 A recent on-line column at Advisors Perspective attempts to provide an objective framework for conducting a long term care insurance analysis in a financial planning practice. It fails on several levels.
The article, “Evaluating Long-Term Care Insurance”, published February 24, 2020, and written by Allan Roth is hardly a comprehensive view of the subject, and it needs to be viewed with limited applicability. I find it to be only partially researched, inconsistently analyzed, and overly opinionated. Too many financial advisors inappropriately seek to value insurance products using an investment analysis model. While there are certainly cash-flow and cost of money considerations, as noted above insurance is purchased with an expectation of “losing” a little in exchange for potentially protecting a lot. And there are “soft”, subjective considerations that are also routinely ignored, but that often create the biggest value in having coverage when the risk event occurs.
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This week the news media lost its collective mind over a silly, old social media trope about a guy who says he won't live out his days in a nursing home, rather he'll simply stay at a Holiday Inn. It's cheaper, and the service is better, so it says. But it's a false narrative. I wrote an extensive blog on this in 2016. The e-mail I copied into that post from three years ago and the "new" Facebook post getting all the current attention are identical, word-for-word. It's certainly not original, it's specious and misleading, and the numbers are (still) way out of date.
A TV station in Houston, KHOU, even found an internet post from 2004 with nearly the same wording as this old-is-new-again misleading social media joke. You can't compare "independent retirement living" with CARE in a nursing home - or an assisted living facility. Hotel staff - nor cruise ship staff - will bathe and dress you, help you to and from the toilet, nor will they make sure your dementia doesn't lead you out the front door into traffic - or over the rail into the ocean - in the middle of the night. Once you need CARE, you'll be on the curb - or the dock. CLICK HERE to read my 2016 blog post for more details on why this is a ridiculous idea. "Aging in place" is an oft-quoted ideal for seniors of all ages and stages. But it takes a lot of personal, professional, and community resources to do so. The Villages movement seeks to expand the idea by helping people "age in community".
NPR looked at the "village" movement for seniors last month in a four part series. Villages are groups of seniors living in the community who come together to offer support and companionship to each other as they "age in place". For an annual fee, Villages provide volunteers and vetted professional services like handymen, as well as sponsoring events, arranging assistance for members, and other services suited to each unique "village". CLICK HERE to read - or listen to the stories! "I know people who refuse to visit a family member in the nursing home. They say it’s too difficult to see Grandpa that way. They’d prefer to remember him the way he was, not the way he is now. They mention the sights and smells and it disturbs them. I understand those sentiments. But I believe it’s a mistake not to go." Here is a beautiful, personal essay on living with and loving someone with dementia. The "new thinking" on caring for people with dementia is a shift from exclusively a "tragedy" narrative to one that honors, respects, and continues to celebrate the life that the person is still living. Life's different with dementia, but it's still a life and it can still be a good life. This essay not only illustrates that this is possible, but it also shows us with personal examples how to do it. Greg Lhamon is a friend and a client and one of the best radio and media executives I know ... He's also a wonderful writer and a die-hard Cardinals baseball fan. CLICK HERE or on the link or photo below to read Greg's story...  If an insurance agent tells you to replace your long-term care (LTC) insurance, be careful! Take your time. Get a second opinion. It's probably a mistake, and the agent pushing a replacement may be breaking the law. It is almost NEVER a good idea to replace an in-force LTC insurance policy. We are hearing stories almost daily of unscrupulous agents urgently telling their clients to immediately replace their in-force long-term care (LTC) insurance for a variety of reasons, all bad:
A huge mistake that many people make when considering LTC insurance is "over-quoting".
