An argument against self-insuring for long-term care

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

Post by tweetybird »

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.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

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.
"Rich" is a purely subjective term.

It's better to look at this in terms of comparing the cost of LTC to your portfolio. If you have $5 million, you can pay for 50 years of LTC at $100k a year. As such, you don't need to worry about LTC. If you need it, you buy it.

The problem is when you have $500k and one spouse is consuming $100k of LTC every year, rapidly depleting the other spouse's nest egg.
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Re: An argument against self-insuring for long-term care

Post by Sandtrap »

MIL is in "at home" care 24/7.
Age 94.
Cost: $8,000/month.

If not for recently deceased FIL being a true "Boglehead", she would not have been so well provided for.

But, still, those costs are indeed high.
At what point and age would LTCI have been practical in MIL's case? Purchased at age 70, 80, etc. How to know?

j
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

Sandtrap wrote: Thu Jul 26, 2018 8:58 pm MIL is in "at home" care 24/7.
Age 94.
Cost: $8,000/month.

If not for recently deceased FIL being a true "Boglehead", she would not have been so well provided for.

But, still, those costs are indeed high.
At what point and age would LTCI have been practical in MIL's case? Purchased at age 70, 80, etc. How to know?

j
For 24/7 at home care, that actually sounds reasonable. A semi-private room in a nursing home in our area would be slightly more than that.
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Sandtrap
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Re: An argument against self-insuring for long-term care

Post by Sandtrap »

willthrill81 wrote: Thu Jul 26, 2018 9:08 pm
Sandtrap wrote: Thu Jul 26, 2018 8:58 pm MIL is in "at home" care 24/7.
Age 94.
Cost: $8,000/month.

If not for recently deceased FIL being a true "Boglehead", she would not have been so well provided for.

But, still, those costs are indeed high.
At what point and age would LTCI have been practical in MIL's case? Purchased at age 70, 80, etc. How to know?

j
For 24/7 at home care, that actually sounds reasonable. A semi-private room in a nursing home in our area would be slightly more than that.
Wow!
MIL is in Maryland. I thought that was outrageous. I guess not so. New to all this.
Corporate "Age in Place" retirement centers popping up in Prescott and Northern Arizona because of the "mild" climate. Fees are enormous.
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GreenGrowTheDollars
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Re: An argument against self-insuring for long-term care

Post by GreenGrowTheDollars »

Sandtrap wrote: Thu Jul 26, 2018 8:58 pm MIL is in "at home" care 24/7.
Age 94.
Cost: $8,000/month.

If not for recently deceased FIL being a true "Boglehead", she would not have been so well provided for.

But, still, those costs are indeed high.
At what point and age would LTCI have been practical in MIL's case? Purchased at age 70, 80, etc. How to know?

j
That's incredibly cheap for 24x7 care -- $11.11/hour all-in for each of 720 hours a month. Services charged a minimum of $18/hour and that was 5 yeas ago in California; folks we hired independently got $10/hour ($12 or so for the one who could drive MIL places) plus we had to pay employer's share of SS, Medicare, unemployment and worker's comp insurance. That was before the new overtime rules kicked in, so in today's costs it would be even higher.
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Re: An argument against self-insuring for long-term care

Post by HereToLearn »

Years of care may be needed before an insured can satisfy the terms of the policy to become benefit-eligible. When the policy defines Eating as 'The ability to move food by any means from a receptacle into the body', it does not take into consideration the fact that a homebound person will need help obtaining groceries and preparing & serving meals. There is a lot of distance between lifting fork to mouth and all of the other tasks associated with daily meals. Until such time as the insured is unable to feed herself, the LTC carrier will not pay a penny.

My uneducated guess is that LTC policies pay off for those who suffer severe cognitive impairment or a degenerative disease such as Parkinson's. The more typical older person who becomes increasingly frail and is a fall risk will not qualify for benefit payment unless completely unable to satisfy two ADLs, and it requires a ton of documentation to reach the claim payment stage. By that time, the insured has already spent quite a bit of money, and had to submit provider notes hoping to satisfy the policy elimination period.

