Do You Stand Out from “All the Rest?”

When I started selling long-term care insurance in 1988 and even when I started my training and consulting business in 1991, I felt as though I were on a lonely planet, watching most everyone else whiz past. In 2002, there’s no room in the parking lot on the LTCI planet. But how many people on the planet really know the topography or as newcomers, are they waiting on a tour themselves?

How much do YOU know about LTC insurance? Rather than give you a quiz, let’s look at the 9/24/02 Washington Post article, “Long-Term Thinking”.

Someone with a cursory knowledge of the subject will immediately spot the error in the Medicare benefits. The article says Medicare pays 100% for the first 20 days in a nursing home, then $100 a day for an additional 80 days, and after that nothing. The website cited as a reference (www.medicarehelp.org) has the correct information that the beneficiary is responsible for $101.50 per day co-payment for days 21-100, not the other way around.

But how many agents will have no problem with the inaccurate information that in Maryland, a person’s income must be below $350 a month to qualify for Medicaid? In fact, after certain allowable deductions, income must be below the average cost of nursing home care as defined by the state’s Medicaid department.

And how many will spot the error that “almost half the people in nursing homes are on Medicaid assistance”? Actually, the “almost half” applies to the DOLLARS paid by Medicaid. About two-thirds of people in nursing homes are on Medicaid, except in a handful of states that have a higher than average long-term care insurance market penetration – proof that LTCI can keep people off Medicaid.

And the real misdirected advice comes under the heading “If So, When?”, which explores the age at which most people should buy. The article cites $1,512 premium for a 44-year-old, $2,196 for a 54 year old, and $3,348 for a 65 year old, then multiplies the premium to age 74. The answer makes a case for waiting from a pure mathematical sense, even though the author at least encourages people to buy younger for insurability purposes.

Had you been through my live Long-Term Care University or my LTCUniversity.com online training class – one of which over 37,000 agents have attended - you would know that this article completely misses the point on the true cost of waiting because it doesn’t consider the impact of inflation. If a 44-year-old is buying a $150 daily benefit, at age 54, that person would probably be considering a $250 daily benefit and at age 65, a $350 daily benefit. THOSE premiums multiplied to age 74 would make a clear case for buying younger. In other words, the younger you buy, the longer you pay, but the less you pay.

Then the article suggests shorter benefit periods based on nursing home statistics. Shorter benefit periods are certainly fine if it’s an affordability issue, but that decision shouldn’t be based on just nursing home utilization. The National Center for Health Statistics shows an average nursing home length of stay of 2.4 years in the 1999 National Nursing Home Survey, but the average time people are cared for at home is about 4.5 years. We don’t have a good figure yet for how long out of that 4.5 years the benefit trigger for a LTCI policy would be met, but however long it is, that has to be added to the average nursing home stay. Then throw assisted living into the mix in addition to family longevity, and it’s a much bigger picture than the average nursing home stay.

Finally, the article suggests that individuals over age 72 might save money by just buying a higher daily benefit to handle inflation protection instead of buying the 5% compound rider. I compared a 75 year old buying a $150 daily benefit with 5% compound inflation vs. a $240 daily benefit, which is what the $150 will grow to in ten years at 5% compound, and the premium is similar for those two plans. If the person doesn’t live longer than 10 years, no sweat. After 10 years, the benefit gap really kicks in, using a 5.8% average growth rate, which syncs with the Center for Medicare and Medicaid Services’ projection for LTC growth for 2001 – 2011. And do people, especially women, live longer than age 85? All day long…

Being able to spot these flagrant misconceptions and explain them in a clear manner to your clients and prospects are what set you apart from “all the rest”, and that person, my friend, is ultimately who gets the check.

Become a seasoned tour guide, not a visitor, on this wonderful planet. See you in one of our virtual classrooms in 2003!