WSJ Long Term Care self-insuring article

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rustwood
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WSJ Long Term Care self-insuring article

Post by rustwood »

I thought this WSJ article from yesterday might be of interest to some here:

Should You Self-Insure Your Long-Term Care?

The subtitle is "Seven questions to ask yourself when considering whether to buy a policy or pay for the care out of your own pocket"

In general I agree with the points it raises but I don't understand a comment in the first question: "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring." I would think just the opposite - if you don't have any legacy concerns and you don't have any obvious choice for someone to manage your finances while you are receiving care, why wouldn't you just want to use your funds to secure your care through LTC insurance? Am I missing something?
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Re: WSJ Long Term Care self-insuring article

Post by jebmke »

Just skimming it but the way I read that paragraph is that wealthy, no legacy couples are good candidates for not buying LTC policies. Did I misinterpret the article?
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Re: WSJ Long Term Care self-insuring article

Post by rustwood »

Yes, that is how I understand it as well, but I don't understand why. I would think just the opposite.
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Re: WSJ Long Term Care self-insuring article

Post by Leesbro63 »

Same ol same ol. Those who need LTC insurance can’t afford it; those who can afford it don’t need the expense.
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Re: WSJ Long Term Care self-insuring article

Post by Silk McCue »

Whether a single individual would be paying with LTCi or out of financial assets they would need to protect themselves by arranging to have a trusted entity or individual manage their finances should they be unable to do so themselves. Therefore if they have sufficient assets they would not need LTCi. That is the reason for the articles recommendation in that scenario.

Cheers
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Re: WSJ Long Term Care self-insuring article

Post by Silk McCue »

Leesbro63 wrote: Fri Jun 02, 2023 7:10 am Same ol same ol. Those who need LTC insurance can’t afford it; those who can afford it don’t need the expense.
I don’t think the article says that at all. Did you read the full article?

Cheers
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Re: WSJ Long Term Care self-insuring article

Post by pantomime »

rustwood wrote: Fri Jun 02, 2023 6:34 am "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring."
i think what they mean is that if you don’t have any dependendents or a spouse, then you’re less likely to need to leave a legacy behind for anyone. so, you’re more likely to be able to use all of your assets to care for yourself and not have to worry about impoverishing your (nonexistent) heirs.

Thanks for the article!
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Re: WSJ Long Term Care self-insuring article

Post by jebmke »

rustwood wrote: Fri Jun 02, 2023 7:04 am Yes, that is how I understand it as well, but I don't understand why. I would think just the opposite.
Maybe I am missing something; I would think that wealthy people with no legacy plans would simply want to pay for the costs from their assets rather than pay a premium for insurance.

I have always been of the mind that if you don't need the insurance policy implied in any financial instrument (e.g. an annuity, LTC) then you probably should self-fund.
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Re: WSJ Long Term Care self-insuring article

Post by Rex66 »

That’s what they mean

Also nobody to apply for your benefits on your behalf which is important
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Re: WSJ Long Term Care self-insuring article

Post by jebmke »

Silk McCue wrote: Fri Jun 02, 2023 7:14 am Whether a single individual would be paying with LTCi or out of financial assets they would need to protect themselves by arranging to have a trusted entity or individual manage their finances should they be unable to do so themselves. Therefore if they have sufficient assets they would not need LTCi. That is the reason for the articles recommendation in that scenario.

Cheers
Exactly. We have "enough" so the pure financial aspect is not what concerns me. Frankly, there is a lot more about getting old and failing that has absolutely nothing to do with LTC that occupies my thinking these days.
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Re: WSJ Long Term Care self-insuring article

Post by nisiprius »

A disappointingly shallow article that sidesteps all the big questions. I don't have answers to any of them, but I don't feel that the article shed much light on them.

Notice that all the dollar amounts are monthly or annual. The Big Uncertainty in planning long-term care is how long and, therefore, what the grand total amounts to.

Obviously, of course, monthly costs are relevant if you are in a situation where you can afford to pay those costs indefinitely.

A lot of comments in the forum mention "average length of stay," but the distribution of lengths of stay has a brutally long tail. The article doesn't discuss this at all.