The $40K my mother has paid in premium may have been better spent paying for the care providers she wants instead of having to hire licensed CNAs approved by the LTC carrier. My vote is with saving your money so that you can hire the help you want on the schedule you want.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

HereToLearn wrote: Thu Jul 26, 2018 10:06 pmMy vote is with saving your money so that you can hire the help you want on the schedule you want.
As long as you have enough money to take on that risk, that's almost certainly the optimal way. But the key is to have enough money.
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Re: An argument against self-insuring for long-term care

Post by ResearchMed »

indexonlyplease wrote: 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.
$200 per 24 hour day!?
My abacus shows that's less than $10/hour. Some babysitters here get that.
Health care agencies here charge much more than that for a regular shift, but that of course includes their own fee.
And even with the higher pay, it's difficult to get good care.
The "good" caretakers (of whatever level) typically get "taken" with clients who need/want them long term, but they do exist.
And better pay, no surprise, opens up the pool...

Yes, my plan includes a "strong emphasis on pain control, regardless of the potential side effects", etc......
Hopefully, it will be more straightforward in the future.
(We were able to help our beloved pets pass more comfortably, after all.)

What terrifies me is unremitting pain. I will NEVER forget a family member who withheld pain meds from one of my grandmothers, who was without a doubt dying - soon - from a known and incurable disease. The relative "didn't want her to get addicted" during her last weeks. I don't even know what that *means* at that stage!

Many of the nicer care facilities around here will take someone with a certain minimum amount of resources (depending upon age/condition). Once "in", if one runs out of money, the facility will switch you to Medicaid, without changing the care. They might switch you to a smaller room or such, which is fair enough.
The "trick" is to have the resources to "get in". The nicer ones aren't inexpensive.
The facilities that take Medicaid patients from the start typically aren't as nice (though we obviously haven't checked all of them).

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

Post by HereToLearn »

$200 per 24 hour day!?
My abacus shows that's less than $10/hour. Some babysitters here get that.
Health care agencies here charge much more than that for a regular shift, but that of course includes their own fee.
And even with the higher pay, it's difficult to get good care.
The "good" caretakers (of whatever level) typically get "taken" with clients who need/want them long term, but they do exist.
And better pay, no surprise, opens up the pool...


I have not priced 24 hour care in nine years, but when I had hired someone to live in at my parents' house, the 24 hour rate was not much more than $200/day. The hourly rate for someone who does not live in and instead works a shift is now $25/hour. The live-in person had very few responsibilities because my mother was capable of driving, buying groceries & preparing meals, laundry, etc. The aide was there to assist my father with ADLs only.

The live-in aides do not have own car so some additional assistance is still required to provide food and transportation. Contrast this with the aide we are currently paying $25/hour to who has own car and can drive my mother to her medical appointments.
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Re: An argument against self-insuring for long-term care

Post by indexonlyplease »

ResearchMed wrote: Thu Jul 26, 2018 10:57 pm
indexonlyplease wrote: 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.
$200 per 24 hour day!?
My abacus shows that's less than $10/hour. Some babysitters here get that.
Health care agencies here charge much more than that for a regular shift, but that of course includes their own fee.
And even with the higher pay, it's difficult to get good care.
The "good" caretakers (of whatever level) typically get "taken" with clients who need/want them long term, but they do exist.
And better pay, no surprise, opens up the pool...

Yes, my plan includes a "strong emphasis on pain control, regardless of the potential side effects", etc......
Hopefully, it will be more straightforward in the future.
(We were able to help our beloved pets pass more comfortably, after all.)

What terrifies me is unremitting pain. I will NEVER forget a family member who withheld pain meds from one of my grandmothers, who was without a doubt dying - soon - from a known and incurable disease. The relative "didn't want her to get addicted" during her last weeks. I don't even know what that *means* at that stage!

Many of the nicer care facilities around here will take someone with a certain minimum amount of resources (depending upon age/condition). Once "in", if one runs out of money, the facility will switch you to Medicaid, without changing the care. They might switch you to a smaller room or such, which is fair enough.
The "trick" is to have the resources to "get in". The nicer ones aren't inexpensive.
The facilities that take Medicaid patients from the start typically aren't as nice (though we obviously haven't checked all of them).

RM
Thats $200 a day for a live in. They sleep at night (it's the law). Also, must provide free room and food for them and car. Someone for the day only we paid $25 hr. If you get in a nursing facility with medicare you are in a dump. I can say if someone in the family was a Veteran the VA has nice nursing homes if you can get into one. This is where my father in law lived for 2 years. But because of his income he had to pay the full price which was around $6000 a month. That was cheap compared to the other nursing homes we looked at that were around $10,000 a month for same quality.

