Long-term Care Insurance

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willyd123
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Long-term Care Insurance

Post by willyd123 » Sun Oct 14, 2018 4:09 pm

Hello -

The more I read about long-term care insurance, the more I think it is probably a good thing to have. My wife and I have one child and I just don't want to put the onus on him to care for us if/when that becomes necessary and I don't want him or us in an awkward position of having to spend his inheritance on taking care of us.

I know that the market for LTC has been evolving since these products first came out and the premiums are much higher than they were. However, my understanding is that the reason for this is that insurance companies greatly under estimated persistence (the percentage of policy holders holding on to their policies) but have since repriced the policies so in theory, the prices should be leveling out.

What do you think? What's the best place to go to buy a policy? Roughly how much should it cost assuming a 56 year old male and 53 year old female? Would you buy an asset-based policy (life insurance or annuity with rider) or just a regular LTC policy?

ResearchMed
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Re: Long-term Care Insurance

Post by ResearchMed » Sun Oct 14, 2018 5:25 pm

willyd123 wrote:
Sun Oct 14, 2018 4:09 pm
Hello -

The more I read about long-term care insurance, the more I think it is probably a good thing to have. My wife and I have one child and I just don't want to put the onus on him to care for us if/when that becomes necessary and I don't want him or us in an awkward position of having to spend his inheritance on taking care of us.

I know that the market for LTC has been evolving since these products first came out and the premiums are much higher than they were. However, my understanding is that the reason for this is that insurance companies greatly under estimated persistence (the percentage of policy holders holding on to their policies) but have since repriced the policies so in theory, the prices should be leveling out.

What do you think? What's the best place to go to buy a policy? Roughly how much should it cost assuming a 56 year old male and 53 year old female? Would you buy an asset-based policy (life insurance or annuity with rider) or just a regular LTC policy?
I think it is certainly wise to be thinking ahead about care needs.

But your child's "inheritance"... is that money inherited from you or from other family members?
If from *you*, then ... why would you not consider making sure that YOU are secure and comfortable, before worrying about your child's future beyond what the child would be earning as an adult?

RM
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Artful Dodger
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Re: Long-term Care Insurance

Post by Artful Dodger » Sun Oct 14, 2018 5:53 pm

willyd123 wrote:
Sun Oct 14, 2018 4:09 pm
Hello -

The more I read about long-term care insurance, the more I think it is probably a good thing to have. My wife and I have one child and I just don't want to put the onus on him to care for us if/when that becomes necessary and I don't want him or us in an awkward position of having to spend his inheritance on taking care of us.

I know that the market for LTC has been evolving since these products first came out and the premiums are much higher than they were. However, my understanding is that the reason for this is that insurance companies greatly under estimated persistence (the percentage of policy holders holding on to their policies) but have since repriced the policies so in theory, the prices should be leveling out.

What do you think? What's the best place to go to buy a policy? Roughly how much should it cost assuming a 56 year old male and 53 year old female? Would you buy an asset-based policy (life insurance or annuity with rider) or just a regular LTC policy?

I was in the situation you bring up when my dad died, and my mom had alzheimers. She went into a nursing home for four years, and the cost was in the $175K range (in the early 2000s). My dad had purchased LTC which covered almost all this. They left an estate of around $250K, so we could have paid the costs from it, but I'm happy the LTC was there. We paid for a private room, and she was moved to a new memory care wing when it was available. Having the insurance provided real peace of mind, and I didn't have to think about the estate (and eventual inheritance) when I was writing out checks to the NH and other providers.

As far as buying a plan, I would check with some insurance agents. I'd look for someone who specializes in LTC, or at least does it as a major part of their practice. I would lean toward a traditional LTC policy. It doesn't make sense to me to buy additional life insurance or an annuity, with a LTC rider, unless you want or need the main product. If you have the need, then that just opens up more options.

thelimocat
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Re: Long-term Care Insurance

Post by thelimocat » Sun Oct 14, 2018 6:19 pm

Artful Dodger wrote:
Sun Oct 14, 2018 5:53 pm
willyd123 wrote:
Sun Oct 14, 2018 4:09 pm
Hello -

The more I read about long-term care insurance, the more I think it is probably a good thing to have. My wife and I have one child and I just don't want to put the onus on him to care for us if/when that becomes necessary and I don't want him or us in an awkward position of having to spend his inheritance on taking care of us.

I know that the market for LTC has been evolving since these products first came out and the premiums are much higher than they were. However, my understanding is that the reason for this is that insurance companies greatly under estimated persistence (the percentage of policy holders holding on to their policies) but have since repriced the policies so in theory, the prices should be leveling out.

What do you think? What's the best place to go to buy a policy? Roughly how much should it cost assuming a 56 year old male and 53 year old female? Would you buy an asset-based policy (life insurance or annuity with rider) or just a regular LTC policy?

I was in the situation you bring up when my dad died, and my mom had alzheimers. She went into a nursing home for four years, and the cost was in the $175K range (in the early 2000s). My dad had purchased LTC which covered almost all this. They left an estate of around $250K, so we could have paid the costs from it, but I'm happy the LTC was there. We paid for a private room, and she was moved to a new memory care wing when it was available. Having the insurance provided real peace of mind, and I didn't have to think about the estate (and eventual inheritance) when I was writing out checks to the NH and other providers.

As far as buying a plan, I would check with some insurance agents. I'd look for someone who specializes in LTC, or at least does it as a major part of their practice. I would lean toward a traditional LTC policy. It doesn't make sense to me to buy additional life insurance or an annuity, with a LTC rider, unless you want or need the main product. If you have the need, then that just opens up more options.
We go down this road every couple of months. IF and thats a big IF you can find an old style LTC policy it's going to cost you. But as above Artful recommended speak to an insurance agent. I would start with your current home/auto provider as you will at least have a relationship with them.
We had an agent speak to our investment club. She was not real upbeat about LTC out there today. My company John Hancock doesn't offer them any more. They withdrew from the market, I also expect my policy cost to increase greatly over the coming years. I wish you the best in your research.

JoeRetire
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Re: Long-term Care Insurance

Post by JoeRetire » Sun Oct 14, 2018 6:19 pm

willyd123 wrote:
Sun Oct 14, 2018 4:09 pm
The more I read about long-term care insurance, the more I think it is probably a good thing to have. My wife and I have one child and I just don't want to put the onus on him to care for us if/when that becomes necessary and I don't want him or us in an awkward position of having to spend his inheritance on taking care of us.
We also purchased LTC insurance so as not to burden our two children with our long term care. We are covered financially - they won't need to worry.
What do you think? What's the best place to go to buy a policy?
If you work with a financial adviser, start there.
Otherwise, Accuquote is very good. They can look at all the LTCi providers for you, and find the best one based on your coverage needs.
Roughly how much should it cost assuming a 56 year old male and 53 year old female?
Too many factors to come up with a guess.

My wife and I were 59 when we first purchased LTCi from Mutual of Omaha. Our policies cost $1600 for me and $3800 for her and the premiums haven't change in the past 4 years while the coverage has increased by 3% each year. You can purchase more coverage or less coverage and can vary almost all the factors.
Would you buy an asset-based policy (life insurance or annuity with rider) or just a regular LTC policy?
For me a regular LTC policy is best. Your financial adviser can help you decide among all of your choices.