Most people do not need to buy coverage for 100% of the cost of the highest-possible cost of care (skilled nursing home), and even shorter benefit periods (3-4 years) will cover the vast majority of care needs. It's kind of like thinking, "If I can't afford a Mercedes, then I'll just wait for the bus." It shouldn't be a zero-sum, all-or-nothing decision - that's a HUGE mistake. A Malibu with cloth seats and a 4-cylinder is great transportation ... $3000 a month of LTC insurance benefits will pay for five hours of home care seven days a week, or 10 hours every-other day. It will cover more than 1/2 of a good Assisted Living Facility in most of the country, and provides a 33% "discount" to a $9000/month bill in a nursing home. LTC insurance claims data show that 60%+ of claims start at home. Guess what, about 60% of claims also END at home. Only about 20% of LTC insurance claims end in a nursing home. The average LTC insurance claim is less than four years, even less than three years for men. Cover that first before you worry about Alzheimer's care for 6+ years. If you only buy a 3-year policy (couples can "share" up to a total of 6 years for the price of 3 each), and if you do get Alzheimer's, you will still have much more private-pay flexibility than having nothing. We need to stop worrying about the cost of care in a facility where most of us are NOT likely to end up (especially with reasonable - and affordable - planning). We do need to worry about where we will get an extra $3000-$4000 a month to pay for part-time home care so our spouse can have a life, get a good night's sleep, stay healthy, etc., and so our adult kids can be care managers not caregivers. Home care comes first. Always. And this is also where families are personally and financially most at risk when someone they love needs care. Solve the part-time home care problem first. What does this have to do with LTC? Nothing ... but it's sports history and so much fun for true baseballs fans (excluding Indians'). A fantastic 7-game World Series, and an epic game 7. I'm a St. Louis boy, born and raised, and therefore a dyed-in-the-red Cardinals fan ... BUT I couldn't be happier for Chicago Cubs fans everywhere!!!  As an insurance broker who has sold LTC insurance since 1992, and who has focused exclusively on LTC insurance since 2000, I have been following the FLTCIP rate increase news since it is such a large player in the marketplace. The "average" increase for current policyholders is over 80%, with some as high as 125%!
Here's my take: Welcome to LTC insurance. The FLTCIP is basically having to realize the same increases, for the same reasons as the rest of the private LTC insurance marketplace. 125% is NOT an outlier. Several other companies including some of John Hancock's individual policies, and Genworth’s have had 80%-100%+ increases. Others have had those amounts as well cumulatively over 2 or 3 increases in the past 10 years .......... Another story that confuses "independent living" with long-term careThis was an interesting article about alternative retirement living up until the author started comparing it to assisted living and nursing homes. (Link to full CNBC article at the end of this post.) The only reasonable land-based analogy here is "independent living". Even mentioning assisted living, or worse nursing homes, is completely ridiculous. While a cruise ship is staffed for "medical care" that means, acute, temporary medical conditions, not long-term, custodial care. NO cruise ship will provide help for you to physically get out bed, bathe, dress, etc., the types of basic care services provided in assisted living. And NO cruise ship wants a long-term passenger with safety issues related to Alzheimer's or dementia. And if you're so poor off to be in a skilled nursing home, you probably can't even get on the ship. Here is a quote from today's CNBC article: A study published in the Journal of the American Geriatrics Society found that when considered over a 20-year span, "cruises were comparably priced to assisted living centers and offered a better quality of life, "though land-based assisted living can vary greatly by facility, location and needs." And here's a quote from the source article linked in the quote above (published in 2004!), that itself is quoting an article (from 2004!) in a medical journal: "Elderly people often choose assisted living facilities, nursing homes, 24 hours a day home caregivers, or family support. Living on a cruise ship might be a better choice, says Lee Lindquist, instructor of medicine at Northwestern University's Feinberg School of Medicine in Chicago, and a geriatrician at Northwestern Memorial Hospital." Dr. Lindquist should lose her (his?) license, hospital privileges, and teaching post. While there are indeed people with canes, walkers, and wheelchairs on cruise ships, NONE of them are living there. And who is it helping them bathe and dress and use the toilet on board? Right, spouses or other family. If someone needs the degree of care provided in assisted living, they cannot "live" on a cruise ship. MAYBE they could take a vacation, but the ship's staff sure as heck is not going to provide any direct care services. BTW, getting "long-term care" in a Holiday Inn is just as ridiculous. Follow this link to the full article on-line:
http://www.cnbc.com/2016/07/26/ahoy-matey-more-folks-retiring-on-a-cruise-ship.html
This idea (or the "Cruise ship vs. nursing home" variation) has been around on the internet and e-mail chains for years. But when my mom recently forwarded it to me from a group of her friends, it just set me off. Here's the e-mail ... my commentary follows: No nursing home for us. We'll be checking into a Holiday Inn! Please pardon my over-sensitivity to this old trope. I do realize it's really just a joke (as a "real" LTC planning idea it's truly a JOKE), but I meet far too many people on a daily basis who continue to turn a blind eye toward real, thoughtful, grown-up long-term care planning who take ideas like this as Conventional Wisdom, and they flippantly use it (or the "Cruise Ship vs. Nursing Home" variation) as a convenient way to allow themselves to shrug their shoulders at engaging in a personal, adult conversation about the topic. The real problem with this is two-fold:
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