The article mentions long-term-care insurance but doesn't discuss the current problems with LTCi. Current insurance seems to be available only for shorter time periods, like five years, meaning they insure exactly the part you might be able to afford yourself, and don't insure the exceptional tail risks which are the usual reason for buying insurance. And they don't discuss the problem of viciously rising premiums that may make the insurance unaffordable and resulting in your letting it lapse before you need it.

The article touches on the important point that your future health is unpredictable, but I don't think it stresses it sufficiently. Everybody wants to believe they can predict their lifespan from their "genes," but in studies the correlation between parental and child longevity has been very low.

The article touches on misleadingly-named "hybrid" policies: "which combines life insurance with long-term care." Not really. It is a life insurance policy that allows you raid the death benefit to pay for long-term care. The article uses interesting language here: "beneficiaries can receive a larger death benefit if long-term-care services aren’t used." Another way to say this is that the receive a smaller death benefit if long-term-care services are used. In my view you have a logical problem. If your families will actually need the death benefit, you shouldn't be buying life insurance. If they really do need the death benefit, and it is sized to their needs, then long-term-care will eat up what they need. If the policyholder needs to go into a nursing home and eventually passes, I can't think of any logical reason to believe that their survivors will be in a better financial situation then they would have been if the policyholder had stayed healthy.
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Re: WSJ Long Term Care self-insuring article

Post by kavm »

I agree that the article is quite shallow and did not make me any wiser. We are in the situation where we have good LTCi (10-years, 430/day, 1.6M total max) but at a substantive price (about 11K combined for the two of us in early 60s). We also somewhat fit the category the OP wrote about - 10+M in savings, though 50% in tax deferred, no kids or significant legacy considerations. We did receive advice that we don’t need the LTCi and can drop it. Have yet to decide if we drop it or not. Currently inclined to keep it.
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Re: WSJ Long Term Care self-insuring article

Post by trustquestioner »

Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
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Re: WSJ Long Term Care self-insuring article

Post by Rex66 »

trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
Funny enough that was what the insurance companies originally projected. They based lapse rates off WL where very few keep it. They were wrong. Much much higher keep in force.
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Re: WSJ Long Term Care self-insuring article

Post by Leesbro63 »

Rex66 wrote: Fri Jun 02, 2023 9:35 am
trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
Funny enough that was what the insurance companies originally projected. They based lapse rates off WL where very few keep it. They were wrong. Much much higher keep in force.

My mother is 87 and has had LTC for 25 years. The premiums keep going up. She’s barely on the good side of not needing assisted living. So we keep paying.
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Re: WSJ Long Term Care self-insuring article

Post by Taylor Larimore »

Bogleheads:

We never purchased long-term care insurance primarily because I knew the insurance companies could raise the premiums (which they have done).

What is often overlooked is the importance of a good hospital policy. Once a month I receive a hospital infusion of an anti-cancer drug. My hospital bill each month is about $100,000.00 dollars. Fortunately, I have Medicare and a good Blue X hospital policy which pays the bill.

Best wishes.
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Re: WSJ Long Term Care self-insuring article

Post by GhostMang »

Taylor Larimore wrote: Fri Jun 02, 2023 10:04 am Bogleheads:

We never purchased long-term care insurance primarily because I knew the insurance companies could raise the premiums (which they have done).

What is often overlooked is the importance of a good hospital policy. Once a month I receive a hospital infusion of an anti-cancer drug. My hospital bill each month is about $100,000.00 dollars. Fortunately, I have Medicare and a good Blue X hospital policy which pays the bill.

Best wishes.
Taylor
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Any examples of a good hospital policy? I don't know anything about LTC insurance. I'm most likely not going to have any children and this is one of those things that I'm going to like to know more about as I get closer to retirement.
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Re: WSJ Long Term Care self-insuring article

Post by Jovby »

rustwood wrote: Fri Jun 02, 2023 6:34 am
In general I agree with the points it raises but I don't understand a comment in the first question: "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring." I would think just the opposite - if you don't have any legacy concerns and you don't have any obvious choice for someone to manage your finances while you are receiving care, why wouldn't you just want to use your funds to secure your care through LTC insurance? Am I missing something?
A LTC policy is not going to help manage your finances. It actually makes your finances more difficult to manage as you have to keep the policy current, and also jump through their hoops when it comes time to collect benefits.
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Re: WSJ Long Term Care self-insuring article

Post by Alan S. »

rustwood wrote: Fri Jun 02, 2023 6:34 am I thought this WSJ article from yesterday might be of interest to some here:

Should You Self-Insure Your Long-Term Care?