If you have a lot of assets (say $5M or so), you may be better served by self-insuring. If you have so little assets that you expect to be Medicaid-eligible, you probably shouldn't purchase LTCi at all.

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willthrill81
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Re: Long-term Care Insurance

Post by willthrill81 » Sun Oct 14, 2018 8:49 pm

JoeRetire wrote:
Sun Oct 14, 2018 6:19 pm
If you have a lot of assets (say $5M or so), you may be better served by self-insuring. If you have so little assets that you expect to be Medicaid-eligible, you probably shouldn't purchase LTCi at all.
You can likely self-insure with a significantly smaller portfolio than $5 million unless you live in a very high cost of living area. With 4% withdrawals, a $5 million portfolio will yield $200k of annual income. All but the most expensive LTC facilities will cost less than that, possibly much less. The priciest ones in our area are about $100k annually. And the odds are around 75% that even if you need LTC that you'll need it for no more than three years. I'd say that $2 million is likely the more common lower bound level at which you can self-insure LTC.

And it's not necessary to be destitute to receive Medicaid benefits, which is a common misconception. Irrevocable trusts held for five years or longer and Medicaid-compliant annuities are available workarounds. A good elder care attorney can help with deciphering the best option(s).
“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

bsteiner
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Long-term Care Insurance

Post by bsteiner » Sun Oct 14, 2018 8:56 pm

willthrill81 wrote:
Sun Oct 14, 2018 8:49 pm
... the odds are around 75% that even if you need LTC that you'll need it for no more than three years. ...
I would be interested in a policy that covered an unlimited duration, but not the first 3 years. Since many people will need care for 3 years of less, insurance for the first 3 years is more like a prepaid expense. Excluding the first 3 years should substantially reduce the cost of the policy. However, I'm not aware of any such policies.

Rwsawbones
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Re: Long-term Care Insurance

Post by Rwsawbones » Sun Oct 14, 2018 9:10 pm

Cost of semi private care in Boston area is about $180,000 per year. It is probably more in the N.Y. area and Alaska but less in much of the rest of the country

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willthrill81
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Re: Long-term Care Insurance

Post by willthrill81 » Sun Oct 14, 2018 9:38 pm

bsteiner wrote:
Sun Oct 14, 2018 8:56 pm
willthrill81 wrote:
Sun Oct 14, 2018 8:49 pm
... the odds are around 75% that even if you need LTC that you'll need it for no more than three years. ...
I would be interested in a policy that covered an unlimited duration, but not the first 3 years. Since many people will need care for 3 years of less, insurance for the first 3 years is more like a prepaid expense. Excluding the first 3 years should substantially reduce the cost of the policy. However, I'm not aware of any such policies.
To my knowledge, no states will permit a LTC policy with an exclusion period of even one year, much less three. But there's no doubt that such a policy would be far less costly than the current policies available.
“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

ResearchMed
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Re: Long-term Care Insurance

Post by ResearchMed » Sun Oct 14, 2018 9:39 pm

willthrill81 wrote:
Sun Oct 14, 2018 9:38 pm
bsteiner wrote:
Sun Oct 14, 2018 8:56 pm
willthrill81 wrote:
Sun Oct 14, 2018 8:49 pm
... the odds are around 75% that even if you need LTC that you'll need it for no more than three years. ...
I would be interested in a policy that covered an unlimited duration, but not the first 3 years. Since many people will need care for 3 years of less, insurance for the first 3 years is more like a prepaid expense. Excluding the first 3 years should substantially reduce the cost of the policy. However, I'm not aware of any such policies.
To my knowledge, no states will permit a LTC policy with an exclusion period of even one year, much less three. But there's no doubt that such a policy would be far less costly than the current policies available.
Any idea why? It can't be (can it?) just because of the low probability, b/c that would be matched by much lower rates. Sort of like - VERY much like - umbrella policies.

RM
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munemaker
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Re: Long-term Care Insurance

Post by munemaker » Sun Oct 14, 2018 9:40 pm

From experience with relatives, the main problem we experienced with LTCI is the rates are not level. The issuers raise the rates dramatically to the point where the insured are tempted to cancel. You think you are buying a policy for X/year, but then it turns out to be 3X/year (or whatever).

One of the two companies we dealt with was very good about paying the claim when filed. The other one made it difficult for the insured.

Another difference between the two companies we dealt with was in how the in-home care was covered. A lot of the in home care is very routine. These two situations were both in the same rural area, in fact, in the same household. One company would allow local caregivers who are experienced in this type of work, but not credentialed; the rate is a lot lower for uncredentialed help. The other company insisted on credentialed caregivers. Local credentialed help was not available and had to travel a distance. The insured would end up with different caregivers on different days and never really was able to establish a relationship with them. Also, since your insurance covers a fixed dollar amount (not a fixed number of hours), your insurance dollars do not go as far with credentialed help. You never think of things like this when you purchase a policy.

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willthrill81
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Re: Long-term Care Insurance

Post by willthrill81 » Sun Oct 14, 2018 9:54 pm

ResearchMed wrote:
Sun Oct 14, 2018 9:39 pm
willthrill81 wrote:
Sun Oct 14, 2018 9:38 pm
bsteiner wrote:
Sun Oct 14, 2018 8:56 pm
willthrill81 wrote:
Sun Oct 14, 2018 8:49 pm
... the odds are around 75% that even if you need LTC that you'll need it for no more than three years. ...
I would be interested in a policy that covered an unlimited duration, but not the first 3 years. Since many people will need care for 3 years of less, insurance for the first 3 years is more like a prepaid expense. Excluding the first 3 years should substantially reduce the cost of the policy. However, I'm not aware of any such policies.
To my knowledge, no states will permit a LTC policy with an exclusion period of even one year, much less three. But there's no doubt that such a policy would be far less costly than the current policies available.
Any idea why? It can't be (can it?) just because of the low probability, b/c that would be matched by much lower rates. Sort of like - VERY much like - umbrella policies.

RM
Upon investigation, it seems that at least some states will allow an elimination period up to one year, but I can't find any longer than that. Someone here discussed why states don't allow longer periods, but I don't recall all of the specifics. I think it was something along the lines of preventing consumers from being sold policies that wouldn't benefit them unless they were able to first self-pay for multiple years of LTC, which clearly most Americans are not prepared to do.
“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

ralph124cf
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Re: Long-term Care Insurance

Post by ralph124cf » Mon Oct 15, 2018 9:29 am

My wife and I have LTCi policies with a one year elimination period. When shopping for policies this made a HUGE difference in the rates quoted. We also got a 40% discount for each of us, for both of us buying policies at the same time, even though she bought unlimited time with a 3% inflation rider while I only bought a six month limit after the one year elimination period, no inflation rider, and minimum benefit.

Ten years and no increase so far.

Ralph

RickBoglehead
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Re: Long-term Care Insurance

Post by RickBoglehead » Mon Oct 15, 2018 9:42 am

We researched this option and decided to not pursue after reading dozens of accounts of people stuck in a situation where the premiums rose dramatically or companies left the business. Articles worth reading, all under the heading "Unprepared":

Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice
Battered by losses, long-term-care insurers hit policyholders with steep rate increases that many never saw coming - WSJ Jan 17, 2018

These policies were touted as the be all and end all. They're not. Make sure you really understand what they pay for, what they don't pay for, and whether they can raise the premiums (or lower the coverage). In my experience, most people listen to salespeople, then sign contracts, having never read, nor understood, what they were signing. No matter the document, if there are words or paragraphs that you don't understand clearly, and you then sign the document, you deserve the outcome that you get IMO. People do this all the time.

