Cost of Long Term Care


A lot of people incorrectly assume that health insurance and Medicare will cover long term care. They cover medically necessary care for up to 100 days, or until you stop improving or stablize. After that, you’re on your own.

The majority of Americans over 60 do not have long term care insurance yet 70% will need care. So, why do people not buy insurance?

Most will say the cost of the policy. An average policy, depending on age, health and benefits chosen, will cost $1,000-$3,000 per year per person.

But what about the fact that the same people who say they will “self-insure” for long term care will never “self-insure” a parking meter… they always put money in the meter, even though they could easily afford and “self-insure” the parking fine.

We make decisions based mostly on emotion. That’s what causes people to buy stocks when they are high and sell when it crashes, the opposite of what seasoned investors do.

What if you “self-insure” for long term care, how much will it cost you? The national average for nursing home care is $89,000/year with some areas over $140,000/year. Home care and assisted living average $50,000/year. See how much care cost in your state: download the Cost of Care brochure.

For every $1,000 of monthly retirement income you want to generate from your own savings, you will need about $230,000 in assets, according to the Schwab Center for Investment Research. For example, if you want only $3,000 a month, or $36,000 a year, you would need savings of $690,000. That’s a conservative estimate, assuming that you earn 5.2% on your investments and live off the earnings without dipping into the principal.

If you cannot afford a long term care insurance policy, how are you going to afford paying out of pocket? The other option is spending all your cash for your care. This includes anything of cash value: savings, investments like stocks, bonds, life insurance, annuities. Medicaid allows you can keep only $2,000.

There are 30 states with filial laws that allow the state to make your children repay Medicaid for your care expenses, although this is rarely done. Fifteen years ago the #1 reason people bought long term care insurance was they did not want to be a burden on their family. Today, the #1 reason is people do not want to outlive their money (and end up on Medicaid-Welfare Health Care).

Some people will buy long term care insurance for asset protection. Most states have a Partnership program that will protect assets from Medicaid if you own a Partnership long term care insurance policy.

You have five options to pay for long term care:

1. Self-insure.

2. Long term care insurance and Partnership.

3. Life insurance with long term care rider.

4. Annuity with long term care rider.

5. Medicaid.

The life insurance and annuity do not qualify for the Partnership (neither do group LTC policies). The life/LTC or annuity/LTC are often bought because: the person’s health will not qualify for traditional LTC insurance, or the person has too many cash assets and they’d never spend down to qualify for Medicaid. An old life policy or old annuity can be converted to one with long term care benefits without paying capital gains.

You can continue down the same road, uninsured, until either a diagnosis or a serious change of health, like a stroke, will disqualify you from insuring. Then you will only qualify for state assistance. At that point you would have to have used, sold or given away your assets 5 years before applying for Medicaid. Who has the ability to see 5 years into the future?

*  The best age to insure: the age your health will still insure you.
*  The best benefits to get: enough to cover what you cannot afford to pay out of pocket.

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Why You Should Consider Long Term Care Insurance in Your Retirement Planning

If you haven’t already done so, now is an excellent time to consider adding long term care insurance to your retirement portfolio. Because uninsured long term care expenses can pose a significant risk to the assets you’ve worked a lifetime to accumulate, long term care insurance should be considered as part of a complete financial plan.
As former Senator told the United States Senate Special Committee on Aging, “Although the need for health insurance to cover a patient’s medical expenses in case of catastrophic illness is widely recognized, few people are insured against the costs of providing long term support services for that same person. This lack of insurance coverage jeopardizes the financial security of families and diminishes the economic security of the country.”
The likelihood that you may need long term care is significant.  Some 70% of Americans who reach the age of 70 can expect to utilize some type of long-term care during the remainder of their lives.  And while long term care includes a broad range of services, from in-home care to nursing home care, each comes at a cost.  Those costs could be substantial, and could have a significant adverse effect on your retirement portfolio.
Why? Most forms of health insurance focus on medical expenses, not the custodial care and nonmedical expenses associated with long term care. Medicare only covers nursing home care after a related three-day inpatient hospital stay and even then for only 20 days before a daily co-payment is assessed and Medicare only covers a total of 100 days.

