assume a 0% investment return, a $100k spend, and a $1.5M starting portfolio, the portfolio is exhausted in 15 years. If you retire at 60, you would be broke by 75.
Please pay close attention to what I said, which was "well into their 80s," not someone who's 60. According to the Social Security Administration, an 85 year old female has a life expectancy of 7.3 years. So 15+ years is very reasonable, even for a 0% real return.
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

andypanda wrote: Sun Jul 29, 2018 5:43 pm DC3509 wrote:
"That seems to me to be a curious choice when there is a government program that we all pay for through taxes that is available to assist with nursing home care, and there are lawful ways to shield assets and still qualify for the program. Is it a moral objection? That people don't fully grasp the nuances?"

Have you made a tour of the local nursing homes that will accept what little Medicaid pays? More to the point, have you made a local tour of the places that have vacancies and accept Medicaid?

If you have made the rounds and seen the nursing homes, are they honestly your first choice of places to live? Now, some are obviously much better than others, but getting in is the constant problem.
My point isn't that you should sell your house and move into a Medicaid nursing home tomorrow. My point is that I think LTCI is very overblown especially in lower cost of living areas where most nursing homes accept private pay and Medicaid and where some Medicaid planning can basically get you the same outcome as private pay people at a much lower overall cost.
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Re: An argument against self-insuring for long-term care

Post by tooluser »

At what levels of income is LTCI a moot point? Let's say I expect to be able to generate $450 x 365 days = $164,250 a year in income. (Not that that's my number.) From what I have read, average skilled nursing care in a decent facility costs $250-$350 a day. That would seem to make the point moot for someone with a retirement income of $164,250 or greater. Plenty of margin.

Obviously it's a different outcome for someone with an income of $64,250 ($176 a day). At some point, perhaps more or less than $64,250, one has little choice but to rely on Medicaid: cannot afford insurance, cannot afford the cost of the facility.

Where can one find a complete discussion of the issue of LTCI? I haven't found one yet, despite seeing many discussions (not necessarily here) of people touting LTCI as a "must have". It seems to me it is of good value only for some middle range of income that has not been defined. It would be very helpful to define that range of income where LTCI is most useful.
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

tooluser wrote: Sun Jul 29, 2018 10:23 pm At what levels of income is LTCI a moot point? Let's say I expect to be able to generate $450 x 365 days = $164,250 a year in income. (Not that that's my number.) From what I have read, average skilled nursing care in a decent facility costs $250-$350 a day. That would seem to make the point moot for someone with a retirement income of $164,250 or greater. Plenty of margin.

Obviously it's a different outcome for someone with an income of $64,250 ($176 a day). At some point, perhaps more or less than $64,250, one has little choice but to rely on Medicaid: cannot afford insurance, cannot afford the cost of the facility.

Where can one find a complete discussion of the issue of LTCI? I haven't found one yet, despite seeing many discussions (not necessarily here) of people touting LTCI as a "must have". It seems to me it is of good value only for some middle range of income that has not been defined. It would be very helpful to define that range of income where LTCI is most useful.
$160K in retirement incomes assumes a portfolio of about $4 million using the 4% rule. The number of people who retire with a $4 million dollar portfolios is very, very, very small. I agree that they can self-fund and this discussion is a moot point.

I've wondered about your last question -- a lot. I think the pure economic case is very difficult when you have Medicaid as a backstop and there are lawful ways to protect assets. It seems to me that it would make sense for people who live in HCOL and where there is a major difference between nursing homes that accept and do not accept Medicaid, and who are not otherwise able to self-fund it. For everyone else, the case seems to me to be very tough to justify economically.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

tooluser wrote: Sun Jul 29, 2018 10:23 pm At what levels of income is LTCI a moot point? Let's say I expect to be able to generate $450 x 365 days = $164,250 a year in income. (Not that that's my number.) From what I have read, average skilled nursing care in a decent facility costs $250-$350 a day. That would seem to make the point moot for someone with a retirement income of $164,250 or greater. Plenty of margin.