So I will stay say if you have a good income pension or large portfolio that brings in income I don't see the need for long term care insurance. Unless you are looking to leave your kids or family money. My father in law lived off his pension and was able to pay for all expenses before and when staying in a nursing home.
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

The reality is this: 2/3 of seniors who are sitting in nursing homes today are on Medicaid. In some lower cost of living states -- West Virginia, Mississippi, Georgia, etc. -- that number is much higher. There is a lot of fretting on these boards about LTC, and I am not sure it is really justified. There is a perception from some that all "Medicaid facilities" are dungeons whereas all "private pay facilities" are the Four Seasons. First, every nursing home is a fairly unpleasant place -- even the nicest ones. Beyond that, the vast majority of nursing homes -- especially in lower cost of living areas -- accept both Medicaid and private pay. The nursing care itself is the same. Things can be different around the edges -- private rooms, private aides, geriatric care managers. But the bottom line is that you can get all of that stuff even when on Medicaid if you do some smart Medicaid planning. If you transfer your house and other assets to an irrevocable trust and survive the 5 year look-back, the trustees can pay the money out to someone other than the grantor, and then that person can pay the nursing home on their own. So, essentially Medicaid can pay for the basic care, and then you can use your own assets from the irrevocable trust to supplement it. People can usually qualify for Medicaid by using a Medicaid-complaint annuity -- and some states even allow the annuity to be for a very short period of time, so there is little risk to it. Just take the extra money and reinvest it. Some people might object to that morally, and I understand that objection, but it is an economically rationale thing to do.
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Re: An argument against self-insuring for long-term care

Post by FBN2014 »

I would use a hybrid LTCi policy. Payout for nursing home or in home care. If you don't need these benefits then the policy pays a death benefit to your heirs. Get coverage for 3-5 years. Once you are in a long term care situation then it's time to visit an elder law attorney and set up an asset protection trust. Once you transfer assets into the trust then the 5 year Medicaid look back period starts. If you are still living when your LTCi benefit expires then Medicaid will kick in.
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Re: An argument against self-insuring for long-term care

Post by ChrisC »

DC3509 wrote: Fri Jul 27, 2018 6:55 am The reality is this: 2/3 of seniors who are sitting in nursing homes today are on Medicaid. In some lower cost of living states -- West Virginia, Mississippi, Georgia, etc. -- that number is much higher. There is a lot of fretting on these boards about LTC, and I am not sure it is really justified. There is a perception from some that all "Medicaid facilities" are dungeons whereas all "private pay facilities" are the Four Seasons. First, every nursing home is a fairly unpleasant place -- even the nicest ones. Beyond that, the vast majority of nursing homes -- especially in lower cost of living areas -- accept both Medicaid and private pay. The nursing care itself is the same. Things can be different around the edges -- private rooms, private aides, geriatric care managers. But the bottom line is that you can get all of that stuff even when on Medicaid if you do some smart Medicaid planning. If you transfer your house and other assets to an irrevocable trust and survive the 5 year look-back, the trustees can pay the money out to someone other than the grantor, and then that person can pay the nursing home on their own. So, essentially Medicaid can pay for the basic care, and then you can use your own assets from the irrevocable trust to supplement it. People can usually qualify for Medicaid by using a Medicaid-complaint annuity -- and some states even allow the annuity to be for a very short period of time, so there is little risk to it. Just take the extra money and reinvest it. Some people might object to that morally, and I understand that objection, but it is an economically rationale thing to do.
Much of what you say is sound advice, especially for those without LTCi or without the assets/net worth to obtain better care beyond facilities that accept both Medicaid and private pay, which is the vast majority of facilities for the most part. Having witnessed first hand skilled nursing care, home care, and assisted living facility care for relatives with dementia, incontinence, Parkinson's Disease, MS, and general inability to engage in activities of daily living, I've come away with the impression that there are stark differences in care at the higher end of the cost spectrum for home or skilled nursing care as opposed to care provided in run-of-the mill skilled nursing facilities (whether restricted to private pay or accepting Medicaid residents). If you can afford high end care whether at home or in a facility, I believe it provides better comfort to those in need of LTC -- I think this is one of the reasons why some find CCRCs attractive -- the end of life cycle care there appears to be better than at a general skilled nursing facility.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

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.
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 WoW2012 »

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. 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.
Is this story an argument in favor of or against long-term care insurance?
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 TomatoTomahto »

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

Post by willthrill81 »

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.
I can see a little bit of logic to it. Most here don't have a problem buying homeowner's insurance, even if their home only represents 10% of their portfolio. On average, such folks should mathematically prefer to self-insure (apart from losing liability coverage), but with a sizable portfolio, the cost of the LTCi doesn't really move the needle much.

