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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35357  
Subject: Long term care ins. question Date: 12/15/2005 9:40 PM
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Does anyone have any links to what an optimum time to sign up for long term care insurance might be? Even tables of probabilities would be welcome.

Its a case of balancing the case of "the older you are, the higher your premium" vs. "the longer you pay premiums (premia?) the more money you pay in".

Then there's always the possibility that you die before qualifying for the payout. But that may balance the likelihood of developing a chronic condition before signing up.

TIA,
Mom

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14534 of 35357
Subject: Re: Long term care ins. question Date: 12/15/2005 10:10 PM
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PolymerMom, I think you are trying to beat the house at the big casino in the sky.

They tell me that there is a very specialized profession called actuarial science. They are the ones who figure the odds for everything and advise the insurance companies on what to charge at what age so people like you can't beat the system. The rates are selected so that based on the chances of you collecting exactly balance with what you pay at any age based on some reasonable rate of return.

At first approximation, no matter what choice you pick, your costs will all be the same. Of course, if you can invest your own money at higher return than the insurance company rate, you might come out a bit ahead. But similarly if you come up with any diagnosis that makes the need for long term care more likely, you will probably become uninsurable.

So if you think you need insurance, its better to buy it sooner. Either that or plan on being self insured. That is to say, invest the funds that you would have paid in premiums wisely and safeguard them for the possibility that you might need long term care some day.

My objections to long term care insurance are

1) most people who pay in never collect a dime. Only about one third of us ever spend a day in a nursing home.
2) if you have insurance and decide you need nursing home care, the amount paid by insurance will almost always not be enough to cover the cost of your care.
3) the insurance company can and will constantly raise prices in order to cover the rising costs of care. Can you keep up?
4) you are paying the insurance company a fee to invest your funds for you so you can fight with them to give them back to you when or if you ever need them.

I prefer the self insurance route.

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Author: GoldRushers Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14535 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 12:45 AM
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My objections to long term care insurance are

1) most people who pay in never collect a dime. Only about one third of us ever spend a day in a nursing home.


Being holders of long-term insurance, we hope to never have to collect.

2) if you have insurance and decide you need nursing home care, the amount paid by insurance will almost always not be enough to cover the cost of your care.

If costs are not completely covered, the difference will be minimal compared to no coverage at all.


3) the insurance company can and will constantly raise prices in order to cover the rising costs of care. Can you keep up?

Read the small print. Many policies have set premiums if an insuree commits early enough.


4) you are paying the insurance company a fee to invest your funds for you so you can fight with them to give them back to you when or if you ever need them.

Well, sure . . . insurance companies cover their costs in order to provide their service and stay in business.

It is pretty negative on your part to view them as a future enemy.


I prefer the self insurance route.

Like investing in real estate or a savings account? Do you have any first-hand knowledge of how fast such equity can disappear when and if long-term care is needed?

To each his own, though. Guess we just prefer a peace of mind that some insurance buys.


J&R



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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14536 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 8:59 AM
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With luck, all of the money we pay for insurance will be lost. I also hope that all the money any of us put into safe keeping for emergencies and contingencies in low return investments never needs to be used for emergencies and contingencies.

A year ago, we had the opportunity to get in on the ground floor on newly offered long-term care insurance (ground floor meaning no questions asked, automatic coverage at a group rate). We opted for the inflation adjusted, fixed premium option (about $3500 a year for 2 people). I calculated that, at a 5% return on savings and 3% increases in premiums, we would break even with the much lower initial, adjustable, premium in about 20 years—I expect the insurance company uses a higher rate of return, but as individuals, we would need to keep the money safe.

If we had chosen to "self-insure," it would take about 10 years of saving the premium to cover 1-year of long-term care costs, as paid out by the insurer, maybe more if costs inflate more than 3%. We're probably well enough off that 1 or 2 years of care would be survivable without insurance. But once we retire we won't be paying disability insurance, which comes in about the same, so this is just a budget shocker for about 10 years.

Long-term care insurance isn't about typical end-of-life nursing care needs (e.g., my father-in-law who lasted about 3 weeks after starting Hospice care). It's about long, severely disabling but not life-threatening diseases, that can go on for years.

If necessary, to cover the added cost of long term care insurance, we can keep working for an extra year. I think I left enough leeway in the budget planning that won't be necessary, especially since we chose the fixed premium.