The subtitle is "Seven questions to ask yourself when considering whether to buy a policy or pay for the care out of your own pocket"

In general I agree with the points it raises but I don't understand a comment in the first question: "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring." I would think just the opposite - if you don't have any legacy concerns and you don't have any obvious choice for someone to manage your finances while you are receiving care, why wouldn't you just want to use your funds to secure your care through LTC insurance? Am I missing something?
If you live in the NE without any family care givers or legacy concerns, you can knock close to 60% off your nursing home bills by moving out of that area to certain southern or lower midwest states as a contingency plan to back self insuring.
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Re: WSJ Long Term Care self-insuring article

Post by Jovby »

Alan S. wrote: Fri Jun 02, 2023 10:48 am
If you live in the NE without any family care givers or legacy concerns, you can knock close to 60% off your nursing home bills by moving out of that area to certain southern or lower midwest states as a contingency plan to back self insuring.
That is a good point.
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Re: WSJ Long Term Care self-insuring article

Post by Jovby »

rustwood wrote: Fri Jun 02, 2023 6:34 am
In general I agree with the points it raises but I don't understand a comment in the first question: "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring." I would think just the opposite - if you don't have any legacy concerns and you don't have any obvious choice for someone to manage your finances while you are receiving care, why wouldn't you just want to use your funds to secure your care through LTC insurance? Am I missing something?
Moving into a continuing care retirement community might be a good choice for streamlining your care at the end of life. If your income and assets cover the cost, and you set up auto pay, there may be very little for anyone to help manage.
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Re: WSJ Long Term Care self-insuring article

Post by Watty »

nisiprius wrote: Fri Jun 02, 2023 8:18 am A disappointingly shallow article that sidesteps all the big questions. I don't have answers to any of them, but I don't feel that the article shed much light on them.
Also surprisingly not behind a paywall, I almost did not even trying clicking on the link.
rustwood wrote: Fri Jun 02, 2023 6:34 am Am I missing something?
Anyway a few important things that it did not mention were;

1) The cost of long term care varies dramatically depending on where you live.

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

I live in an area where the cost is below average at $91K for a single room in a nursing home home or $42K for assisted living according that that web site. The national average is $108K and $54K. There are some areas which are much more expensive, for example in California it is $146K and $63K. I would be a lot move concerned about LTC if I lived in an expensive part of the country.

2) "Long term care" is a terrible term since it lumps in the lower cost assisted living in with skilled nursing facilities and a dementia care units. When you hear a story where someone spent five years in LTC that often means something like they spent four years in the much less expensive assisted living and less than a year getting the more expensive full nursing home care in a skilled nursing facility, which may be in a different wing of the same building.

Dementia care may last longer but even then the average is only about two to three years.

3) Even with a modest paid off house the home equity can be used for long term care.

For us if we are both surviving when LTC is needed the other person would likely want to sell the house anyway after a while since the house would be too much for one person to manage on their own. A reverse mortgage can also be used in some situations.

4) For a single person or a single surviving spouse from a couple most of their other expenses will stop when they go into long term care. This means that when looking at long term care costs they can focus on the gap between their normal retirement budget and their costs with long term care. For a well off single person their costs could actually go down when they are in the lower cost level of assisted living.

For example our normal retirement budget is somewhere around $70K which along with a paid off house is enough for an above average middle class lifestyle where I live. If only one of us is surviving when LTC is needed and it cost $100K a year that sounds scary but that is only about a $30K gap which we could cover for a long time especially with our home equity.

5) A worse case scenario would be something like a spouse needing 10+ years in an expensive dementia care unit. The problem is that many long term care policies that are being sold today might only cover something like three years so it would not protect the other spouse well if they are still surviving.

