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Is Long-Term Care Insurance Really Worthwhile?

BY MARGARET PRICE
FOR INVESTOR'S BUSINESS DAILY
03/20/2015 07:34 PM ET

Special Report: Retirement Planning 2015

Tricia Baker rues the day, some 25 years ago, when her parents were talked out of buying long-term care insurance. Today, these elderly parents, who have dementia, live in an assisted living facility that costs $8,000 a month.

But after their money runs out, they'll have to go on Medicaid, says Baker, of Greenville, N.C. "They'll probably have to move somewhere not as nice, since their facility doesn't accept Medicaid."


Long-term care insurance might be advisable for those
with $250,000 to $750,000 in assets.

To help avoid such sorry sagas, Baker believes "everybody should have long-term care insurance (LTCI) if they can afford it."

Or should they?

That quandary comes as ever more baby boomers reach their 60s and have to consider that they may need long-term care. But data show few people rushing to buy LTCI as part of their retirement planning. And now, in controversial reports, Boston College's Center for Retirement Research (CRR) is lowering its boom.

In a November brief, the CRR deemed LTCI "optimal" for only about 20%-to-30% of unmarried individuals. While the "risk of needing a nursing home is higher than some researchers previously thought, average nursing home stays are shorter, and thus, less costly," explains CRR senior research economist Anthony Webb. What's more, Medicaid often kicks in if long-term care patients run out of funds.

And the CRR's view — that LTCI is often not cost-effective — doesn't just apply to singles: In a report due out in March, the CRR will explain why this insurance also "may not make sense for most married couples," Webb says.

But even as LTCI proponents sharply disagree with the CRR, data does show flagging interest in traditional LTCI. According to LIMRA, a worldwide research firm, sales of individual LTCI policies slid an average annual 6.9% between 2004 and 2013. Experts cite such deterrents as policy rate hikes, a weak economy, insurers exiting the business and a general reluctance to buy the product.

Deemed Expensive

Among consumers' concerns: LTCI is widely deemed expensive. The average premium cost for what's dubbed "best coverage" for a couple aged 60 is about $3,840 a year, according to the American Association of Long-Term Care Insurance. Premiums can rise. And policyholders could be paying premiums for years — even after they retire and live on a more fixed income — without knowing if they'll ever use the coverage.

Indeed, "Few of my clients have ever had any significant amount of long-term care," says financial adviser Paul Ruedi, of Champaign, Ill. "If they have needed this care, most of my clients, who are affluent or semi-affluent, self-funded it."

He feels LTCI might be advisable for those with $250,000 to $750,000 of assets, who want to leave inheritances but have a family history of longevity with long-term care needs.

But government data show 70% of those turning 65 will need long-term care at some point. Having LTCI, its proponents say, can provide important benefits to both patients and their families. For instance, policyholders could expect that they wouldn't be bankrupted by care costs. They could better afford professional home care, instead of burdening their families with their care, and they could preserve assets for heirs.

And if they don't drain their funds — and have to use Medicaid — on care costs, they'll likely have more choices about how and where to get care. Some nursing homes don't accept Medicaid.

Care At Home

And as for the CRR's views on LTCI: proponents of the insurance widely and sharply disagree. To Tobe Gerard, who specializes in selling LTCI, the CRR's findings are "dated," especially given the studies' focus on nursing home care. "Today, LTCI is really about care at home. That's where most people want to receive care," points out Gerard, of Natick, Mass.

Says the CRR's Webb: While the Center's data do focus on the use of care in nursing homes, "our estimates of the value of LTCI also take into account home health care and stays in assisted living facilities."

To financial adviser Steve Samuel, everybody should plan for what they would do if they needed long-term care. And LTCI should be one consideration. "People with assets of at least $250,000 likely have enough money to afford an LTCI policy worth buying. And it could help them stay in their home longer if they need care," says Samuel, of Dedham, Mass.

Other options include transferring assets to, say, family members so that Medicaid requirements can be met. Self-insuring using a reserve fund is another way to go.

Or, if consumers do want insurance, there's a newer variation: hybrid-LTCI plans, which are surging in popularity, according to LIMRA data.

These hybrid offerings are life insurance or annuity-based products with an LTCI rider. The most popular kind are the single-payment (say, a one-time $100,000 outlay) life insurance policies that provide LTCI if it's needed. If it's not, the premium isn't just wasted: the policy can provide a death benefit, or the premium can be returned to the policyholder. Likely candidates: Those who can afford a large one-time payment.



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Given, health, life, dental, homeowners, vehicles, trip, etc; I'm insured to death anyway. With taxes, insurance, food, and fuel needs, there's not much $$$ left. I'm going to pass on that one. I'll consider life over when I'm enrolled in long term care. They can use my medicare and social security to fund that one.

The concept is great, the Companies than provide it are thieves and have made a mess of the industry.

We have it. But we were lucky enough to find a plan that has great benefits and fixed premiums. It turned out to be so good that the company quickly stopped offering it - but we're locked in. Our premium is only $1,300 a year, each. Pocket change, considering that only one month of long-term care costs more than that.