I don't like having to pay for liability insurance, either (we have more than just the standard for the house), but there is only so much keeping up with my icy sidewalk I can do, especially since I didn't take out the insurance of stocking up on more than a typical year's supply of salt-substitute against the contingency of a year's worth of de-icing before Christmas (i.e., the hardware store was out when I went for a resupply a couple of days ago and probably going to have to use salt, which I hate).

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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14538 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 10:03 AM
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I didn't take out the insurance of stocking up on more than a typical year's supply of salt-substitute against the contingency of a year's worth of de-icing before Christmas (i.e., the hardware store was out when I went for a resupply a couple of days ago and probably going to have to use salt, which I hate).

I'm waiting for a couple, three solid days above 35 so I can spread my remaining salt on the driveway and be rid of it.

Lawn fertilizer works as a substitute. One thing I like about Ma and Pa stores is that they hate having that stuff in inventory this time of year and are often willing to deal. Try doing that with H.D. or Lowes who have no permission to haggle.

jack

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14539 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 10:09 AM
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3) the insurance company can and will constantly raise prices in order to cover the rising costs of care. Can you keep up?

Read the small print. Many policies have set premiums if an insuree commits early enough.

****************************

I sugggest you go back and read the fine prnt again. Pretty much every policy I have ever seeen allows insurers to raise policies whenever they please. Many policyholders found this out after getting slapped with rate increases of 50% and higher.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14541 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 11:10 AM
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"I'm waiting for a couple, three solid days above 35 so I can spread my remaining salt on the driveway and be rid of it.

Lawn fertilizer works as a substitute."

Didn't think about fertilizer. Your tips are definitely worth more than 2% real return. I really don't want to go out driving to some mall in this mess (Christmas plus light snow over a layer of ice) and the I-never-got-around-to-using-it fertilizer in the garage could get me through the immediate crisis. Good luck on those above 35 days.

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14542 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 11:16 AM
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I'm waiting for a couple, three solid days above 35 so I can spread my remaining salt on the driveway and be rid of it.

Lawn fertilizer works as a substitute."
______________________________
But does fertilizer help melt the ice, or just give you a gritty surface to help walk on, as, say, kitty-litter?

I hate keeping fertilizer in the garage any length of time; I can't abide the smell.

Bill

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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14543 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 11:26 AM
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Bill,

But does fertilizer help melt the ice,

Yup its an exothermic reaction. Its easier on animal toes too. Salt lowers the freezing point of water which makes it a great additive to the beer cooler. My poor critters get the salt slurry on their feet and it hurts because its so cold and it sticks. All of them accept one, are pretty cold tolerant.

jack

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14544 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 11:28 AM
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See this and look at the right side of the page for addition links to stuff by Pixy

http://www.fool.com/retirement/care/01.htm

This stuff is 5 or 6 years old, so the dollar amounts are off a little, but the concepts in my view are valid.

From several sources, I have seen comments do not buy LTC insurance before age 50 -- I suspect the reason is two fold. First it is a long time to pay premiums. Second when I purchased their is an upper limit on the benefit you can start with. Well cost increases over a period of 25 years or so will be huge. Certainly within recent history even the 5% compound payment increase policies don't come close to keeping track of cost increases.

Also I have seen buy before age 60 -- and these articles point out premium cost and the danger of being denied coverage for health reasons.

There is no question, insurance has value only if you can not afford to sustain a loss. Insurance companies have expenses and they make profits. So the money they pay out has to be less then they take in. So it is crazy to buy insurance for something you can cover yourself. Hence deductibles on auto insurance, fire insurance, etc.

As you are looking at insurance, the sales agents will give you carefully selected facts which may insurance look essential. You may hear high percentages (maybe over 85%) of women will be in a nursing home. Nursing home costs are high. But what you don't hear from the sales agent is how long people stay in the nursing home -- I saw one figure that said 90% of people entering a nursing home are not there 12 months later. (Most die.) While Medicare does not pay for LTC, it does pay for the first 100 or so days -- well not all of it, but most.

Clearly there are income levels where buying LTC insurance is crazy - some people just need to accept that if they get seriously sick they are going to end up on welfare (aka Medicaid).

