LTCI Einstein

Is Long Term Care Insurance Worth It?


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My dad’s death last year not only made me and my siblings 40-something orphans, but it also marked the end of my parents’ Nursing Home Era (1998-2011).  Until his death, either my mom or dad was in a nursing home for almost 11 years of that 13 year span.  That blew.

It was also very expensive.  My mom shelled out $500,000 cash over the years, and her place was neither shmancy nor fancy.  My dad “only” paid $22,000 per year because he had Long Term Care Insurance.

Long Term Care Insurance (LTCI) is insurance you buy to help pay for Nursing Home, Assisted Living, or In-Home Care should you ever need it.  We did not have LTCI for my mom.  We paid about $200/day for her care.

After my dad saw that first bill, he did what all shocked cartoon characters do. He lifted his jaw off the floor and put his eyeballs back in their respective sockets. Then he purchased an LTCI policy for himself. My dad had just turned 65 and this was 10 years before he would need to use it.

My dad paid $131/month or $1,572/year for LTCI.  Therefore, over 10 years he paid out almost $16,000 for his LTCI.  His policy covered $150/day for three years’ worth of days.  The nursing home was $210/day.  That extra $60/day came to $22,000/year and was paid out of my dad’s pocket.  The other $55,000 per year was paid by the LTCI company.

My dad’s LTCI saved him $130,000 over the 2+ years he was being cared for.  Subtract the $16K my dad paid in premiums over the 10 years before he moved into a home, and my dad still came out ahead $114,000.  The $114,000 return on his “investment” in LTCI was sevenfold.

Pretty sweet, right?  Sounds like I’m doing a pitch to get LTCI.  Not so fast.

I looked into getting a policy for myself five years ago.  I saw how nursing homes devoured my parents’ life savings and thought it might be wise to get an LTCI policy while I was young.  The best deal I found was comparable coverage and pricing to my dad’s policy.  But my dad got his in 1998 when he was 65, and I was only 42 in 2007.

My beef with buying an LTCI policy, is that I did not find any company willing to guarantee that the monthly premium would remain unchanged.  In other words, it could go up.  Not guaranteeing my premium price seemed fairly significant.  I don’t recall any time in my life when I agreed to buy something where I could get charged more later at the seller’s whim.

Even my Magic 8 Ball said that my premium would go up.  I would be foolish not to think it would.  Since I would then have to choose to pay the increase or drop the coverage and wave bye-bye to the tens of thousands I sunk into the LTCI policy, I do not have an LTCI policy.

In August 2008, my dad checked into the nursing home.  We hoped it would be temporary, but soon realized he needed full time care.  In November 2008, a letter came from my dad’s LTCI company, Genworth.  See the letter below.  They noticed he had started using his LTCI and were going to raise his premium or drop his daily benefit!  I’m not saying this was some devious scheme.  Everyone I dealt with at Genworth was very helpful.  If they were going to do this in 2008, I assumed my LTCI premiums would get jacked up before I need it 25-50 years later.  After all, health care costs are not getting less expensive.

In my opinion, I don’t think nursing homes as we know them will be there in 30 or 40 years.  As it is now, if you don’t have LTCI or enough money to pay for your care, Medicaid pays for you.  (Note: Medicaid requirements vary from state to state. In my parents’ home state of Ohio, our eldercare attorney, informed us that “It is $1,500 for an individual and $2,200 for a couple. Most states however are 2,000 and $2,500, respectively.” That is how small your asset pile must be to qualify for Medicaid.)

So, what should we do?  Should we spend every penny we make while healthy, then ask our fellow citizen taxpayers to pay for our care via Medicaid when we are penniless?  That seems to be the approach many Americans take.  To be fair, this has not even occurred to most people.

Or do we get an LTCI policy and hope to afford it and the probable price hikes on the monthly premiums?  Rock, meet hard place.  Hard place – rock.

My hunch is that In-Home Care will proliferate.

Back in 1988 in Huntsville, Alabama, in one of my first weeks as a full-time professional stand-up comic, I worked with Brett Leake.  Here he is backstage with Jay Leno.  The Leaker is a great comic and friend.  20 years after meeting, we often found ourselves talking about the challenges we were going through with our fathers.  He and his family received the 2008 Virginia Governor’s Caregiver Recognition Award for their in-home care for his father.