For us at least the big risk is that both of us will still be surviving and some sort of long term care is needed for a long period of time.
Last edited by Watty on Fri Jun 02, 2023 11:52 am, edited 4 times in total.
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Re: WSJ Long Term Care self-insuring article

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trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
On the flip side, our top-tier GE/Genworth policy saw us through our younger years, where long term care for one of us after a stroke or accident would have devastated household finances. When premiums began to steeply climb, we dropped the policy because: 1) we were in better financial shape to cover expenses on our own, 2) we had fewer years to cover going forward in our early and late 60s than we did in our mid-40s and 50s, and 3) doubt over whether the company could cover future claims. The latter with an eye toward how easily we could self-insure the $300K state coverage limit should the LTC company fail.
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Re: WSJ Long Term Care self-insuring article

Post by nisiprius »

trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
I was very concerned about this when we bought our policies, and I opted for an option of fully paying for the policy in ten annual payments. I don't know if that option is still widely available. It roughly doubled the annual premium, but it limited the time period of our exposure to premium increases, and also confined them to a part of our life when we were still working and reasonably confident we could afford them, whereas I was worried about having to keep them up under the dual stress of premium increases and a possibly marginal income in retirement.

When we bought the policy, we had to sign a paper saying that we would still be able to afford the premiums even if they increased 20%, or something like that. I took that seriously and literally.
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Re: WSJ Long Term Care self-insuring article

Post by rustwood »

With respect to my original question, I guess it depends on your definition of "weathier". If you have no concern that you will run out of money no matter how long you need care, then I agree there is no need for insurance (e.g. sustainable monthly retirement spending rivals the full cost of LTC). With that said, I was thinking along the lines of someone who easily has enough money to maintain their relatively modest lifestyle for many years and afford 3 or 4 years of care near the end of their life, but might not be able to afford a much longer LTC need. To me, if someone who is potentially in that situation can obtain it LTCi with a lifetime or very long benefit period, that would be a worthwhile use of the funds that they apparently won't need for anything else.

Perhaps I am being naive, but if I have a valuable LTC policy and end up in a LTC facility, I would imagine someone from the facility will find a resource to help claim my benefits - especially if I would otherwise run out of funds.

It is true that many people in the past have faced substantial LTCi rate increases and many have let their policy lapse. I completely sympathize with them, but while future rate increases are possible, policies that are currently being issued are more regulated than they have been in the past. If that is truly one's only concern about LTCi, some insurers offer a single premium payment option that will permanently lock in your cost. I'm not sure, but I believe a 10 year premium option also generally locks in the cost.

I believe the WSJ article is behind their paywall, my subscription allows me to create a certain number of shareable links.

A CCRC can be a good option, but the problem is that by the time you are ready to make that move, you might not qualify for the type A contract that one would want to ensure that their care will be fully covered. Certainly this is a potentially good option someone who is in good health in their later years, but someone who is 60 can't plan on being able to get a type A contract when they are 80.
Last edited by rustwood on Sun Jun 04, 2023 3:36 pm, edited 1 time in total.
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Re: WSJ Long Term Care self-insuring article

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rustwood wrote: Fri Jun 02, 2023 12:20 pm
It is true that many people in the past have faced substantial LTCi rate increases and many have let their policy lapse. I completely sympathize with them, but while future rate increases are possible, policies that are currently being issued are more regulated than they have been in the past.
All insurance policies are regulated, both now and in the past. That does not prevent premium increases. The insurance company just needs to apply to the regulator for an increase.

I was surprised a few years back when I received a notice from NWML about a significant premium increase on our two LTC policies. My agent, when we purchased the policies, assured us that NWML is not that type of company. So we were disappointed. I think we ended up opting for a somewhat reduced benefit in order to keep the premiums within reason. Like most things in life, it seems the risk only operates in one direction. While you sign up for a policy with fixed benefits, there is nothing fixed about the premium. Moreover, inflation in LTC costs makes the fixed benefit less and less valuable. Heads they win, tails we lose.

I didn't read the WSJ article yet, but I often thought we would be better off self-insuring. So each year when the premium comes due, I think maybe it's time to drop the policies. Frankly, the only thing that keeps me paying it is that I can pay my LTC premium from my whole life cash value, so my policy essentially costs me nothing and I only need to pay DW's policy.