The absolute worst thing I can think of is for a person to buy a LTC policy that will not pay for their care when they have few assets -- say one today that would pay $80 a day and that person. Except in very low cost parts of the country, $80 a day won't pay the costs. So where is the rest of the cost going to come from? Once the money used to pay the difference between $80 and the total cost is used up, it is a Medicaid story. Nursing homes know this and they know they can't throw people out on the street. So many nursing homes just will not admit people whose total of assets and insurance won't pay the total cost.

Many people just don't want to be rational and logical in the area of LTC costs. If people are not logical and rational, there only hope is to die fast - so far people have not figured out how to avoid death --

Gordon
Atlanta

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14546 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 12:23 PM
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"Many people just don't want to be rational and logical in the area of LTC costs. If people are not logical and rational, there only hope is to die fast - so far people have not figured out how to avoid death -- "

First and foremost, long term care insurance is for the spouse of the one who needs care (and the children who might otherwise inherit or end up helping pay for costs). It is also protection against bad case scenarios.

For the insurance company, statistics are everything. For individuals, they are worthless. The probability that nursing home stays are brief won't help if your spouse gets Alzheimers and lives on for years and years unable to care for him or herself.

As to Medicaid, which has been a reasonable option in terms of quality of care, presuming the person who gets ill is a surviving spouse or single, I wouldn't want to count on that as boomers start to burden the system. It's not just a matter of forcing people to divest themselves of all assets with no chicanery (chicanery is be to forbidden for the middle class and reserved for the fat cats). Nursing home care and last year of life medical intervention are a disproportionate part of medicaid and medicare costs, even now. With an aging population, there will be a need to control costs. Of course, some of the savings can come from creating an effective medical care system (30%-50%). But even if politics, and a public willingness to accept that evidence-based medicine means not pulling out all the stops, allowed for getting the best bang possible for the medical buck, an aging population requires a lot of medical care, and I wouldn't be surprised to see savings come at the expense of the poor and expendible elderly.

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Author: missash Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14547 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 1:01 PM
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I have been looking into LTC insurance also. FACT: In my area of Western Massachusetts the daily cost of a bed in a skilled nursing facility is currently $243-$335. The lower end is for 2 in a room, the upper end for a private room, which there are apparently few of. That's just for room and board. Drugs and supplies are "extra". To "self insure" for such costs would require quite a large nest egg, imho

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14548 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 1:43 PM
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There's apparently a lot of variation from place to place as to costs. We bought the mid-cost option among three choices, which is supposed to at least cover the low end. I just got an update (which hasn't yet been filed, so I could look at it lying on the floor by my desk) and for next year they've increased to $210/day. And I checked the actual cost, which is just under $4000 for 2 people per year. Ouch. But if either of us spends 1-year in a nursing home some day, or requires extensive home health care (also covered), the insurance will pay for itself.

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14551 of 35357
Subject: Re: Long term care ins. question Date: 12/16/2005 5:00 PM
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Mom,

I don't know your age, but what I did was to start paying $1000 a month into CDs about 10 years ago. This was more than long-term care insurance would have cost me to pay $100/day for 3 years. I did this for a number of reasons. One was that I still seemed to have my faculties about me. another was that no male in my family (either paternal or maternal) had lived to the age of 75. My brother almost made it to 75, but he had been seriously ill for 25 years.

Well, here I am older than my brother was when he died by a few months and still seem to be in good health (Though I have had a spine operation). My CD fund is now approaching one year at $100/day. Yes, a nursing home will cost maybe $200/day, but I do have other resources.

The questions remain as to how long will I live and will I need a nursing home so I continue to put in my $100/mo.

brucedoe

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14552 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 9:51 AM
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Loki,

Have you tried kitty litter for icy walks? We found it works quite well. Also sand is good.

brucedoe

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14554 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 9:59 AM
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Two,

We were told that three years in a nursing home is pretty much what you should plan for though my mother lasted 7 years.

brucedoe

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Author: GoldRushers Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14558 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 11:34 AM
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Has anyone mentioned that the premiums are fully tax deductible?

They are.

That is not a big thing, but it is a pleasant factor to consider.

Jim

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14559 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 11:48 AM
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"Has anyone mentioned that the premiums are fully tax deductible?

They are.

That is not a big thing, but it is a pleasant factor to consider."