Obviously it's a different outcome for someone with an income of $64,250 ($176 a day). At some point, perhaps more or less than $64,250, one has little choice but to rely on Medicaid: cannot afford insurance, cannot afford the cost of the facility.
It varies across the country, but a private room in a nursing home in our area (the most costly 'flavor' of LTC) is about $130k a year. So for a married couple in our area, if they could pay that for one spouse and have plenty for the other spouse to live on, then they would have no real need at all for LTCi, regardless of the length of the LTC (assuming that the cost of LTC keeps pace with overall inflation). In reality, very few people need LTC more than five years, and the majority who receive it need it for under two years.
tooluser wrote: Sun Jul 29, 2018 10:23 pmWhere can one find a complete discussion of the issue of LTCI? I haven't found one yet, despite seeing many discussions (not necessarily here) of people touting LTCI as a "must have". It seems to me it is of good value only for some middle range of income that has not been defined. It would be very helpful to define that range of income where LTCI is most useful.
That's a good question, and I don't know. The problem is that most 'discussions' you'll find online apart from a forum like this (and sometimes even then) are written by people who are either trying to sell you something (e.g. LTCi, Medicaid trust services from an attorney) or parroting what they've heard from a salesperson.
“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

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DC3509 wrote: Sun Jul 29, 2018 10:35 pmIt seems to me that it would make sense for people who live in HCOL and where there is a major difference between nursing homes that accept and do not accept Medicaid, and who are not otherwise able to self-fund it. For everyone else, the case seems to me to be very tough to justify economically.
I agree. The argument for LTCi essentially seems to revolve around (1) a belief that one will have superior care by self-paying rather than with Medicaid and (2) fear that Medicaid won't be around if/when it's needed. I won't say whether those beliefs are justified or not, especially since the first may be very dependent on the area. But if you reject these two premises, then I haven't heard a strong case as to why it's necessary for anyone.
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Re: An argument against self-insuring for long-term care

Post by CurlyDave »

DC3509 wrote: Sun Jul 29, 2018 10:35 pm
...$160K in retirement incomes assumes a portfolio of about $4 million using the 4% rule. The number of people who retire with a $4 million dollar portfolios is very, very, very small. I agree that they can self-fund and this discussion is a moot point...
I don't think it requires anywhere near that kind of portfolio, because the 4% "rule" just does not apply here. The maximum reasonably expected stay in a LTC facility is 10 years and 5 years is much more typical.

If I go back and look at the revised Trinity Study 10% (non-inflation adjusted) withdrawal rates are reasonably safe for 15 years. So a $1.6M portfolio is at the high end of the range. Plus if we throw in any kind of SS that produces a further reduction.

DW and I both have pensions and SS, and have elected to self-insure on LTC.

Another issue pushing us hard in that direction is the experience we saw when my father needed to us the LTC care insurance he had. Essentially every nickel that company paid out was a long uphill battle. My stepmother is a very persistent woman, and had years of experience in an insurance office. If that had not been the case, the company would have paid possibly 20-40% of what he was due under his policy. Getting them to pay was a full-time job for her.

When they are selling you a policy insurance companies pretend to be your friend, but when it comes time to pay out, they know every dirty trick in the book, and are constantly inventing new ones.
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Re: An argument against self-insuring for long-term care

Post by jpdion »

Curly Dave included the statement "DW and I both have pensions and SS, and have elected to self-insure on LTC." in his post, and I think it is extremely important to understand both income generating assets and non-asset based income in a personal situation when deciding about LTCI. In addition, the expense half of the equation must be assessed. Decent non-asset based income/portfolio (>$2M?) and an expense regime that allows for a SWR less than 4 percent, and allows the assets base to grow, would seem to obviate the need for LTCI. When one member of a couple requires LTC, a shortfall between income and expenses when LTC is added may be compensated for by a reverse mortgage that creates an additional income stream (and even eliminates a mortgage payment if one still exists).
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Re: An argument against self-insuring for long-term care

Post by HereToLearn »

CurlyDave wrote: Mon Jul 30, 2018 2:48 am
DC3509 wrote: Sun Jul 29, 2018 10:35 pm
Another issue pushing us hard in that direction is the experience we saw when my father needed to us the LTC care insurance he had. Essentially every nickel that company paid out was a long uphill battle. My stepmother is a very persistent woman, and had years of experience in an insurance office. If that had not been the case, the company would have paid possibly 20-40% of what he was due under his policy. Getting them to pay was a full-time job for her.