I should explore whether there is a one-time premium option. The other option is [Inappropriate comment removed by Moderator Misenplace.]
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Re: WSJ Long Term Care self-insuring article

Post by Misenplace »

This topic is now in the Investing - Theory, News and General forum. OP, if you had a specific question to ask about your own personal situation, please provide enough details so that members can provide input, and we can move it back to the Personal Finance forum.
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Re: WSJ Long Term Care self-insuring article

Post by healthshopper »

Another consideration is LTC income tax. WA passed it in a way where people with LTCi could opt out and other states are considering similar systems
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Re: WSJ Long Term Care self-insuring article

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rustwood wrote: Fri Jun 02, 2023 6:34 am In general I agree with the points it raises but I don't understand a comment in the first question: "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring." I would think just the opposite - if you don't have any legacy concerns and you don't have any obvious choice for someone to manage your finances while you are receiving care, why wouldn't you just want to use your funds to secure your care through LTC insurance? Am I missing something?
Um, the benefits of "free" LTC provided by the spouse or partner or children? If you don't have unpaid labor to do the cleaning, cooking & shopping, to give toileting & dressing assistance, to check that you haven't fallen... Well, you are going to need more LTC than someone who does.

Edit, snarky comment: women's work is, basically, valueless.
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Re: WSJ Long Term Care self-insuring article

Post by BernardShakey »

Leesbro63 wrote: Fri Jun 02, 2023 9:47 am
Rex66 wrote: Fri Jun 02, 2023 9:35 am
trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
Funny enough that was what the insurance companies originally projected. They based lapse rates off WL where very few keep it. They were wrong. Much much higher keep in force.

My mother is 87 and has had LTC for 25 years. The premiums keep going up. She’s barely on the good side of not needing assisted living. So we keep paying.
Have you looked to see if she might now qualify for benefits? Something like 2-3 activities of daily living that she needs help with. That can be pretty subjective.
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Re: WSJ Long Term Care self-insuring article

Post by rustwood »

MJS wrote: Fri Jun 02, 2023 3:03 pm
Um, the benefits of "free" LTC provided by the spouse or partner or children? If you don't have unpaid labor to do the cleaning, cooking & shopping, to give toileting & dressing assistance, to check that you haven't fallen... Well, you are going to need more LTC than someone who does.

Edit, snarky comment: women's work is, basically, valueless.
This must not be my day because I don't follow you. Aren't we arguing the same thing - that such a person should ensure (through buying insurance) that they will be able to get LTC - as much as they need and for however long they need it? The article is saying the opposite.

Of course as I said in my previous reply, I now realize that once such a person reaches a certain level of wealth, insurance really doesn't make sense since there is no question that any care they might need could be paid for out of pocket.
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Re: WSJ Long Term Care self-insuring article

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pantomime wrote: Fri Jun 02, 2023 7:20 am
rustwood wrote: Fri Jun 02, 2023 6:34 am "Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring."
i think what they mean is that if you don’t have any dependendents or a spouse, then you’re less likely to need to leave a legacy behind for anyone. so, you’re more likely to be able to use all of your assets to care for yourself and not have to worry about impoverishing your (nonexistent) heirs.

Thanks for the article!
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Re: WSJ Long Term Care self-insuring article

Post by LiveSimple »

Pierce offers the example of a couple who owned several small corporations. The couple decided to self-insure because they felt they weren’t going to live very long, probably wouldn’t need much care and didn’t want to pay the insurance premiums for long-term care. But they lived into their 80s and 90s, and both needed long-term care. This left their seven children with significantly less money than the couple had intended, and they had to sell three of the companies to pay for the long-term care—causing family friction, Pierce says.

Even high-net-worth people may not be in a position to self-insure, Pierce says. There are factors that come into play such as how many children they have and the parent’s desire to leave an inheritance. Another consideration is whether parents are philanthropically inclined and want to know they can leave significant money to a favorite charity. Additionally, it makes a difference whether your assets are liquid or illiquid.