Actually this would be a big thing, if true. At least when we bought in last year, they were not tax deductible. I know the insurance industry (which obviously wants more people to sign up) was lobbying to get it tax deductible. Did I miss this some legislation?


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Author: missash Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14561 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 12:12 PM
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<<<<<Did I miss this some legislation>>>>>>>>..Unfortunately, no. The premium is tax deductible only insofar as when added to your other medical expenses, it exceeds 7.5% of your adjusted gross income. And then, it is only the dollar amount over 7.5% that is deductible. Bummer.

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Author: DollarSignz Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14562 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 1:11 PM
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Perhaps by using a FSA or HSA? I know that I am able to deduct what I pay for perscritions and medical and dental costs not covered by my insurance, although there are some restrictions (i.e. teeth whitening treatments). I pay the cost and then submit a claim to the FSA administrator, who reimburses me with money taken out of my paycheck before taxes.

-$$$

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14563 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 2:40 PM
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Our HSA doesn't list long term care insurance as an eligible expense and explicitly rules out the part of our health coverage premiums we pay.

If anyone can find a tax loophole on this, I'll be more than happy, but I doubt I'm wealthy enough to qualify for tax loopholes.

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14565 of 35357
Subject: Re: Long term care ins. question Date: 12/17/2005 10:17 PM
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gold,

Well, the premiums are not simply deductible. Your medical expenses have to exceed 7% of your AGI. Actually, this year our Medicare B and backup health insurance exceed 7% of our AGI by themselves.

brucedoe

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14566 of 35357
Subject: Re: Long term care ins. question Date: 12/18/2005 7:57 AM
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Many thanks to all who provided info!

Both MIL and FIL had LTC. Its from one of the better insurers. They bought a policy to pay for a max of 4 yrs. It doesn't have much of an escalation for inflation, and there is a 90 day wait period before payout begins. This seems to be fairly standard. FIL never collected. He spent about a week in the retirement community's nursing ward before to succumbing to a myriad of physical problems. It was at this time we discovered that MIL has Alzheimers. Luckily, we received a payment past due statement from the insurer and managed to keep MIL's coverage. FIL never collected.

Drugs and supplies are "extra".

That is most certainly true. Most facilities require medications to be pre-packaged in individual doses. This includes vitamins, aspirin, as well as prescription drugs. This is not cheap and is not covered in the basic fee. One place my MIL was had a special Alzheimers floor, but when we voiced concern that she was turning into a vegetable, they offered extra programs - for a handsome fee.

MIL started out at a church-sponsored facility that was reasonably priced. They had a retirement apartment in the complex and after FIL died they required her to move to assisted living, since she had forgotten how to cook and was starving herself. We had to move her from that assisted living facility last year because they were not capable of dealing with her. (She took a walk one day and didn't come back. They found her sitting on a porch of a house a few blocks away.)

We found a place that had an Alzheimer floor, for about $1000 more per month. It had controlled access, but the staffing model for the place was set to provide the absolute minmimum. MDH happened to be there when a fairly big guy marched into MIL's room and demanded she give him her paper. (He said it was his.) MIL, all 5'2" of her, stood up to him. The other patient was about to get violent and MDH couldn't find someone on the staff to intervene. Luckily the situation resolved itself.

We found a third place, at another $1000 per month increase. It seems to be working fairly well. (Thank heavens! I'm not sure there is another alternative in the area.)

There is some indication that Alzheimers may have a genetic basis. To care for MIL, one of us would have had to quit our job. The indications of Alzheimers didn't appear in MIL until she was in her mid-80's. So, LTC insurance may be useful in our family. Given that MDH is already in early 60's, we are looking at possibly 20+ years of paying premiums if MDH develops it.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14567 of 35357
Subject: Re: Long term care ins. question Date: 12/18/2005 9:06 AM
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Mom,

Our decision to jump in when we did was there was an open enrollment with no need to prove we were a decent insurance risk. Otherwise, I'm sure we would have put it off. We don't have any family history, like Alzheimers, that might make us bad risks, but I'm always leery of insurance companies.

In your case there is a family history, so I would think if there is any way to get insured through work automatically that would save a lot of money. Otherwise, I think it is a virtual certainty, insurance for your hubbie will go through the roof.

