Long Term Care Insurance Data

[ifish100]

I have been researching long term care insurance, on the web, youtube, and some of the company sites, along with Bogleheads. I am considering self-insuring after reading through most of the material. My self-insurance idea is to set aside first a lump sum, then augment that with monthly payments essentially equivalent to the monthly premium I would pay an insurance company, such that at age 70 I would have the inflated local nursing home care paid for a total of 60 months (2.5 years each for my wife and I). I am 60 now, wife 59. The lump sum and monthly payments would fuel a Vanguard Tax Managed Balanced Fund (50% stock/50% Muni Bond), CAGR=5.85%. I would jockey the lump sum and monthly payments to get to that 2.5 years each at age 70. I have a spreadsheet model of that.

One of the biggest pieces of data going into this is the probabilities. Most of what I have found are the data provided by the insurance companies:
1) 70% of all people over 65 will eventually need long term care. Note this would mean "some type of LT care" like it could be an aid coming to the house not necessarily in a nursing home. The scary monthly cost of course.
2) Most nursing home stays are < 90d
3) Most policies have an exclusion time of 90d. With the confusing "service days" or "calendar days", and qualification of 2 ADL activated. You have other people deciding if you will collect and oh... if you cannot collect you have to pay the cost anyway until the exclusion is over. Which seems like you need a pot of money anyway to fund these sporadic unpredictable episodes. I am not sure if the 90d exclusion "resets" on every episode or not. Personal experience with both sets of parents that is what actually mostly happens, a series of shorter visits, followed by perhaps a 3 month final visit at death.
4) One piece of stated information on probabilities on nursing home care durations:
22% of men, 36% of women > 1 year stay
8% of men, 15% of women > 3 year stay... I also found it stated as 1 in 20 chance of > 2 yr.
2% of men, 7% of women > 5 year stay
Note I think these numbers are people that actually have any nursing home stay at all which is 40% of the population. So I am unsure for example the > 3 year stay, if one multiplies 0.4*0.08= 3.2% chance a man in the general population would have a stay of > 3years?

Question: Does anyone that has researched this heavily have a source that talks about the real numbers of...
- General population, men and women.
- What is the probability of nursing home stays > 90 d, > 1 year, > 2 years, > 3 years, >4 years?
- Also it would be interesting if someone had insurance company data of... for a couples policy bought at age 60, how many people bought these LTC policies, how many people actually collected any money at all ever, how many collected for 12 months, 24 months, 36 months, etc.... insurance companies would not state that .

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

[smitcat]

I have been researching long term care insurance, on the web, youtube, and some of the company sites, along with Bogleheads. I am considering self-insuring after reading through most of the material. My self-insurance idea is to set aside first a lump sum, then augment that with monthly payments essentially equivalent to the monthly premium I would pay an insurance company, such that at age 70 I would have the inflated local nursing home care paid for a total of 60 months (2.5 years each for my wife and I). I am 60 now, wife 59. The lump sum and monthly payments would fuel a Vanguard Tax Managed Balanced Fund (50% stock/50% Muni Bond), CAGR=5.85%. I would jockey the lump sum and monthly payments to get to that 2.5 years each at age 70. I have a spreadsheet model of that.

One of the biggest pieces of data going into this is the probabilities. Most of what I have found are the data provided by the insurance companies:
1) 70% of all people over 65 will eventually need long term care. Note this would mean "some type of LT care" like it could be an aid coming to the house not necessarily in a nursing home. The scary monthly cost of course.
2) Most nursing home stays are < 90d
3) Most policies have an exclusion time of 90d. With the confusing "service days" or "calendar days", and qualification of 2 ADL activated. You have other people deciding if you will collect and oh... if you cannot collect you have to pay the cost anyway until the exclusion is over. Which seems like you need a pot of money anyway to fund these sporadic unpredictable episodes. I am not sure if the 90d exclusion "resets" on every episode or not. Personal experience with both sets of parents that is what actually mostly happens, a series of shorter visits, followed by perhaps a 3 month final visit at death.
4) One piece of stated information on probabilities on nursing home care durations:
22% of men, 36% of women > 1 year stay
8% of men, 15% of women > 3 year stay... I also found it stated as 1 in 20 chance of > 2 yr.
2% of men, 7% of women > 5 year stay
Note I think these numbers are people that actually have any nursing home stay at all which is 40% of the population. So I am unsure for example the > 3 year stay, if one multiplies 0.4*0.08= 3.2% chance a man in the general population would have a stay of > 3years?

Question: Does anyone that has researched this heavily have a source that talks about the real numbers of...
- General population, men and women.
- What is the probability of nursing home stays > 90 d, > 1 year, > 2 years, > 3 years, >4 years?
- Also it would be interesting if someone had insurance company data of... for a couples policy bought at age 60, how many people bought these LTC policies, how many people actually collected any money at all ever, how many collected for 12 months, 24 months, 36 months, etc.... insurance companies would not state that .

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

Are you also considering long term assistance at home that would utilize LTCi?

I do not know any source for the exact questions you ask , but some of the data you seek will be here...
https://www.cdc.gov/nchs/data/series/sr ... 43-508.pdf

[JoeRetire]

If you play probability games, you'll never purchase insurance.

Insurance is typically used to cover relatively improbable, but financially significant events - transferring the risk from you to the insurer.