When they are selling you a policy insurance companies pretend to be your friend, but when it comes time to pay out, they know every dirty trick in the book, and are constantly inventing new ones.
+1 on the above.

I am in the middle of dealing with the LTC carrier on my mother's behalf, and worked with them years ago on my father's behalf. It is NOTHING like obtaining reimbursement for a medical or dental claim. I do not know how the average LTC claimant could navigate the process alone. Reams of required documentation, which is often denied, pended, etc.
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Re: An argument against self-insuring for long-term care

Post by Kevin M »

willthrill81 wrote: Wed Jul 25, 2018 11:28 pm 3. LTC insurance should be to protect against situations where LTC is needed for extended periods of time, many years.
My step-father recently asked me to advise on a change being offered for his LTC policy. They were offering a lower price (maybe keep the price the same) if he reduced the maximum coverage period from three years to two years, and an increased price to keep it at three years. That's the first time I was ever aware that the coverage time limit was as short as three years. I was surprised. My advice was to pay a little bit more and keep it at three years, which he did.

He is 89 and my mom is 88, and they're still independent, active, and in relatively good health for their ages. So they probably won't need more than 2-3 years of LTC if it's needed at all.

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

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Kevin M wrote: Mon Jul 30, 2018 10:00 am
willthrill81 wrote: Wed Jul 25, 2018 11:28 pm 3. LTC insurance should be to protect against situations where LTC is needed for extended periods of time, many years.
My step-father recently asked me to advise on a change being offered for his LTC policy. They were offering a lower price (maybe keep the price the same) if he reduced the maximum coverage period from three years to two years, and an increased price to keep it at three years. That's the first time I was ever aware that the coverage time limit was as short as three years. I was surprised. My advice was to pay a little bit more and keep it at three years, which he did.

He is 89 and my mom is 88, and they're still independent, active, and in relatively good health for their ages. So they probably won't need more than 2-3 years of LTC if it's needed at all.

Kevin
My father purchased a three year benefit for himself and a five year benefit for my mother. His instinct was sound as he only lived to receive a week of benefits from the LTC plan.

One thing I only recently discovered is that my mother's five year plan can actually pay benefits for more than five years, if she does not use the full daily benefit limit of $421. The lifetime limit is a product of the $421 daily benefit for five years, so payments could string out for many years until the full benefit has been exhausted. She has been fortunate that current premium is only 50% higher than original premium from 20 years ago.

I agree that your mother & stepfather most likely won't need their full benefit.
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Re: An argument against self-insuring for long-term care

Post by Artful Dodger »

HereToLearn wrote: Mon Jul 30, 2018 9:43 am
CurlyDave wrote: Mon Jul 30, 2018 2:48 am
DC3509 wrote: Sun Jul 29, 2018 10:35 pm
Another issue pushing us hard in that direction is the experience we saw when my father needed to us the LTC care insurance he had. Essentially every nickel that company paid out was a long uphill battle. My stepmother is a very persistent woman, and had years of experience in an insurance office. If that had not been the case, the company would have paid possibly 20-40% of what he was due under his policy. Getting them to pay was a full-time job for her.

When they are selling you a policy insurance companies pretend to be your friend, but when it comes time to pay out, they know every dirty trick in the book, and are constantly inventing new ones.
+1 on the above.

I am in the middle of dealing with the LTC carrier on my mother's behalf, and worked with them years ago on my father's behalf. It is NOTHING like obtaining reimbursement for a medical or dental claim. I do not know how the average LTC claimant could navigate the process alone. Reams of required documentation, which is often denied, pended, etc.
Just to give a contrary perspective, I've been involved with two LTC claims, and I thought they both were handled well. The first was my mother's claim that began 14 years ago, and ended when she passed away four and a half years later. The second was my brother's wife about 2 years ago. In both instances, the LTC carrier worked directly with the providers, with very little involvement on our part. The claim on my brother's wife was for a much shorter period, just less than 6 months. He received a nice surprise at the end. His LTC carrier notified him that his coverage would be continued at no cost for the rest of his life.
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Re: An argument against self-insuring for long-term care