Universal Life was touted in a similar manner.

Universal Life Insurance, a 1980s Sensation, Has Backfired
A long decline in interest rates caused premiums to soar when they were supposed to stay level, trapping retirees and forcing many to drop coverage. “These life policies were quicksand,” says one 85-year-old customer. WSJ Sept 19, 2018

If you hit a paywall, trying Googling the title of the article.

beardsworth
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Re: Long-term Care Insurance

Post by beardsworth » Mon Oct 15, 2018 9:57 am

willyd123 (original poster) wrote:
The more I read about long-term care insurance, the more I think it is probably a good thing to have. . . .

What do you think?
That search box at the top of the Bogleheads forum pages can be your friend. This subject has been discussed here many times, in considerable depth. Here are search results, for the terms long term care insurance, and LTC, which you may also find helpful.

https://www.google.com/search?sitesearc ... +insurance

https://www.google.com/search?sitesearc ... .org&q=LTC

In addition to issues of rising premiums, there has also been a drastic reduction in the number of companies, especially highly-rated "safe" companies, which offer this product at all.

You will see some people, typically those with sizable financial assets, saying that they have decided to "self-insure." That's a misnomer. True insurance involves pooling risk with other people, some of whom will end up needing insurance benefits and some of whom will not. There is no true "insurance" characteristic to self–funding solely from one's own liquid assets. When people say they're going to "self–insure," what they really mean is just that they're going to "pay cash" if and when a long-term care need arises.

JoeRetire
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Re: Long-term Care Insurance

Post by JoeRetire » Mon Oct 15, 2018 10:16 am

munemaker wrote:
Sun Oct 14, 2018 9:40 pm
From experience with relatives, the main problem we experienced with LTCI is the rates are not level. The issuers raise the rates dramatically to the point where the insured are tempted to cancel. You think you are buying a policy for X/year, but then it turns out to be 3X/year (or whatever).
For some. For us - 4 years in and no increases. For my dad - many years in (not sure how many) and no increases.

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willthrill81
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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 10:32 am

beardsworth wrote:
Mon Oct 15, 2018 9:57 am
In addition to issues of rising premiums, there has also been a drastic reduction in the number of companies, especially highly-rated "safe" companies, which offer this product at all.
Yep. IIRC, there were over 100 providers of LTC insurance twenty years ago, and now there are fewer than ten. Someone buying LTC insurance should question whether it's reasonable to believe that their insurer will still be in this business in five or ten years.
beardsworth wrote:
Mon Oct 15, 2018 9:57 am
You will see some people, typically those with sizable financial assets, saying that they have decided to "self-insure." That's a misnomer. True insurance involves pooling risk with other people, some of whom will end up needing insurance benefits and some of whom will not. There is no true "insurance" characteristic to self–funding solely from one's own liquid assets. When people say they're going to "self–insure," what they really mean is just that they're going to "pay cash" if and when a long-term care need arises.
This is inaccurate. Taking on the risk oneself is defined as self-insurance. It has nothing to do with pooling risk with other entities.
Self-insurance describes a situation in which a person does not take out any third party insurance. The essence of the concept is that a business that is liable for some risk, such as health costs, chooses to "carry the risk" itself and not take out insurance through an insurance company.

In the United States the concept applies especially to health insurance and may involve, for example, an employer providing certain benefits – generally health benefits or disability benefits – to employees and funding claims from a specified pool of assets rather than through an insurance company, as the term is traditionally used. In self-funded health care, the employer ultimately retains the full risk of paying claims, in contrast to traditional insurance, where all risk is transferred to the insurer.
https://en.wikipedia.org/wiki/Self-insurance
Self-insuring means that you save up enough money to cover the related and possible expenses that may occur in the event that you suffer an unexpected loss, injury, or illness.
https://www.thebalance.com/what-does-it ... re-2386103
“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

beardsworth
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Re: Long-term Care Insurance

Post by beardsworth » Mon Oct 15, 2018 10:48 am

willthrill81 wrote:
Mon Oct 15, 2018 10:32 am
beardsworth wrote:
Mon Oct 15, 2018 9:57 am
In addition to issues of rising premiums, there has also been a drastic reduction in the number of companies, especially highly-rated "safe" companies, which offer this product at all.
Yep. IIRC, there were over 100 providers of LTC insurance twenty years ago, and now there are fewer than ten. Someone buying LTC insurance should question whether it's reasonable to believe that their insurer will still be in this business in five or ten years.
beardsworth wrote:
Mon Oct 15, 2018 9:57 am
You will see some people, typically those with sizable financial assets, saying that they have decided to "self-insure." That's a misnomer. True insurance involves pooling risk with other people, some of whom will end up needing insurance benefits and some of whom will not. There is no true "insurance" characteristic to self–funding solely from one's own liquid assets. When people say they're going to "self–insure," what they really mean is just that they're going to "pay cash" if and when a long-term care need arises.
This is inaccurate. Taking on the risk oneself is defined as self-insurance. It has nothing to do with pooling risk with other entities.
Self-insurance describes a situation in which a person does not take out any third party insurance. The essence of the concept is that a business that is liable for some risk, such as health costs, chooses to "carry the risk" itself and not take out insurance through an insurance company.

In the United States the concept applies especially to health insurance and may involve, for example, an employer providing certain benefits – generally health benefits or disability benefits – to employees and funding claims from a specified pool of assets rather than through an insurance company, as the term is traditionally used. In self-funded health care, the employer ultimately retains the full risk of paying claims, in contrast to traditional insurance, where all risk is transferred to the insurer.
https://en.wikipedia.org/wiki/Self-insurance
Self-insuring means that you save up enough money to cover the related and possible expenses that may occur in the event that you suffer an unexpected loss, injury, or illness.
https://www.thebalance.com/what-does-it ... re-2386103
The OP here, and other OPs like him in the dozens of past Bogleheads threads about this product, were asking about how to buy an insurance policy from an insurance company, i.e., pooling risk with a large number of other people to address a perceived need to cover a potentially enormous future expense--not about how to pay cash-out-of-pocket as a solo individual but nevertheless call it "insurance."

Anyone can call a horse a cow, but that doesn't make it so. :)

WoW2012
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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 12:29 pm

willthrill81 wrote:
Sun Oct 14, 2018 8:49 pm
JoeRetire wrote:
Sun Oct 14, 2018 6:19 pm
If you have a lot of assets (say $5M or so), you may be better served by self-insuring. If you have so little assets that you expect to be Medicaid-eligible, you probably shouldn't purchase LTCi at all.
You can likely self-insure with a significantly smaller portfolio than $5 million unless you live in a very high cost of living area. With 4% withdrawals, a $5 million portfolio will yield $200k of annual income. All but the most expensive LTC facilities will cost less than that, possibly much less. The priciest ones in our area are about $100k annually. And the odds are around 75% that even if you need LTC that you'll need it for no more than three years. I'd say that $2 million is likely the more common lower bound level at which you can self-insure LTC.