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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14568 of 35357
Subject: Re: Long term care ins. question Date: 12/18/2005 1:58 PM
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We have had similar problems in our family. Much has been written about how an increasing number of us will face these problems in the future. http://www.efmoody.com/longterm/alzheimers.html . Unfortunately you and I are both facing them now and are anticipating more to come.

You asked: “Does anyone have any links to what an optimum time to sign up for long term care insurance might be? Even tables of probabilities would be welcome.” I personally felt this of no help in my decision-making for I assumed, right or wrong, one ends up paying the same amount no matter when you purchase a policy. To me the important question was do I buy long-term care insurance or self-insure. I decided that I could afford the approximate $350,000, that the insurance would pay, and still leave enough to maintain my wife's standard of living. If I lived more then about five years then Medicaid would cover me for the remaining time.

I found this site informative related to ones mental state. http://www.alzheimerprediction.ca/



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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14569 of 35357
Subject: Re: Long term care ins. question Date: 12/18/2005 11:16 PM
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Speak of the devil:

Editorial on the topic in tomorrow's Times:

http://www.nytimes.com/2005/12/19/opinion/19mon1.html?hp


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Author: tedhimself Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14570 of 35357
Subject: Re: Long term care ins. question Date: 12/18/2005 11:59 PM
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Actually this would be a big thing, if true. At least when we bought in last year, they were not tax deductible. I know the insurance industry (which obviously wants more people to sign up) was lobbying to get it tax deductible. Did I miss this some legislation?

My 2005 Turbo Tax Premier program shows long term care premiums are deductible for those who itemize deductions - Schedule "A". Now that the standard deduction is $10,000, plus another thousand for each spouse over 65, it may be hard to have enough deductions to get over this standard deduction threshold. Disclaimer: I don't know if Turbo Tax is correct on this. I haven't seen the enabling legislation. HTH
Ted



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Author: tedhimself Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14571 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 12:05 AM
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OOPS! posted too quickly. Forgot to mention that it goes in with the other medical expenses and is therefor, as was mentioned in an earlier post, subject to the 7.5% deductible issue as are all medical expenses.
Ted

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14572 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 9:50 AM
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I just ran a calculation that may, or may not, be helpful. Basically, I want to know how much care my money being put into insurance would buy if I self-insured.

If I saved $4000 per year (a little more than we're paying) for the next 30 years and got 5% interest and paid 15% federal taxes and 4% state taxes, I'd have about $243,000.

If my inflation adjusted benefit grew from $72000 per year (actually a little more) at a 3% inflation rate for 30 years, it would cover $177,000 for a year.

It really covers a higher inflation rate (I'd have to look at the policy) and taxes at least part of the time would be 25%, so we're looking at self-insurance covering 1 year plus when I'm 85. If anything happened sooner, it would cover even less.

We can fit an extra $4000/year into our budget. $1 million bucks to cover 5 years or so of care, even in inflated dollars, 30 years from now would be a killer.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14573 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 3:32 PM
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Pretty much every policy I have ever seeen allows insurers to raise policies whenever they please.

Typically the way these work is they say "We promise not to single you out for an increase. But we reserve the right to hike everyone's policy by the same percentage."

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14574 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 4:20 PM
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Typically the way these work is they say "We promise not to single you out for an increase. But we reserve the right to hike everyone's policy by the same percentage."
*****************

Correct, they can't pick someone who is costing them money in claims and jack up premiums on an individual. But they can look at a group of policies and decide they aren't making enough money on them and jack premiums through the roof. Ask some of the Conseco and Thrivent policyholders how that felt.

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Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14576 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 7:28 PM
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We can fit an extra $4000/year into our budget. $1 million bucks to cover 5 years or so of care, even in inflated dollars, 30 years from now would be a killer.

I have never seen a long term care policy like the one you have purchased and I would read that policy very carefully for I would never assume an insurance company has your interests at heart. With that said your figures seem reasonable. I say that because roughly speaking, $4000 a year for 30 years invested at 12.5% has a future value of $1,063,786 (assuming I put the numbers in correctly on my TI BA-5 calculator). If only 50% of their clients required payout of that future value they would only need to get 6.25% on the funds paid in. Which is exactly why I would be uncomfortable and look very closely at the company and their policy. But then, this is probably due to my ignorance for I don't have a logical method of determining when it makes sense to purchase any form or amount of insurance. In my lifetime if I had enough money to cover the potential loss, without destroying me financially, I did not buy the insurance.

