Financial Samurai

This was a very emotional topic for me. Unfortunately my father passed away years ago but I would agree that LTC is the better way to go. The only way assisted living facilities could change the minds of everyone is if they changed their title. The living longer and better than ever facility.

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Financial Samurai Reply:
February 8th, 2012 at 5:13 am

I’m sorry for your loss Jai. Puts things in perspective and hammers home the point that we should try and get the best care for our parents, or for ourselves when we are older.

Let us push for the “Living Longer And Better Than Ever Facility”!

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I am my parents’ long term care insurance, which means that I should get myself covered. I visited the topic last year but got distracted somehow. Will definitely get the coverage this year.

Have you looked into providers? And if so what are some of the best and why in your opinion? Perhaps someone else can chime in on these as well???

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LTC is very important for people with assets to protect. My father in law decided to avoid this because “I’m healthy.” Today he has Parkinsons and we’re confronting the ogre of him spending their life savings on LTC while my very healthy mother in law worries about not having enough left for herself.

I will say, though, that if you’re worried about paying the day-to-day bills, LTC is irrelevant. If there’s nothing to protect, Medicaid is currently a “safety net.”

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It is interesting, the majority of people who end up purchasing LTCi (at least in my office) has had to pay for a parent’s LTC.

I think my parents are woefully underinsured but at this point it doesn’t matter since both are uninsurable!

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I bought LTC insurance a number of years ago to avoid this problem. I do not expect to go into a facility, but home care is expensive too. I was thinking of a pretty little Swedish girl who would cook for me, bathe me and tell me silly stories. She will need to be very near sighted and patient since I probablywill be difficult! They are expensive caretakers!

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My mother just went into a nursing home. Additionally, I used to work in various places in my region. Having that background, along with further education, I would offer to anyone looking at LTC placement some tips.
First and foremost, talk to an attorney to plan as much as possible for the estate, et al. Things can get complicated, and sorting out what you can ahead of time helps. As to the actual facility itself. Visit as many places in whatever distance you are comfortable driving. Visit them all for comparison. Visit at all hours of the day: 6a.m., noon, midnight, etc. Talk to staff and clients; not just the admitting staff, ALL the staff- at least random staff.

Then step outside the box and talk to hospital staff about any possibilities you’ve id’d. Talk to EMS personnel as well. Nurses and Doctors and Medics know things about facilities they might share- especially after you mention you are considering placing a loved one.

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Financial Samurai Reply:
February 9th, 2012 at 2:35 pm

Thanks for these tips JR. Talking to the hospital and attorney does sound like a good idea. Can’t hurt at least! Well, maybe the hourly attorney fee can.

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My relative is in poor health and has been in a nursing home for a few years. She has a LTC policy that has been her saving grace. She would have run out of money long ago were it not for that policy!

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Financial Samurai Reply:
February 9th, 2012 at 2:35 pm

That is good to hear!

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My wife and I have been have this decision a lot recently. Her mom is older and we see that her grandmother lives with her mother and its just a lot. She is in her 60′s working to cover both her and her mother. I dont want to be in a situation where my children have to worry about having enough money for both their parents and their own families. I dont currently have it but it brings to light that I should do more then just look around. Like Sunil I know I am my parents LTC provider.

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Financial Samurai Reply:
February 9th, 2012 at 2:36 pm

Man, that sounds like a tough decision ring in you 60s and caring for parents in their 80s and 90s. The 60s is when we should be living life even more!

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I think LTCi is absolutely essential. I don’t think kids should be born just to take care of their parents as they age. I think that is a terribly selfish reason to have a child, making them “pay back their parents” for the gift of life. I’ve been looking into this, and plan on getting LTCi for my husband and I when we hit our late 40′s, early 50′s. My husband’s family has a long history of cancer, so for him (in his words) it’s not just a matter of if but when.

My aunt’s husband just passed away from Prostate cancer. It was very sudden, and from symptoms to death it was under 2 years. In that time, they spent half a million dollars on treatment for him. She was the one who informed me that LTCi is an absolute necessity. I’m going to listen to her on that matter.