And it's not necessary to be destitute to receive Medicaid benefits, which is a common misconception. Irrevocable trusts held for five years or longer and Medicaid-compliant annuities are available workarounds. A good elder care attorney can help with deciphering the best option(s).
Putting pre-tax retirement accounts into irrevocable trusts have horrific tax consequences. You'd lose almost half the value in federal and state income taxes.

Putting highly-appreciated assets into an irrevocable trust results in substantial capital gains taxes.

WoW2012
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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 12:36 pm

bsteiner wrote:
Sun Oct 14, 2018 8:56 pm
I would be interested in a policy that covered an unlimited duration, but not the first 3 years. Since many people will need care for 3 years of less, insurance for the first 3 years is more like a prepaid expense. Excluding the first 3 years should substantially reduce the cost of the policy. However, I'm not aware of any such policies.
I would be interested in a policy that covered an unlimited duration, but not the first 3 years.

Insurance companies used to offer these policies.
No one bought them.

Excluding the first 3 years should substantially reduce the cost of the policy.
It doesn't.


However, I'm not aware of any such policies.

They don't exist because the insurers stopped offering them because no one was buying them. Also, most states do NOT allow elimination periods longer than 365 days. The huge regulatory expense of trying to get each state to approve a policy with a 1095 day elimination period is not worth it since few people will buy it.

The risk of litigation is another big factor causing the insurers to stop offering 730 and 1095 day elimination periods.

At least you can tell your wife you want a policy but it's just not available.

WoW2012
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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 12:43 pm

ResearchMed wrote:
Sun Oct 14, 2018 9:39 pm
willthrill81 wrote:
Sun Oct 14, 2018 9:38 pm
bsteiner wrote:
Sun Oct 14, 2018 8:56 pm
willthrill81 wrote:
Sun Oct 14, 2018 8:49 pm
... the odds are around 75% that even if you need LTC that you'll need it for no more than three years. ...
I would be interested in a policy that covered an unlimited duration, but not the first 3 years. Since many people will need care for 3 years of less, insurance for the first 3 years is more like a prepaid expense. Excluding the first 3 years should substantially reduce the cost of the policy. However, I'm not aware of any such policies.
To my knowledge, no states will permit a LTC policy with an exclusion period of even one year, much less three. But there's no doubt that such a policy would be far less costly than the current policies available.
Any idea why? It can't be (can it?) just because of the low probability, b/c that would be matched by much lower rates. Sort of like - VERY much like - umbrella policies.

RM

Umbrella policies are not cheap because they have a $300,000 deductible (which is what a 1,095 day elimination period is).
Umbrella policies have very low deductibles.
Umbrella policies are cheap because the chances of claiming on one is about 10,000 to 1.
The chances of claiming on your LTCi policy is about 10 to 1.

WoW2012
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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 12:48 pm

munemaker wrote:
Sun Oct 14, 2018 9:40 pm
From experience with relatives, the main problem we experienced with LTCI is the rates are not level. The issuers raise the rates dramatically to the point where the insured are tempted to cancel. You think you are buying a policy for X/year, but then it turns out to be 3X/year (or whatever).
That's why a policy purchased today costs about twice what a similar policy cost 10 years ago. Under the new rules, if an insurance company requests a rate increase they must decrease the profit levels in their pricing to a cap that is pre-determined by the new regulation and they can't include any net profit in the rate increase itself.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 12:50 pm

ralph124cf wrote:
Mon Oct 15, 2018 9:29 am
My wife and I have LTCi policies with a one year elimination period. When shopping for policies this made a HUGE difference in the rates quoted. We also got a 40% discount for each of us, for both of us buying policies at the same time, even though she bought unlimited time with a 3% inflation rider while I only bought a six month limit after the one year elimination period, no inflation rider, and minimum benefit.

Ten years and no increase so far.

Ralph
There's no such thing as a long-term care policy with only six months of benefits.

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Re: Long-term Care Insurance

Post by shell921 » Mon Oct 15, 2018 12:57 pm

found this on-line:
...............

"When it comes to long-term care insurance, readers should be aware of alternatives other than a stand alone long term care policy. Specifically, you can buy a “hybrid” policy built on a life insurance chassis.Rather than paying annual premiums, the premium is a one-time lump sum deposit,with the total long term care benefit equal up to 5 times the deposit amount.The lump sum deposit is refundable at any time.The cost of the coverage is the interest lost on the lump sum deposit. There could be several advantages to this approach,including easier underwriting, premiums can not be increased, and whatever benefits are not used, are paid as life insurance to a named beneficiary."

..................................

I do not know if this is true or not.

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Re: Long-term Care Insurance

Post by jalbert » Mon Oct 15, 2018 1:06 pm

You can likely self-insure with a significantly smaller portfolio than $5 million unless you live in a very high cost of living area. With 4% withdrawals, a $5 million portfolio will yield $200k of annual income. All but the most expensive LTC facilities will cost less than that, possibly much less. The priciest ones in our area are about $100k annually. And the odds are around 75% that even if you need LTC that you'll need it for no more than three years. I'd say that $2 million is likely the more common lower bound level at which you can self-insure LTC.
The analysis is a bit more complex for a couple where one spouse may need LTC at a time when the other may live another 30 years.
Risk is not a guarantor of return.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 1:22 pm

RickBoglehead wrote:
Mon Oct 15, 2018 9:42 am
We researched this option and decided to not pursue after reading dozens of accounts of people stuck in a situation where the premiums rose dramatically or companies left the business. Articles worth reading, all under the heading "Unprepared":

Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice
Battered by losses, long-term-care insurers hit policyholders with steep rate increases that many never saw coming - WSJ Jan 17, 2018

These policies were touted as the be all and end all. They're not. Make sure you really understand what they pay for, what they don't pay for, and whether they can raise the premiums (or lower the coverage). In my experience, most people listen to salespeople, then sign contracts, having never read, nor understood, what they were signing. No matter the document, if there are words or paragraphs that you don't understand clearly, and you then sign the document, you deserve the outcome that you get IMO. People do this all the time.

Universal Life was touted in a similar manner.

Universal Life Insurance, a 1980s Sensation, Has Backfired
A long decline in interest rates caused premiums to soar when they were supposed to stay level, trapping retirees and forcing many to drop coverage. “These life policies were quicksand,” says one 85-year-old customer. WSJ Sept 19, 2018

If you hit a paywall, trying Googling the title of the article.

where the premiums rose dramatically:

If new long-term care policies had the same pricing and regulations as old long-term care policies, the threat of rate increases would be a valid reason for not buying a policy today. For an insurance company to be allowed to sell a new long-term care policy today, the new policy must include all of the company’s prior rate increases in the new pricing. In other words, someone buying a new LTCi policy today is not going to get hit with the old rate increases because the old rate increases are ALREADY in the new policy's pricing. That's why policies today cost about twice what policies cost ten years ago.

In 41 states, the new pricing must also include an additional “cushion” (about 10%) as extra protection from future rate increases. Lastly, the regulators, in these 41 states, require insurers to reduce their profits if they seek a rate increase AND they can't include any net profit in the rate increase itself. Bottom line: there's no longer any profit incentive in rate increases on the long-term care policies that are under this new regulation.

companies left the business:

An insurance company that sold long-term care insurance can't "leave the business". They must honor that policy and pay all claims until all of the insureds have died.

