Do we have too much long term care insurance?

[Ishmael1]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

[nisiprius]

No good advice. But I would say this. There is a lot of shortsighted dismissal of LTCi based on "average" length of stay, but in fact the distribution of stays has a very ugly long tail. It's surprisingly difficult to find data on really long stays, but they are just not all that rare. I did find

Almost half of all MassHealth nursing facility residents stay less than one year; but 20% have extremely long lengths of stay. In 2008, 46% of MassHealth lengths of stay were one year or less, while 33% were between 1-4 years and 21% were more than 4 years.

And I found this chart, and I wish they had a table so I could read out and add up the longer ones:

Source



The Masshealth numbers suggest that the 4-and-up tail total 20%, and by eyeball I'm going to guess that over 7 years totals at least 5%. There's a 30% to 50% chance of eventually going into a nursing home, so that's 5% of 30% to 50%... a couple of a percent. Same the chances of rolling "2" on a pair of dice. About the same as your house burning down.

Our circle of acquaintances includes at least one eight-year stay.

You buy insurance for the things you can't afford. Typical nursing home costs are running $100,000 to $150,000/year. So for a seven-year stay that's $700,000 to $1,050,000.

So $900,000 isn't by any means grossly excessive. And that assumes the 5% increases will keep pace with nursing home costs, and my guess based on nothing much is "almost will but not quite."

You can play the numbers various ways, of course. Even if the insurance doesn't fully cover the cost it's better than nothing.

The other point is that insurance companies want you to drop your LTCi. Years ago they priced them on the assumption that lots of people would drop them, so they'd get the premiums without ever having to pay benefits. It turned out that didn't happen, and that they had underpriced the insurance, which has created major turmoil in the market.

In other words, the reason why Genworth keeps "incentivizing" you to modify the plan is that even with the premium increases it is probably a goodish deal for you.

[Rex66]

You didn’t provide any details of the policy or policies but in general if you value the insurance I’d keep doing what you are doing and paying the increase

[WoodSpinner]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

In a similar situation with Calpers LTC (by Genworth). I think the coverage amount is reasonable, especially for a couple (but a lot depends on the policy). We reduced the inflation adjustment to 0 but increase the coverage amount every few years as needed. Consulted a LTC Insurance agent who specializes in this area and reviewed our plan vs. what is available today.

Kerry Peabody, kpeabody@clarkinsurance.com

WoodSpinner

[Artful Dodger]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

We’re in a similar plan. Right now just over $900k combined with the 5% inflation rider. Five years with spousal benefit, so one person could access ten years of benefits. Spouse 70, me 69. Premiums have doubled but still reasonable in my view. My plan was to reduce to 3% inflation at some point, then 1% if/when premiums rise.

[stan1]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

Do you have the income and assets to self insure?

$900K with 5% inflation rider seems like a lot of insurance today (and probably in 20-30 years when you are more likely to need it). If you had a terminal diagnosis would you and your spouse consider hospice (palliative) care? If you were diagnosed with moderate to severe dementia would you want a urinary tract infection or pneumonia treated? While difficult to consider, one's answers to questions like that can also help determine how much LTCI is needed. In some ways the likelihood of lengthy long term care needs decreases with age. Someone paralyzed in their 60s is a very different situation than someone in their 90s who has dementia and is very frail.

[HENRYGRUGER]

Ismael1:

Too Much LTCi?

I am not sure there could be such a thing. You are both most likely 7-10 years from the typical age for LTC to occur. The cost of care will continue to increase in those 7-10 years, so, NO you do not have "too much LTCi insurance."

Back in the late 1990's, Genworth was the Cadillac of LTCi. Through a series of management changes and poor decisions by management, as well as market shifts requiring premium increases, in the early 2000s Genworth joined all the other companies and began raising premiums. They have continued to honor their policies and claims are being paid.

You said you can afford the premiums and you think they are reasonable, so you answered your own question.. Chances are should either of you need care, 100% of all your premiums paid in will be recouped in less than 12-18 months...but the policies will continue paying claims for the duration of your contract.

Wishing you great health and that you never need the care.

[huskerblue]

Bought a policy at 49 and 46. Joint life with inflation rider and no payment of premium if one of us access the policy. Started at a lesser amount ($140?) and is now at $278 per day per person, no max limit, 90 day elimination period. Home health is included. That was 15 years ago.

Can’t remember what the premium was at the start but it was cheap due to getting when young and healthy; something like $1,600 per year. Two years ago they hit us with a pretty big increase. The only change we made was a change to simple interest increase from compounding. It’s now about $3,800 per year. They really wanted us to drop the no max limit by dangling a big premium decrease but not a chance. You can’t get no max limit anymore. This is catastrophic coverage and will remain so.