So you cannot afford to self insure if you have sell your companies or leave a huge inheritance,

Another create a fear to help sell
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Re: WSJ Long Term Care self-insuring article

Post by rossington »

rustwood wrote: Fri Jun 02, 2023 10:09 pm Of course as I said in my previous reply, I now realize that once such a person reaches a certain level of wealth, insurance really doesn't make sense since there is no question that any care they might need could be paid for out of pocket.
Then the important question arises that if one is completely alone who is it that will pay one's expenses? A lawyer? a Trustee? A DPOA?
Or the LTC insurance company? But who pays the premiums in that situation?
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Re: WSJ Long Term Care self-insuring article

Post by Leesbro63 »

BernardShakey wrote: Fri Jun 02, 2023 4:20 pm
Leesbro63 wrote: Fri Jun 02, 2023 9:47 am
Rex66 wrote: Fri Jun 02, 2023 9:35 am
trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
Funny enough that was what the insurance companies originally projected. They based lapse rates off WL where very few keep it. They were wrong. Much much higher keep in force.

My mother is 87 and has had LTC for 25 years. The premiums keep going up. She’s barely on the good side of not needing assisted living. So we keep paying.
Have you looked to see if she might now qualify for benefits? Something like 2-3 activities of daily living that she needs help with. That can be pretty subjective.
Good point. We’re watching.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

Leesbro63 wrote: Fri Jun 02, 2023 7:10 am Same ol same ol. Those who need LTC insurance can’t afford it; those who can afford it don’t need the expense.
LTC Partnership Policies are the affordable solution for the middle-class, in most states, except for CA, CT, IN, and NY.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by Leesbro63 »

WoW2012 wrote: Sun Jun 04, 2023 11:45 am
Leesbro63 wrote: Fri Jun 02, 2023 7:10 am Same ol same ol. Those who need LTC insurance can’t afford it; those who can afford it don’t need the expense.
LTC Partnership Policies are the affordable solution for the middle-class, in most states, except for CA, CT, IN, and NY.
Elaborate please.
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Re: WSJ Long Term Care self-insuring article

Post by RationalWalk »

As Nisiprius points out, the tail risk of long term care is the elephant in the room. To address this, you need to have (a) a great deal of wealth, (b) a very large life annuity, (c) close family or friends who can manage the financial aspects of transitioning to Medicaid if you run out of money paying for care, or (d) the ability and willingness to move into a CCRC that won't kick you out if you go broke. Excluding these, almost everybody ends up relying on the good fortune to die before spending much time in the tail. Most of us will win that bet -- but a very small cohort won't.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

Leesbro63 wrote: Sun Jun 04, 2023 11:47 am
WoW2012 wrote: Sun Jun 04, 2023 11:45 am
Leesbro63 wrote: Fri Jun 02, 2023 7:10 am Same ol same ol. Those who need LTC insurance can’t afford it; those who can afford it don’t need the expense.
LTC Partnership Policies are the affordable solution for the middle-class, in most states, except for CA, CT, IN, and NY.
Elaborate please.
50% of retirees should NOT own LTC insurance because they can already qualify for Medicaid-funded long-term care pretty easily. The other half, if they live in one of 41 states, can buy affordable LTC Partnership policies that can protect all their assets from Medicaid.

These “Long-Term Care Partnership Programs” encourage the middle-class to purchase an amount of LTCi benefits equal to their net worth. If their LTCi Partnership policy runs out of benefits they can apply for Medicaid to pay for their care and all of their assets will be protected from Medicaid both while they are alive and even after they pass away.

It's called "dollar for dollar" asset protection. One dollar received in benefits from an LTC Partnership Policy protects one dollar of assets from Medicaid.

If you want to protect more savings you can buy more benefits for a higher premium. If you have less savings you can buy less benefits for a lower premium. It's an equitable and affordable solution for those who want to plan ahead.

