Do You Need Long Term Care Insurance?

Just Curious!

Like many other questions I pose to clients, who ask me the question first – my answer often begins with . . . “it depends.”  This particular question is often posed by clients doing pre-retirement planning and this may be the best time to be considering one’s options about how best to plan for retirement.  I would consider how one answers this question posed in the title to be part of how we look at our elderhood and its challenges and uncertainties, about which I have recently blogged.  So I will start with some basic questions.

How long will you live?

Sure, I bought a crystal ball a couple years back from a local shop, Grandpa’s Attic in Littleton, but I haven’t yet found a reputable online “gazing” course to hone my crystal ball reading skills. . . . ! Let me know if you have any leads on that.

Will you have health conditions that will make it difficult for you to live independently?

Some of us already have chronic health issues by the time we hit our 50’s or 60’s, so this might be a “heads up” that things could get progressively more difficult.  But many of us just want to simply pretend that a downturn in our health status isn’t likely and so somehow it wouldn’t be possible that we will outlive our financial resources.

Will you have enough money saved to cover for the needed additional care?

Many elders I know want to leave something to their kids after they’re gone.  How does the need to pay for care services, which one typically had been paying for previously in one form or another (if the elder had not been a longtime recipient of government benefits) adversely impact the person’s ability to leave a legacy to family members? Well, simply put, it can pit your own well-being and financial wherewithal against your child’s desire to inherit from you.  I know, it sounds crass and the kind of thing that would never happen to you . . . but the fact is that we elder law attorneys see a fair amount of this.  Why provide the temptation for your kids, to pit your ability to pay for your care against their ability to inherit funds from you?

If you don’t have sufficient funds to pay, who will pay for your care?

Many people assume that if they can’t pay their own way, perhaps family members will care for them.  In fact, our health care system (and I am reminded of Walter Cronkite’s quote “America’s health care system is neither healthy, caring, nor a system”) relies heavily on family caregivers to provide free services to help manage their loved one’s care, improve the patient’s quality of life, as well as reduce costs to the health care system.  Many folks simply want to assume that they will be able to stay in their home, regardless of their physical or medical condition.  This behavior has a name: avoidance or denial!

Will there be sufficient levels of public assistance available in the even you run out of money?

If you think that there will be plenty of money from your fellow taxpayers to fund your care, you might want to reconsider! The Medicaid expansion in Colorado under the Affordable Care Act made many more funds and programs available to impoverished elders who could not afford long term care services, but the continuation of these funds and services is not a sure thing!  The failed American Health Care Act would have gutted those funds available for elders.  Read more here from Justice in Aging’s blog.

Do you already assume that long term care insurance is going to be too expensive?

I met a financial advisor last year who was fairly new to the business, she told me that only “wealthy people” get LTC insurance. I explained to her in my experience that was not the case!  There are people who make getting a LTC policy a financial priority, and they aren’t always those folks who can otherwise afford easily to self-insure – meaning the wealthy who can afford a Cadillac LTC policy or who have enough funds to privately pay for care without making a dent in their kids’ inheritance.

The fact is, there are more ways to fund the purchase of an LTC policy than you can shake a stick at!  Here’s an article by Wade Pfau from Forbes magazine that has several helpful links to the smorgasbord of options currently available.

© Barbara E. Cashman 2017   www.DenverElderLaw.org

 

The Insurance Industry’s Response to our Unprecedented Longevity

Denver Elder Law

Monet Garden Pond with Chihuly Glass sculpture, DBG July 2014

 

This post is about the insurance industry’s response to our unprecedented longevity.  Hmmm. . . . puzzling over the title of this one?  Well, a couple interesting insurance developments have made it onto my radar screen recently and so I thought I’d write a post about them.  I’ll focus on two in particular:

  1.  Flexible long-term care insurance

We used to have a much larger number of companies offering long-term care insurance in this country, about 100+ ten years ago and now it seems we’re hovering around a dozen or so companies offering the policies.  But it is important to note that there are still many misconceptions about long-term care insurance.  Many people still mistakenly think that Medicare will cover this (it doesn’t) and that there will be plenty of Medicaid beds and service providers if they need care (the Medicaid coffers are still shrinking and doesn’t coordinate well with Medicare).  I recently read about the prediction that the Medicare trust fund for hospital benefits will be depleted by 2026.  Ouch! if I’m lucky enough to still be here, I will be eligible for social security benefits the following year.   For a variety of reasons, long term care insurance has never really “caught on” in this country, at least in part due to the misconceptions that someone else will be able to pay for it if we are unable to pay and in need of such care.  It also has to do with the fact that paying for these premiums is for providing the care that we hope we will never need to receive.  But bottom line, it is about not being a burden on your family members – from a financial, medical or emotional perspective.

There are many different types of LTC policies available, with more variety than ever.  This makes it even more important to understand and know what kind of policy it is you are purchasing and that it is the right one for your situation.   As the number of old elders (80+) continues to grow, Long term care insurance still has hurdles in selling to the baby boomers.  What happens if you pay all those years for coverage and then can’t afford the premiums anymore?  What happens if you pay all those years and then die without ever having used any benefits?  These and many other questions are now answered in new and interesting ways thanks to new and varied option for LTC.  A standard feature of most of the new policies is that they provide coverage for home care, which can be more expensive than staying in a facility – so it’s not just “nursing home insurance” anymore.  There are a number of different products available, so be sure to start with some good information about the basics  of how these policies work.   It is a good idea to remember that health care in this country is not cheap, and Medicare and “Medigap” only get you so far.  And in case you’re wondering whether I am trying to “sell” LTC, I’m not – there are still plenty of risks involved in both purchasing the policies and investing in the companies offering those policies.

Bottom line is, the best way to ensure that unforeseen medical consequences do not decimate your financial well-being or that of you spouse as a result of the need for long term care – is to carefully consider your options now so that when you decide to make a choice, it will be a considered one and not made under the duress of crisis.  Thinking about these matters now lessens the burden on your family members or loved ones in dealing with difficulties in the event they arise in an uncertain future.

  1. Longevity Insurance

Where did this new product come from?  Changes in tax rules!  This kind of insurance is essentially protection against running out of money in our ever-lengthening old age.  Since none of us knows how long we will live, whether we will have saved enough for retirement, along with a few other life-altering details along those lines . . .  this insurance looks to have big potential.  Couple that with the emotional attractiveness of annuities, and we’re off to the races!  Check out this recent NY Times article about some of the rules for these policies as retirement tools.  What makes these policies “new?”  The article considers the previous prohibition against using these annuities within retirement plans due to required minimum distribution rules.  With the rule change “workers can now satisfy those rules if they use a portion of their retirement money to buy the annuities and begin collecting the income by age 85.”

But keep in mind that the sky is not the limit here and retirement plan participants can use no more than 25 percent of their total account balances, or $125,000, to buy the annuity, whichever is less.  If you are considering these, you will want to carefully read all the fine print concerning these new vehicles.  What is helpful to know is that, for the Americans that have saved some money for retirement (sadly, only about one-half of American households have a retirement account beyond social security), there are more options available.

©Barbara Cashman  2014   www.DenverElderLaw.org