long term health care plans

I looked when I was in my early 60's (approximately 2000) - my bottom line was a) my late wife was uninsurable at the time b) the articles that I read at the time suggested that it wasn't for me.

At that time nursing homes cost about $100 a day

I summarized my findings and will present them here

Whether to purchase LTC insurance becomes a question of your net worth, your estimate of your personal probability of entering a nursing home and whether there is a spouse or other dependent still at home.

The consensus of articles that I have seen in Business Week, WSJ, Forbes etc is that you should not buy LTC Insurance if your assets are < $100K or > $1M

The recommended time to buy is about age 60 - you will still have your health and should have an idea if you will be able to afford the care

Nothing could be worse than to pay LTC premiums for 15 years and then have to give up the policy because you can no longer afford the premiums

Spend down rules vary from state to state - especially the amount that can be set aside for a spouse still at home. Elder Law attorneys in CA claim that they can usually arrange for a larger amount/portion of the income to be set aside for the spouse still at home than might be inferred from the spend down rules.

If you think that you will never return home, I can make a case for going to the Waldorf Nursing Home during the spend down period and then going on MedicAid.

Here are some statistics that I have gleaned:

"Taking Care of Tomorrow" by CA Dept of Aging (which would prefer that you have LTC Insurance and not become dependent on Medi-Cal*) quoting a study by Kemper and Murtaugh called Lifetime Use of Nursing Home Care and the 1986 National Mortality Followback Survey:

Age at Death % who used a Nursing Home

65-74 17 74-84 36 85-94 60

Projected lifetime use of Nursing Homes for persons who reached age 65 in 1990 Never 57% Under 3 mo 11

3-12 Mo 8 1-5 yr 15% *MediCal is what MedicAid is called in California

"Business Week" 3/29/99 pg 182 > 1 yr in a Nursing Home Men aged 65 14% Women aged 65 30% (probably influenced by mortality and survivorship)

Business Week 7/19/99 Average stay is 30 months

76% out within 36 months 86% out within 5 yrs (not a normal distribution)

Wall Street Journal 4/23/90

70% of all couples have at least one partner go into a nursing home after age 65

Study by Health Insurance Association of America 1992 (I haven't actually seen this but I think it is the source of most of the statistics) and the Journal of Taxation of Estates and Trusts - Winter

1992: Nearly half of all persons aged 65....

Quote attributed to the 1991 Annual Report of Long Term Care Facilities of the CA Health and Welfare Agency (another outfit which would prefer that you have LTC Insurance and not become dependent on Medi-Cal)

Under 2 weeks 23% 1 yr 7%

2-3 week 20% 2 yr 4% 1-2 mo 21% 3-4 yrs 4% 2-6 mo 12% 5-6 yrs 2% 7-12 mo 8% 7-10 yrs 1% which is consistent with the previous table

Employees of the State of California gets to buy a very good long term care plan at a great price. I can afford to buy the top line of the plan.

I heard a fair number were exercising their clauses to increase premium rates.

Uncertain whether I not forget a or be unable to make a premium payment for each of 30-some years, I decided on the self-insurance option. I'll probably always have three-plus years of nursing home costs in my retirement savings.

If you decide you should be purchasing LTC insurance, the rates are better the younger you are when you purchase. I believe I will live well into my

90s, and feel confident that I will need some sort of assistance in the end years.

I googled and found an agent in Washington state who specializes in LTC insurance and is licensed to sell in all 50 states. He helped me find a policy that covers either or both my husband and me. It is not a policy with unlimited benefits - I bought what I could afford, which is approximately 4 years coverage, but does cover for home health care if we need it. This policy has a clause so that benefits increase with inflation, 5% compounded. Since I believe health care costs will increase at a greater rate than the cost of other goods, this was a very attractive clause. I also purchased a slightly higher monthly benefit amount than is the current cost in Alaska, about $4500 per person per month where I live, to further help with inflation.

I recommend you find an agent who specializes in LTC insurance and explore your various options. My agent was easily able to find a policy that beats the group rates offered through my husband's pension, and my coverage is better. But in the end, you will have educated yourself, even if you choose not to buy.