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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14577 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 10:20 PM
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Just want to go on the record and say I've never upped anyone's premium.

jack

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14578 of 35357
Subject: Re: Long term care ins. question Date: 12/19/2005 10:58 PM
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I really don't get this anti-insurance company paranoia. They can make a hefty profit from long-term care insurance without cheating anyone. They have the actuarials set so they will win handsomely if most people never need care for much longer than what the statistics now show.

Sure they raised rates dramatically on lots of premiums after the stock market crashed and they discovered (unlike a lot of folks) that you can't rely on unrealistically high returns on investments. But the rules for my long term care, inflation adjusted, policy are very clear and they don't need to cheat to make money from the average of people like me.

Maybe I could self-insure for 5 years if I got $12.5% on my investments. But I'm ot going to be putting self-insurance money into anything risky enough to get 12.5% (which is a lot more than I expect the stock marke to return in the future, anyway). The insurance company doesn't need to get 12.5% on my money, though I'm sure they project higher returns than 5%. They just need the length of nursing home stays to be less than their ability to pay, and they are pretty sure they have the numbers right. If I end up a statistical everyman, I will have spent too much money. Insurance companies rely on the statistical everyman. I buy insurance in case I'm a statsitical wierdo.

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14579 of 35357
Subject: Re: Long term care ins. question Date: 12/20/2005 8:28 AM
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I really don't get this anti-insurance company paranoia. They can make a hefty profit from long-term care insurance without cheating anyone. They have the actuarials set so they will win handsomely if most people never need care for much longer than what the statistics now show.

Sure they raised rates dramatically on lots of premiums after the stock market crashed and they discovered (unlike a lot of folks) that you can't rely on unrealistically high returns on investments. But the rules for my long term care, inflation adjusted, policy are very clear and they don't need to cheat to make money from the average of people like me.
*************************************

I am not anti-nsurance company by any stretch of the imagination. I am a serious student of the industry and I have devoted years of my professional life to analyzing these companies. My comments are based on my professional experience and what I have seen in the LTC market.

I am not suggesting that insurers are cheating someone. LTC is based on a contract, and they will honor their end of the contract. But you had better read carefully and understand fully what you are getting into when you buy this product. The actuaries do the best they can, but there are many variables that are tough to forecast with limited data, and there are other pressures on insurers to write business even when it might not be priced appropriately.

Just a little clue on what backs these policies: no insurer that I am aware of uses a significant amount of equity investment to fund LTC policies. The overwhelmingly popular choice is long term bonds, and in general insurers can't find enough high quality bonds with long enough duration to offset their LTC liabilities.

Going back to the contract, you may think that you have laid the risk entirely off to the insurer, but you haven't. If morbidity experience or investment returns are not what was expected, insurers can and will put that back to the policyholders in the form of rate increases. That doesn't mean LTC is a terrible product or that nobody should buy it, but you should be fully aware of the economics and the amount of risk you truly lay off.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14580 of 35357
Subject: Re: Long term care ins. question Date: 12/20/2005 12:22 PM
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I really don't get this anti-insurance company paranoia

Insurance companies are funny beasts. Sometimes they will be extremely generous and give out cash left and right, for losses that arguably are not covered by the policy, without even doing basic fraud checks. And sometimes they will become extremely tightfisted and will make you wade through swamps of bureaucracy and jump through all sorts of hoops to pay out benefits that are clearly stated in the contract.

Sometimes they continue coverage in force months after you've quit paying the premium; other times they cancel coverage if the payment is one day late.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14581 of 35357
Subject: Re: Long term care ins. question Date: 12/20/2005 12:41 PM
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I'll recheck the fine print to see if they left any wiggle room to change what they sold as a premium fixed for life. I really think they have their bases pretty well covered by capping the inflation adjustment on the pay out.

Regardless, my basic argument is, if you choose to self-insure, in the sense of saving/investing what your would pay for a premium, you can probably cover 1 or maybe 2 years of long term care, but unless you have what I consider pie in the sky expectations for returns, you can't self insure for 5 or 10 years of long term care, and that's where a married couple risks one of them being driven into poverty to cover care for the other.