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Financial Samurai Reply:
February 9th, 2012 at 2:38 pm

Kris, that is very thoughtful of you not wanting to burden your kids!

I don’t have a problem caring for my parents, no questions asked. I strongly feel it’s my duty.

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My parents definitely have it. After having three parents (combined) who were both in assisted living facilities out of necessity, they got a first-hand look at the ever rising costs of health care.

I would argue that long-term care insurance is more important today than it has ever been, especially for people who were previously banking on Medicare. Medicare cuts will be very real – look to the market panic in health care stocks during the summer – and at-home care is one of the most likely to experience massive cuts. (The ticker AFAM is a great example of this fear.)

This year, home health care agencies will have to tolerate a 2.3% cut in reimbursement. The original plan called for something like 5%! Admittedly, I haven’t been following this story all that much (I wanted to know why at-home care companies were getting crushed on the market) and these cuts may have changed. Do your due diligence for sure! I know there were also talks of new $100 copays for home health care starting in 2017 as part of the health care reform bill. $100 copays are nuts!

Seriously – now isn’t a time to bank on entitlements, no matter how much you pay in. The unfortunate reality is that the health care reform bill, as well as any cuts in domestic federal spending will force price hikes onto health care consumers.

I’m not just being political – seniors unfortunately aren’t prepared to read the legalese that they’ll need to read before making any long-run decisions. Long-term care insurance may be one of the only ways to make sure that people can get the at-home care they might have previously expected to receive from the government.

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Financial Samurai Reply:
February 9th, 2012 at 2:39 pm

Let’s just hope the LTC insurance premiums don’t get ridiculously high!

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After my step-father died, my mother bought LTC insurance. She decided to go with a plan that’s a little more expensive but that will, if she never uses it, refund a portion of the premiums to my brother and I upon her death.
I wish my MIL has LTC coverage. She had total knee replacement in mid-October and was supposed to be in rehab 6-8 weeks. She’s still in a facility after nearly dying over New Year’s. At this point, we don’t know if she’ll ever be able to go back to living independently or not. She’s been living on disability for 10+ years, but she has a condo with renters that means she makes too much to qualify for Medicaid.
We’re at the point where we need to consider selling her condo or buying it ourselves, and perhaps even spending some of the money we saved up to cover medical costs in order to get her on medicaid so that she can afford to go into care.
Of course, she just switched facilities and the thearpy staff seems more engaged than at the last place, so we’re still a little hopeful. Hopeful, but trying to line up the legalities of what may have to happen.

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Financial Samurai Reply:
February 9th, 2012 at 2:40 pm

Having that refund option if she doesn’t use it, it definitely sounds like a more palatable insurance to undertake. Helps share the costs with the insurer, provided they are not greedy.

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I have been trying to convince my mom to get this, but she really doesn’t have the money for the premiums (which obviously means she doesn’t have the money to pay for her care should she need it). I would like to split the cost of the premiums with her, but she just isn’t interested. As her only living child, all of the responsibility will fall on me.

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Financial Samurai Reply:
February 9th, 2012 at 2:55 pm

Hmmm, that sounds like a tough situation you are in. It’s like gambling with life, which is unfortunate. Can you pay the full LTC premium?

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I am still debating long term care insurance. I mis-trust that the life insurance companies will be around still when I need to draw on the policy. I’ve read that most people who buy it will eventually need to use it and will get all of their premiums back in just a couple of years. If that is the case, the insurance company business models are out of whack which would cause some of them problems, or cause them to deny coverage somehow.

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Financial Samurai Reply:
February 9th, 2012 at 3:01 pm

Good point. Which means they are charging even more than they have to, to make a profit. It’s their prerogative and ours for taking it.

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I don’t think it’s worth it. Here’s why – it’s basically a gamble. The insurance companies price their premiums based on actuarial data. This data includes, of course, horrendously unhealthy Americans. So, you’re basically subsidizing their poor health. You don’t get what you think you pay for. For instance, you might pay $4K per year for like 20 years to find out when you actually need it that it doesn’t even kick in until after you’ve exhausted 180 days out of pocket. OK, so you spent 5 months in assisted living all on your own dime and the policy never even kicked in. In theory, if you’d invested all those premiums yourself over the 20 years, you would have been able to pay out of pocket for the same term they cover and then some. There are millions of different types of policies with terms, costs, what’s covered and what isn’t.

