"An empty man is full of himself." -- Edward Abbey

Friday, March 28, 2014

The Basics of Long-Term-Care Insurance

     "No American should ever have to spend their golden years at the mercy of insurance companies."  -- Barack Obama.

     And yet that's just what I've done. I've applied for a long-term-care insurance policy. I'm giving the company about $2000 a year, every year for the rest of my life. And in return the company promises to cover a portion of the costs of my care when and if I get old and infirm, those that Medicare and medical insurance don't cover -- the cost of a nursing home, or the cost of having an aide come to my house and help me eat and go to the bathroom and clean myself up.

     But there's a limit. The company will pay up to a maximum of $5,500 a month; and my total benefit will not exceed $200,000.

     Does this sound like a good deal to you?

     I got started on this because B has been hounding me about it. She took out a long-term-care policy for herself about ten years ago, after her husband died. At the time she had two teenage boys, and no husband, and she figured she'd have no one to take care of her when she got older.

     But also, B likes security, and she sleeps better knowing that when and if she becomes infirm, she has the resources to pay someone to take care of her. Besides, she has a better policy than the one being offered to me. Back then, when long-term-care policies were relatively new and untested, the insurance company agreed to cover all of her costs for up to three years, with no dollar limit, and then she somehow becomes eligible for Medicaid without losing her home and all her money.

     B's mother is now 97 years old, and only last year did she move into an assisted-living facility. All the women in B's family have lived a long time, and so B has every expectation that she will survive into her 90s, and probably end up needing some kind of long-term care.

     We've been to visit B's mother in her facility twice so far. It's a nice place in Pennsylvania -- relatively new and very clean, and it has a friendly, caring staff. Last time we went, we took her down to the dining room for dinner. There were maybe 30 tables in the room, with a sprinkling of white-haired people bent over the tables. And there the future was laid starkly before me. Elderly women, some in wheelchairs, others with walkers standing beside their chairs. And the men? There were no men.

     Or, nearly so. I did a quick count, and came up with 45 women sitting at the tables. And 7 men.

     So why do I need long-term-care insurance? Men don't live long enough to use long-term-care facilities.

     The insurance salesman told me 70% of people need some kind of long-term care at some point in their lives. He did allow that the percentage is higher for women, lower for men. I'm not sure if I believe him. But it did occur to me why B wants me to get the insurance. The men get sick and become infirm while their wives are still alive and still around to take care of them. The women outlive the men, and there's nobody left to take care of them.

     (Of course, this is a generalization. My own dad outlived my mother, and took care of her before she went into a Hospice for the last two weeks of her life.)

     Regardless, my long-term-care insurance will let me hire someone to take care of those bathroom and bathing needs, so B doesn't have to do it for me.

     So I've applied for the insurance. I checked out a policy being offered through my university. I checked out Genworth, the biggest in the industry. I ended up going with B's company because I get a couple's discount.

     At this point, there's no guarantee I'll be accepted for the policy. The company pulls your medical records; and also does its own physical exam, plus a memory test to see if you have any sign of Alzheimer's. I do not know how the insurance company decides whether a person is eligible for a policy. But it sounds as though if you have any serious medical issues, you're out of luck. In other words, if the insurance company thinks you'll need long-term-care anytime soon, it will not take you on.

     I'm pretty healthy. I'm assuming I'll be accepted (but you never know). And I will pay the premium, year after year, and I figure, if in 20 years I need some care, the amount I paid in will surely be less than what my maximum benefit is. I also get a 20% tax credit for my payments from the state, and because I file a Schedule C on my Federal taxes, I can take a deduction on my Federal tax as well (although how much longer I'll be working and filing a Schedule C is an open question).

     And then I just have to hope that 20 years from now, the insurance company will keep its promise to pay for my care.



Meryl Baer said...

Long term insurance is a gamble. My Mom has long term insurance, is 89 and still lives independently. My mother-in-law has been in assisted living three years, no insurance and is draining her bank account, paying over $5,000/month. When the $ is gone she goes on Medicaid.