You can read about The Leakes’ situation and what they did to care for his dad at home, on Brett’s website.  As Brett wrote: “We use this opportunity to tell you about an extraordinary man, to say thanks, and to make the case for in-home care… If there is someone in your family who needs help and whose needs can be met outside an institution, please try to make it work at home.”

Nursing homes serve a valuable purpose.  Many of the caregivers are angels.  But no matter how nice the institutions are, they still blow.

If you have not seen the movie I.O.U.S.A. by former U.S. Comptroller General David Walker (the nation’s accountant who served under Reagan, Clinton & George W. Bush), I beg you to watch this 30 minute clip from the movie which explains our National Debt.  Money itself is apolitical.  Zip to 12:28 to see how Medicaid, and free long term care, plays a part.  I think you will agree with D-Dub that our current path is unsustainable.  I also found what looks to be the entire feature film, in case you want to be the smartest person in the room when it comes to the National Debt.

I’d like to hear your thoughts.  Have you found an LTCI company that will guarantee that they will not raise your premiums?  Have you hired caregivers?

Here is Page One of the letter from Genworth.  They told us they were going to raise my dad’s policy premium 12%.  We could keep virtually the same monthly premium payment we’d been paying for 10 years, but reduce the daily benefit, if my dad ever needed to use his LTCI.  The reduction of daily benefit coverage would be $17/day or $6,205/year.  That’s kinda significant!

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  1. Ann Swanson
    Ann Swanson01-12-2012

    Hi Chip,
    Great analysis of tricky subject. One thing my dad did was purchase an insurance product that paid at least 100K on his death. There could be some interest on this, but that’s dessert – namely for me and my brother. So, if my dad burns through every other last dime in a nursing home (which I will do whatever I can to avoid), the heirs at least split 100K.

    I guess the moral is, if you like your kids and want to share some of your life savings, that is one way to do it.

    Love your stuff, Chip.
    Ann

  2. John Zussman
    John Zussman01-15-2012

    I agree with Ann; this is a tricky subject, and one more example (as if we needed one) of how insurance companies are not on our side. The personal details you shared are both poignant and revealing. Thanks.

  3. Chip
    Chip01-15-2012

    Thanks Anne & John. My dad always told me to learn from his example, both the good and the bad. Feel free to forward, Tweet, Facebook!

  4. Susan
    Susan01-17-2012

    Hi, Chip.

    I really appreciated this article, as purchasing this insurance was a decision we made recently. You are right: It is scary to buy something without having the guarantee that the premium prices will remain steady. However, there were two parts of this situation we found even scarier in the long-term. The first is that, based on our research, initial policy prices are significantly higher for a first-time purchaser over the age of 50, and my husband and I were approaching that magic number. The second concern is that we are parents of three children in three different (private) schools, with college tuition starting next year. While we may not choose to keep this policy for the rest of our lives, I do sleep better now knowing that should one of us become disabled, hopefully we won’t be spending tuition money to pay for our care. In ten years we will revisit the idea of this coverage, but, until the last child graduates, it is nice to know that we have a shot at getting the kids through school even if we have serious health-related expenses.
    Also: Even though we purchased our policy more than a year ago, my Dad’s terminal illness this past summer gave us a glimpse into the incredible expense of daily care, so we remain happy with our decision,atleast for the time being. I always enjoyed your Mom and Dad; amazing that they are still able to teach us by example. Take care—Susan Kelley-Fernandez

  5. John Kroeger
    John Kroeger03-12-2012

    In answer to your query, there is at least one genre of Long Term Care Insurance where the premiums are guaranteed to never increase: a hybrid Whole Life / Long Term Care insurance policy. The chasis is a whole life insurance policy that pays a guaranteed death benefit with premiums that are guaranteed to never increase. The long term care part comes about where the insured may accelerate payout of the the death benefit by a maximum of two or four percent of the death benefit face value per month under the similar triggers that would cause a payout from a traditional long term care insurance policy. Instead of the maximum long term care benefit being defined in terms of years as your father’s was, it is defined in terms of the maximum death benefit. One additional advantage under this scenario is that no benefits are ever left on the table: if the entire death benefit has not been used for long term care, the remaining balance is paid to the heirs at death. Thus, the return is guaranteed even though the premium paying period is variable (ie life – same as the other policies). Hope this helps!

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