I consider this “well spouse protection” to ensure the well spouse has few financial concerns while trying to care for the sick spouse. This type of insurance is not meant to pay the full rate on full nursing home but will pay a majority. It gives us great peace of mind, especially the DW. I intend to never use it and I am more than okay with it that proves true.

[Artful Dodger]

Do you have the income and assets to self insure?

$900K with 5% inflation rider seems like a lot of insurance today (and probably in 20-30 years when you are more likely to need it). If you had a terminal diagnosis would you and your spouse consider hospice (palliative) care? If you were diagnosed with moderate to severe dementia would you want a urinary tract infection or pneumonia treated? While difficult to consider, one's answers to questions like that can also help determine how much LTCI is needed. In some ways the likelihood of lengthy long term care needs decreases with age. Someone paralyzed in their 60s is a very different situation than someone in their 90s who has dementia and is very frail.

Is that even legal? Could a spouse or children intercede with a health care facility to deny routine care to the husband/wife/father?

[TN_Boy]

Do you have the income and assets to self insure?

$900K with 5% inflation rider seems like a lot of insurance today (and probably in 20-30 years when you are more likely to need it). If you had a terminal diagnosis would you and your spouse consider hospice (palliative) care? If you were diagnosed with moderate to severe dementia would you want a urinary tract infection or pneumonia treated? While difficult to consider, one's answers to questions like that can also help determine how much LTCI is needed. In some ways the likelihood of lengthy long term care needs decreases with age. Someone paralyzed in their 60s is a very different situation than someone in their 90s who has dementia and is very frail.

Is that even legal? Could a spouse or children intercede with a health care facility to deny routine care to the husband/wife/father?

The short answer is yes, at least in my state. You can specify that even what you call "routine care" can be withheld/not given.

A patient or a POA for someone with dementia could specify that "non-treatment". And, that may be a very very good thing to ask for. Look up MOST forms.

Consider a 75 yo with moderate to severe dementia and low quality of life (a lot of dementia patients are pretty unhappy ...). That person gets pneumonia. Do you want that treated, or do you perhaps want nature to take its course? It's a difficult decision. For myself, were I that 75 y/o I'd be happy if they just keep me comfortable and didn't treat the infection. After you've seen/handled this sorts of situations you understand why such decisions might be made.

Yes, it is a step beyond not putting a feeding tube into a comatose patient. You are explicitly saying "we could cure this, but we are not going to."

[texasdiver]

You buy insurance for the things you can't afford. Typical nursing home costs are running $100,000 to $150,000/year. So for a seven-year stay that's $700,000 to $1,050,000.

While those costs are sobering at first glance. The fact of the matter is that nursing homes are essentially all-expenses paid living situations. If you are in a nursing home then you are not paying

rent/mortgage
home upkeep, repairs, landscaping etc.
utilities
groceries
property taxes
transportation expenses (car)
etc.

So the relevant question is what is the marginal cost INCREASE to move someone from independent living into a nursing home. It isn't going to be $100,000 per year. It will be $100,000 per year minus the current cost of living for that person.

Of course for couples the cost is going to be more burdensome if one spouse is institutionalized in a nursing home and the other is maintaining their previous independent life. Because then they are paying double. But if we are talking about the cost of nursing home for say, someone's elderly widowed mother then the cost is just the marginal cost increase from independent living to the nursing home.

[stan1]

Do you have the income and assets to self insure?

$900K with 5% inflation rider seems like a lot of insurance today (and probably in 20-30 years when you are more likely to need it). If you had a terminal diagnosis would you and your spouse consider hospice (palliative) care? If you were diagnosed with moderate to severe dementia would you want a urinary tract infection or pneumonia treated? While difficult to consider, one's answers to questions like that can also help determine how much LTCI is needed. In some ways the likelihood of lengthy long term care needs decreases with age. Someone paralyzed in their 60s is a very different situation than someone in their 90s who has dementia and is very frail.

Is that even legal? Could a spouse or children intercede with a health care facility to deny routine care to the husband/wife/father?

Is it legal? Of course. There is no law requiring a patient accept medical care. People get to make choices, or give authority to someone else to make decisions for them if necessary. Competent patients decline care all the time. These are the choices families make all the time who are faced with end of life care decisions. This is exactly why you need a competent and available medical power of attorney to carry out your wishes expressed in an advanced health care directive, POLST, and DNR along with a physician and hospital who won't fight your personal beliefs. Not everyone wishes to extend life indefinitely at any cost or consequence. It's a very personal choice.

