Thursday, March 28, 2013

Long Term Care (LTC) Insurance - not for me

Some time back, Kristi on her popular "On the Edge" blog asked readers the question, "Should I purchase long term care insurance".  I had commented at the time that I believed this question included a large philosophical decision in addition to the financial risk management analysis that is generally applied to the decision.  It occurred to me that I should elucidate this response in a full posting.  For many years, I served as a licensed social worker coordinating a contracted nursing program for a large organization.  In addition to this posting in regards to Long Term Care (LTC) insurance, I am also planning a future post in regards to nursing homes in general.

What is a nursing home?

While this question appears simplistic and unnecessary, I wish to dispel the notion that a nursing home is somewhere you go when you get old and need a "little" help.  The word "nursing" is key; in billing circles nursing homes are referred to as "skilled nursing" facilities which designates a "level of care."  Long past are the days of nursing equating to maid service and bed pans; today's nurses are highly skilled technicians.  When someone needs a nursing home, it is not because they need a "little" help; it is because they need "a lot" of help. Indeed, in order for one to "qualify" for this level of care, they must score appropriately on a formal assessment referred to as the Patient Review Instrument (PRI).

One facility; two flavors

What many do not realize there are actually 2 very different types of care when it comes to skilled nursing.  First, there is restorative care where, as the name implies, the services are targeted toward recovery whereby the patient is expected to regain sufficient function so that they can progress to a lower level of care.  The classic example is the "broken hip" whereby a fall occurs, the patient proceeds from emergency room to hospital bed to nursing home and then back home.  The typical payer for restorative skilled nursing is Medicare for the elderly and private major medical health insurance (or private pay) for all others.

The second type of skilled nursing is known as custodial care.  These are instances where the patient's condition is not anticipated to significantly improve to the extent where the patient would be successful at a lower level of care.  (Sadly, it's all downhill from here...).  Skilled nursing custodial care is most problematic for patients and there families as it truly may be long term and given the cost of health care can be astronomically expensive.  Moreover, unlike restorative skilled nursing care, custodial care is typically not paid for by Medicare or your major medical policy (both often having very limited coverage for a fixed number of days).  The typical payer for long term custodial care is private pay until assets are depleted and then Medicaid.  (The push to encourage LTC insurance is an effort to shift the primary payer for this type of care).

So, why LTC Insurance is not for me
  1. Cost:  Shocking as it may be, this blog has not yet yielded an unlimited income.  There are simply other life priorities that are far ahead of LTC on my priority list.  I do not live an extravagant life, but neither am I willing to eat Oodles of Noodles full time to afford LTC insurance.  Following the costs for reasonable food and shelter are costs for transportation, costs for retirement and costs for children's education - all of which I place higher in priority to LTC.

  2. Las Vegas Odds:  In my many visits to skilled nursing facilities, one thing really stands out - there are far more females than males in nursing homes.  Sorry ladies, that's the price for a longer life expectancy.  For better or for worse, I believe the odds are a bit higher for women to have a stroke and need skilled nursing.  (As opposed to us guys who have a bit better chance of completely checking out with a full blown heart attack).

  3. Not a problem for me:  As I stated in my overview of nursing homes, when you need a nursing home, it is not because you need a "little" care, it is because you need "a lot" of care.  Once you reach this level of care, worrying about the bill is the least of your problems.  I often hear folks express that they should obtain LTC insurance to "preserve assets" that they can leave to loved ones.  As I have expressed in prior posts, I believe people need to shift their focus from dying to living.  What does this mean?  It means, enjoy your loved ones while you are living.  If you want to pass something on, consider passing it on now, while you're living.  The gift thresholds are very generous, so what are you waiting for?  Furthermore, I hear folks worry along the lines, "but all my assets will be used to care for me..."  My reply, "What's wrong with that?  If not you, then who should pay for your care?" 

  4. Other estate planning options:  If leaving an estate / inheritance is worrisome to you, there is good news; it's called "estate planning."  Many attorney's specialize in this field and if this is an area of concern, I recommend you speak to one and the sooner the better.  The reason why "sooner than later" is important is that "look back" periods often come into play in estate planning strategies.  Specifically, one common strategy is for a trust to be created and assets are placed into the trust.  As stated previously, Medicaid is a primary payer for custodial care; Medicaid eligibility is established by an examination of income and assets.  The theory with trusts is that assets placed into the trust are no longer assets of the individual, but rather assets of the trust.  Medicaid rules have started to address this loophole by implementing a "look back" period for trusts whereby the Medicaid program looks back to assets that were recently placed into the trust (commonly looking back 5 years) and applies rules for considering these recently moved assets as available to use for paying for the care of the individual.

  5. Trust:  I've heard it said (somewhat in jest), that if the government says its good for you; it isn't.  The government is a proponent of LTC insurance because it helps to shift likely costs from government programs (Medicare, Medicaid) to individuals via insurance.  Insurance companies are in the business of making money; this is done by taking in as much money as possible and paying out as little money as possible.  I've experienced this first hand with health insurance whereby a health insurer (ahem, United Health Care) was extremely recalcitrant in paying legitimate health care claims. Most recently, I was reading a post by Ann Carrns, which included a reference to this issue.  So it should logically follow that as someone who places little trust in the government and even less in insurance companies, I remain extremely skeptical of the benefit of this product to me.
MyTurnQuips is all about expressing an opinion; my opinion in regards to LTC insurance is "no thank you."

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