[fourwheelcycle]

Your plan sounds great to me. You seem confident you can fund the plan. You do not mention your other savings, but if you will not need this fund to live on during your retirement I would say you are good to go. If you don't need the fund it will always be there to represent a fairly conservative 50/50 cushion within your overall portfolio.

You have researched the numbers sufficiently to convince yourself you face some possibility of using your LTC bucket at some point for you and/or your wife. The biggest variable is not the national average numbers but family experience for you and your wife. To give an anecdotal example, for my wife and I, of our four parents three lived or have lived to ages 97 or 98 and one died at 85. Among all four of them, they (have) had the equivalent of about five years of LTC expense. My wife and I have signed up for a CCRC that requires a non-refundable entrance fee equivalent to about three years of LTC expense, with zero increase in our monthly fee (except for regular annual fee increases!) whether we live in our original apartment, the memory care unit, the assisted living unit, or the LTC/skilled care unit.

My financial plan, similar to yours, is to self-insure by paying the CCRC's non-refundable fee. If my wife and I end up needing more than three years of LTC between us we will come out ahead.

[JoeRetire]

My self-insurance idea is to set aside first a lump sum, then augment that with monthly payments essentially equivalent to the monthly premium I would pay an insurance company, such that at age 70 I would have the inflated local nursing home care paid for a total of 60 months (2.5 years each for my wife and I). I am 60 now, wife 59.

What does your plan call for if you should need the benefits before you reach 70? (Say, tomorrow, for example)

[gmaynardkrebs]

A lot of the plans now limit the coverage to 5 years. Yeah, very few stays are that long, but people can have strokes and the like at any age, and what if god forbid it happens to you or your wife. If you can find a plan that has no lifetime limit, I would buy it, but not otherwise. Otherwise, you are paying very high premiums for let's say $500-$600K of insurance (in real terms, assuming inflation adjustment), and it's just not worth it. I'd sooner set aside $500K in 30 year TIPS. BTW, I think 50/50 stocks looks great on paper, but what if stocks crash or do poorly? Another alternative is some new life insurance products that allow you to convert it to pay LTC expenses.

[Beehave]

I've done what you are planning, starting when I was about your age.

We looked at the then current LTC policies and just did not think they provided price or care guarantees that were right for us. So we commenced self-insuring in the way you describe. We contributed (stayed the course) through the big 2008 downturn which helped a lot in terms of our LTC "nest egg."
Medically, it looks very possible that one of us may need LTC in the future. I do not have an exact analysis, but my guess is that based on LTC insurance premiums not paid, plus gains from investments made in place of obtaining LTC insurance, in the case that LTC is needed, we will pretty come out equal to the LTC benefit. And of course, if we do not need LTC, we come out ahead.

But this is luck of the draw - - we benefited from the very favorable sequence of returns we experienced and we have not needed the LTC quickly which gave us time for our plan implementation to work. Had we needed the funds right away to pay for LTC (before the nest egg had a chance to grow), or had the market return sequence been different the plan might have backfired.

Two other thoughts.

(1) The future status is still uncertain. The market could tank significantly which would do some damage to our plan. On the other hand, the insurance company we would have selected could go under or raise rates. So whether our strategy was good is in some sense still up in the air.

(2) My thinking has changed over the years since RMDs have become a reality for me. I'd rather pay for LTC out of IRA or 401k funds than from our "LTC nest egg" fund because LTC care will probably be tax deductible and it would in some sense be preferable to draw down the IRA/401k-type funds as opposed to paying out of the so-called "LTC nest egg" fund. So it could end up that the IRA/401K retirement fund is the real LTC fund and that the self-infured/self-funded "LTC nest egg" becomes the retirement income fund. Somehow, the world is strange and when you plan, never quite what you expected.

Hope this is helpful. best wishes.

[bsteiner]

...
I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you want the insurance, you might consider whatever policy comes closest to this -- the longest available coverage period with the longest available waiting period.

[d0gerz]

Question: Does anyone that has researched this heavily have a source that talks about the real numbers of...
- General population, men and women.
- What is the probability of nursing home stays > 90 d, > 1 year, > 2 years, > 3 years, >4 years?
- Also it would be interesting if someone had insurance company data of... for a couples policy bought at age 60, how many people bought these LTC policies, how many people actually collected any money at all ever, how many collected for 12 months, 24 months, 36 months, etc.... insurance companies would not state that .

Have a look at the Society of Actuaries report published in 2015. It studied data from 2000-11 from 22 different LTC insurers, covering roughly 80% of the total insured population.

https://www.soa.org/resources/experienc ... gregrated/

They provide three different aggregated spreadsheet models.

Claim Incidence - this is the probability of someone with LTC insurance going on claim i.e. satisfying the ADL triggers and start getting paid
Claim Termination - the probability that a claim ends, whether through death, recovery, lapse, etc.
Claim Utilization - once on claim, how much of the benefit do policyholders use

These should help you calculate the probabilities you want. E.g. probability of nursing home stays of varying duration would be covered by the claim termination model. Generally, termination probabilities start high for the first few months, then decrease and stabilize, and then start to go up again further down the road.

Each model above can be used in a couple of different ways. I would encourage you to read the report to gain familiarity.

[gmaynardkrebs]

...
I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you want the insurance, you might consider whatever policy comes closest to this -- the longest available coverage period with the longest available waiting period.

