Long Term Care Insurance

[no1g8r]

Long Term Care insurance covers the policyholder in the event they require extended care outside of a hospital, such as in a nursing home, alternate care facility, or home health care.

While a large portion of the population will require such care at some point in their lives, the reviews are mixed as to whether or not LTC insurance should be purchased.

The prevailing thoughts seem to be:

a) For those with no significant assets, there is no reason to buy LTC insurance because medicare will kick in and cover you.

b) For folks who significant assets that they want to pass on to their heirs, LTC insurance pays for these healthcare options before/instead of engaging medicare for coverage. Once medicare is engaged, they force you to deplete your assets before they will pay. A spouse is allowed to keep their home and a modest amount of savings, but most assets still must be depleted. This seems to be the group for whom LTC insurance makes the most sense.

c) For people that have a lot of assets, it may make more sense to self-insure. That is, use some of the assets to cover the cost of the care. According to Genworth, annual nursing home costs run upwards of $86k/year for a semi-private room, and $98k/year for a private room. Less than 12% of people are in a nursing home for over 5 years, so $500k should cover it for most people.

With all that said, I purchased a LTC insurance policy 20 years ago through an employer, and was able to continue my policy after I left. I pay about $500/yr each for the two of us to be covered for nearly $500k in lifetime benefits. If either of us die before age 75, the policy returns the premiums paid on a pro-rated basis (100% until age 65, 10% less each year until 75 (0%). It does provide some peace of mind, as I fall more closely into group B.

What about you? Do you have LTC insurance? Have you considered it and decided against it? Is this the first you've ever heard of it? Do you know anyone who has it that it did/did not work well for?

 

[78]

a) Medicare pays for 100% of LTC for the first 20 days. From days 21-100, the insured pays $170.50 a day. Beyond day 100, you're out of pocket 100% unless you have insurance.

b) Medicaid requires a spenddown, not Medicare. Medicare is a federal program, Medicaid is administered on the state level.

Escalating long-term costs coupled with gaping legal loopholes has for years threatened to bankrupt many a state Medicaid program, which is why the Long-Term Cate Partnership program was developed over a decade ago. It's supported by the federal government, run on the state level and takes into consideration whether you have LTC insurance or not.

Before you decide you want to go the Medicaid route, it would behoove you to consider that Medicaid financial assistance for long-term care is now essentially a family loan program under the Medicaid Estate Recovery Program. Borrower beware.

How Medicaid Takes Its Money Back After You Die

 

[no1g8r]

Thanks for the clarification. It's a policy that I'm glad that I have, but like a lot of insurance, it never feels like enough.

 

[ChiefGator]

Good information, I hope never to be in this situation, but you never know. Current policies are said to be very expensive as the insurance companies know how risky they can be.

 

[78]

All the major players -- Hancock, Genworth, Met, Chubb, Cigna -- have pulled out of this arena. Only Northwestern Mutual remains. Risks outweighed the benefits. Companies tried raising premiums and consumers balked. No-win situation.

What is available is the hybrid plan that takes a UL and adds an accelerated LTC rider. The owner gets a bucket of money for LTC, a separate tax-free death benefit and access to their cash, in some cases all of their cash without a surrender penalty. Consumers seem to like them.

 

[no1g8r]

Hancock has continued to offer my policy. Is there a risk that they could cancel it?

 

[78]

Hancock has continued to offer my policy. Is there a risk that they could cancel it?

They can only cancel it for non-payment of premiums. I was referring to issuing new contracts. Hancock is out of that arena.

 

[GatorInGeorgia]

Long Term Care insurance covers the policyholder in the event they require extended care outside of a hospital, such as in a nursing home, alternate care facility, or home health care.

While a large portion of the population will require such care at some point in their lives, the reviews are mixed as to whether or not LTC insurance should be purchased.

The prevailing thoughts seem to be:

a) For those with no significant assets, there is no reason to buy LTC insurance because medicare will kick in and cover you.

b) For folks who significant assets that they want to pass on to their heirs, LTC insurance pays for these healthcare options before/instead of engaging medicare for coverage. Once medicare is engaged, they force you to deplete your assets before they will pay. A spouse is allowed to keep their home and a modest amount of savings, but most assets still must be depleted. This seems to be the group for whom LTC insurance makes the most sense.

c) For people that have a lot of assets, it may make more sense to self-insure. That is, use some of the assets to cover the cost of the care. According to Genworth, annual nursing home costs run upwards of $86k/year for a semi-private room, and $98k/year for a private room. Less than 12% of people are in a nursing home for over 5 years, so $500k should cover it for most people.