Honestly, those that can't afford to self-insure the risk of LTC may be better off just taking on the risk and getting Medicaid-compliant annuities to protect the spouse not receiving LTC if the risk shows up. Trusts can be another good option. Those who can afford to self-insure probably should do so.

Interestingly, the 'trust people' (lawyers) don't seem to like the 'LTCi people' (insurance salespeople), and vice versa.
Last edited by willthrill81 on Sat Jul 28, 2018 1:40 pm, edited 1 time in total.
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Re: An argument against self-insuring for long-term care

Post by LadyGeek »

TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm 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.
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Re: An argument against self-insuring for long-term care

Post by delamer »

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.

How do you simultaneously gain 0.4% each year and lose hundreds of thousands of dollars with the same action?
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Re: An argument against self-insuring for long-term care

Post by randomguy »

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.
.4% is a lot of money

1 million at 6% for 25 years = 4.3 million
1 million at 6.4%for 25 years = 4.7 million

I notice people try to make things sound cheap (only dollars/ day, less than the cost of a cup of coffee, only .4%) when selling marginal products.:)
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Re: An argument against self-insuring for long-term care

Post by randomguy »

delamer wrote: Sat Jul 28, 2018 1:41 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.

How do you simultaneously gain 0.4% each year and lose hundreds of thousands of dollars with the same action?
Spending 4k/year costs you .4%. Using LTCG might save you 400k (hand waving about exact product payouts). The part that is left off is the .4% over 10+ years is a lot of money.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

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.

If you have to resort to ad hominem attacks, you’ve already lost the debate.

It's a simple question.
Would you change your investment mix in order to increase your investment earnings each year by 40 basis points IF the change of investments could result in you losing, at some point in the future, several hundred thousands of dollars of your principal?

If you choose to self-insure for long-term care, you're risking losing several hundred thousand dollars of principal and all you're gaining is about 40 basis points each year.

If your portfolio is $2M and you choose to self-insure for long-term care, you're risking losing several hundred thousand dollars of principal and all you're gaining is about 20 basis points each year.

If your portfolio is $4M and you choose to self-insure for long-term care, you're risking losing several hundred thousand dollars of principal and all you're gaining is about 10 basis points each year.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
delamer
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Re: An argument against self-insuring for long-term care

Post by delamer »

randomguy wrote: Sat Jul 28, 2018 1:48 pm
delamer wrote: Sat Jul 28, 2018 1:41 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.

How do you simultaneously gain 0.4% each year and lose hundreds of thousands of dollars with the same action?
Spending 4k/year costs you .4%. Using LTCG might save you 400k (hand waving about exact product payouts). The part that is left off is the .4% over 10+ years is a lot of money.

I was actually being facetious, but I guess that doesn’t translate well online. :|

I do agree with your overall point, that you can’t ignore the costs of the insurance when comparing options.
randomguy
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Re: An argument against self-insuring for long-term care

Post by randomguy »

delamer wrote: Sat Jul 28, 2018 1:56 pm
randomguy wrote: Sat Jul 28, 2018 1:48 pm
delamer wrote: Sat Jul 28, 2018 1:41 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.

How do you simultaneously gain 0.4% each year and lose hundreds of thousands of dollars with the same action?
Spending 4k/year costs you .4%. Using LTCG might save you 400k (hand waving about exact product payouts). The part that is left off is the .4% over 10+ years is a lot of money.

I was actually being facetious, but I guess that doesn’t translate well online. :|

I do agree with your overall point, that you can’t ignore the costs of the insurance when comparing options.
No problem. This technique of making insurance (and other products) seem cheap has been used forever. After all it is only 1 buck to extend the warranty of your 10 dollar cable from best buy. That is less than a penny a day. How can you afford not to buy cable insurance?:) You need to compare the upside and downsides of insurance products to decide what you can live with. If the product was cheap enough to be a no brainer, it wouldn't be an affordable product. It is priced right where it becomes an interesting discussion with a few winners (collect early and for max period) and a lot of losers (don't collect, collect for a short period)
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

randomguy wrote: Sat Jul 28, 2018 1:46 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.
.4% is a lot of money

1 million at 6% for 25 years = 4.3 million
1 million at 6.4%for 25 years = 4.7 million

I notice people try to make things sound cheap (only dollars/ day, less than the cost of a cup of coffee, only .4%) when selling marginal products.:)
1) If I knew I wouldn't need long-term care for another 25 years, I might not buy the insurance. I don't own it because I might need care 25 years from now, I own it because I (or my spouse) might need care 5 years or 10 years from now.
2) Even a small long-term care policy today would grow to over a million or more in benefits, if we didn't need to make a claim for another 25 years. That extra $400K "saved" would be recouped pretty quickly from a policy if we needed care 25 years from now.
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 »

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. After all, that is how w insuraurance componpanies make profits.