I agree that this is ideal for families with assets, but unfortunately, and after considerable time spent looking, I've concluded that this doesn't exist. I didn't find any policy with longer than 90 days, and even the Federal LTC has eliminated the unlimited time option. An almost complete failure of the market.

[Wolfpacker]

To Original Poster:
My wife and I are about your age and your self-funding plan sounds good. Current out-of-pocket assisted living care in Northern Virginia where we live is about $100,000 per year with cost increases averaging about 3% per year.
In your model, how much did you assume for current annual care? And given that, what are your initial lump sum and current monthly additions to achieve your age 70 objective?
Thank you.

[JoeRetire]

I didn't find any policy with longer than 90 days

You tried, but were unable to find any long term care insurance policy with an elimination period longer than 90 days? Is that what you are saying?

[WoW2012]

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

There are policies like this. You pay most of the cost for the first 3 years and the company picks up most (possibly all) of the cost beginning around year 4. But no one will buy this policy because everyone thinks the premium should be very low. It's not low because the risk of needing long-term care for a very long time is pretty darn high.

[WoW2012]

I have been researching long term care insurance, on the web, youtube, and some of the company sites, along with Bogleheads. I am considering self-insuring after reading through most of the material. My self-insurance idea is to set aside first a lump sum, then augment that with monthly payments essentially equivalent to the monthly premium I would pay an insurance company, such that at age 70 I would have the inflated local nursing home care paid for a total of 60 months (2.5 years each for my wife and I). I am 60 now, wife 59. The lump sum and monthly payments would fuel a Vanguard Tax Managed Balanced Fund (50% stock/50% Muni Bond), CAGR=5.85%. I would jockey the lump sum and monthly payments to get to that 2.5 years each at age 70. I have a spreadsheet model of that.

This isn't college funding. When saving for your kids college you know all the important data:
1) When they'll need the funds.
2) How long they'll need the funds for (4 years).
3) Approximate costs.

With long-term care planning you don't know any of the key data.
You have no idea when you'll need care.
You have no idea how long you'll need care for.

Therefore, any calculations are worthless.

What if you need care 3 years from now?
What if your wife needs care for 10 years?

That's why we buy insurance. We all pool our risks together and that decreases the risks for everyone in the pool.

[Watty]

4) One piece of stated information on probabilities on nursing home care durations:
22% of men, 36% of women > 1 year stay
8% of men, 15% of women > 3 year stay... I also found it stated as 1 in 20 chance of > 2 yr.
2% of men, 7% of women > 5 year stay

It is easy to go down the "rabbit hole" when crunching numbers. I have not done nearly as much as you but a couple of sort of random things to consider since you seem to like digging into it.

1) You have to watch the statistics carefully about what level of care they are talking about when they say "long term care". In my area "assisted living" costs about half of what a "nursing home" costs. Compared to a lot of posters here I am pretty middle class but since I live in an area where LTC cost is relatively moderate our costs could actually go down if only one of us is surviving and the lower level of "assisted living" is needed.

2) For a couple a critical statistic is what percentage of them will have both people surviving when LTC is needed. If only one person is surviving when LTC is needed then most of their other costs will stop so you only need to be concerned about the gap between their normal retirement budget and and the LTC costs. I never found a real firm number for this but as I recall the best I could find when I looked into this was that less than a third of people in LTC had a living spouse, but I could be mistaken.

3) If there is only one spouse surviving and you have a paid off house then the house can also be sold to help pay the gap between LTC costs and your normal budget. My mom survived my dad and she used to say that her relatively modest paid off house was her LTC policy. She gave firm instruction(as only a mother can ) and made sure that my siblings and I had the paperwork to sell her house if she went into LTC, and she had the best facility in the area picked out and instructed us to put her in the best room there. She never needed LTC but between her Social Security, normal budget, and the home equity her numbers would have worked without dipping into her other funds for probably ten years.

4) You really need to look at the LTC costs in your area since it varies a lot. This website seems to have good information about local costs.

https://www.genworth.com/aging-and-you/ ... -care.html

[WoW2012]

My financial plan, similar to yours, is to self-insure by paying the CCRC's non-refundable fee. If my wife and I end up needing more than three years of LTC between us we will come out ahead.

Cumulative long-term care insurance premiums paid by a policyholder usually end up equaling about 6 to 12 months of long-term care expenses--nowhere near 3 years of expenses.

[WoW2012]

A lot of the plans now limit the coverage to 5 years. Yeah, very few stays are that long, but people can have strokes and the like at any age, and what if god forbid it happens to you or your wife. If you can find a plan that has no lifetime limit, I would buy it, but not otherwise. Otherwise, you are paying very high premiums for let's say $500-$600K of insurance (in real terms, assuming inflation adjustment), and it's just not worth it. I'd sooner set aside $500K in 30 year TIPS. BTW, I think 50/50 stocks looks great on paper, but what if stocks crash or do poorly? Another alternative is some new life insurance products that allow you to convert it to pay LTC expenses.

There are a few policies that have no lifetime limit.
There are many policies that allow couples to share 15 years of benefits.
If you buy a long-term care partnership policy it effectively doubles the value of the policy's benefits. For every dollar the policy pays in benefits you can protect one dollar from Medicaid, should you choose to apply for Medicaid-funded long-term care.

[ThereAreNoGurus]

Question: Does anyone that has researched this heavily have a source that talks about the real numbers of...
- General population, men and women.
- What is the probability of nursing home stays > 90 d, > 1 year, > 2 years, > 3 years, >4 years?

