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Long-Term Care Insurance? REALLY?

Asking the Hive Mind: Is long-term care insurance (the kind that covers nursing home stays and in-home nursing care) worth the cost?

While I was working for the Great Desert University, I bought long-term care insurance through TIAA-CREF. The price was nominal at the time. Then TIAA-CREF decided insuring the future elderly against old age was not the best business to be in. They unloaded their policyholders on MetLife.

MetLife, which has also said it would like to be out of that business, has steadily increased its rates. This year I’m paying $130 a month. That’s $1,560 a year I could either put into savings or use to buy food. Problem is, this policy has (in theory) a deal where every couple of years you can opt to pay more for inflation adjustment. Shortly after I was laid off, the time came to opt in to that year’s extra gouge. But I was broke. I called and explained this, and the rep said they would give me a couple of months (by which time I would be receiving Social Security) and then offer the chance to opt in. They never did present that opportunity, and when I called them to ask after it, they said too bad, so sad. So that $130 a month is not covering the full current cost of nursing care. At best, it would only defray it.

Look up MetLife’s long-term care insurance on the Web and you find they work hard not to cover what you think they cover: so say Forbes Magazine and a whole raft of unhappy customers. Apparently Metlife is difficult to deal with and does everything it can to weasel out of paying.

The alternative is to move into a life-care community before you need its nursing home. Friends of mine just moved into the Beatitudes, a life-care campus whose amenities remind one of a fancy resort. My father, after my mother died, moved himself into a similar life-care community, which not only kept a roof over his head and two (truly mediocre) daily meals on his table but also covered the cost of any stay in its nursing home. In effect, it provides nursing home insurance: apartment residents have, as part of the package, guaranteed access to and coverage for the on-campus nursing home.

Out of curiosity, I looked into the Beatitudes and found they charge $10,000 a month(!) for nursing home care (unless, of course, you’re a tenant in their life-care community). The Beatitudes does the best it can to hide its costs from the Internet. One site, which more clearly is talking about life-care accommodation (not nursing-home care), estimates the average is $3647 a month; my friend’s husband remarked that they were paying around $5,000/month for a two-bedroom apartment, including utilities, semiweekly cleaning service, and meals. At Royal Oaks in Sun City, the cost is around $3600/month (my total average living expense here in my paid-off shack with yard guy., taxes, insurance, & utilities is around $2000/month). In effect, the elevated monthly cost of these places amounts to nursing home insurance.

However, one wonders whether that is worth the cost. Noting that 1 in 4 Americans will die in a nursing home, a study done between 1992 and 2006 showed the median length of nursing home stay was 5 months and the average length was 14 months. Interestingly, only 27.3% of the 8,433 subjects lived in a nursing home at the time of their death. Okay…  14 months at 10 grand a month would come to $140,000, which would nicely clean out the assets you’d like to leave to your heirs. Even 5 months would be ridiculous, but it would leave a few pennies for the offspring.

Let’s say one lives to be about 90 before needing such care. At $1,560 a year between my present age (74) and that age, I’d have forked out $31,200 to MetLife, which at today’s supposed rates would cover a little over 3 months of nursing home care. According to a recent Rand study, about half of middle-aged Americans will land in nursing homes at some point, but the cost will be only about $7,300 over a lifetime. If you put $130/month into savings, in 5 years you would have set aside more than $7,300.

So I question whether it’s worth continuing to pay $130/month (and more…and more…and more every year), when money is tight and I sure could use $130 to cover daily necessities. The original TIAA-CREF policy had a deal where if you’d been paying for awhile and then you quit paying premiums, some degree of coverage would remain. Apparently MetLife does, too: see page 4 of the linked PDF. If you put that $130 a month into a savings account (or invested it), after 20 years you’d have stashed over four times the amount needed to cover the typical lifetime cost of nursing care (according to Rand). Since I’ve been paying into that LTC policy for many years, a monthly $130 stash in a bank account plus whatever was accrued permanently at MetLife might cover most of my cost, especially if I were lucky enough to die within two or three months.

Still. It’s one bitch of a dice throw. If you have a stroke that disables you but fails to carry you away, if you come down with Parkinson’s or MS or ALS or Alzheimer’s or God only knows whatever open-ended horror, you in fact could need months or years of care.