Juhli said...

You are braver than we are in deciding to invest in this. We are struggling to decide whether or not to keep our term life insurance policies as our long term care backup/financial recovery plan. In the meantime we are saving as much as we can. I've come to the conclusion that there is no good answer since we can't predict our future needs or the viability of insurance companies accurately.

Veronica Wald said...

LTC insurance is interesting stuff. Years ago I bought a little policy for my mother, it didn't offer much because I couldn't afford much and she was already elderly when I had the opportunity to buy it at a group rate. When she got ready to turn herself in to assisted living, they company sent out a kind, friendly nurse who interviewed her at some length. The company concluded she did not need assisted living (though she desperately did) and would not pay out even a measly $10/day (which would have meant a lot to her). Why? Because while the standard interview asks what meds you're taking, it does not ask whether you are in debilitating pain, which my mother suffered greatly from. She could not take any pain med stronger than over the counter Tylenol because it made her dopey and increased her risk of falling (which in the end was what killed her anyway). Therefore the interview that sought to get at the pain question via prescription medications completely missed the single most important reason she needed to avail herself of what LTC insurance had promised. My objections to the company fell on deaf ears. This is an important lesson for me, when my time comes (I also fork out a little more than $2K a year for coverage similar to yours) I will make a point of asking my physician to prescribe heavy-duty pain medications so when the interviewer examines my pill bottles they will get the right message.
I have mine for same reason you have yours, so I can stay in my home longer with a little bit of help. Best of luck with your policy!

Linda Myers said...

We bought LTC ten years ago. Since then, the premiums have gone up twice. The first time they rose, we talked to our agent and decided to reduce the coverage from lifetime to five years, to keep the premiums down. The second time we decided to pay the increased coverage. My husband is now 71 and I am 65. Our combined premiums are $417 a month.

My husband had a cardiac arrest in January. He was dead for about a minute before CPR and a shock revived him (no damage at all - apparently caused by low potassium messing with the electrolytes in his heart's electrical system). Had he not recovered, all that LTC money would have gone to the insurance company to pay out for others. Which would be better, in my mind, than paying a CEO a ridiculous salary.

Denise said...

We purchased LTC insurance before my husband was 55 because that was a big jump in price. I am 7 years younger than he is. Both of his parents had Alzheimer's and Mom lived 2 1/2 years in a nursing home and Dad lived 5 1/2 years in a nursing home.

Our insurance agent told us to look at this as car insurance: you hope you never have to use it, but it's there. Another way of looking at it is insuring the assets that the survivor will need. Actually all insurance is that: insuring what you cannot replace (easily). With Hubby's folks, they were both in the nursing home in the same time and there was (eventually) no home to go back to and need, but with most couples, the survivor has some kind of future life.

That's why we have LTC insurance. Obviously, the age at which you buy it makes a difference.

stephen Hayes said...

Getting old is a sobering thing. Two thousand a year doesn't sound too bad providing they do what they promise. Unfortunately, I have my doubts.

Anonymous said...

I'm hoping the end of my life will be a good as my dad's. He died at the age of 92 and would not leave his home. Instead, for the last few years of his life, my sister hired a live-in companion to care for him and his needs at $600 per week. We siblings visited often, but my sister was the main care distributor.
It was only the last 3 weeks of his life he spent in a hospital due to respiratory ailment where he later died.
If I can be so lucky and fortunate as my dad, then I will be happy.
I am planning for the same demise as my father.

Anonymous said...

If nothing else, LTC insurance gives you and your family peace of mind. My policies cover home care also, and I can use it sporadically as needed. I've had both policies many years (15 and 20). If I never use them it will be OK too! I lay out about $300+ per month. My rates are lower than they might have been as I bought the insurance when I was younger.

Anonymous said...

