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Deidre Woollard
Deidre Woollard
Writer, Editor, and Podcaster focused on investing, real estate, and market trends.
Published Jul 3, 2024
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When you start looking at care for an aging parent, you realize something awful, getting supportive care outside of a sudden illness is nearly impossible. Long-term services and supports (LTSS) are some of the most expensive parts of getting older and this is mostly left out of Medicare. That means if you are in need of caregiver services or a permanent care solution (nursing home, memory care, assisted living), the common path is that you pay all of your money until it's gone and Medicaid takes over. This is not how we are sold retirement. We think we are saving to be the old couple on the beach, not the old lady in the home.
Long-term care insurance should help pay for care in theory. The problem is that less than 10% of people have it. Is this the problem of the consumer or the industry? Much of the narrative around this has been that the consumer is somehow short-sighted or cheap. According to one study, couples turning age 65 face a 5% risk of incurring costs of over $260,000 for LTSS alone. That number will completely devastate most American households. And yet, most of us would take those odds and not pay if the price of insurance was high, but we would be more willing to pay if it were cheaper or it were required, like automobile insurance.
What would make it better? Is it just price? I think it's both price and complexity. The more people understand what they are paying for, the more they are willing to make the commitment to paying. The horror stories of getting long-term insurance activated are well-known among people trying to secure payments to care facilities for their parents. I like to think that building a better product for the consumer will benefit the insurers as well because part of the issue here is that long-term care insurance isn't structured very well.
Part of the issue is how insurers can get enough money in premiums that they can invest and, therefore, pay for the future. I know next to nothing about the insurance industry but as I've been watching home insurers move out of Florida and California, it reminds me again that insurers will only insure what they know they can make money on. Long-term care insurance may be a little like flood insurance where we need a national program to bolster it. Most people don't see the need now but we are headed into a massive crisis. Don't take it from me; listen to this podcast with Marc Cohen, co-director of the LTSS Center and professor of gerontology at UMass Boston.
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Another component here is that LTSS isn't quite seen as medical care. Sometimes it is but a large portion of caregiving in the home is either being present and watching someone or helping with tasks of daily living. And yet these caregivers are the people who are monitoring their patients and may know more about their conditions and wellbeing than their primary care physician.
Most people who aren't of retirement age get insurance through their employers. Many of those employers offer long-term care insurance, too, but it's optional and not clearly messaged. Also, people in their 20s, 30s, or even 40s aren't thinking about funding their need for a nursing home in their 70s, 80s, and beyond.
If we are expecting people to fund their own retirement, mostly without the benefit of pension plans, long-term care insurance should be a way to help prevent catastrophe. Care costs are only going to rise in the future, and even if we think we can save our way out of it, we probably can't. The simplest way to protect yourself is to look into these policies and find one that works for you. I've turned down long-term care insurance in the past. Now I know it's one of the things that is most important for me to have. There is a possibility that the government will get more serious about creating public coverage, but we can't wait and hope for that to happen.
An Uncertain Age
An Uncertain Age
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Barclay Sisk
Vice-President, 1st Atlantic Brokerage
2mo
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Many don't understand how Long-Term Care Insurance works with their future income source because we never tracked premiums with their funding source (Portfolio). Thus, why so many are discouraged by rate increases as well as how the policies stack up against the most desired level of care - Home Health Care. In most cases, traditional LTCI will be part of your plan if you want Home Health Care...then, we have to look at ways to "discount" the extra dollars spent on care or pay back family members for their participation.
Kevin Ervin Kelley, AIA
Co-founder of Shook Kelley. Keynote Speaker. Author of IRREPLACEABLE: How to Create Extraordinary Places That Bring People Together.
2mo
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You offer such helpful advice on a topic most of us want to avoid, but I greatly appreciate your regulary emails coming into my inbox. We need more people like you nudging us to make better plans for our life, as opposed to being overwhelmed by them at the worst time. Thank you for what you do, Deidre!
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Dan Caplinger
Director of Investment Planning, Contractor with Motley Fool
2mo
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Long-term care insurance has failed thus far because the industry initially miscalculated costs badly: https://prospect.org/familycare/the-collapse-of-long-term-care-insurance/which in turn led to massive unanticipated rate increases that blind-sided policyholders: https://kffhealthnews.org/news/article/dying-broke-why-long-term-care-insurance-falls-short/and so now, policies tend to have coverage limits that don't actually address the long-tail risk that poses the biggest challenge. It's easier for someone to self-insure against the chance of the 1-2 year skilled nursing stay than it is the real chance of a rest-of-your-life care need, yet the LTC policy with strict care-duration and/or total-payout limits won't provide the truly long-term protection that would be the primary draw for many potential policyholders.I hope you'll share your search for policies, because I think you'll find the lack of affordable options that actually address your risk to be frustrating. That's sad, but you're right that the alternative of stronger government protection seems politically unlikely anytime in the near future.best,dan
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Kristi Waterworth
Freelance Real Estate and Financial Journalist
2mo
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I wonder if this is one of those things that will save you a lot of money to get it early. I don't have any children, as you know, and I am planning on having to pay for home health at some point. Should I get this now? It only just occurred to me that it might be smart to go in early.
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Catherine Whiteman
Passionate Advocate & Communicator | Relationship Builder | Strategic Thinker with a Creative Side | Observant Listener
2mo
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I found you and An Uncertain Age through my friend, Alyson Austin. I appreciate your very timely and relevant writing about what so many face today. It seems to me an untapped trove of feelings, topics and realities faced by many and discusssed openly by few. Thank you.
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