These policies were touted as the be all and end all. They're not:

Over 1,000,000 families have incurred over $100 Billion of long-term care insurance claims. One of them is my MIL and her policy has saved us about $100,000 of capital gains taxes and so far the policy has paid more than twice the amount she paid in premiums. And she still has about $350,000 of benefits left.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 1:27 pm

willthrill81 wrote:
Sun Oct 14, 2018 9:54 pm
Upon investigation, it seems that at least some states will allow an elimination period up to one year, but I can't find any longer than that. Someone here discussed why states don't allow longer periods, but I don't recall all of the specifics. I think it was something along the lines of preventing consumers from being sold policies that wouldn't benefit them unless they were able to first self-pay for multiple years of LTC, which clearly most Americans are not prepared to do.
fyi... the 365 day elimination period is probably only 5% cheaper than a 90-day elimination period.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 1:48 pm

willthrill81 wrote:
Mon Oct 15, 2018 10:32 am

Yep. IIRC, there were over 100 providers of LTC insurance twenty years ago, and now there are fewer than ten. Someone buying LTC insurance should question whether it's reasonable to believe that their insurer will still be in this business in five or ten years.

This is inaccurate. Taking on the risk oneself is defined as self-insurance. It has nothing to do with pooling risk with other entities.
The insurance industry has consolidated. In the 1980s, about 100 companies sold disability insurance. Today, fewer than 15 do. In the 1990s, over 400 companies sold medical insurance. In most states today, only a handful of companies sell medical insurance. In the 1990s, over 100 insurance companies sold long-term care insurance. Today,13 companies sell long-term care insurance and most of them have very high financial ratings. Two companies that had stopped selling long-term care insurance several years ago are now selling it again. Recently, a 106-year old insurance company that has never sold long-term care insurance began selling it. In most states there are more long-term care insurers than their are medical insurers and disability insurers. Last year over 100 companies paid claims on long-term care insurance policies. 13 of those companies sell long-term care policies today. The other 87 are no longer "in the business" (to use your phrase). If a company stops selling new policies, they still have to pay all claims on the policies they issued.

Regarding self-insurance, it amazes me how many people decide to self-insure for long-term care, yet they insure their jewelry, they own collision insurance on cars they paid cash for, and they own umbrella liability insurance. Why would someone choose to "self-insure" for the greatest risk but insure the lesser risks.

By sacrificing less than 50 basis points from earnings each year, most investors can fortify their portfolio from the most likely threat to loss of principal.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 1:51 pm

shell921 wrote:
Mon Oct 15, 2018 12:57 pm
found this on-line:
...............

"When it comes to long-term care insurance, readers should be aware of alternatives other than a stand alone long term care policy. Specifically, you can buy a “hybrid” policy built on a life insurance chassis.Rather than paying annual premiums, the premium is a one-time lump sum deposit,with the total long term care benefit equal up to 5 times the deposit amount.The lump sum deposit is refundable at any time.The cost of the coverage is the interest lost on the lump sum deposit. There could be several advantages to this approach,including easier underwriting, premiums can not be increased, and whatever benefits are not used, are paid as life insurance to a named beneficiary."

..................................

I do not know if this is true or not.
Those policies exist and they are the kind of policies the Wall Street Journal and Forbes (which are nothing but a mouth organs for Big Insurance) want you to buy.

Big Insurance doesn't want you to buy long-term care insurance. Most insurers don't know how to underwrite it profitably. Big Insurance wants you to buy life insurance instead, especially over-priced cash value life insurance they call "hybrids". There's a lot more profit for the insurers in these "hybrids".

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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 2:43 pm

beardsworth wrote:
Mon Oct 15, 2018 10:48 am
Anyone can call a horse a cow, but that doesn't make it so. :)
On that point we agree. Attempting to redefine widely established terminology is confusing and non-productive.
“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: Long-term Care Insurance

Post by munemaker » Mon Oct 15, 2018 8:12 pm

JoeRetire wrote:
Mon Oct 15, 2018 10:16 am
munemaker wrote:
Sun Oct 14, 2018 9:40 pm
From experience with relatives, the main problem we experienced with LTCI is the rates are not level. The issuers raise the rates dramatically to the point where the insured are tempted to cancel. You think you are buying a policy for X/year, but then it turns out to be 3X/year (or whatever).
For some. For us - 4 years in and no increases. For my dad - many years in (not sure how many) and no increases.
That's good to hear. The two cases in our family were not so, but they were a lot older than 4 years. I have also read many people complain about the very large rate increases. If the rates were reasonable and guaranteed to be level, I would buy LTCI, but no way that is going to happen.

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Re: Long-term Care Insurance

Post by DC3509 » Mon Oct 15, 2018 9:38 pm

WoW2012 wrote:
Mon Oct 15, 2018 1:48 pm
willthrill81 wrote:
Mon Oct 15, 2018 10:32 am

Yep. IIRC, there were over 100 providers of LTC insurance twenty years ago, and now there are fewer than ten. Someone buying LTC insurance should question whether it's reasonable to believe that their insurer will still be in this business in five or ten years.

This is inaccurate. Taking on the risk oneself is defined as self-insurance. It has nothing to do with pooling risk with other entities.
The insurance industry has consolidated. In the 1980s, about 100 companies sold disability insurance. Today, fewer than 15 do. In the 1990s, over 400 companies sold medical insurance. In most states today, only a handful of companies sell medical insurance. In the 1990s, over 100 insurance companies sold long-term care insurance. Today,13 companies sell long-term care insurance and most of them have very high financial ratings. Two companies that had stopped selling long-term care insurance several years ago are now selling it again. Recently, a 106-year old insurance company that has never sold long-term care insurance began selling it. In most states there are more long-term care insurers than their are medical insurers and disability insurers. Last year over 100 companies paid claims on long-term care insurance policies. 13 of those companies sell long-term care policies today. The other 87 are no longer "in the business" (to use your phrase). If a company stops selling new policies, they still have to pay all claims on the policies they issued.

Regarding self-insurance, it amazes me how many people decide to self-insure for long-term care, yet they insure their jewelry, they own collision insurance on cars they paid cash for, and they own umbrella liability insurance. Why would someone choose to "self-insure" for the greatest risk but insure the lesser risks.

By sacrificing less than 50 basis points from earnings each year, most investors can fortify their portfolio from the most likely threat to loss of principal.
Most people in general -- not necessarily on this board but in general -- do not buy LTCI because it is expensive and there is already a back-up government program -- it is called Medicaid. 2/3 of seniors end up on it someday, and that percentage is even higher in most low cost of living states. If there was a government program that would give you back your jewelry, I imagine you wouldn't see as many insured pieces of jewelry either. Moreover, the other types of insurance you mention are extremely inexpensive. LTCI is not. Yes, even with jewelry, at some point the premiums are big enough that at some point you might start paying for that ring twice. But when the premium amount is very small, people don't process it that way. When the premium amount is much more, people get scared off. The higher LTCI premiums do scare off a certain subset of the population.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 9:46 pm

DC3509 wrote:
Mon Oct 15, 2018 9:38 pm
WoW2012 wrote:
Mon Oct 15, 2018 1:48 pm
willthrill81 wrote:
Mon Oct 15, 2018 10:32 am

Yep. IIRC, there were over 100 providers of LTC insurance twenty years ago, and now there are fewer than ten. Someone buying LTC insurance should question whether it's reasonable to believe that their insurer will still be in this business in five or ten years.