47%: Estimated percentage of men 65 and older who will need long-term care during their lifetimes.

58%: Estimated percentage of women 65 and older who will need long-term care during their lifetimes.

Lots more stats here... hope this helps a bit: https://www.morningstar.com/articles/95 ... 19-edition

[WoW2012]

Claim Incidence - this is the probability of someone with LTC insurance going on claim i.e. satisfying the ADL triggers and start getting paid
Claim Termination - the probability that a claim ends, whether through death, recovery, lapse, etc.
Claim Utilization - once on claim, how much of the benefit do policyholders use

These numbers are significant IF you're an insurance company.
For individuals the odds of needing long term care are 100% or 0%.

[OT comments removed by admin LadyGeek]

[WoW2012]

...
I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you want the insurance, you might consider whatever policy comes closest to this -- the longest available coverage period with the longest available waiting period.

I agree that this is ideal for families with assets, but unfortunately, and after considerable time spent looking, I've concluded that this doesn't exist. I didn't find any policy with longer than 90 days, and even the Federal LTC has eliminated the unlimited time option. An almost complete failure of the market.

You need a better insurance agent.
Look for a long-term care insurance specialist, NOT an investment advisor or life insurance agent.

[WoW2012]

3) If there is only one spouse surviving and you have a paid off house then the house can also be sold to help pay the gap between LTC costs and your normal budget. My mom survived my dad and she used to say that her relatively modest paid off house was her LTC policy. She gave firm instruction(as only a mother can ) and made sure that my siblings and I had the paperwork to sell her house if she went into LTC, and she had the best facility in the area picked out and instructed us to put her in the best room there. She never needed LTC but between her Social Security, normal budget, and the home equity her numbers would have worked without dipping into her other funds for probably ten years.

Great points.
Long-term care insurance is most important if/when the first spouse needs care.
There are policies like that.

[gmaynardkrebs]

...
I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you want the insurance, you might consider whatever policy comes closest to this -- the longest available coverage period with the longest available waiting period.

I agree that this is ideal for families with assets, but unfortunately, and after considerable time spent looking, I've concluded that this doesn't exist. I didn't find any policy with longer than 90 days, and even the Federal LTC has eliminated the unlimited time option. An almost complete failure of the market.

You need a better insurance agent.
Look for a long-term care insurance specialist, NOT an investment advisor or life insurance agent.

Well, I actually don't have a life insurance agent, which could be the problem. I used online sources, but nothing showed up with longer than 90 days. Will have to look again. Also, I never knew about the partnership policies, so thanks.

If you buy a long-term care partnership policy it effectively doubles the value of the policy's benefits. For every dollar the policy pays in benefits you can protect one dollar from Medicaid, should you choose to apply for Medicaid-funded long-term care.

What do you mean by "protect from Medicaid"?

[WoW2012]

...
I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you want the insurance, you might consider whatever policy comes closest to this -- the longest available coverage period with the longest available waiting period.

I agree that this is ideal for families with assets, but unfortunately, and after considerable time spent looking, I've concluded that this doesn't exist. I didn't find any policy with longer than 90 days, and even the Federal LTC has eliminated the unlimited time option. An almost complete failure of the market.

You need a better insurance agent.
Look for a long-term care insurance specialist, NOT an investment advisor or life insurance agent.

Well, I actually don't have a life insurance agent, which could be the problem. I used online sources, but nothing showed up with longer than 90 days. Will have to look again. Also, I never knew about the partnership policies, so thanks.

If you buy a long-term care partnership policy it effectively doubles the value of the policy's benefits. For every dollar the policy pays in benefits you can protect one dollar from Medicaid, should you choose to apply for Medicaid-funded long-term care.

What do you mean by "protect from Medicaid"?

Normally, to qualify for Medicaid-funded long-term care one has to spend his/her countable assets down to $3,000. If, however, someone owns a long-term care partnership policy, the rules change in their favor. Instead of being able to keep only $3,000 of countable assets, they can keep an amount of assets equal to whatever the policy paid out in benefits. If, for example, the policy paid out $1,000,000 (and there are policies like that) you could apply for Medicaid to pay for your care and you could keep $1,003,000 (one million and three thousand dollars) in savings and still be able to qualify for Medicaid.

You could protect an extra $1,000,000 of countable assets from Medicaid's spend-down requirements. Also, after you passed away, that $1,000,000 would be protected from Medicaid's "estate recovery" efforts and it would go to your heirs instead of reimbursing Medicaid for your care.

[TN_Boy]

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

There are policies like this. You pay most of the cost for the first 3 years and the company picks up most (possibly all) of the cost beginning around year 4. But no one will buy this policy because everyone thinks the premium should be very low. It's not low because the risk of needing long-term care for a very long time is pretty darn high.

I'm sorry, please define precisely what "the risk of needing long-term care for a very long time is pretty darn high" means.

1) What do you call a long time
2) What exactly is "pretty darn high"

Provide stats and a reputable link. From my prior research, I cannot see how you can make this claim, unless you define "pretty darn high" in an unusual way.

[TN_Boy]

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

There are policies like this. You pay most of the cost for the first 3 years and the company picks up most (possibly all) of the cost beginning around year 4. But no one will buy this policy because everyone thinks the premium should be very low. It's not low because the risk of needing long-term care for a very long time is pretty darn high.