Medicaid doesn’t kick in until one has spent down a significant portion of their assets (spend-down to $2,000*).  Therefore, if either you or your spouse needs long term care, you may have to pay for that care out of your accumulated assets … unless you have long term care insurance.

genworth-nursing-cost-2016The average cost of a private room in a nursing home met or exceeded $80,000 annually.  If one partner needs such care, the cost could quickly and substantially erode the assets acquired over a lifetime.
Let’s use a hypothetical couple living off the interest of $500,000 of invested assets to illustrate how serious an impact long term care expenses could have.

For the sake of this discussion, assume the couples’ investments are earning approximately eight percent annually, generating about $40,000 per year in income.  Let’s also presume this couple needs all of this income to support them while they’re living together in their home.
Based on an $80,000 annual cost for nursing home care, it may appear that this couple has enough for a little more than six years of care. However, that basic calculation does not consider the living expenses of the spouse who remains in the community.  

If this couple is using all of their investment income to provide for their living expenses, they will soon need to start withdrawing from the principle for a portion of those living expenses as well as for the long term care expenses of the partner who needs care.
In circumstances like these, it’s easy to see how the assets accumulated over a lifetime could soon be completely exhausted.
Long term care insurance can help provide the funds to pay for the care you may need, while simultaneously protecting the assets you’ve worked a lifetime to accumulate. Long term care insurance may also help preserve financial independence, choice, and dignity, and those can be priceless.
It’s never too early to consider insurance because your health can change at any time, meaning you may be uninsurable and end up paying out-of-pocket.

The Partnership Asset Protection program is available in most states. This will protect your home and assets to the limit as was paid by a qualified policy.

Some people have too many assets to benefit from the Partnership. They may prefer an annuity or life insurance with a long term care rider. You can use an existing whole/universal life policy or existing annuity to fund a new policy with long term care coverage. The Pension Protection Act allows this transfer without having to pay capital gains.

Feel free to contact us for more information or for an updated quote.

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.* States can differ on spend-down.




U.S. Congress increases money for Alzheimer’s research

Congress just increased the budget for Alzheimer’s research by $400 million for fiscal year 2017. In 2016 the budget for Alzheimer’s at the National Institutes of Health was about $910 million.

The number of people living with Alzheimer’s disease is expected to reach 14 million by 2050. It is estimated that for every $100 that goes into research, around $16,000 is spent in caring for people with the disease.

Money for research has greatly improved the outlook for heart disease and cancer patients. In 2017, health and long term care costs for Alzheimer’s came to around $259 billion in the United States. That number is expected to rise to $511 billion by 2020. Since not finding a cure is expensive, more funding for Alzheimer’s research is obviously needed.

For more information on Alzheimer’s and long term care, see the Guide To Long Term Care.

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Why are some long term care insurance rates going up so much?

Group rates for long term care insurance will rise steeply in November.

  • Federal LTCI premiums will rise an average of 83%
  • CNA recently raised premiums nearly 100% for some group policies for employers, unions, and associations.
  • John Hancock Financial raised premiums as much as 126% on group policies for federal employees and retirees.

Policy holders, many of them angry, are wanting to know the reason for the sudden rise in rates.

Some blame the Office of Personnel Management. OPM oversees government insurance programs and must approve any rise in premiums.

Some say that the government keeping oil prices down produced the shortfall.

Others blame John Hancock, the only insurance company to bid on the federal program this year. John Hancock pays about $13 million a month in federal long term care insurance claims. Since 2002 the federal program has paid out more than $700 million for long term care.

ltc cost1

Part of the reason for the rise in premiums is that insurers originally set prices too low, underestimating how long people would live and need care. Insurance companies must balance the need for affordable rates with the responsibility to pay claims when they come in. Fourteen years ago, 102 companies offered long term care insurance. In 2016, only 12 to 14 companies are still in the business.

Insurance companies earn some of their money in interest on premiums; they make investments that help pay for claims. The recession unexpectedly brought interest rates down below 8%. Around the world, interest rates are near zero, and in some places have even become negative. The low interest rates are one of the main reasons insurance companies must raise premiums.