This is inaccurate. Taking on the risk oneself is defined as self-insurance. It has nothing to do with pooling risk with other entities.
The insurance industry has consolidated. In the 1980s, about 100 companies sold disability insurance. Today, fewer than 15 do. In the 1990s, over 400 companies sold medical insurance. In most states today, only a handful of companies sell medical insurance. In the 1990s, over 100 insurance companies sold long-term care insurance. Today,13 companies sell long-term care insurance and most of them have very high financial ratings. Two companies that had stopped selling long-term care insurance several years ago are now selling it again. Recently, a 106-year old insurance company that has never sold long-term care insurance began selling it. In most states there are more long-term care insurers than their are medical insurers and disability insurers. Last year over 100 companies paid claims on long-term care insurance policies. 13 of those companies sell long-term care policies today. The other 87 are no longer "in the business" (to use your phrase). If a company stops selling new policies, they still have to pay all claims on the policies they issued.

Regarding self-insurance, it amazes me how many people decide to self-insure for long-term care, yet they insure their jewelry, they own collision insurance on cars they paid cash for, and they own umbrella liability insurance. Why would someone choose to "self-insure" for the greatest risk but insure the lesser risks.

By sacrificing less than 50 basis points from earnings each year, most investors can fortify their portfolio from the most likely threat to loss of principal.
Most people in general -- not necessarily on this board but in general -- do not buy LTCI because it is expensive and there is already a back-up government program -- it is called Medicaid. 2/3 of seniors end up on it someday, and that percentage is even higher in most low cost of living states. If there was a government program that would give you back your jewelry, I imagine you wouldn't see as many insured pieces of jewelry either. Moreover, the other types of insurance you mention are extremely inexpensive. LTCI is not. Yes, even with jewelry, at some point the premiums are big enough that at some point you might start paying for that ring twice. But when the premium amount is very small, people don't process it that way. When the premium amount is much more, people get scared off. The higher LTCI premiums do scare off a certain subset of the population.

Obviously someone who can easily qualify for Medicaid shouldn't buy long-term care insurance.
I was referring to people who are not likely to qualify for Medicaid without first losing hundreds of thousands of dollars.

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Re: Long-term Care Insurance

Post by DC3509 » Mon Oct 15, 2018 9:49 pm

As Willthrill mentioned earlier -- that's really not necessary if you are willing to put your assets into an irrevocable trust and you survive the 5 year look-back. You can hypothetically have 7 figures of assets and still qualify for Medicaid under this scenario.

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 9:52 pm

DC3509 wrote:
Mon Oct 15, 2018 9:49 pm
As Willthrill mentioned earlier -- that's really not necessary if you are willing to put your assets into an irrevocable trust and you survive the 5 year look-back. You can hypothetically have 7 figures of assets and still qualify for Medicaid under this scenario.
Are you aware of the tax consequences of "putting" a 401k into an irrevocable trust?
You'd lose about half of its value in taxes.

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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 10:06 pm

WoW2012 wrote:
Mon Oct 15, 2018 9:52 pm
DC3509 wrote:
Mon Oct 15, 2018 9:49 pm
As Willthrill mentioned earlier -- that's really not necessary if you are willing to put your assets into an irrevocable trust and you survive the 5 year look-back. You can hypothetically have 7 figures of assets and still qualify for Medicaid under this scenario.
Are you aware of the tax consequences of "putting" a 401k into an irrevocable trust?
You'd lose about half of its value in taxes.
Moving tax-deferred assets into an irrevocable is indeed a tax-heavy move. You must pay income taxes on the amount withdrawn from the 401k, and you must also pay the gift tax on moving transferred into the trust (beyond the $15k per person annual exclusion). But with some careful planning and time, this can be minimized by spreading out the 401k withdrawals and also spreading out the transfers to the trust so as to minimize the gift tax rate.

This isn't an ideal solution due to the taxes involved and other consequences (e.g. cannot withdrawal principal contributions to an irrevocable trust), but it may be preferable to LTC insurance.

I think that Medicaid-compliant annuities are likely to be a better option for many. They don't have the stiff tax consequences of irrevocable trusts, but they are a less effective means of retaining capital for bequests.
“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: Long-term Care Insurance

Post by DC3509 » Mon Oct 15, 2018 10:08 pm

No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/

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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 10:25 pm

DC3509 wrote:
Mon Oct 15, 2018 10:08 pm
No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/
Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?

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Re: Long-term Care Insurance

Post by ResearchMed » Mon Oct 15, 2018 10:28 pm

WoW2012 wrote:
Mon Oct 15, 2018 10:25 pm
DC3509 wrote:
Mon Oct 15, 2018 10:08 pm
No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/
Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?
How does a Medicaid Compliant annuity differ from a "regular" SPIA?

RM
This signature is a placebo. You are in the control group.

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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 10:34 pm

ResearchMed wrote:
Mon Oct 15, 2018 10:28 pm
WoW2012 wrote:
Mon Oct 15, 2018 10:25 pm
DC3509 wrote:
Mon Oct 15, 2018 10:08 pm
No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/
Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?
How does a Medicaid Compliant annuity differ from a "regular" SPIA?

RM
Very little. Basically, it must be "actuarially sound," meaning that the annuity payout must be based on the 'healthy' spouse's life expectancy, and the state must be the named beneficiary of any benefits paid out by the annuity after the 'healthy' spouse's death, which are usually zero.
In order to qualify as a Medicaid-compliant annuity under federal law, the terms of the annuity contract must satisfy certain criteria. The income from the annuity contract must be payable only to the community spouse, the contract must be irrevocable and non-assignable, and the payment term must be based on the life expectancy of the community spouse. Payments must be made in equal installments (i.e., there can be no balloon-type payment) and the annuity cannot be a deferred annuity.

While the annuity must be an immediate annuity, a recent court in Pennsylvania found that there is no minimum term requirement that an annuity must satisfy in order to qualify as a Medicaid-compliant annuity, but that the annuity must be actuarially sound—meaning that it ensures that the term of the annuity will be no longer than the healthy spouse’s life expectancy.

Finally, the state must be named as the remainder beneficiary on the annuity contract, allowing it to receive up to the amount that it has paid for the institutionalized spouse’s long-term care.
https://www.thinkadvisor.com/2017/05/17 ... 0915233135
“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: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 10:36 pm

WoW2012 wrote:
Mon Oct 15, 2018 10:25 pm
DC3509 wrote:
Mon Oct 15, 2018 10:08 pm
No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/
Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?
Why? Source?

There is virtually no difference between a Medicaid-compliant annuity and any other lifetime annuity. Yes, most of the money being paid in benefits over your life expectancy is a return of your premium plus a relatively small amount of interest, but it isn't negative in any cases I've seen. And even if it was slightly negative, that negative return could easily be less costly than LTC insurance premiums.
“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: Long-term Care Insurance

Post by ResearchMed » Mon Oct 15, 2018 10:40 pm

willthrill81 wrote:
Mon Oct 15, 2018 10:34 pm
ResearchMed wrote:
Mon Oct 15, 2018 10:28 pm
WoW2012 wrote:
Mon Oct 15, 2018 10:25 pm
DC3509 wrote:
Mon Oct 15, 2018 10:08 pm
No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/
Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?
How does a Medicaid Compliant annuity differ from a "regular" SPIA?