Post by ResearchMed »

HereToLearn wrote: Mon Jul 30, 2018 11:33 am
Kevin M wrote: Mon Jul 30, 2018 10:00 am
willthrill81 wrote: Wed Jul 25, 2018 11:28 pm 3. LTC insurance should be to protect against situations where LTC is needed for extended periods of time, many years.
My step-father recently asked me to advise on a change being offered for his LTC policy. They were offering a lower price (maybe keep the price the same) if he reduced the maximum coverage period from three years to two years, and an increased price to keep it at three years. That's the first time I was ever aware that the coverage time limit was as short as three years. I was surprised. My advice was to pay a little bit more and keep it at three years, which he did.

He is 89 and my mom is 88, and they're still independent, active, and in relatively good health for their ages. So they probably won't need more than 2-3 years of LTC if it's needed at all.

Kevin
My father purchased a three year benefit for himself and a five year benefit for my mother. His instinct was sound as he only lived to receive a week of benefits from the LTC plan.

One thing I only recently discovered is that my mother's five year plan can actually pay benefits for more than five years, if she does not use the full daily benefit limit of $421. The lifetime limit is a product of the $421 daily benefit for five years, so payments could string out for many years until the full benefit has been exhausted. She has been fortunate that current premium is only 50% higher than original premium from 20 years ago.

I agree that your mother & stepfather most likely won't need their full benefit.
About that "number of years"... DH's policy is also like that... it's really a "dollar amount maximum", but that can't be used for more than a specified maximum daily amount.
But if the daily costs that are reimbursable are less than the daily max, then the "number of years" ends up getting extended.
The total just cannot be used up "faster".

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

Post by WoW2012 »

ThereAreNoGurus wrote: Sat Jul 28, 2018 4:31 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm
WoW2012 wrote: Sat Jul 28, 2018 1:10 pm If your portfolio is $1 million, would you alter your investment mix to gain an extra 0.4% (four-tenths of one-percent) each year, if the new investment mix could result in you losing hundreds of thousands of dollars?

If the answer is no, then you agree that it makes sense for you to own long-term care insurance.
Long-term care insurance is portfolio insurance.
I'm not sure that I follow the logic.

I did notice that your 185 posts all seem to be about LTCi. Perhaps this is not of only academic interest to you? There's no law against being an insurance salesman, but, for example, if I were a car salesman recommending a particular car, I'd mention it, perhaps in my signature.
Nice catch TT. The logic didn't make much sense to me either, but now it does (given the poster's probable interest in the matter).

OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 11:12 am
ThereAreNoGurus wrote: Sat Jul 28, 2018 4:31 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm
WoW2012 wrote: Sat Jul 28, 2018 1:10 pm If your portfolio is $1 million, would you alter your investment mix to gain an extra 0.4% (four-tenths of one-percent) each year, if the new investment mix could result in you losing hundreds of thousands of dollars?

If the answer is no, then you agree that it makes sense for you to own long-term care insurance.
Long-term care insurance is portfolio insurance.
I'm not sure that I follow the logic.

I did notice that your 185 posts all seem to be about LTCi. Perhaps this is not of only academic interest to you? There's no law against being an insurance salesman, but, for example, if I were a car salesman recommending a particular car, I'd mention it, perhaps in my signature.
Nice catch TT. The logic didn't make much sense to me either, but now it does (given the poster's probable interest in the matter).

OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Your question would be better framed as "Would you spend $4k every year to avoid a potential loss of up to (insert the maximum amount provided by a LTCi plan at that premium level)." Mixing basis points and nominal dollars is unnecessarily obfuscating.
“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 WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 11:17 am
WoW2012 wrote: Tue Jul 31, 2018 11:12 am
ThereAreNoGurus wrote: Sat Jul 28, 2018 4:31 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm
WoW2012 wrote: Sat Jul 28, 2018 1:10 pm If your portfolio is $1 million, would you alter your investment mix to gain an extra 0.4% (four-tenths of one-percent) each year, if the new investment mix could result in you losing hundreds of thousands of dollars?