Elizabeth Richardson

Its been a while since I checked the stats, but one popular report suggested that 40% of Americans will need assisted living at some point and the average stay will last 2.5 years. You can use that, plus your local nursing care costs, plus your current assets, to help determine if LTC is worth the risk.

Elizabeth hit on the "unseen" value of LTC in her earlier post. As long as healthcare costs continue to inflate at a rate faster than the average, the real costs of being one of the unlucky 40% increases every year. Healthcare research has also has a newly developed habit of not curing diseases, but treating them. We still contract cancer, alzheimers, diabetes, heart disease, hepatits, etc, but are able to live with the disease for many more years. The end result is that we MAY see the 40% calculation rising as the baby boomers start to retire.

[disclaimer: I do sell LTC, but I didn't intend this to be a "scare story". I probably recommend against it as often as I recommend it when meeting with varying clients.]

I would suggest that there are a number of items that you would look for IN the contract.

a) cost of living increase (usually 5% per year, COMPOUNDED) b) A Bucket of Money Concept ! ! ! ! you purchase what ever benefit that you can afford. It amounts to a Total DOLLAR amount benefit (say 4K total). That money can be utilized for what ever NEED you have: drugs, home care, assisted living, Home heath care, day care, or one of many other legitimate expenses. Last of which would be Nursing Home care.

c) guaranteed premium period. Or if that is NOT available, look into the possibility of a "10 Pay Contract". It will cost a few dollars more, BUT you are Guaranteed that NO PREMIUMS WILL BE DUE AFTER 10 Yr..

Kalman J. Lester CLU

On Fri, 21 Dec 2007 16:02:35 -0800, sandybeth wrote (in article ):

I am surprised that, In all this discussion, no one is looking at the possibility that government health insurance will come about in the not too distant future. I would not be surprised if something is put in place after the next presidential election. And from that point , I cannot see anything but increasingly more government coverage in years to come. We all know that the USA lags behind other industrialized nations in health care, that the Canadians are ahead, and that American politicians and people generally are gradually coming to the conclusion that the situation is bad. So it would seem to be a sensible prediction that the USA is not going to remain at the bottom of the heap forever more. Something surely will be done eventually.

I am wondering how people with the better private health plans will fare when they become eligible along with everyone else for government assistance. And will private plans survive when public ones are available? I should imagine that advice from financial planners to pre-retirement seniors about what coverage to buy would prudently take these matters into consideration.

Is that why Canadians are coming across the border daily to get health care here? They have a hard time getting a lot of routine stuff. We may have a very expensive system here, and surely there are ways to address that, but don't be too sure that we don't have really fine health care in the US.

Elizabeth Richardson

Your domain name suggests that you are a Canadian. I was and my father lived in Montreal until he died in 2006 at the age of 98.

Quebec (a Canadian province) does not pay for LTC unless you exhaust your funds. In the US, Medicare does not pay either, if you exhaust your funds Medicaid will pay.

The 80 plus percent of Americans with health insurance worry that any national health plan will leave them with lousier medical care. My observation of Quebec was that what you had was the equivalent of a government HMO with care being rationed by the fact that facilities were not available.

One of the main reasons seniors become impoverished is because they didn't do sufficient financial planning when they were younger. As to your health reasoning, many younger people in the US have a difficult time today with medical costs because they do not try to live a healthy life. This has a ripple effect.

Elizabeth Richardson

This is one of the major reasons for a shortage of doctors. Until around the early eighties you could look over your doctor's shoulder and see a whole set of US ARMY medical books. Most doctors received their medical training through the US. Army in exchange for some service. This has all changed now and has been "privatized." Thumper

======================================= MODERATOR'S COMMENT: Posters to this thread should relate comments to general financial planning.

On Sat, 22 Dec 2007 08:27:18 -0800, Elizabeth Richardson wrote (in article ):

Hmmm. I suppose the people and their elected officials in Canada and those European countries never figured that out. Maybe they are taking the wrong approach entirely. Maybe they should dismantle their government sponsored health plans and privatize everything again and then try to convince all the people to do better financial planning and give up junk food. I wonder how many people in those countries would listen to that kind of advice and keep a straight face.