The only states that do not have an LTC Partnership Program are: VT, MA, MS, AK, HI.
NY, CA, CT, and IN have programs but the programs need to be modified to keep in step with the industry.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by RationalWalk »

Apparently, these long term care partnership policies are essentially useful for asset protection. You can avoid spending down the amount paid out by the LTCi before qualifying for Medicaid. You'll still be dealing with Medicaid when that sum is exhausted, so it's not a Medicaid-avoidance strategy. The net benefit would consist of the amount you'll pay for LTCi premiums deducted from the amount of asset preservation. That benefit accrues to someone else and not directly to you.
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Re: WSJ Long Term Care self-insuring article

Post by Silk McCue »

RationalWalk wrote: Sun Jun 04, 2023 1:00 pm Apparently, these long term care partnership policies are essentially useful for asset protection. You can avoid spending down the amount paid out by the LTCi before qualifying for Medicaid. You'll still be dealing with Medicaid when that sum is exhausted, so it's not a Medicaid-avoidance strategy. The net benefit would consist of the amount you'll pay for LTCi premiums deducted from the amount of asset preservation. That benefit accrues to someone else and not directly to you.
That last sentence is not accurate. The protected assets can be used to supplement care provided by Medicaid and can be of benefit to the surviving spouse during their lifetime.

Cheers
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Re: WSJ Long Term Care self-insuring article

Post by RudyS »

rustwood wrote: Fri Jun 02, 2023 12:20 pm
....
A CCRC can be a good option, but the problem is that by the time you are ready to make that move, you might not qualify for the type A contract that one would want to ensure that their care will be fully covered. Certainly this is a potentially good option someone who is in good health in their later years, but someone who is 60 can't plan on being able to get a type A contract when they are 80.
Very good point. Most of the folks in our CCRC have moved in at around age 75. But you do have to meet financial and medical assessment criteria. The financial part is because the CCRC will let you remain if you run out of money (through no fault of your own - you can't just then give away all your assets). DW and I made the move at 76 and 81. We often hear the comment "better 5 years too soon than 5 minutes too late."
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Re: WSJ Long Term Care self-insuring article

Post by grabiner »

RationalWalk wrote: Sun Jun 04, 2023 12:15 pm As Nisiprius points out, the tail risk of long term care is the elephant in the room. To address this, you need to have (a) a great deal of wealth, (b) a very large life annuity, (c) close family or friends who can manage the financial aspects of transitioning to Medicaid if you run out of money paying for care, or (d) the ability and willingness to move into a CCRC that won't kick you out if you go broke. Excluding these, almost everybody ends up relying on the good fortune to die before spending much time in the tail. Most of us will win that bet -- but a very small cohort won't.
And most long-term-care policies won't cover this. If your policy has a 5-year benefit period and care costs $100K per year, you'll need to come up with $500K of your own money if you need care for 10 years.

It would make more economic sense for better-off people to have a catastrophic-coverage policy with, say, a 3-year elimination period but lifetime benefits beyond three years. In that situation, you could budget your own $300K but the policy would pay everything beyond that. However, few people would buy such a policy.
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

grabiner wrote: Sun Jun 04, 2023 6:02 pm
RationalWalk wrote: Sun Jun 04, 2023 12:15 pm As Nisiprius points out, the tail risk of long term care is the elephant in the room. To address this, you need to have (a) a great deal of wealth, (b) a very large life annuity, (c) close family or friends who can manage the financial aspects of transitioning to Medicaid if you run out of money paying for care, or (d) the ability and willingness to move into a CCRC that won't kick you out if you go broke. Excluding these, almost everybody ends up relying on the good fortune to die before spending much time in the tail. Most of us will win that bet -- but a very small cohort won't.
And most long-term-care policies won't cover this. If your policy has a 5-year benefit period and care costs $100K per year, you'll need to come up with $500K of your own money if you need care for 10 years.

It would make more economic sense for better-off people to have a catastrophic-coverage policy with, say, a 3-year elimination period but lifetime benefits beyond three years. In that situation, you could budget your own $300K but the policy would pay everything beyond that. However, few people would buy such a policy.
You may also want to look at the large picture and see how it all plays out. If you had say $650K in LTCi now and needed your $100K per year as an example you would no longer need your SS during your care stay. If your SS was say $50K and you accrued that during the 6 years of LTCi payout you would have another 3 years of fees - and after that 3 years you would have another 1.5 years.
Then the 6 + 3 + 1.5 gets you out to that 10 years of care you were targeting without touching any other assets.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
It's true that many policies have had huge premium increases. Industry wide, less than 5% of LTCi policyholders lapse their policy after a big rate increase. Fortunately 41 states have enacted the Rate Stability Regulation.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