[nisiprius]

...So the relevant question is what is the marginal cost INCREASE to move someone from independent living into a nursing home. It isn't going to be $100,000 per year. It will be $100,000 per year minus the current cost of living for that person.

Of course for couples the cost is going to be more burdensome if one spouse is institutionalized in a nursing home and the other is maintaining their previous independent life. Because then they are paying double. But if we are talking about the cost of nursing home for say, someone's elderly widowed mother then the cost is just the marginal cost increase from independent living to the nursing home.

That's a good point. I tend to miss it because I'm currently part of a couple.

[bd7]

There is a lot of shortsighted dismissal of LTCi based on "average" length of stay, but in fact the distribution of stays has a very ugly long tail. It's surprisingly difficult to find data on really long stays, but they are just not all that rare.

My father recently passed away after spending 7 years in a memory care nursing home situation. LTC insurance will give a significant number of couples the possibility of a year or two of skilled nursing care without wiping out the other spouse or the estate, but not too many will have insurance that will go 7 years. In my parents case, there will be no estate and my mother will get by, the long term care was paid by Medicaid. So in the rare case that someone has that much LTC insurance, it is worth hanging on to IMO, as long as it is affordable. I have ~450k in Genworth coverage and I'm getting a 54% premium increase but I still think it is crazy cheap considering what they are insuring.

[JayB]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

A few months back, spouse and I gave up on a Genworth shared care policy similar to yours, with 5% compound inflation benefit, that covered 4 years of shared benefits with a $700K+ pool. We had the policy for 14 years, but back-to-back 30% increases on top of a 20% increase and other increases drove our decision to abandon the policy (actually, it was converted to a fixed pool $ amount representing premiums paid to date, with no additional premiums). We researched the settlement terms in the Haney vs. Genworth lawsuit and determined that even the most generous settlement would not alter our decision.

Then I did some detailed analysis with an Excel spreadsheet and determined that the premiums going forward + the opportunity cost of those payments (conservatively, about 3%/yr.) would more than equal the total benefit pool by our mid-80's or beyond. So we concluded that the Genworth policy was acting as a pre-paid policy, not as an insurance policy to cover low probability, high cost events. We are now comfortable self-insuring for LTC and we budget for 2 years each of custodial nursing home care for spouse and myself at the end of our financial plan. And I modified my Excel planning worksheet to estimate how many additional years of nursing home care could be supported by our assets at end of plan; IMHO that's a key number to pay attention to in deciding whether or not to walk away from a LTC policy.

[Ishmael1]

Thanks all for very insightful comments. I think we'll stay the course. At least one first hand experience (windowed parent)... less than one year in assisted living followed by plus ten years in skilled nursing, several on Medicaid, after burning through a 750K estate. We can review again when we're older, say 80 and 70 yoa. No kids as mentioned but would like to spend our money in retirement and give to charity, friends and family, GW, vs the nursing home industry.

[JP2015]

I know I'm kind of late to this thread but thought I'd post just in case it's helpful.

You may want to check out Genworth's Cost of Care Survey (which shows you the average cost of long-term care by location).

Comparing your existing daily benefit amount with the average cost of care near your place of residence may be useful when deciding whether you need more coverage.

https://www.genworth.com/aging-and-you/ ... st-of-care is a link to the Cost of Care Survey.

[stlrick]

Just remember that what you need from LTC insurance is not the full expenses of the covered care, only the marginal increase in costs from your ongoing retirement income. If you already have a long-term SWR, or income from social security, pensions, and/or SPIA, those will continue when you are using your LTC insurance.

[Hot Sauce]

I know I'm kind of late to this thread but thought I'd post just in case it's helpful.

You may want to check out Genworth's Cost of Care Survey (which shows you the average cost of long-term care by location).

Comparing your existing daily benefit amount with the average cost of care near your place of residence may be useful when deciding whether you need more coverage.

https://www.genworth.com/aging-and-you/ ... st-of-care is a link to the Cost of Care Survey.

I checked out the link. The opening sentence was a bit of a head-scratcher: “The worlds population is aging at a faster rate than ever before…”

I guess time is speeding up or something

[BruDude]

That's a massive LTC benefit depending on the max monthly coverage but unless you are looking to cover 100% of your costs, I'd definitely consider modifying your policy. Just dropping the inflation protection from 5% to 3% can have a pretty big premium reduction.

[Pdxcess]

Some questions for OP:
1. Is 900k the lifetime max for each of you or both combined?
2. What is the current annual maximum benefit per person? (You may have to contact the insurance company to get this if they don’t report the inflation- adjusted benefit to you annually)
3. What is your current annual premium per person?