P-Mom has a mother-in-law with Alzheimers, with which many sufferers live on for years and years. My advice is, get long term care insurance for your husband, at least, before they hold the family history against you or refuse to sell you the insurance at all.

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14582 of 35357
Subject: Re: Long term care ins. question Date: 12/20/2005 6:50 PM
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P-Mom has a mother-in-law with Alzheimers, with which many sufferers live on for years and years. My advice is, get long term care insurance for your husband, at least, before they hold the family history against you or refuse to sell you the insurance at all.

That's my inclination. If I go through my employer, I'll likely have to insure myself, as well. (Need to check.)

An Alzheimer patient typically lives 6-8 years from diagnosis. The question is are they better able to diagnose someone now? Many family doctors are not trained to detect Alzheimers.

The earlier version of the mini-mental exam did the counting backwards (no problem for MIL, she did the books for their business), who is the president, what is the date and day-of week and draw a clock face with the specified time. She aced the tests. From her internist's perspective she was normal, but we knew there was something amiss.

The link provided earlier was excellent! The mini-mental exam has become much more likely to detect the likely Alzheimers patient.


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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14583 of 35357
Subject: Re: Long term care ins. question Date: 12/20/2005 9:02 PM
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P-mon,

I think it comes down, as usual, to weighing the risks. It's like Jack's point that if he can't save enough for a 3% initial withdrawal rate, it's more risky to invest with an eye to getting 2% above inflation than 4% above inflation, while if I can achieve an initial withdrawal rate of 2.8%, it is less risky to go for 2% above inflation.

Adding long term care insurance has definitely had a big impact on our budget, but all it really does is cut the margin for error I had built in and maybe it will necessitate working an extra year to achieve the previous savings goal. There really is little risk that this added expense will make it difficult to save enough to retire with a conservative investment plan. On the other hand, paying for years of long term care would have a devastating effect on the other spouse.

It think for those struggling to save enough for basic retirement goals, the added expense could be the straw that broke the camel's back, and the risk of needing longer than average nursing home care may be worth ignoring. Having a family history, of course, raises the risk and makes it hard to ignore.

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Author: gerrymanning Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14605 of 35357
Subject: Re: Long term care ins. question Date: 12/22/2005 3:32 PM
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Incorporate a sideline business and let it pay the premiums. Then they're deductible by the corporation as a non-taxable fringe benefit to you, the employee.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14606 of 35357
Subject: Re: Long term care ins. question Date: 12/22/2005 5:09 PM
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Except the business has to actually make a profit (and pay taxes on the profit) or the IRS will declare it a "hobby" and invalidate all the deductions.

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Author: HarrietB Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14622 of 35357
Subject: Re: Long term care ins. question Date: 12/26/2005 8:56 PM
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I bought a long-term care policy in April of 1998, at age 55. The premium was $66.18 per month. Guess what it is now?? Ha! Gotcha!! It's STILL $66.18 per month! My policy provides waiver of premium if I am in a nursing home, and becomes "fully paid-up" if I am there for at least 120 consecutive days, including the 90-day elimination period during which they pay nothing. In addition, it allows me to increase my coverage due to inflation, if I choose to use that option. The policy not only pays for nursing home care, but for a plethora of other care options. I think $794 a year is a bargain! Assuming I don't have to use the coverage until I am 80 years old (25 years from date of purchase), I will only have paid in a little under $20,000--which wouldn't begin to cover even one year in a nursing home. There is really no way the average investor can hope to guarantee he or she will be able to achieve a great enough return to cover long term care. It just isn't a feasible option.

Furthermore, I think buying long-term care coverage is the socially responsible thing to do. It's that, or go on Medicaid at taxpayer expense...assuming there is any such thing when I reach that time in my life.

I hope to leave my children and grandchildren a little something at my death, rather than having them deplete their own retirement savings to take care of me in my old age. This policy should help me do just that.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14729 of 35357
Subject: Re: Long term care ins. question Date: 1/3/2006 10:36 AM
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My policy provides waiver of premium if I am in a nursing home, and becomes "fully paid-up" if I am there for at least 120 consecutive days,

Who gets to define "nursing home", "consecutive", and "days"?

All kinds of ways the ins. co could mess with you if they wanted.

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