With all that said, I purchased a LTC insurance policy 20 years ago through an employer, and was able to continue my policy after I left. I pay about $500/yr each for the two of us to be covered for nearly $500k in lifetime benefits. If either of us die before age 75, the policy returns the premiums paid on a pro-rated basis (100% until age 65, 10% less each year until 75 (0%). It does provide some peace of mind, as I fall more closely into group B.

What about you? Do you have LTC insurance? Have you considered it and decided against it? Is this the first you've ever heard of it? Do you know anyone who has it that it did/did not work well for?

With what you said about how much you pay annually and having purchased 20 years ago, my guess is you got a good deal. As 78 said, most insurers stopped selling these policies because they dramatically underpriced the risk when they first started selling these policies.

 

[Treebeard]

Hancock has continued to offer my policy. Is there a risk that they could cancel it?

I can't speak for the overall financial wisdom for the insurance companies, but my mother got one of these policies years ago. She has, and continues to benefit from it 20 times over.

 

[no1g8r]

So I read some snippet recently about a Long Term Care plan being buried in the SECURE Act, called an 844 Plan. Apparently it is a hybrid plan that is selling much better than the old LTC plans did. Is anyone familiar with these and can offer any pros and cons

 

[DarksideGator]

There are several life insurance policies available that have the ability to draw off the death benefit based on a percentage of the DB every month. Example a $300,000 DB could give you $12,000 a month towards LTC. These policies also are easier on claim, not having to produce receipts, invoices, etc. once you are deemed from a physician unable to take care of yourself.

Others are a single-pay, or maybe you do a 5-pay. $10,000 a year for 5 years, then you have probably about $90,000 of DB but about $170,000 of LTC available.

These policies are definitely becoming more “popular”, you know eventually the policy is going to pay either a DB, LTC, or in most cases both.

 

[CDGator]

Heaven forbid anyone should ever need LTC, however it is facing reality and something to consider. Most people don’t think about it. The reality is though that you could blow through it quickly if the worst should happen depending on the level of care. Having just gone through 3 parents needing round the clock care in 5 years, proper care is not cheap. Two stayed at home and were VA assisted and one was in a nursing home without LTC insurance. My dad bought a policy years ago but now that he’s in his 80’s the premium is crazy but there if he needs it.

 

[FireFoley]

Heaven forbid anyone should ever need LTC, however it is facing reality and something to consider. Most people don’t think about it. The reality is though that you could blow through it quickly if the worst should happen depending on the level of care. Having just gone through 3 parents needing round the clock care in 5 years, proper care is not cheap. Two stayed at home and were VA assisted and one was in a nursing home without LTC insurance. My dad bought a policy years ago but now that he’s in his 80’s the premium is crazy but there if he needs it.

Thanks for the info and I can echo your sentiment. I just went thru a period of care for my last parent who did not have LTC. I passed on it after losing my first parent as I thought the premiums were just way too high for what I would have gotten in return. I viewed it as prepaid healthcare and thought it would be better for a younger person to put that much aside on their on and invest it. Fast forward and I saw how much it costs for daily, basic home health care and it is not cheap. So I doubt even a LTC policy covers that, but to get a good policy it is super expensive. So I agree with you that everyone should heed your advice and start thinking about it as young as possible.

 

[CDGator]

Thanks for the info and I can echo your sentiment. I just went thru a period of care for my last parent who did not have LTC. I passed on it after losing my first parent as I thought the premiums were just way too high for what I would have gotten in return. I viewed it as prepaid healthcare and thought it would be better for a younger person to put that much aside on their on and invest it. Fast forward and I saw how much it costs for daily, basic home health care and it is not cheap. So I doubt even a LTC policy covers that, but to get a good policy it is super expensive. So I agree with you that everyone should heed your advice and start thinking about it as young as possible.

It is shocking to find out the cost of a reputable nursing home.