Rex66 wrote: Fri Jun 02, 2023 9:35 am
trustquestioner wrote: Fri Jun 02, 2023 8:59 am Almost everyone I know who bought long term care did so when relatively healthy then let the policy lapse due to massive premium increases as they approached an age where they may actually need it.
Funny enough that was what the insurance companies originally projected. They based lapse rates off WL where very few keep it. They were wrong. Much much higher keep in force.
Exactly. The single biggest reason for rate increases was that the people who bought long-term care insurance didn't cancel it. They held onto it. No other insurance product has such a high level of persistency. Now, most LTCi companies use a 1% (or lower) lapse assumption.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

Alan S. wrote: Fri Jun 02, 2023 10:48 am

If you live in the NE without any family care givers or legacy concerns, you can knock close to 60% off your nursing home bills by moving out of that area to certain southern or lower midwest states as a contingency plan to back self insuring.
Moving when you're sick and disabled is not easy. I know from personal experience.
Moving to be closer to family members can make a lot of sense, though.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

Watty wrote: Fri Jun 02, 2023 11:36 am
5) A worse case scenario would be something like a spouse needing 10+ years in an expensive dementia care unit. The problem is that many long term care policies that are being sold today might only cover something like three years so it would not protect the other spouse well if they are still surviving.
There are policies for sale today that can cover 10+ years of care for a couple. In fact, 5 different companies offer policies like that. But, a better option for the middle-class, is an affordable "Long-Term Care Partnership" policy. That type of policy can protect your assets from Medicaid even if the policy runs out of benefits. 41 states have active LTC Partnership Programs.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

JazzTime wrote: Fri Jun 02, 2023 1:48 pm
rustwood wrote: Fri Jun 02, 2023 12:20 pm
It is true that many people in the past have faced substantial LTCi rate increases and many have let their policy lapse. I completely sympathize with them, but while future rate increases are possible, policies that are currently being issued are more regulated than they have been in the past.
All insurance policies are regulated, both now and in the past. That does not prevent premium increases. The insurance company just needs to apply to the regulator for an increase.



Rustwood is correct.
Long-term care insurance regulations have changed over the years (in 41 states).
There are the old rules and there are the new rules.
If your state has passed the "Rate Stability Regulation" the old rules apply to the policies purchased before the Rate Stability Regulation became effective. The new rules apply to the policies purchased after the Rate Stability Regulation became effective.

UNDER THE OLD RULES
when a rate increase was requested the insurance company could price normal profit levels into the rate increase. In many cases, a rate increase would result in increased profits for the insurance company.

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. This regulation has removed the profit motive from rate increases.

UNDER THE OLD RULES
Profits were capped in the initial pricing, but more profit could be made when a rate increase was requested.

UNDER THE NEW RULES
Higher profits are allowed in the initial pricing, but the higher profits can ONLY be kept IF THEY KEEP PREMIUMS LEVEL.

UNDER THE OLD RULES
the insurance companies were NOT allowed to include in their pricing any “margin for error”. There was no cushion priced into the policy in the event their claims exceeded their original projections. This resulted in a lot of rate increases.

UNDER THE NEW RULES
every insurance company is REQUIRED to include a “cushion” in their pricing–a margin for error. The goal of the “cushion” is to try to avoid the need for any future premium increases.

UNDER THE OLD RULES
the insurance companies did NOT have to certify the accuracy of their pricing assumptions. If their assumptions turned out to be wrong, they would just request a rate increase.

UNDER THE NEW RULES
the insurance companies are required to have a qualified actuary certify that no premium increases are anticipated over the life of the policy. This is why they are required to include a “margin for error” in their pricing.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

healthshopper wrote: Fri Jun 02, 2023 2:15 pm Another consideration is LTC income tax. WA passed it in a way where people with LTCi could opt out and other states are considering similar systems
That's another good point.
Anyone who works in New York or California should buy a long-term care insurance policy before 12/31/2023 in order to have the option to opt-out of the long-term care payroll taxes being proposed in those states.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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