This is what the morningstar article linked in another post said:

48%: Percentage of people receiving long-term care who need care for less than one year.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.

21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.

13%: Percentage of people who will need long-term care for longer than five years.

[WoW2012]

This is what the morningstar article linked in another post said:

48%: Percentage of people receiving long-term care who need care for less than one year.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.

21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.

13%: Percentage of people who will need long-term care for longer than five years.

48%: Percentage of people receiving long-term care who need care for less than one year.
THE INSURANCE COMPANY WINS.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.
21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.
13%: Percentage of people who will need long-term care for longer than five years.
THE POLICYHOLDER WINS.

[TN_Boy]

This is what the morningstar article linked in another post said:

48%: Percentage of people receiving long-term care who need care for less than one year.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.

21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.

13%: Percentage of people who will need long-term care for longer than five years.

48%: Percentage of people receiving long-term care who need care for less than one year.
THE INSURANCE COMPANY WINS.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.
21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.
13%: Percentage of people who will need long-term care for longer than five years.
THE POLICYHOLDER WINS.

Still would like answer to my other question.

[Gnirk]

My mom and her aunts would be considered outliers, statistically. LTC required: Aunt E-20 years, Aunt C-13 years, Mom-8 years.

[WoW2012]

I'm sorry, please define precisely what "the risk of needing long-term care for a very long time is pretty darn high" means.

1) What do you call a long time
2) What exactly is "pretty darn high"

Provide stats and a reputable link. From my prior research, I cannot see how you can make this claim, unless you define "pretty darn high" in an unusual way.

1) What do you call a long time
5+ YEARS

2) What exactly is "pretty darn high"
20%+

Using the statistics you provided from Morningstar, for a married couple, the odds of one spouse needing care for 5+ years is about 25%. (Someone who's better at probability than I am can calculate the exact percentage.)

[willthrill81]

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you play probability games, you'll never purchase insurance.

Insurance is typically used to cover relatively improbable, but financially significant events - transferring the risk from you to the insurer.

The problem with LTC and non-high deductible health insurance plans is that most of the premium being paid isn't covering 'tail risk' situations; it's paying for 'typical' costs of care, the first three years worth. A LTC policy with a 3-5 year elimination period would be far less costly than existing premiums and cover the very costly but unlikely LTC scenarios. But TMK, no state will allow a LTC policy to be sold with such a long elimination period, probably because the average person can't self-insure the first 3-5 years of LTC.

[WoW2012]

The problem with LTC and non-high deductible health insurance plans is that most of the premium being paid isn't covering 'tail risk' situations; it's paying for 'typical' costs of care, the first three years worth. A LTC policy with a 3-5 year elimination period would be far less costly than existing premiums and cover the very costly but unlikely LTC scenarios. But TMK, no state will allow a LTC policy to be sold with such a long elimination period, probably because the average person can't self-insure the first 3-5 years of LTC.

Yup.
If you never need care, the insurance company wins.
If you need care for less than 6 months, the insurance company wins again.
If you need care for 6 to 12 months, that approaches breaking even.
If you need care for over a year, you win.
(Actually, your family wins because they didn't have to bear the brunt of providing your care.)

[gmaynardkrebs]

I personally would like to have had a policy that is catastrophic. I pay the first 3 years and insure for a cheaper policy for a really long term stay, but that does not seem to be readily available.

If you play probability games, you'll never purchase insurance.

Insurance is typically used to cover relatively improbable, but financially significant events - transferring the risk from you to the insurer.

The problem with LTC and non-high deductible health insurance plans is that most of the premium being paid isn't covering 'tail risk' situations; it's paying for 'typical' costs of care, the first three years worth. A LTC policy with a 3-5 year elimination period would be far less costly than existing premiums and cover the very costly but unlikely LTC scenarios. But TMK, no state will allow a LTC policy to be sold with such a long elimination period, probably because the average person can't self-insure the first 3-5 years of LTC.

You are 100% correct, and ironically, the regulators have killed the market for both the insurers and the customers. People who have few resources rely on Medicaid; those in the middle can't afford the premiums, and those with high net worth are turned off by having to pay for coverage they could self-insure, and not the catastrophic coverage they really want.

[JoeRetire]

those in the middle can't afford the premiums.

Some of us can.

[gmaynardkrebs]

those in the middle can't afford the premiums.

Some of us can.

The quote I got from the Federal program for me and the missus was over $10K/yr for the plan we were interested in. I may still do it, but that's a lot of $$$.

[JoeRetire]

those in the middle can't afford the premiums.

Some of us can.

The quote I got from the Federal program for me and the missus was over $10K/yr for the plan we were interested in. I may still do it, but that's a lot of $$$.

Yup, that's a lot. You may be able to reduce the premiums by tweaking the benefit amounts, if you so choose.

We're paying about $5400 for our two plans. It's more than it could have been due to my wife's health. Still, we could have afforded $10k. Everyone gets to decide if they are interested or not, even when they can afford it.

[WoW2012]

those in the middle can't afford the premiums.

Some of us can.

The quote I got from the Federal program for me and the missus was over $10K/yr for the plan we were interested in. I may still do it, but that's a lot of $$$.

The average long-term care insurance premium is about $200 per month. You must be a lot older than the average buyer. It rarely makes sense for someone to buy LTCi if they are over age 69!

[gmaynardkrebs]

those in the middle can't afford the premiums.

Some of us can.

