Is long-term care insurance worth it?
My dad's death last year not only made me and my siblings 40-something orphans, but it also marked the end of my parents' Nursing Home Era (1998-2011). Until his death, either my mom or dad was in a nursing home for almost 11 years of that 13 year span. That blew.
It was also very expensive. My mom shelled out $500,000 cash over the years, and her place was neither shmancy nor fancy. My dad “only” paid $22,000 per year because he had Long-Term Care Insurance.
What Is Long-Term Care Insurance?
Long-Term Care Insurance (LTCI) is insurance you buy to help pay for Nursing Home, Assisted Living, or In-Home Care should you ever need it. We did not have LTCI for my mom. We paid about $200/day for her care.
After my dad saw that first bill, he did what all shocked cartoon characters do. He lifted his jaw off the floor and put his eyeballs back in their respective sockets. Then he purchased an LTCI policy for himself. My dad had just turned 65 and this was 10 years before he would need to use it.
My dad paid $131/month or $1,572/year for LTCI. Therefore, over 10 years he paid out almost $16,000 for his LTCI. His policy covered $150/day for three years' worth of days. The nursing home was $210/day. That extra $60/day came to $22,000/year and was paid out of my dad's pocket. The other $55,000 per year was paid by the LTCI company.
My dad's LTCI saved him $130,000 over the 2+ years he was being cared for. Subtract the $16K my dad paid in premiums over the 10 years before he moved into a home, and my dad still came out ahead $114,000. The $114,000 return on his “investment” in LTCI was sevenfold.
Pretty sweet, right? Sounds like I'm doing a pitch to get LTCI.
Not so fast.
Is Long-Term Care Insurance Worth It?
I looked into getting a policy for myself five years ago. I saw how nursing homes devoured my parents' life savings and thought it might be wise to get an LTCI policy while I was young. The best deal I found was comparable coverage and pricing to my dad's policy. But my dad got his in 1998 when he was 65, and I was only 42 in 2007.
My beef with buying an LTCI policy, is that I did not find any company willing to guarantee that the monthly premium would remain unchanged. In other words, it could go up. Not guaranteeing my premium price seemed fairly significant. I don't recall any time in my life when I agreed to buy something where I could get charged more later at the seller's whim.
Even my Magic 8 Ball said that my premium would go up. I would be foolish to think it wouldn't. Since I would then have to choose to pay the increase or drop the coverage and wave bye-bye to the tens of thousands I sunk into the LTCI policy, I do not have an LTCI policy.
In August 2008, my dad checked into the nursing home. We hoped it would be temporary, but soon realized he needed full time care. In November 2008, a letter came from my dad's LTCI company, Genworth. (See the letter at the end of this article.)
They noticed he had started using his LTCI and were going to raise his premium or drop his daily benefit! I'm not saying this was some devious scheme. Everyone I dealt with at Genworth was very helpful. If they were going to do this in 2008, I assumed my LTCI premiums would get jacked up before I need it 25-50 years later. After all, health care costs are not getting less expensive.
Predicting the Future
In my opinion, I don't think nursing homes as we know them will be there in 30 or 40 years. As it is now, if you don't have LTCI or enough money to pay for your care, Medicaid pays for you.
So, what should we do? Should we spend every penny we make while healthy, then ask our fellow citizen taxpayers to pay for our care via Medicaid when we are penniless? That seems to be the approach many Americans take. To be fair, this hasn't even occurred to most people.
Or do we get an LTCI policy and hope to afford it and the probable price hikes on the monthly premiums? Rock, meet hard place.
My hunch is that In-Home Care will proliferate.
Back in 1988 in Huntsville, Alabama, in one of my first weeks as a full-time professional stand-up comic, I worked with Brett Leake. Here he is backstage with Jay Leno. The Leaker is a great comic and friend. Twenty years after meeting, we often found ourselves talking about the challenges we were going through with our fathers. He and his family received the2008 Virginia Governor's Caregiver Recognition Award for their in-home care for his father.
We use this opportunity to tell you about an extraordinary man, to say thanks, and to make the case for in-home care. If there is someone in your family who needs help and whose needs can be met outside an institution, please try to make it work at home.
Nursing homes serve a valuable purpose. Many of the caregivers are angels. But no matter how nice the institutions are, they aren't home.
I'd like to hear your thoughts. Have you found an LTCI company that will guarantee that they will not raise your premiums? Have you hired caregivers?
Postscript: Here is Page One of the letter from Genworth. They told us they were going to raise my dad's policy premium 12%. We could keep virtually the same monthly premium payment we'd been paying for 10 years, but reduce the daily benefit, if my dad ever needed to use his LTCI. The reduction of daily benefit coverage would be $17/day or $6,205/year. That's kinda significant!