If the answer is no, then you agree that it makes sense for you to own long-term care insurance.
Long-term care insurance is portfolio insurance.
I'm not sure that I follow the logic.

I did notice that your 185 posts all seem to be about LTCi. Perhaps this is not of only academic interest to you? There's no law against being an insurance salesman, but, for example, if I were a car salesman recommending a particular car, I'd mention it, perhaps in my signature.
Nice catch TT. The logic didn't make much sense to me either, but now it does (given the poster's probable interest in the matter).

OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Your question would be better framed as "Would you spend $4k every year to avoid a potential loss of up to (insert the maximum amount provided by a LTCi plan at that premium level)." Mixing basis points and nominal dollars is unnecessarily obfuscating.
I disagree. What some people are missing is that the upside to self-insuring is very small, the downside can be huge. LTCi is simply portfolio management but cognitive dissonance often gets in the way of dispassionate reasoning.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 11:46 am
willthrill81 wrote: Tue Jul 31, 2018 11:17 am
WoW2012 wrote: Tue Jul 31, 2018 11:12 am
ThereAreNoGurus wrote: Sat Jul 28, 2018 4:31 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm
I'm not sure that I follow the logic.

I did notice that your 185 posts all seem to be about LTCi. Perhaps this is not of only academic interest to you? There's no law against being an insurance salesman, but, for example, if I were a car salesman recommending a particular car, I'd mention it, perhaps in my signature.
Nice catch TT. The logic didn't make much sense to me either, but now it does (given the poster's probable interest in the matter).

OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Your question would be better framed as "Would you spend $4k every year to avoid a potential loss of up to (insert the maximum amount provided by a LTCi plan at that premium level)." Mixing basis points and nominal dollars is unnecessarily obfuscating.
I disagree. What some people are missing is that the upside to self-insuring is very small, the downside can be huge. LTCi is simply portfolio management but cognitive dissonance often gets in the way of dispassionate reasoning.
The language you're trying to use is precisely that used by salespeople to try to make costs seem small and benefits seem large. The question should be framed either in terms of percentages (e.g. .4% annually to insure against a 50% portfolio loss) or dollars ($4k annually to insure against a $500k loss).

Will you please respond as to whether you sell LTCi?
“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 WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 11:52 am
WoW2012 wrote: Tue Jul 31, 2018 11:46 am
willthrill81 wrote: Tue Jul 31, 2018 11:17 am
WoW2012 wrote: Tue Jul 31, 2018 11:12 am
ThereAreNoGurus wrote: Sat Jul 28, 2018 4:31 pm

Nice catch TT. The logic didn't make much sense to me either, but now it does (given the poster's probable interest in the matter).

OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Your question would be better framed as "Would you spend $4k every year to avoid a potential loss of up to (insert the maximum amount provided by a LTCi plan at that premium level)." Mixing basis points and nominal dollars is unnecessarily obfuscating.
I disagree. What some people are missing is that the upside to self-insuring is very small, the downside can be huge. LTCi is simply portfolio management but cognitive dissonance often gets in the way of dispassionate reasoning.
The language you're trying to use is precisely that used by salespeople to try to make costs seem small and benefits seem large. The question should be framed either in terms of percentages (e.g. .4% annually to insure against a 50% portfolio loss) or dollars ($4k annually to insure against a $500k loss).

Will you please respond as to whether you sell LTCi?

Isn't every worthwhile insurance product a small premium that protects against a much larger loss?
When buying your auto insurance, do you ask your State Farm agent, "Are you an insurance salesman?"
Of course, your State Farm agent is an insurance salesman. Does that mean you ignore everything he says?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by gretah »

smitcat wrote: Thu Jul 26, 2018 9:51 am One source that may shed some light....
https://www.morningstar.com/articles/82 ... -care.html
This article is terrific!

Thank you, SmitCat
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Re: An argument against self-insuring for long-term care

Post by gretah »

I've just started looking into a Life Insurance Retirement Plan.

It seems to be life insurance with a named beneficiary with a rider that allows me to draw funds if needed for long term care.