That would clean out your estate, leave you living (after a fashion: breathing, anyway) on the public dole, and rob your heirs of everything you worked so hard to pass down to them.

So…what’s your opinion? Do you have long-term care insurance? Why or why not?

9 thoughts on “Long-Term Care Insurance? REALLY?”

  1. The REAL question is ….what is to stop Met Life from “spinning off the long term care business” and for that entity then to go BK. It seems to be this business plan is unsustainable. GE was also very BIG in this line of insurance…now not so much…it would seem that the “actuaries” that laid out this scenario…erred…big the premiums don’t support the care needed…Is there a cash value for what you have already paid in should you surrender future rights to claims? And to be clear it is my understanding the insurance companies fighting claims in this area of their portfolios is only going to get worse as the population ages and modern medicine keeps us alive longer and longer…

    • Exactly. TIAA-CREF foisted its customers onto MetLife; there’s no reason to expect MetLife won’t find a way to dump us. However, from reports I’ve read over the past few years, the strategy is to inexorably raise premiums until customers realize it’s just not worth it to hang in there.

      One thing for sure: people in our generation are living longer than those who came before us. No question: 75 is the new 60 ,90 is the new 80, and more and more people are making it to 100…or beyond. Check it out:

      Problem is, after you hit about 85 or 90, you need someone to help you or even to take care of you 100 percent. We no longer live in a culture that expects adult children to care for their parents. And…if your parents are 98 and you’re 78, you may not be able to care for them. So as a society we have a problem.

      According to my contract, Metlife will provide a certain amount even if I quit paying premiums. So there would ge SOMETHING to defray nursing home costs, no matter what. If you died fairly quickly, that non-forfeitable fund could save assets for the offspring. Obviously, if you lingered in a nursing home for more than a few months, your assets would be drained.

      Given that fact, if you have a kid who can be trusted, it might be worth starting to transfer assets to her or him at the maximum rate you can without losing it to taxes.

    • Insurers can’t wipe out claims through the bankruptcy court. That’s against the law. No bankruptcy court would approve that.

      • That seems fair. Well, I mean: let’s say you’re already in the nursing home and you’ve made a claim…it would seem reasonable that of course they can’t throw up their hands and so “Ooops! We can’t do that anymore.” But if you haven’t made a claim yet, can they say “We can’t handle future claims; therefore we’re discontinuing coverage, giving our customers a reasonable chunk of money back, and covering claims that have already made, but after thus-&-such a date we’re not covering any more claims”?

      • Are you sure this is illegal? I seem to remember GE and other insurers having this very argument before the Courts and as I recall the ruling was in their favor. If there is no money to pay claims, as I understand it, it falls to a fund that acts as a “backstop” for insurance companies when they become insolvent…But as I understand it if a fairly large insurance company goes out (one to big to fail?)…it’s game over for the fund. I guess there really is no “free lunch”…

  2. Can they say “We can’t handle future claims; therefore we’re discontinuing coverage, giving our customers a reasonable chunk of money back, and covering claims that have already made, but after thus-&-such a date we’re not covering any more claims”?

    No. They cannot do that.

  3. After my divorce, I bought a term life insurance policy and kept it until my youngest graduated from college. At that point I bought a Long Term Care policy – mostly for my children’s sake. I look at it like car insurance. I’ve only had one minor claim on my car insurance in the 28 years since the divorce, but I wouldn’t want to drive without it. Having said that – if I had trouble putting food on the table, I’d reconsider the Long Term Care policy.

    • Yes, that’s kind of the way I’ve looked at it. In a way, the best thing my father did for me was to sign himself in to the life-care community he selected. They had an excellent nursing home right there on the campus, and so we didn’t have to search all over the city when he needed care — doing so for my mother was a ghastly nightmare. The way I look at it (and I suspect he probably did, too) was that the pricey cost for the living arrangements while he was well amounted to long-term care that covered him when he needed nursing care. I surely would like to spare my son the difficult chore of managing my care.

      One would like to hope that could happen without having to surrender one’s autonomy, at least until you absolutely can’t take care of yourself. My father was 67 when he went into the old-folkerie, which IMHO was way premature. But by the time he was 80, he did need care. And he got it.

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