Because of the low earnings, some insurers have struggled to pay dividends to their shareholders. The Federal Reserve Board held down interest rates on Treasury bonds to prevent another recession.

A law passed in 2012 was supposed to protect consumers from steep increases in insurance rates. Insurers need permission from regulators in most states before premiums can be increased. However, since state insurance regulators still have not issued the final rules, insurance companies can raise rates on some policies without regulatory approval. Group coverage, while it offers discount rates, does not have the same regulatory protections as individual coverage. New regulations are being discussed.

ltc cost2

The National Active and Retired Federal Employees Association and some members of Congress are calling for hearings on the premium increases. But Congress will have little time for action before September 30 when enrollees must decide whether to keep their policies; so hearings will probably take place after the premiums have already gone up.

For those who enrolled in a policy before August 2015, premium increases will begin on November 1.

Policy holders must choose to either keep their policy and pay higher premiums, scale back coverage, or discontinue the policy and consider getting a different policy. Some enrollees can switch to an option in which they pay no more premiums but have a much lower benefit.

For some people, it may be possible to find a better policy in the private market. If the policy holder is in good health and bought the policy within the last few years, it may be possible to get a new policy with better rates. However, if the original policy was bought many years ago, a new policy will probably not cost less – and may have no guarantee that its premium will not rise.

Premiums are based on the insured’s age at the time of purchase. Each year the purchaser waits to buy a policy, premiums can rise 5% to 12%. The risk of being denied coverage for medical reasons also increases with age. And newer policies are regulated more strictly, which makes them more expensive than those issued years ago. Genworth 2015 Cost of Long-Term Care Survey ChartWays to lower the cost of a policy include reducing the benefit period, reducing the daily or monthly benefit, extending the waiting period before benefits apply, or changing the inflation protection. People who have policies with lifetime coverage could save a lot by reducing the benefit period to three or five years. Most long term care claims are for three years or less.

Policy holders should not wait until the last minute to look at the alternatives. If you decide to switch to another company, make sure your application has been approved before ending your existing coverage.

Many policy owners bought their policy before their state had approved the Partnership asset protection program. Some policyholders may choose to buy a smaller second policy just to get the Partnership.

Despite the proposed rate hike, long term care insurance is still the most cost effective way to protect yourself from the high risk that you will need expensive long term care.

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5 things state lawmakers want to do about long-term care insurance

Legislators are wrestling with purchasing incentives, benefits options and rate stability

State lawmakers have a huge stake in improving private long-term care planning.

genworth nursing cost 2016States now spend about $100 billion per year, or about 6 percent of their $1.7 trillion in annual revenue, on Medicaid nursing home benefits and other Medicaid long-term care benefits for the poor, and for residents who have used “Medicaid planning” to protect their assets.

The share of state revenue going to fund Medicaid long-term care benefits could rise sharply starting around 2031, when the baby boomers begin to flow into the 85-and-older age category.

Read Rest of Story Here

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New blood test for Alzheimer’s disease

Researchers have developed a blood test to detect early stages of Alzheimer’s disease.

Scientists at Rowan University in New Jersey have developed a blood test that can detect mild cognitive impairment (MCI). MCI usually appears ten or more years before the severe symptoms of Alzheimer’s disease.

Not everyone with mild cognitive impairment goes on to get Alzheimer’s. MCI can be caused by multiple sclerosis, Parkinson’s Disease, vascular problems, depression, traumatic brain injury, and other conditions.

HomeNursingHomeAccording to researchers at Rowan, their blood test can distinguish between different forms of cognitive impairment, and, using a small number of blood-borne autoantibody biomarkers, can predict with nearly 100 percent accuracy the cases that will progress to advanced Alzheimer’s disease.

The study tested the blood of 236 subjects, 50 of whom had MCI. If the original findings are confirmed by a larger study, doctors could use the test to make treatment recommendations. The care of those who have early Alzheimer’s would be different from those who have MCI for different reasons.

Early detection of Alzheimer’s is important so that treatment can begin when it is most beneficial, before a lot of brain changes have occurred.

The research will be published in a future issue of Alzheimer’s & Dementia: Diagnosis, Assessment & Disease Monitoring.