The overwhelming odds are that you will either not use (put any insurance product in this space) or not expend nearly the amount you paid in premiums. After all, that is how insurance companies make profits.
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 »

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.
About 80% of the people who need long-term care receive their care at home.
About 2 out of every 3 long-term care insurance claims start (and end) at home.
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 »

letsgobobby wrote: Thu Jul 26, 2018 1:00 am
...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.
rapidly rising premiums: new pricing rules have reduced the frequency and size of rate increases on newer long-term care policies.

caps on lifetime benefits: most LTCi policies offer couples 10 to 16 years of shared benefits. My wife and I share about $900,000 of LTCi benefits. Most companies will sell $1.5M or more to any couple.

difficulty getting claims paid: There is no evidence to support this. Many home care agencies are experts at getting LTCi claims processed and approved quickly.
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 WoW2012 »

msj16 wrote: 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?
If someone is going to self-insure, the least they should do, for the sake of their loved ones, is make a list of their assets and tell their loved ones which asset to liquidate first, then second, then third, then fourth, etc...

If you don't do that, the family will, in most cases, sacrifice their own careers and/or health to try to provide your care for you.
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 »

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.
Whoever said this is ignorant of how long-term care insurance works.

1) Many 60 year olds should NOT own long-term care insurance because they can qualify for Medicaid.
2) A 59-year old who is retired could lose much of his retirement savings if he had an event that compromised his health and required him to need help with basic, daily activities.

There's no best age to buy LTC insurance.
The time to own it is when you have enough income and/or assets you could lose that would justify the premium.
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 »

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.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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TomatoTomahto
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Re: An argument against self-insuring for long-term care

Post by TomatoTomahto »

WoW2012 wrote: Sat Jul 28, 2018 1:51 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm 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.
If you have to resort to ad hominem attacks, you’ve already lost the debate.
I will leave this thread now, but can't leave without mentioning that your view of what rises to the level of an "ad hominem attack" is set pretty low.

ETA: correction: 194 posts as of now.
I get the FI part but not the RE part of FIRE.
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Re: An argument against self-insuring for long-term care

Post by krafty81 »

Don't know if this helps but here is my actual experience with LTC. I am 59, my wife 57. Both in great health. After two years of research, I narrowed my search down to three companies I felt were very financially viable with the best ratings for long term health. I got detailed proposals from all - a broker was very helpful in this case. Ended up going with Mass Mutual. There are many options in LTC, so I used the book "LTC for Dummies" to help me learn the language. Bottom line - we both got our own 5 year policy, which ended up being cheaper than sharing options. 2300/year for each of us. MM had never raised rates as of last year, but now they announced they will - but only on policies prior to 2000. So we are OK for now but I do know they may raise our rates at some point and accept that. In deciding to go with LTC instead of self insure, we looked at many factors - including the fact that an average stay in a skilled nursing facility is less than 3 years. I also did not want LTC costs to drain my portfolio or have to depend on my kids. We feel good about the decision. Some people say to wait and buy it later, but we did not want to gamble on our health situation changing - a very sensitive factor for LTC.
DC3509
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Re: An argument against self-insuring for long-term care

Post by DC3509 »

Here's what I don't understand about LTCI -- would people buy car insurance if there was a government program that insured your car if you didn't do so? Would people buy home insurance if there was a government program that insured your house if it burned down?

I think we all know the answers.

If you live in an area where there are nursing facilities that only accept private pay and do no accept Medicaid, and you anticipate living in a nursing home in such an area, then, yes LTCI can make sense.

But those set of circumstances are not the circumstances for vast parts of the country, especially in LCOL areas. As I stated earlier -- in some states 3 out of every 4 nursing home residents are on Medicaid. In such areas, there is no difference between "Medicaid" and "non-Medicaid" facilities because everyone accepts Medicaid. So you can (and very well might) end up in a nursing home with LTCI benefits paying for your room and your neighbor next door might is on Medicaid. You see the same nurses. You eat the same food. Your buddy next door did some crafty Medicaid planning and his kids are paying for a private room so you are on even ground there too. The only difference is that you paid all those LTCI premiums through the year because you believed insurance advertisements that LTCI is absolutely necessary and he paid nothing because he understood how a basic government program works.

