Friday, August 17, 2018

Weighing Costs & Need for LTC Insurance

I'm teaching a "short course" on long-term care insurance for my law students this semester.  Therefore I'm collecting as much current information on policies and costs as possible to share with my students.  Along that line, WTOP-News in the D.C. area recently posted a two part discussion on "Weighing the Costs and Need for Long Term Care Insurance."

From the first part of the series:  

Based on a 2016 Department of Health and Human Services study, about half of Americans turning 65 today will require long-term care services during their lifetimes (47 percent for men and 58 percent for women) with most needing assistance for an average of two years. About 12 percent will need between two and five years of long-term care, and nearly one in seven adults will require five or more years. . . . 

 

Now let’s turn to the potential costs of long-term care services which varies by state and type of care. Genworth, a provider of long-term care insurance, released its 2017 Cost of Care Survey stating the national average annual cost of a private room in a nursing home is $97,452 which is an increase of 5.5 percent from one year ago and a five-year annual inflation increase of 3.5 percent. Interestingly, the biggest increase in long-term care costs was for a home health aide, which increased 6 percent from 2016 to 2017, to $49,162 per year for 44 hours per week.

 

Summary of Genworth’s median annual 2017 long-term care costs are below:

 

Adult Day Care (5 days/week)              $18,200
Assisted Living (one-bedroom)        $45,000
Homemaker Services (44 hours/week)  $47,934
In-Home Health Aide (44 hours/week)  $49,192
Nursing Home (semi-private room)$85,775
Nursing Home (private room)          $97,455

 

Source: Genworth 2017 Cost of Care Study

The article also has a good summary of key features of LTCI, including inflation riders, elimination periods, maximum daily benefits vs. maximum benefit period, lifetime maximums, guarantees on renewability, nonforfeiture options and shared care.

The writer, Nina Mitchell, who is a advisor for The Colony Group, says that she plans to focus on "alternative long-term care solutions, such as hybrid policies that combine life insurance with long-term care insurance" in Part 2.  

https://lawprofessors.typepad.com/elder_law/2018/08/weighing-costs-need-for-ltc-insurance-.html

Consumer Information, Current Affairs, Health Care/Long Term Care, Property Management, State Statutes/Regulations, Statistics | Permalink

Comments

I’m a resident of a CCRC that offers both Life Care and Fee-for-Service contracts. Since the costs of long term care provided in one’s independent living units (home aides) is usually NOT part of a Life Care contract, the resident pays out of pocket. So an LTC insurance plan with “home health” can come in handy, even if one is a Life Care resident.
During my father’s life he enrolled in small whole life insurance policies. Maybe he did so not only to obtain coverage on his life for Mom, or to get a build-up of cash value, but maybe he wanted to give a new agent an encouraging boost. When my brother found all these life policies in a file cabinet, he bundled them into a 1035 transfer into one policy that had a Long Term Care rider. As it turned out, we eventually used most of the LTC feature.
There was a recent program presented to residents here at our CCRC village – by an insurance representative. He was NOT selling his company’s products but providing an information session about insurance in general and how policies can be viewed as an investment. I sat there wondering if he even had studied his audience in advance. Many had probably purchased all the life insurance they’d need. Many might have been “uninsurable” for various reasons (age, physical condition, etc.). Many, I thought, might be just like my dad, having collected small policies over the years. I kept waiting for the presenter to get to the subject of 1035 transfers. Didn’t happen. I raised my hand and asked him to explain that option. Even though he was able to describe what a Section 1035 permitted, he did not mention a transfer to a policy with an LTC rider. Maybe the commission level is too low for an agent to “push” this concept, but rolling “stray” life policies into one policy with an LTC rider might help a lot of people, especially seniors. And one’s health condition isn’t an obstacle.

Posted by: Jennifer Young | Aug 17, 2018 10:17:52 AM

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