The quote I got from the Federal program for me and the missus was over $10K/yr for the plan we were interested in. I may still do it, but that's a lot of $$$.

The average long-term care insurance premium is about $200 per month. You must be a lot older than the average buyer. It rarely makes sense for someone to buy LTCi if they are over age 69!

Yes I'm 69, spouse is 65. We are in excellent health, but yeah, I should have bought earlier.

[WoW2012]

those in the middle can't afford the premiums.

Some of us can.

The quote I got from the Federal program for me and the missus was over $10K/yr for the plan we were interested in. I may still do it, but that's a lot of $$$.

The average long-term care insurance premium is about $200 per month. You must be a lot older than the average buyer. It rarely makes sense for someone to buy LTCi if they are over age 69!

Yes I'm 69, spouse is 65. We are in excellent health, but yeah, I should have bought earlier.

As a side note, the federal long-term care plan is usually a good value for single women. It's rarely a good value for couples. For healthy married couples, the federal plan is usually priced about 25% to 50% higher than buying a policy on your own. That's primarily because individual policies have marital discounts of up to 35% and preferred health discounts of up to 15%.

The federal plan does not have any marital discounts nor preferred health discounts.

[ifish100]

Thank you again.
Follow-up questions.
I read through the replies.
1) Although I have not studied the references made, some of them probably answer the original question about the percentages of the general population that go to a nursing home and have stays> 12, 24, 36 months etc.
2) I did some further research on the www.ltcfeds.com website and did estimates of the following conditions… all with 90d waiting periods, $250K/day ($7.5K per month), 3% inflation:
a) 5 year, lifetime limit= $456K, premium= $501/month
b) 3 year, lifetime limit= $274K, premium= $339/month
c) 2 year, lifetime limit= $182.5K, premium= $232/month
Northwest had a LTC expert, talking about what you are really buying with LTC is access to a pot of money. Debra Newman discusses it on Youtube.

A couple of questions for those with experience using LTC or knows someone that has… let’s say you are 60 and buy into 2b.
Question 1. At the age of 70 you have an incident that requires nursing home care for 5 months. You have 3 months or 90d you have to wait, so you have to pay out of pocket 3*7500= $22,500 (ignoring inflation). The LTC insurance could pay the other 2 months so it pays out say $15,000. Time goes on. Does this payout trigger the starting of a 3 year clock, meaning after age 73 you have nothing, or does it just reduce the pot of money by $15K leaving, $274K-15K= $259K? This is assuming the Dr. gives you the approval you are worthy because of meeting 2 ADL.

Question 2. At the age of 74 you have another incident that requires say a 6 month stay. Assuming the clock has not expired… do you have to again pay out of pocket for the first 3 months of this new incident? Or does the “deductible” of having already paid (1) 90d waiting period mean after the first incident there are no more 90 d waiting periods?

I assume that it is the pot of money being reduced in Question 1 and not the starting of the clock otherwise LTC would have some serious concerns.

There were a few posts talking about someone being in a nursing home 8 or 20 years. That would be beyond the scope of what I am trying to figure out here. It looks like most of these 2,3,5 year policies have limits of around $500K… something like 20 years is not something I am looking to do here, I am trying to figure out the much more commonplace LTC policies like 2a,2b,2c. Even 8 years at 7500/month would be > $900K, even if LTC were available I am not considering that here.

[ifish100]

A correction it should be $250/day as corrected below. (Not $250K/day).

2) I did some further research on the www.ltcfeds.com website and did estimates of the following conditions… all with 90d waiting periods, $250/day ($7.5K per month), 3% inflation:

[TN_Boy]

I'm sorry, please define precisely what "the risk of needing long-term care for a very long time is pretty darn high" means.

1) What do you call a long time
2) What exactly is "pretty darn high"

Provide stats and a reputable link. From my prior research, I cannot see how you can make this claim, unless you define "pretty darn high" in an unusual way.

1) What do you call a long time
5+ YEARS

2) What exactly is "pretty darn high"
20%+

Using the statistics you provided from Morningstar, for a married couple, the odds of one spouse needing care for 5+ years is about 25%. (Someone who's better at probability than I am can calculate the exact percentage.)

I don't think five years is a "very long time" per your comment. 10 years yes. Unfortunately, the morningstar data doesn't tell us how many need 5, how many need 6 years, etc. Do you have that data?

[TN_Boy]

This is what the morningstar article linked in another post said:

48%: Percentage of people receiving long-term care who need care for less than one year.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.

21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.

13%: Percentage of people who will need long-term care for longer than five years.

48%: Percentage of people receiving long-term care who need care for less than one year.
THE INSURANCE COMPANY WINS.

19%: Percentage of people receiving long-term care who need care for between one and 1.99 years.
21%: Percentage of people receiving long-term care who need care for between two and 4.99 years.
13%: Percentage of people who will need long-term care for longer than five years.
THE POLICYHOLDER WINS.

Actually the win for the policy holder might not be until you hit the "between 2 and 4.99 years."

You are paying premiums for 10 to 20 years (assuming policy bought at age 60).

The policy won't pay during the first X days, where 90 is a common value of X.

You have the "good fortune" that once you starting paying for LTC and deducting those costs, your taxes go down a little. I don't think it is much of a win for the policy holder (versus no policy) until you get past two years.

[RetiredCSProf]

Do the statistics take into account care provided at home by family members? This may skew the length and cost of care.