I say all this because I believe the LTCI industry has led people -- myself included -- to believe that there is such a significant difference in quality between Medicaid and non-Medicaid facilities. In some HCOL areas, there definitely is, and perhaps the product is well suited to those people. But in a lot of other areas there isn't, and good Medicaid planning can make up the difference. Medicaid planning costs a fraction of a LTCI policy.
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Re: An argument against self-insuring for long-term care

Post by Dandy »

msj16 wrote: 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?
I am a believer in insurance in general but decided to self insure LTC for several reasons:

1. Insurance companies are getting out of the business and many LTC insurance providers left LTC is more of a cost center than a profit center despite rising rates. Lots of incentives to contest/delay/avoid payments.
2. Rising rates - if rates get too much you lose all the value of years worth of premium payments
3. You usually have to pay LTC for a waiting period of 3-6 months and the reimbursement is often capped at say $300k or so.
4. I am 70 spouse 69 and we have ample financial resources e.g. large portfolio, house paid for, no debt, pension/SS income that almost equals our current expense run rate. RMDs for the most part aren't needed.`

I have not set aside a specific account for LTC expenses which I figure might be 250 - 300k in most cases. I do have a conservative investment allocation of 43/57 which means there is a decent amount of fixed income scattered among taxable, TIRA and Roth Accounts. So I am not overly impacted by equity market returns.

I'd much rather insure this potential expense if the market/premiums/costs were more stable.
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

TomatoTomahto wrote: Sat Jul 28, 2018 3:09 pm
WoW2012 wrote: Sat Jul 28, 2018 1:51 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm 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.
If you have to resort to ad hominem attacks, you’ve already lost the debate.
I will leave this thread now, but can't leave without mentioning that your view of what rises to the level of an "ad hominem attack" is set pretty low.

ETA: correction: 194 posts as of now.
You might also mention that he did not address your point about possibly being a salesman for the product being discussed.
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 »

TomatoTomahto wrote: Sat Jul 28, 2018 3:09 pm
WoW2012 wrote: Sat Jul 28, 2018 1:51 pm
TomatoTomahto wrote: Sat Jul 28, 2018 1:21 pm 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.
If you have to resort to ad hominem attacks, you’ve already lost the debate.
I will leave this thread now, but can't leave without mentioning that your view of what rises to the level of an "ad hominem attack" is set pretty low.

ETA: correction: 194 posts as of now.
You might also mention that he did not address your point about possibly being a salesman for the product being discussed.
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 »

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.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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ThereAreNoGurus
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Re: An argument against self-insuring for long-term care

Post by ThereAreNoGurus »

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).
Trade the news and you will lose.
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Re: An argument against self-insuring for long-term care

Post by Cruise »

WoW2012 wrote: Sat Jul 28, 2018 1:19 pm
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. 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.
Is this story an argument in favor of or against long-term care insurance?
I trust that most Bogelheads possess the critical thinking skills to make informed decisions in matters such as these.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

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

Post by marcopolo »

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.
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 SeeMoe »

This , LTC, is an issue we have thought hard and long about. We are in our mid 70’s now and the prices for LTC would be prohibitive, I would assume! So we look at this way: I am a 100% service connected DAV and therefore have full access to V.A. Geriatrics if necessary. Probably could receive most necessary care at home in our 5 Star CCRC too, as the post suggests. The wife has more than enough money, and resources to stay in the very good CCRC nursing home on campus. Matter of fact both of us could be there at the same times for years with our substantial resources... Good to know. It’s just the cats we are concerned about, and have a will giving each $3k per year for care by a neighbor. No declawing is stipulated and all 3 must remain together as a family. Euthanasia is a last resort,...for the cats!

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

Post by TheDDC »

I don't see LTCI in existence for long. Millennials will not go/pay for something like that, not even the majority Boglehead millennials. I see no value in it myself (and I would probably be on the older millennial side).

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

Post by coincollector »

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.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

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

Post by marcopolo »

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

Post by willthrill81 »

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
marcopolo wrote: Sat Jul 28, 2018 4:06 pm

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

Post by randomguy »

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.
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