The bottom line is it’s like buying an extended warranty on electronics – only the retailer wins.

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Financial Samurai Reply:
February 9th, 2012 at 3:03 pm

A very good point, which is why insurance industries get such a bad wrap. They should be under a mega magnifying class by the government.

The prob is, people lack discipline saving for when that time comes!

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LTC insurances provide so much of security that one is never left alone in times of utter need. However, it costs too much. Though the concept is really a good one,but to afford such insurances is beyond the imagination of common people.

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Great post, and I love seeing the prices broken out by age group. 60 years-old is the mark on the wall and the turning point. You need to buy it before then to really lock in a low rate.

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I know someone in her 60′s who purchased LTC a few years back and it was totally worth it for her. She is able to get some of her help reimbursed up to $1,100 a month (she has people come and give her B12 injections). And, she’s only paying about $80 a month for the coverage. Totally worth it in my book. When I turn 50, I’ll be applying for AARP and signing myself up for LTC! (Oh, why 50? Minimum age for AARP membership.)

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Financial Samurai Reply:
February 9th, 2012 at 3:04 pm

Sounds good! 50 is still spring chicken age IMO!

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I think long term care insurance is the way to go. I provides the needed protection for you should you require the additional care that Medicare or Medicaid or your primary insurance wouldnt cover. I think purchasing it if you can is definately the way to go. I read an article a while back, I cant remember where but it mentioned how older people were divorcing after being married for 50 years because one of the individuals health condition was spending all of their money and to make sure that the other spouse had money to live they divorced before all the assets were spent. You spend an entire life with your spouse and want to go to the grave together but have to divorce because our system will bankrupt the healthy spouse at an age where they cant just go out and find a job. Sad but you have to do what you have to do. At 29, I really havent thought about that type insurance yet.

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We can always do with insurance, the trouble is as you demonstrate, the costs get prohibitively higher the older you get. You can also find that certain companies will refuse to cover “pre-existing” conditions which makes getting insurance even harder as you are more likely to become ill as you get older.

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LTC is a bit daunting, I evaluated several options for my mother and finally settled on 200/day benefit costing $567/mo. she is currently 78 and relatively good health. We have been paying premiums from her mandatory distributions for 6 yrs. now. Upon reflection, we are paying for too much benefit, we should have calculated in her Income sources that do not deplete her ability to continue generating that income. Currently, with Social Security and Mandatory distributions she makes roughly $36k per year, and lives comfortably. That amount would cover about 1/2 of her annual expenses for LTC. So I figure we should have taken 18K and applied toward anticipated annual cost of LTC facility. Just a guess, but I think a 150/day benefit would have been more appropriate.

Chose not to include riders and uped the daily benefit amount, as riders are quite expensive. a good tactic had we incorporated her present income stream.

For myself, I have $100/ day benefit for 5 yrs. to supplement expected income stream. You mentioned if not 200-300K in cash laying around the need for a policy, but don’t dismiss the anticipated income stream as well.

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One more point, Mom is a survivor of both Breast Cancer and Stroke!! I know the premiums look a bit high, but we were fortunate to get her qualified for a policy. In the long run, we were able to afford, and preserve somewhat limited assets as she wished to do, and have peace of mind that she will get the care that may be necessary down the road. The life expectancy for someone my moms age in a LTC facility is 3 years.

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I sort of agree with your stance that people with under $200,000 should rely on Medicaid as their primary Long Term Care planning tool. However, there is absolutely no reason for somebody with 1.5 million or more in assets not to protect themselves against the potential cost of Long Term Care.

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This is one of the saddest topics I think. At least I know I will be around for my parents if ever they need help after retirement. I hope that would be the case for when we retire too, but I have already started to save a little bit more in hopes of retiring peacefully.

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