My neighbor took care of his wife for several years (early-onset, full-blown dementia) until he could no longer care for her -- she has been in assisted living for two years, at $10K per month.

My sister took care of her husband (Parkinson's Disease) at home, with occasional help, until his final months.

A relative (by marriage) has needed 24-7 care since having a stroke in her 60's. She is physically well, but with severe short-term memory loss. Her family has been able to provide for her care by moving her across the border to her vacation home in Mexico, where labor is much cheaper than in California.

My aunt moved into assisted living at age 89 when her younger son, who had been her constant caregiver, succumbed to a heart attack. Her older son had passed away from heart problems, three years earlier. My aunt declined an offer to move in with her only grandchild.

The data may not reflect the true cost of LTC because family members often take on the care-giving role.

[gmaynardkrebs]

Some of us can.

The quote I got from the Federal program for me and the missus was over $10K/yr for the plan we were interested in. I may still do it, but that's a lot of $$$.

The average long-term care insurance premium is about $200 per month. You must be a lot older than the average buyer. It rarely makes sense for someone to buy LTCi if they are over age 69!

Yes I'm 69, spouse is 65. We are in excellent health, but yeah, I should have bought earlier.

As a side note, the federal long-term care plan is usually a good value for single women. It's rarely a good value for couples. For healthy married couples, the federal plan is usually priced about 25% to 50% higher than buying a policy on your own. That's primarily because individual policies have marital discounts of up to 35% and preferred health discounts of up to 15%.

The federal plan does not have any marital discounts nor preferred health discounts.

FWIW, the Federal LTC program was revised substantially last fall. The coverage didn’t seem as good, but they added some flexibility and an option for a return of premium if I’m not mistaken.

[HereToLearn]

Thank you again.
Follow-up questions.
I read through the replies.
1) Although I have not studied the references made, some of them probably answer the original question about the percentages of the general population that go to a nursing home and have stays> 12, 24, 36 months etc.
2) I did some further research on the www.ltcfeds.com website and did estimates of the following conditions… all with 90d waiting periods, $250K/day ($7.5K per month), 3% inflation:
a) 5 year, lifetime limit= $456K, premium= $501/month
b) 3 year, lifetime limit= $274K, premium= $339/month
c) 2 year, lifetime limit= $182.5K, premium= $232/month
Northwest had a LTC expert, talking about what you are really buying with LTC is access to a pot of money. Debra Newman discusses it on Youtube.

A couple of questions for those with experience using LTC or knows someone that has… let’s say you are 60 and buy into 2b.
Question 1. At the age of 70 you have an incident that requires nursing home care for 5 months. You have 3 months or 90d you have to wait, so you have to pay out of pocket 3*7500= $22,500 (ignoring inflation). The LTC insurance could pay the other 2 months so it pays out say $15,000. Time goes on. Does this payout trigger the starting of a 3 year clock, meaning after age 73 you have nothing, or does it just reduce the pot of money by $15K leaving, $274K-15K= $259K? This is assuming the Dr. gives you the approval you are worthy because of meeting 2 ADL.

Question 2. At the age of 74 you have another incident that requires say a 6 month stay. Assuming the clock has not expired… do you have to again pay out of pocket for the first 3 months of this new incident? Or does the “deductible” of having already paid (1) 90d waiting period mean after the first incident there are no more 90 d waiting periods?

I assume that it is the pot of money being reduced in Question 1 and not the starting of the clock otherwise LTC would have some serious concerns.

There were a few posts talking about someone being in a nursing home 8 or 20 years. That would be beyond the scope of what I am trying to figure out here. It looks like most of these 2,3,5 year policies have limits of around $500K… something like 20 years is not something I am looking to do here, I am trying to figure out the much more commonplace LTC policies like 2a,2b,2c. Even 8 years at 7500/month would be > $900K, even if LTC were available I am not considering that here.

I can only respond based on how my mother's policy functioned.

Although the plan was written as a five year max, the plan would have paid out for more than five years if the $$ limit had not been exhausted. I believe the daily benefit limit was $410 by the time she died. That translated to $750K in benefits for five years. If she only used $100/day, the lifetime benefit max would only be reduced by say $36,500 (for the $100/day). The plan would have paid out for 20 years at $100/day, although $100 really doesn't buy the level of care needed. The plan had a 5% rider, so the daily benefit max bumped up each year.

I understand your question about the elimination period, but I do not know how her plan operated. Her plan had a 100 day limit, but I never investigated if it would reset if the recovered. She had excellent coverage at a reasonable premium: $2400/year as of two years ago.

My perspective from having navigated LTC for both of my parents is that it is not of as much use for the person who suffers from the regular failings of old age. One had to be unable to perform two of the ADLs, and that definition can be difficult to satisfy for someone who is not suffering from dementia or a decline in neurological function (Parkinson's, MS, etc).

Also, someone needs to document the care received during the 100 day elimination period. It is not enough to say that the insured was incapable of taking care of herself but decided to tough it out with family help. My mother's policy required documented care provided by licensed professionals in order to satisfy the elimination period. The policy had a liberalization where one visit in a week counted as seven days toward the 100 days, so a weekly home PT visit helped to defray seven of the 100 days. However, someone who is unable to complete two ADLs really cannot be on her own for three months, so care must be hired, paid for, and documented in order to qualify for benefits. I have the feeling that the documentation is much easier if one is an AL facility, so be sure to budget for the three months of care before benefits kick in, and any care needed until unable to perform two ADLs.