For more information on Alzheimer’s disease, see Guide To Long Term Care.

It is estimated that unpaid family members take up 2/3 of the cost of long term care. Long term care insurance can help pay for both home care and nursing home care. Two LTC insurance companies include a (limited) cash benefit that can be used to pay family members, many of these policies have Partnership asset protection. Also available are life policies with long term care riders and some companies have a cash benefit.

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Good News for Long Term Care Insurance Companies and Policy Holders

Long term care insurers are paying more in claims in 2016, and expect the increase in claim benefits to continue in future years. Around $8.15 billion in claim benefits were paid to 260,000 insured individuals in 2015; In 2014 there were benefits amounting to $7.85 billion paid to roughly 250,000 individuals.

Why the increase? First, more people are living to be older. Also, many policies have a 5% compound inflation, which increases benefits. And of course, some of the increase in claims payments is caused by increases in the cost of care.

The difference between low-cost and high-cost policies remains between 20% and 90%, but monthly premiums are not rising, because the number of policy holders claiming benefits is already factored in to the monthly premium.

The average cost for a long term care policy has gone down in 2016. The lowest price for one of the better policies is $873 a year or $72 a month for a 55-year-old single man. In 2015 it was $1060 or $88 a month. For a 55-year-old single woman, the lowest price in 2016 is $1100 a year or $91 per month. In 2015 it was $1,390 a year or $115 per month.

Linked benefit plans, including life insurance with a long term care rider and annuities with a long term care rider, have been popular since 2014. Sometimes linked benefit plans will be the best option for people who have pre-existing conditions that disqualify them from getting traditional long term care insurance.


Long term care insurance policies have a relationship with interest rates. The extended period of low interest rates for the last decade forced some long term care insurers out of business. The Federal Reserve raised its key interest rate in December, from a range of zero to 0.25 percent to a range of 0.25 percent to 0.5 percent. Insurers mainly invest in bonds or fixed income securities and not equities; therefore higher interest rates are good news for them.

The reason monthly premiums increased over the past few years was that interest rates were declining. Now, rising interest rates will bring additional revenue to long term care insurers, making it possible for them to lower their premiums. According to the American Association for Long Term Care Insurance (AALTCI), a 1% increase in long term interest rates can mean a 10% to 15% decline in policy premiums.


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Tips for Buyers: LTC Insurance Health Assessment

Insurance companies will request a health assessment (interview) to be done either by phone or in-person. Insurance companies outsource the testing to paramedical companies.

When you are called to set your appointment they will identify themselves and the insurance company and they will let you know if it is a phone interview or a face-to-face interview.

Schedule the meeting for a time that is convenient and when you will not be too tired or too distracted.

The interview is an important part of the health underwriting/approval process. It is important to remember to be calm and focused. Also turn off your phone so not to be interrupted and only answer the questions asked.

More LTC insurers are requiring in-person or telephone interviews as well as physical exams, according to Joe Sperling, J.D. He said he reminds clients that the interviewers work for the insurer, which means applicants should be honest but stick to the point when answering interview questions. It’s the same advice an attorney would give a client who is about to testify in court: answer the question, don’t go beyond it, don’t volunteer, he said.

“The examiner is not their high school buddy,” Sperling said. “The examiner is there to ask questions about your medical history. You want to answer the questions, be succinct and not elaborate. A natural tendency is to get a little bit too verbose. Rein that in. The danger is getting into the embellishment because there’s nothing good to happen there.” 

Do not intentionally exclude information that is related to your health. The underwriter will be reviewing your medical record and will compare that to the application and health assessment. If you do remember something later that you had not disclosed during the exam contact your insurance agent.

Term vs Permanent Life — Which Costs Less?

This short video compares Term life insurance with Whole or Universal life insurance. Keeping this in mind, there are Whole and Universal life insurance policies available that have long term care riders. If you use a portion or none of the life/LTC policy for long term care (tax-free) your beneficiaries will receive a tax-free death benefit.

If you currently have a Whole or Universal life policy that has a cash value the Pension Protection Act allows you to convert it to a Whole or Universal life policy with long term care benefits without paying tax on gains. Contact us for quotes or more information.

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