OrangeOkie: I have looked into long term care insurance for my wife - the premiums are amazingly expensive!
Its a worry.
Fortunately I am covered 100% (no deductibles no limits!) for both assisted care living costs and for nursing home costs should those be needed for myself.
My wifes mother (Parkinsons patient) is paying for care at the rate of $8,000.00 per month!
It did not take long at all (5 years+) for her estate to vanish, at that rate.
But she is comfortable, and safe as possible, with that affliction.
I say if one can afford it and ones parents were long lived (but maybe needed nursing home care?) then it would be worth the premiums.
Hold into the wind
VarmintGuy

A recently passed brother in law was in long term care for 4 days before his death. Oddly the bill came to the exact assessed value of his home ($28,000). Nothing itemized, just a bill for 28K.

If you decide to place assets in a child's name [or someone else you trust], make sure you do it soon enough. I know the state Of Oregon, and more recently Washington, have a 5 year look-back period. .

The question is, do you think you'll save the money you'll need before you need it or will you need the money before you saved it?

Like most decisions in life, it's a gamble. Insurance is just a way to purchase liquidity.

It's a roll of the dice.
You are betting on possible need and the Ins. Co. is betting againist you.
If you don't have much for net assets, it is a no brainer.
If you have some and are trying to protect them or have a family history of long term need, it's may be worth a look.
You can pick your value also.
The many companies that have exited the business often did so because they underestimated the cost of future care. They were losing their shorts.
In my case it is a write-off, so that lowers my actual cost.
The feds made it a write-off because they can see just how many people have no insurance and how many trillions this will be costing our kids in the future. Thus, they are real excited when someone is willing to buy it and pay their own way.
So I/WE get to pay for our own longterm care AND the care of all you uninsured......
What else is new?

edit to add....
if you aren't healthy, the Ins. Co. does not want you........

Like Vegas,
they win most bets.

Wife's dad had a short term care insurance policy.
When he originally bought the insurance he was led to believe that it would pay all above $800 per month, which would come out of his pocket. As it turned out the insurance company refused to pay anything and he had to pay it all.

As is so often the case, the devil turned out to be in the details buried somewhere way down deep in the fine print.

After suffering a severe stroke, upon release from the hospital she had him transfered to a small rest home near where we live so wife and I, our kids, and grandkids, could spend as much time as possible with him.

Their reason (loop-hole) was the small rest home he was at didn't have a full time RN on duty, on the premises, 24/7, which according to them was one of their requirements. First and second shifts each had a full time RN on duty but their third shift was covered by an on-call RN.

My financial advisor tried to sell us about a 200k policy for 2500 a yr. Wife is 50 , im 51. I figure, every month we dont use it we save 210 bucks. I really dont like this kind of ins. I dont know what 2500 per yr plus 6-8% intert would amount to after 10 yrs or so. I have no reason to believe we will be in dire straights to the point we need this ins. Noone knows, we have been lucky all our lives, most likely cause we pray almost every day for our health and sfatety. We live simple , clean quiet lives to try to tip the scales in our favor.

Yes. One can bet they will research and fight to the bitter end to avoid payment. Have a niece in the business (assisted care), and it's fight every step of the way to get companies to pay.

Some years ago, a couple in Spokane, WA did that. To protect their assets, they put their house in the name of their son who was somewhere in his early 20's IIRC. As soon as the paperwork was signed, he evicted them and took HIS house.

Yes, this is the extreme exception but it does happen. I hope that SOB quickly met his maker.

I overinsure for most things, but my wife and I think LTC insurance is a waste of money. Aside from it being expensive, the payout does nothing to make life better. My inlaws carried it. My father in law was only in a home for a about 3 weeks before he moved to hospice for a very short stay, far short of the 90 day exclusion period. My mother in law was in a home for about 15 months. After the 60 day exclusion period applicable to her, during which she paid full price, she still was out of pocket to the tune of about $4,000 a month, and the care was so poor that we had to hire extra sitters for about $2,500 a month. We/she also were paying for the 90% of the inmates of the home who were on Medicaid. The quality of life was so poor that my wife and I would rather just die than live like that.

When we were in Seattle three years ago we ate at a Ruth’s Chris that was on the first floor of a Hilton Hotel. There was a very old guy sitting at a table across the aisle. He knocked back about 3 gin and tonics, mumbled to himself something about Rangoon, and passed out in his steak and side dishes. My wife got up to check him out and I was getting ready to punch 911 on the phone when the wait staff came up and said not to worry about it. It was Mr. X who stayed at the Hilton. They called the Hilton and the staff showed up with a wheelchair. My wife helped him into the chair and the hotel staff carted him off to his room. With some Priceline magic, that could be cheaper and much more pleasurable to me than rotting away in a nursing home.

More cost conscious alternatives include moving to a state where pot is legal and going out high. It’s not like the nursing home is changing diapers anyway, so just live in filth in your own place until you die . Alternatively, Oregon has assisted suicide for those who want to speed things up a little.

Sounds good in theory but I've heard lots of stories about the insurance companies weaseling out paying. If you get a plan, you better read the fine print and understand what you are getting for your money. I think I'll just go with the Dr Kevorkian plan.

Here comes safariman...

Which insurance company? Short term care policies are rather rare in the industry, or so I understand.

every situation is different, in general through the years i have not been much in favor of it.
Having said that, one lady we take care of in a group home has been getting a rather large check each month now for a couple of years to take care of a rather large bill, which it covers fully.
It won't pay forever but it is sure keeping in the distance invasion of other assets.