65% of all deaths in the US (maybe worldwide, but I don't know that statistic) due to diabetes, heart disease and stroke are preventable. Living with diabetes is a very expensive. It would be far wiser, including financially wiser, to do the things that prevent it rather than doing the things to treat it. And yes, that includes limiting junk food, but it also includes exercise. One of the front-running presidential hopefuls talks about revamping our health care system to that of preventive care rather than disease care. He is not being laughed off the podium.

Elizabeth Richardson

On Sat, 22 Dec 2007 12:05:44 -0800, Elizabeth Richardson wrote (in article ):

Agreed that prevention and healthful living are highly desirable and would bring about great savings in the long run. But, still, the crux of the matter is the lack of health care for disadvantaged people (something like 40 million people or 14% of the US population with no health care at all). And a much larger percentage who are one serious illness away from loss of health care and bankrluptcy. What's more, some of the same factors that are responsible for poor insurance coverage also make it difficult for impoverished people to get enough healthy food and exercise. If you live in substandard housing or in the slums it is hard to go jogging after a day's work, or do push-ups in a small living room with all the kids and cats running around. In some places it is hard to find good food at the corner rip-off market.

I would hazard that most financial planners would not give advice based on "hopes" for the future. And hopes that the government will expand current federal medical programs in the near future may be unfounded. Programs such as Medicare are getting into trouble financially. Given the American distaste for taxation (not that anyone really likes to be taxed), paying for current levels of service, let alone additional services, will be troublesome.

-Will

william dot trice at ngc dot com

"Elizabeth Richardson" wrote snip for brevity

I should amend my earlier comments to note that, if some sort of national health care reform takes place, then its including as its main thrust a head-on, full-speed effort in preventive medicine would give me much more hope that costs and access (fueled by reduced demand) would improve.

Safeway grocery stores CEO Steve Burd has been leading a movement for health care reform. By my understanding Burd is known to be, of course, an enthusiastic capitalist and mostly conservative. The underlying principle of his health care movement is preventive medicine. He implemented a preventive plan with Safeway employees, and he has the numbers (less dollars spent on health insurance; better overall health for employees) to prove its effect.

Wal-Mart has begun to undertake a similar effort, emphasizing preventive medicine and giving its employees incentives (bucks) to quit smoking, lose weight, etc. All in the name of making a buck. But to say the least, a nice side effect is that everyone is healthier.

Business owners coming here for advice, take note. Those working for companies where the costs of health benefits have been rising, urge your companies to study and implement Safeway's model.

On Sat, 22 Dec 2007 03:03:19 -0800, Avrum Lapin wrote (in article ):

I have lived in both countries, and the vast majority of Canadians here in BC want a government plan as it is and would never vote for a US system even as they complain about long waiting lists in Canada. I would guess that the Americans who worry that a national health plan would lead to lousier care are ones who already are able to pay for excellent care. People in the US with no health insurance at all have nothing to lose.

On Sat, 22 Dec 2007 13:17:41 -0800, Will Trice wrote (in article ):

Your prediction might be reasonable if only Canada and perhaps two or three other industrialized nations had national health plans while most European nations had US type systems. But the reality is that the USA is an oddity, a rich nation with inadequate medical care for large numbers of its citizens. Under these conditions, an astute financial planner could be expected to be aware that government health insurance is very likely on the way. I would say it is inevitable. I should thinkl this possibility would have important financial implications and would influence decision making about investments. It should especially concern knowledgeable planners reputed to be aware of the long term and not just what is happening in the market today or what was good last year.

OK, under these conditions, what advice would your hypothetical planner give?

"You can cut back on your savings because I hope that you'll have expanded government-funded health benefits, including long term care, when you retire."

"Now that you're retired, you can invest more aggressively because I hope that you won't need your cash for health care expenses due to expanded government programs."

etc.

Perhaps our resident planners can chime in, but these don't seem like sound strategies for an uncertain future. How uncertain? Well, how long has the U.S. been in the medical situation you perceive? So even if you're correct and our situation will inevitably move towards expanded government programs, how long will it take to get to, say, Canada's level? I would think that as part of a sound financial plan, you would plan for the contingency that these programs will not be in place in time for your use, even if you firmly believe they will come about eventually.

-Will

william dot trice at ngc dot com