If nothing else, LTC insurance gives you and your family peace of mind. My policies cover home care also, and I can use it sporadically as needed. I've had both policies many years (15 and 20). If I never use them it will be OK too! I lay out about $300+ per month. My rates are lower than they might have been as I bought the insurance when I was younger.

Jono said...

My wife is eight years older than I, so I figure we will kick the bucket at about the same time. Hopefully, we will be able to help each other to the bathroom for a long time, but you never know.

Anonymous said...

I don't trust LTC companies. They might go out of business or deny us coverage.
I would rather pay for my care with SS and Medicaid -- something my in-laws did.

Olga said...

La, la, la, fingers in my ears, I can't hear you. I cannot bring myself to even go there. I prefer the head in the sand approach to uncomfortable decisions. I want the magic pill when it gets to that point.

Douglas said...

We always seem to be at the mercy of insurance companies, don't we? But insurance is a business and businesses rely on profit. Had you put away that $2000 a year back when you were in your 30's (and it stayed with you after the divorce), you wouldn't have a need for LTC insurance. Same with the little bit of money we "contributed" to Social Security and Medicare each paycheck. But we are human and tend to be like the grasshopper in that fable about the grasshopper and the ant. The insurance companies use that against us.

Kirk said...

My LTC plan is a wife who is 12 years younger than I.

Bob Lowry said...

Maybe I am overly cynical, but I am convinced any LTC policy will have enough small print to screw me when the time comes to turn my yearly "donations" to the company into some form of care.

Or, like several others, the company that happily takes my money will go out of business or raise the premiums to the point where I cancel and lose any benefit from years of paying the premiums.

No to LTC for Betty and me.

refchef said...

Almost 20 years ago, my aunt (who lived with my mother) had terminal cancer. Her long term care policy allowed her to stay at home with caregivers 12 hours a day and kept my mother from killing herself providing care. It was expensive, but worth every penny.

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Anonymous said...

"I'm not sure if I believe him." Somewhat amazingly, the 70% figure is "close enough" to the figure put out by the Federal Government at longtermcare.gov. That website further gives the following info: 1) 65% of people will need some sort of at-home help for an average of 2 years, 2) 35% will be in a nursing home for an average of 1 year. More statistics are there if anyone is interested.

That said, there may be small print or other issues mentioned in other comments that make such an investment a "bad deal".

Several years ago, we all got a chuckle out of an old woman in her 90s who consulted a trusted advisor about the advisability of buying long-term care. She had millions and could well afford any care that she might some day need.
Cop Car

Anonymous said...

I should have written that the longtermcare.gov's figure to compare to the 70% is that 69% of people will require some amount of long-term care before dying, for an average of 3 years.

Unknown said...

Health insurance can be helpful to everyone, as it serves as a fallback when an unforeseen occurrence or accident occurs, or even for long-term care. And it was wise that you researched about it first and asked the salesman a lot of questions before getting one. That will give you a good idea of what kind of policy will fit your needs best. Anyhow, I hope you will get the approval for your insurance.

Steven Keltsch @ Allied Insurance Managers

Jessie Parker said...

Going with your life without long term care insurance is "dangerous" or risky and I'm glad you have made the right decision to secure your future and let your chosen company pay for your care.

Colbie said...

My father and I just started talking about long term care recently. He is 60 now and has always been in good health but a couple weeks ago he had a heart attack. That started up a lot of conversations and questions about the future. So we were scrolling through some policies and we can't decide if its worth it or not. It's hard to justify spending that much money when you are healthy.

Joshua Duncan said...

Gunning for long term insurance can be a tricky decision to settle on, though there's no harm in wanting to receive healthcare benefits, especially for the long run. Anyway, good luck on your application, Tom! Wishing you all the best!

Joshua Duncan @ Focus Insurance Group

Steph said...

I'm not sure about LTC. I believe it's kind of a gamble really. I guess you don't really know until something actually happens. I would like to have some home health aide training by then and hopefully I would be the one taking care of them. That would be perfect.

Lynn said...

Great article. Thank you for sharing!