[dcabler]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

One way to look at it was what we did. While we were still working our rates increased, but so did our net worth. Meaning we had the ability to cover more of these expenses ourselves. So we used that thought to modify some aspect of our coverage, but judiciously. In our case, there is a long history of alzheimers in my wife's family, so for the most part we left her coverage alone, except to increase the exclusion period (which we did for both of us). We made other changes to my plan. With our provider (NYL) rate increases happened a couple of times but the last time it happened, NYL added a "no rate increase" rider to our plan - and it happened the year before inflation showed up again, fortunately.

Cheers.

[dcabler]

No good advice. But I would say this. There is a lot of shortsighted dismissal of LTCi based on "average" length of stay, but in fact the distribution of stays has a very ugly long tail. It's surprisingly difficult to find data on really long stays, but they are just not all that rare. I did find

Almost half of all MassHealth nursing facility residents stay less than one year; but 20% have extremely long lengths of stay. In 2008, 46% of MassHealth lengths of stay were one year or less, while 33% were between 1-4 years and 21% were more than 4 years.

And I found this chart, and I wish they had a table so I could read out and add up the longer ones:

Source



The Masshealth numbers suggest that the 4-and-up tail total 20%, and by eyeball I'm going to guess that over 7 years totals at least 5%. There's a 30% to 50% chance of eventually going into a nursing home, so that's 5% of 30% to 50%... a couple of a percent. Same the chances of rolling "2" on a pair of dice. About the same as your house burning down.

Our circle of acquaintances includes at least one eight-year stay.

You buy insurance for the things you can't afford. Typical nursing home costs are running $100,000 to $150,000/year. So for a seven-year stay that's $700,000 to $1,050,000.

So $900,000 isn't by any means grossly excessive. And that assumes the 5% increases will keep pace with nursing home costs, and my guess based on nothing much is "almost will but not quite."

You can play the numbers various ways, of course. Even if the insurance doesn't fully cover the cost it's better than nothing.

The other point is that insurance companies want you to drop your LTCi. Years ago they priced them on the assumption that lots of people would drop them, so they'd get the premiums without ever having to pay benefits. It turned out that didn't happen, and that they had underpriced the insurance, which has created major turmoil in the market.

In other words, the reason why Genworth keeps "incentivizing" you to modify the plan is that even with the premium increases it is probably a goodish deal for you.

Agree - and anecdotally, my DW's Mom was in nursing care for 8 years after her Alzheimers diagnosis. And her care started about 2 years after her husband dropped their LTCi - you can probably guess what the effect of that decision was, financially.

Cheers.

[kavm]

One of the interesting things about the LTCi threads is the variance in the cost projections. And, one must remember that LTC costs are rising relatively fast post-Covid. And, those in the early years need to think about the availability of LTC care workers and the cost escalations that might take place in 20+ years. Just as a case in point, here is an article from today’s WSJ -

https://www.wsj.com/personal-finance/ca ... yURL_share

It relates to cost of caring at home. I realize that home care isn’t necessarily what some of the responses are responding to but it is one of the options, perhaps even the preferred option. And, the $240K / year number (in fact, round the clock care projection in the article is $290K/year) is just a tad different from the $100K / year minus the current living cost projection further up the thread. I definitely find that the cost projections tend to be low when coming from those who do not see LTCi as a worthwhile instrument.

[Sandtrap]

I'm not sure who's the best person to discuss this with or how best to determine if we have too much LTC? I'm 70, spouse is 60, no kids, both in good health. We have over 900K in LTC with 5% inflation benefit. Premiums keep going up, up, up from the original, basically now annually. We can afford the premiums but the insurer (Genworth) keeps asking/incentivizing us to modify the plan, cash out, etc., including as part of a recent class action law suit against them. Right now I'm letting it ride, which seems wisest, but would value any feedback. Thanks.

to op:
Not too many years ago, the costs for full time in home care for DW's mother ran from 15-20k per month depending on needs. Fortunately, she had a 450k portfolio as well as other income streams. But, over several years, everything depleted, and more rapidly as medical and care needs rose.
The costs can really "add up" and get overwhelming. If it were for both you and your spouse, then the costs would be staggering.
While in good health now, it's good that you are being prepared.
Know that the 5% LTC "inflation benefit" might not keep up with rising costs, etc. And, also as premiums rise, there's a point where it might be more within "your budget and needs" to self insure "if you have enough assets (wealth?) to do that".

So, not knowing your full financial data on your limited info provided, it might be a good idea to balance your LTC coverage and premiums with other assets you have available. IE: portfolio, income streams (ss/pension, home equity, etc).

Just some things to ponder on that might be helpful for you.
j