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
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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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Genworth is selling one of its life subsidiaries (not LTC company) and the CEO got a big pay cut.
CEO pay tied to performance is a good thing for shareholders & policyholders. It's a sign of honest struggles as he brings a new, deeper understanding of and financial discipline to the LTC business. As I said last fall, part of the financial "loss" - a good 1/2 or more - was attributable to the company putting over a half-billion into policy reserves. Shareholders lost value, but policyholders gained value. The CEO's lower comp now is a result of the decisions made last year, not a sign of more, new problems. This article notes, and others are highlighting GW's attempt to sell one of its life/annuity companies. That is NOT the LTC business. At this point it appears the company is working to focus on and shore up its biggest business, LTC. The sale of a different life & annuity subsidiary will give the company more money to use to stabilize and improve its core businesses: LTC insurance and private mortgage insurance. Again, policyholders are secure with very strong reserves. Shareholders are suffering. Importantly-different perspectives. Many wonder if Genworth will, or should, stop selling LTCI. That won't solve any of their problems. New biz rates are higher, right-er priced for actual historical experience and equal to its peer competitors, if not on the high end of new rates. New sales are not the problem, it's the 35 years of old, under-priced business that continues to challenge as they work to bring those rates up closer to the new, more-experienced, "correct" rates in order to sustainably pay claims. Another reality: no one is buying LTC blocks of biz, so GW must own what it has and manage it to the best on-going value and protection for policyholders and shareholders. Again, currently, this is an investor/shareholder problem, not a policyholder problem. LTC policies are guaranteed renewable, the reserves are mandated to meet regulatory minimums to pay claims now and in the future, and the money now in reserve (including the new $500-million+) cannot be taken back out or used for anything other than policyholder claims. One size does not fit all.That bit of common sense seems to fly out the window when anyone starts commenting on how to "fix" anything, especially, complicated, dynamic problems like financial planning, retirement planning, investing and insurance. A new opinion about how to make LTC insurance cheaper and more effective is getting widespread attention thanks to an editor at the Wall Street Journal. Quoting from a column in Financial Planning magazine, Glenn Ruffenach (who I know, respect, and who has quoted me several times) writes: "...a policy with a two- or three-year elimination period — and benefits that subsequently cover as much as five or 10 years of care, if needed — would be more effective, [the author] says. "'With an elimination period that high, even the average stay in a nursing home will fall within the deductible period; the actual probability of ever having a material claim against the long-term care insurance would fall dramatically,' [the author] says. 'That’s good, as it means the cost of coverage could fall significantly, while policies could simultaneously have richer benefits (after the elimination period) and do a better job of insuring against extreme events when they occur.'" There are two significant errors in this concept:
While it is true that LTC insurance is less expensive with a longer Elimination Period - essentially creating a "higher deductible". And the advice that the EP should be two to three years is also reasonable IF the client can financially - and wants to - self-insure that much care out of pocket to have even longer benefits after that time. While not common, there are LTC plans available with extra-long EPs. But many clients remain well-served by the typical 30 to 90-day EP with total benefits lasting only three to four years. These shorter-benefit plans can be designed to provide guaranteed Medicaid asset protection in most states if there is a worst-case, very long care event. And many people rightly realize that long-term care planning with well-designed LTC insurance coverage is not about leaving money to heirs, but preserving income - and lifestyle - for others at the very beginning of a long-term care event. Bottom line, what does a particular person or family need? Long deductible plans are available, but "normal" 90-day plans remain financially viable for many. Read the WSJ article by clicking here: http://blogs.wsj.com/totalreturn/2015/01/26/a-way-to-fix-long-term-care-insurance/ You can also find it by clicking here to read it on MarketWatch.com: http://www.marketwatch.com/story/how-to-make-long-term-care-insurance-more-affordable-2015-01-26?siteid=yhoof2 The original article in Financial Planning magazine requires a subscription to view.
Analysts' opinions are just that, opinions. Yet more and more are suggesting that the market grossly over-reacted to Genworth's charge against earnings to bolster LTC policyholder reserves. I strongly believe that LTC policyholders - and those who still need to buy LTC insurance - should see Genworth's actions as GOOD NEWS, and that policyholder security should be evaluated differently than an investor's returns. But it's also helpful to recognize - both insurance buyers and stock investors - that news and short-term market swings need to be taken in context with long-term goals. Read the Barrons report about Raymond James' upgrade by clicking the following link: http://online.barrons.com/articles/genworth-stock-can-rise-42-1415909893 This information is not intended to be investment advice, nor a solicitation to buy or sell any particular stock or investment, but is presented as information about LTC insurance.
Bad news for INVESTORS. Good news for POLICYHOLDERS. OR: Shareholders lost value. Policyholders gained security. Stock price (shareholder value and return) and claims paying ability (policyholder security) are two separate issues. The reason for the downdraft in Genworth's stock price is actually a good thing for policyholders. The company put more than a half-BILLION dollars into its policyholder reserves. What I take from this is that instead of simply pursuing yet another round of rate increases (which take a long time), the company has taken a charge to earnings which hurts shareholders in the short run in order to keep promises to policyholders for the long run. There may, or may not, be additional premium increases on older policies, but this should not be read as bad news for LTC policyholders, quite the opposite in my opinion. From the web:
This information is not intended to be investment advice, nor a solicitation to buy or sell any particular stock or investment, but is presented as information about LTC insurance.
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Comfort Long Term Care is an independent insurance brokerage agency specializing exclusively in LTC insurance. Agency owner, Bill Comfort, The LTCpro® is a LTC specialist celebrating 30+ years of experience since 1991! We are based in the Raleigh, Durham, Chapel Hill, North Carolina Triangle region, but we serve clients throughout NC and across the country. We also have an office in St. Louis, Missouri.
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