[d0gerz]

Question 1. At the age of 70 you have an incident that requires nursing home care for 5 months. You have 3 months or 90d you have to wait, so you have to pay out of pocket 3*7500= $22,500 (ignoring inflation). The LTC insurance could pay the other 2 months so it pays out say $15,000. Time goes on. Does this payout trigger the starting of a 3 year clock, meaning after age 73 you have nothing, or does it just reduce the pot of money by $15K leaving, $274K-15K= $259K? This is assuming the Dr. gives you the approval you are worthy because of meeting 2 ADL.

Question 2. At the age of 74 you have another incident that requires say a 6 month stay. Assuming the clock has not expired… do you have to again pay out of pocket for the first 3 months of this new incident? Or does the “deductible” of having already paid (1) 90d waiting period mean after the first incident there are no more 90 d waiting periods?

1. Reduces the pot of money.
2. Elimination period/deductible is generally per claim. So yes you would have to pay out of pocket for the first 3 months of the new incident.

Real answers can vary based on policy fine print however.

[willthrill81]

Thank you again.
Follow-up questions.
I read through the replies.
1) Although I have not studied the references made, some of them probably answer the original question about the percentages of the general population that go to a nursing home and have stays> 12, 24, 36 months etc.
2) I did some further research on the www.ltcfeds.com website and did estimates of the following conditions… all with 90d waiting periods, $250K/day ($7.5K per month), 3% inflation:
a) 5 year, lifetime limit= $456K, premium= $501/month
b) 3 year, lifetime limit= $274K, premium= $339/month
c) 2 year, lifetime limit= $182.5K, premium= $232/month

It seems that you're interested in option B. How much does $274k compare to what you have in your portfolio?

[ifish100]

Thank you d0gerz and HereToLearn. Clear answers to the pot of money question and the 90d waiting period.
I will engage the insurance agent and get into the nitty gritty, I know better what to look for. It seems like the big things are the 2 ADL assessment and how big the pot of money is that is guessed at being needed.

It sounds like the term (time) is kind of a red herring, that is confusing they even mention it. You are buying potential access to a pot of money for you and your spouse, saving some money by getting the married couple discount. The access is determined by the gatekeeper certifying you have 2 ADL shortfalls. I like what HereToLearn said, it may not be applicable to the most common normal aging cases, that would have been my guess too.

I hope the LTC insurance claims department is not as frustrating to deal with as the claims department on automotive policies. The nice friendly local sales agent, then when dealing with the claims department a very cold phone call dealing with people with bad attitudes, just worried about keeping as much of their money as possible.

It will be interesting to dig into the LTC insurance. I have a lot to learn.

Thanks everyone.

[WoW2012]

Question 1. At the age of 70 you have an incident that requires nursing home care for 5 months. You have 3 months or 90d you have to wait, so you have to pay out of pocket 3*7500= $22,500 (ignoring inflation). The LTC insurance could pay the other 2 months so it pays out say $15,000. Time goes on. Does this payout trigger the starting of a 3 year clock, meaning after age 73 you have nothing, or does it just reduce the pot of money by $15K leaving, $274K-15K= $259K? This is assuming the Dr. gives you the approval you are worthy because of meeting 2 ADL.

Question 2. At the age of 74 you have another incident that requires say a 6 month stay. Assuming the clock has not expired… do you have to again pay out of pocket for the first 3 months of this new incident? Or does the “deductible” of having already paid (1) 90d waiting period mean after the first incident there are no more 90 d waiting periods?

1. Reduces the pot of money.
FALSE 2. Elimination period/deductible is generally per claim. So yes you would have to pay out of pocket for the first 3 months of the new incident.

Real answers can vary based on policy fine print however.

That is false. A few of the older policies sold in the 90's required a new elimination period for each new incident. Nearly every policy sold over the last 20 years or so has a "once per lifetime" elimination period. That means that once you fulfill the 90 day elimination period, you never have to fulfill it again.

[WoW2012]

Thank you d0gerz and HereToLearn. Clear answers to the pot of money question and the 90d waiting period.
I will engage the insurance agent and get into the nitty gritty, I know better what to look for. It seems like the big things are the 2 ADL assessment and how big the pot of money is that is guessed at being needed.

It sounds like the term (time) is kind of a red herring, that is confusing they even mention it. You are buying potential access to a pot of money for you and your spouse, saving some money by getting the married couple discount. The access is determined by the gatekeeper certifying you have 2 ADL shortfalls. I like what HereToLearn said, it may not be applicable to the most common normal aging cases, that would have been my guess too.

I hope the LTC insurance claims department is not as frustrating to deal with as the claims department on automotive policies. The nice friendly local sales agent, then when dealing with the claims department a very cold phone call dealing with people with bad attitudes, just worried about keeping as much of their money as possible.

It will be interesting to dig into the LTC insurance. I have a lot to learn.

Thanks everyone.

If you're healthy and married you'd be much better off buying a policy on your own rather than buying the federal long-term care plan for a few reasons:

1) You would pay about 25% to 50% less for the same benefits.
2) The federal plan is not under the Rate Stability Regulation.
3) The federal plan is NOT a long-term care partnership policy.

If you buy a policy that is under the Rate Stability Regulation you are less likely to have a rate increase.
If you buy a long-term care partnership policy, you can protect your assets from Medicaid even if your policy runs out of benefits.