Anyone have any knowledge or experience with this?
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

WoW2012 wrote: Tue Jul 31, 2018 12:17 pm
willthrill81 wrote: Tue Jul 31, 2018 11:52 am
WoW2012 wrote: Tue Jul 31, 2018 11:46 am
willthrill81 wrote: Tue Jul 31, 2018 11:17 am
WoW2012 wrote: Tue Jul 31, 2018 11:12 am


OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Your question would be better framed as "Would you spend $4k every year to avoid a potential loss of up to (insert the maximum amount provided by a LTCi plan at that premium level)." Mixing basis points and nominal dollars is unnecessarily obfuscating.
I disagree. What some people are missing is that the upside to self-insuring is very small, the downside can be huge. LTCi is simply portfolio management but cognitive dissonance often gets in the way of dispassionate reasoning.
The language you're trying to use is precisely that used by salespeople to try to make costs seem small and benefits seem large. The question should be framed either in terms of percentages (e.g. .4% annually to insure against a 50% portfolio loss) or dollars ($4k annually to insure against a $500k loss).

Will you please respond as to whether you sell LTCi?

Isn't every worthwhile insurance product a small premium that protects against a much larger loss?
When buying your auto insurance, do you ask your State Farm agent, "Are you an insurance salesman?"
Of course, your State Farm agent is an insurance salesman. Does that mean you ignore everything he says?
You can't possibly be that naive, so I have to assume you are just being disingenuous.
Of course, I don't ask the State Farm agent whether she is an insurance salesman, i know that she is. So, I know the advice she gives will be affected by that, it is human nature. That does not mean i ignore what she says, but I take it in the context of the salesman/potential customer relationship.
It is about honest disclosure. If you are so confident in your position, why are you unwilling to clearly state whether or not you benefit financially from pushing these products? At least then people on this board would be able to evaluate your advice in the proper context.
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 ResearchMed »

WoW2012 wrote: Tue Jul 31, 2018 12:17 pm
willthrill81 wrote: Tue Jul 31, 2018 11:52 am
WoW2012 wrote: Tue Jul 31, 2018 11:46 am
willthrill81 wrote: Tue Jul 31, 2018 11:17 am
WoW2012 wrote: Tue Jul 31, 2018 11:12 am


OK, let’s pretend I’m a salesman.
If I’m a mere salesman then you should be able to easily refute my logic.
Would you change your investment mix to gain an extra 40 basis points, if the new investment mix could lose hundreds of thousands of dollars of principal?
Your question would be better framed as "Would you spend $4k every year to avoid a potential loss of up to (insert the maximum amount provided by a LTCi plan at that premium level)." Mixing basis points and nominal dollars is unnecessarily obfuscating.
I disagree. What some people are missing is that the upside to self-insuring is very small, the downside can be huge. LTCi is simply portfolio management but cognitive dissonance often gets in the way of dispassionate reasoning.
The language you're trying to use is precisely that used by salespeople to try to make costs seem small and benefits seem large. The question should be framed either in terms of percentages (e.g. .4% annually to insure against a 50% portfolio loss) or dollars ($4k annually to insure against a $500k loss).

Will you please respond as to whether you sell LTCi?

Isn't every worthwhile insurance product a small premium that protects against a much larger loss?
When buying your auto insurance, do you ask your State Farm agent, "Are you an insurance salesman?"
Of course, your State Farm agent is an insurance salesman. Does that mean you ignore everything he says?
And there is nothing WRONG with the State Farm agent being just that.
But he/she is not trying to hide it, which it is now obvious that you are in fact doing, with misdirections/etc., galore.

You know, there would have been nothing wrong with writing something like, "yes, that's what I do [or perhaps, you are an underwriter, not in sales, or such], and I'm trying to give a different perspective/clear up some things/etc..."
But by being squirrelly, you are certainly making it sound like you are trying to hide something, which is hardly helpful to whatever it is you are trying to argue.

We DO have LTCI for DH (special program through employer, special non-unwritten rates as with life insurance, etc.), and we certainly hope we do NOT "get our money back".
Yup, it's *insurance*, just like our home's fire insurance, etc.
And we realize there are costs to administer, etc.
But *you* are sure adding to the impression that there is lots to hide!

RM
This signature is a placebo. You are in the control group.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

Assume I'm a salesman of LTCi.
Please refute my arguments in favor of LTCi.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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