RM
Very little. Basically, it must be "actuarially sound," meaning that the annuity payout must be based on the 'healthy' spouse's life expectancy, and the state must be the named beneficiary of any benefits paid out by the annuity after the 'healthy' spouse's death, which are usually zero.
In order to qualify as a Medicaid-compliant annuity under federal law, the terms of the annuity contract must satisfy certain criteria. The income from the annuity contract must be payable only to the community spouse, the contract must be irrevocable and non-assignable, and the payment term must be based on the life expectancy of the community spouse. Payments must be made in equal installments (i.e., there can be no balloon-type payment) and the annuity cannot be a deferred annuity.

While the annuity must be an immediate annuity, a recent court in Pennsylvania found that there is no minimum term requirement that an annuity must satisfy in order to qualify as a Medicaid-compliant annuity, but that the annuity must be actuarially sound—meaning that it ensures that the term of the annuity will be no longer than the healthy spouse’s life expectancy.

Finally, the state must be named as the remainder beneficiary on the annuity contract, allowing it to receive up to the amount that it has paid for the institutionalized spouse’s long-term care.
https://www.thinkadvisor.com/2017/05/17 ... 0915233135
So ALL of the annuity is for the Spouse's income, and none is expected to be used to offset any of the Medicaid recipient's expenses at all?

And then, why is the "'return"'... usually negative"?

(Obviously, Spouse could pay for extras for Recipient, I assume, much like with a similar-purposed Trust?)

RM
This signature is a placebo. You are in the control group.

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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 10:44 pm

ResearchMed wrote:
Mon Oct 15, 2018 10:40 pm
willthrill81 wrote:
Mon Oct 15, 2018 10:34 pm
ResearchMed wrote:
Mon Oct 15, 2018 10:28 pm
WoW2012 wrote:
Mon Oct 15, 2018 10:25 pm
DC3509 wrote:
Mon Oct 15, 2018 10:08 pm
No, you do not put the 401K in the irrevocable trust. In a minority of states, the 401K is exempted from Medicaid entirely so this isn't an issue. In the majority of states where it is a countable asset, the common Medicaid strategy is to convert the retirement assets into a Medicaid complaint annuity.

Here is a link explaining the concept:

https://www.medicaidannuity.com/convert ... annuity-3/
Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?
How does a Medicaid Compliant annuity differ from a "regular" SPIA?

RM
Very little. Basically, it must be "actuarially sound," meaning that the annuity payout must be based on the 'healthy' spouse's life expectancy, and the state must be the named beneficiary of any benefits paid out by the annuity after the 'healthy' spouse's death, which are usually zero.
In order to qualify as a Medicaid-compliant annuity under federal law, the terms of the annuity contract must satisfy certain criteria. The income from the annuity contract must be payable only to the community spouse, the contract must be irrevocable and non-assignable, and the payment term must be based on the life expectancy of the community spouse. Payments must be made in equal installments (i.e., there can be no balloon-type payment) and the annuity cannot be a deferred annuity.

While the annuity must be an immediate annuity, a recent court in Pennsylvania found that there is no minimum term requirement that an annuity must satisfy in order to qualify as a Medicaid-compliant annuity, but that the annuity must be actuarially sound—meaning that it ensures that the term of the annuity will be no longer than the healthy spouse’s life expectancy.

Finally, the state must be named as the remainder beneficiary on the annuity contract, allowing it to receive up to the amount that it has paid for the institutionalized spouse’s long-term care.
https://www.thinkadvisor.com/2017/05/17 ... 0915233135
So ALL of the annuity is for the Spouse's income, and none is expected to be used to offset any of the Medicaid recipient's expenses at all?
Yep. The annuity payout goes to the healthy spouse, and Medicaid covers the spouse needing LTC. And if they want to leave a bequest, the healthy spouse simply saves however much of the monthly annuity payout desired until their death.
ResearchMed wrote:
Mon Oct 15, 2018 10:40 pm
And then, why is the "'return"'... usually negative"?
No clue. I don't think this is accurate at all. It can't have anything to do with it being Medicaid-compliant because insurance companies don't sell some kind of different annuity labeled as "Medicaid-compliant." It's just a simple lifetime annuity, very plain vanilla.
“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

WoW2012
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Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 10:47 pm

Obviously you guys had never priced a "Medicaid-compliant" annuity. I have.

ResearchMed
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Re: Long-term Care Insurance

Post by ResearchMed » Mon Oct 15, 2018 10:59 pm

willthrill81 wrote:
Mon Oct 15, 2018 10:44 pm
ResearchMed wrote:
Mon Oct 15, 2018 10:40 pm
willthrill81 wrote:
Mon Oct 15, 2018 10:34 pm
ResearchMed wrote:
Mon Oct 15, 2018 10:28 pm
WoW2012 wrote:
Mon Oct 15, 2018 10:25 pm


Do you guys realize that the "return" on a medicaid compliant annuity is usually negative?
How does a Medicaid Compliant annuity differ from a "regular" SPIA?

RM
Very little. Basically, it must be "actuarially sound," meaning that the annuity payout must be based on the 'healthy' spouse's life expectancy, and the state must be the named beneficiary of any benefits paid out by the annuity after the 'healthy' spouse's death, which are usually zero.
In order to qualify as a Medicaid-compliant annuity under federal law, the terms of the annuity contract must satisfy certain criteria. The income from the annuity contract must be payable only to the community spouse, the contract must be irrevocable and non-assignable, and the payment term must be based on the life expectancy of the community spouse. Payments must be made in equal installments (i.e., there can be no balloon-type payment) and the annuity cannot be a deferred annuity.

While the annuity must be an immediate annuity, a recent court in Pennsylvania found that there is no minimum term requirement that an annuity must satisfy in order to qualify as a Medicaid-compliant annuity, but that the annuity must be actuarially sound—meaning that it ensures that the term of the annuity will be no longer than the healthy spouse’s life expectancy.

Finally, the state must be named as the remainder beneficiary on the annuity contract, allowing it to receive up to the amount that it has paid for the institutionalized spouse’s long-term care.
https://www.thinkadvisor.com/2017/05/17 ... 0915233135
So ALL of the annuity is for the Spouse's income, and none is expected to be used to offset any of the Medicaid recipient's expenses at all?
Yep. The annuity payout goes to the healthy spouse, and Medicaid covers the spouse needing LTC. And if they want to leave a bequest, the healthy spouse simply saves however much of the monthly annuity payout desired until their death.
ResearchMed wrote:
Mon Oct 15, 2018 10:40 pm
And then, why is the "'return"'... usually negative"?
No clue. I don't think this is accurate at all. It can't have anything to do with it being Medicaid-compliant because insurance companies don't sell some kind of different annuity labeled as "Medicaid-compliant." It's just a simple lifetime annuity, very plain vanilla.
Obviously, we'll need to look more at our state's particular Medicaid/etc., laws, but this is much better than I had assumed.
(Um, obviously, we haven't really started looking at this particular wrinkle yet.)

And then there is the complication of what if the two are already in a long-term care facility, where they was a lump deposit?

NOTE: We have no serious legacy desires, other than "whatever is left" (and we have designations for that already).
Our primary concern is the care and comfort of both/each of us, for whatever time remains.

I need to figure how this interacts with a joint annuity, or maybe that's no longer wise if there is a chance one of them might need ultra-long term care? We had assumed we'd annuitize a portion.
Yes, definitely... an elder care attorney/etc., is in the cards...

Thanks.

RM
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willthrill81
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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 11:00 pm

WoW2012 wrote:
Mon Oct 15, 2018 10:47 pm
Obviously you guys had never priced a "Medicaid-compliant" annuity. I have.
Obviously, you're jumping to conclusions.

Here's a quote from www.immediateannuities.com. It is for a 70 year old female.

For a $1 million premium, the payout is $6,075 monthly, which is $72,900 annually. At that rate, it will take 13.72 years to recover the nominal premium paid. According to the Social Security Administration, a 70 year old female has a life expectancy of 17.4 years. That comes out to a 2.72% interest rate. And that's a positive rate. It's not high, but that's largely a function of current bond yields.
Last edited by willthrill81 on Mon Oct 15, 2018 11:05 pm, edited 1 time in total.
“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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willthrill81
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Re: Long-term Care Insurance

Post by willthrill81 » Mon Oct 15, 2018 11:04 pm

ResearchMed wrote:
Mon Oct 15, 2018 10:59 pm
Obviously, we'll need to look more at our state's particular Medicaid/etc., laws, but this is much better than I had assumed.
(Um, obviously, we haven't really started looking at this particular wrinkle yet.)

And then there is the complication of what if the two are already in a long-term care facility, where they was a lump deposit?

NOTE: We have no serious legacy desires, other than "whatever is left" (and we have designations for that already).
Our primary concern is the care and comfort of both/each of us, for whatever time remains.

I need to figure how this interacts with a joint annuity, or maybe that's no longer wise if there is a chance one of them might need ultra-long term care? We had assumed we'd annuitize a portion.
Yes, definitely... an elder care attorney/etc., is in the cards...

Thanks.

RM
No problem. :beer

Yes, a good elder care attorney is a must for anyone doing serious LTC planning.

If you don't have a desire for a legacy, the issue is much simpler. You can just wait until one spouse needs LTC, then annuitize 'countable' assets for the benefit of the other spouse. If both spouses need LTC simultaneously, then whatever assets/income are available will fund the LTC, with Medicaid stepping in to pay any difference.

It's situations where one spouse needs LTC and there is a desire for a significant bequest that it gets more difficult.
“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

ResearchMed
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Re: Long-term Care Insurance

Post by ResearchMed » Mon Oct 15, 2018 11:07 pm

willthrill81 wrote:
Mon Oct 15, 2018 11:04 pm
ResearchMed wrote:
Mon Oct 15, 2018 10:59 pm
Obviously, we'll need to look more at our state's particular Medicaid/etc., laws, but this is much better than I had assumed.
(Um, obviously, we haven't really started looking at this particular wrinkle yet.)

And then there is the complication of what if the two are already in a long-term care facility, where they was a lump deposit?

NOTE: We have no serious legacy desires, other than "whatever is left" (and we have designations for that already).
Our primary concern is the care and comfort of both/each of us, for whatever time remains.

I need to figure how this interacts with a joint annuity, or maybe that's no longer wise if there is a chance one of them might need ultra-long term care? We had assumed we'd annuitize a portion.
Yes, definitely... an elder care attorney/etc., is in the cards...

Thanks.

RM
No problem. :beer

Yes, a good elder care attorney is a must for anyone doing serious LTC planning.

If you don't have a desire for a legacy, the issue is much simpler. You can just wait until one spouse needs LTC, then annuitize 'countable' assets for the benefit of the other spouse. If both spouses need LTC simultaneously, then whatever assets/income are available will fund the LTC, with Medicaid stepping in to pay any difference.

It's situations where one spouse needs LTC and there is a desire for a significant bequest that it gets more difficult.
Is the same 5-year look-back required before one can "suddenly" annuitize away all the goodies, for benefit of spouse?

:annoyed

RM
This signature is a placebo. You are in the control group.

DC3509
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Re: Long-term Care Insurance

Post by DC3509 » Mon Oct 15, 2018 11:17 pm

ResearchMed wrote:
Mon Oct 15, 2018 11:07 pm
willthrill81 wrote:
Mon Oct 15, 2018 11:04 pm
ResearchMed wrote:
Mon Oct 15, 2018 10:59 pm
Obviously, we'll need to look more at our state's particular Medicaid/etc., laws, but this is much better than I had assumed.
(Um, obviously, we haven't really started looking at this particular wrinkle yet.)

And then there is the complication of what if the two are already in a long-term care facility, where they was a lump deposit?

NOTE: We have no serious legacy desires, other than "whatever is left" (and we have designations for that already).
Our primary concern is the care and comfort of both/each of us, for whatever time remains.

I need to figure how this interacts with a joint annuity, or maybe that's no longer wise if there is a chance one of them might need ultra-long term care? We had assumed we'd annuitize a portion.
Yes, definitely... an elder care attorney/etc., is in the cards...

Thanks.

RM
No problem. :beer

Yes, a good elder care attorney is a must for anyone doing serious LTC planning.

If you don't have a desire for a legacy, the issue is much simpler. You can just wait until one spouse needs LTC, then annuitize 'countable' assets for the benefit of the other spouse. If both spouses need LTC simultaneously, then whatever assets/income are available will fund the LTC, with Medicaid stepping in to pay any difference.

It's situations where one spouse needs LTC and there is a desire for a significant bequest that it gets more difficult.
Is the same 5-year look-back required before one can "suddenly" annuitize away all the goodies, for benefit of spouse?

:annoyed

RM
Generally speaking, no, but these things can vary from state to state.

On the whole idea of a Medicaid complaint annuity having a negative return -- I agree with Willthrill's points but also beyond that -- guess what is truly a negative rate of return? Giving all of your 401K money to a nursing home. The MCA is at least one way that you can convert what would otherwise be a countable asset into income and take advantage of Medicaid while still essentially utilizing the asset. It will surely leave you in a better place financially than the alternative.

WoW2012
Posts: 312
Joined: Sun Dec 23, 2012 11:28 am

Re: Long-term Care Insurance

Post by WoW2012 » Mon Oct 15, 2018 11:24 pm

willthrill81 wrote:
Mon Oct 15, 2018 11:00 pm
WoW2012 wrote:
Mon Oct 15, 2018 10:47 pm
Obviously you guys had never priced a "Medicaid-compliant" annuity. I have.
Obviously, you're jumping to conclusions.

Here's a quote from www.immediateannuities.com. It is for a 70 year old female.

For a $1 million premium, the payout is $6,075 monthly, which is $72,900 annually. At that rate, it will take 13.72 years to recover the nominal premium paid. According to the Social Security Administration, a 70 year old female has a life expectancy of 17.4 years. That comes out to a 2.72% interest rate. And that's a positive rate. It's not high, but that's largely a function of current bond yields.

That's not a Medicaid compliant annuity.

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