AARP, Modern Maturity, January/February 2003 – “Someone To Watch Over Me”, Russell Wild

Intended to be a due diligence article on long-term care insurance, the author overlooks some important things:

• Citing the odds of needing care – the odds are downplayed by cutting the odds from 43% of people over 65 are expected to spend time in a nursing home to 1/3 by extracting stays of less than three months.

  THE MISTAKES: 1) Citing odds for only people over 65 and ignoring that 40% of people who need LTC are under 65; 2) citing odds for only nursing home use when less than 20% of LTC is in a nursing home; and 3) 1 out of 3 is still high odds!!

• Presenting that people with over $2 million in the Northeast may not be appropriate candidates for LTCI, and perhaps $1 million in the rest of the country.

  THE MISTAKE: Using a 30 year planning period, a couple in their mid-50s will experience an impact of their estate of about $1.5 million

• Focusing on disease alone as the cause for needing LTC – Alzheimer’s, stroke, fractures from falls [probably related to osteoporosis-comment mine], heart disease, etc. He suggests checking family history for these things as a basis for deciding whether or not to buy LTCI.

  THE MISTAKE: He completely ignores that 40% of people who need LTC are 18-64 – many from tragic accidents that have absolutely nothing to do with family history.

• Using the presence of absence of a family caregiver to help determine the need for LTCI.
  THE MISTAKE: Ignoring that no family caregiver is capable of 24-hour a day care. He fails to acknowledge that LTCI may be the only thing that makes it possible for the family caregiver to get enough rest to keep the care recipient at home as long as possible. And “wanting to remain at home” isn’t enough – there are situations that make it impossible for one to remain at home such as a patient who is violent with Alzheimer’s – most families can’t cope with that at home.
• Using the average length of a claim on LTCI policies at two years to dissuade people from buying lifetime coverage.

  THE MISTAKE: The majority of insurance claims today are coming from older policies that focused on nursing home coverage with either no home care coverage or a 50% HHC benefit. The average time in a nursing home is 2.4 years but at home is 4.5 years. I think future claims will be for quite a bit longer and it’s misleading to use current claims data for the benefit period determination, especially since older policies didn’t cover assisted living facilities, and therefore ALF stays aren’t taken into account in most current claims data.

• Using the cost of room and board only to determine the daily benefit.

  THE MISTAKE: Overlooking the 20% or so additional charges made up of drugs and care-related supplies.

• Citing that mid-50’s may be the best time to shop for a policy, according to “many experts”

  THE MISTAKE: Overlooking once again that 40% of the people who need LTC are ages 18-64.

• Citing premium for a 70-year old woman for a plan that includes a daily benefit of $175 with future purchase offers for inflation coverage, not 5% compound.

  THE MISTAKE: If this woman lives even 10 more years, the average cost is projected to be $285, and many people will never be able to make up the shortfall of $110 a day. Since the average lifespan today for women is 85 years old, then the $175 will really fall short!

• Saying the best resource for opinions on policies are attorneys who specialize in elder law, insurance law, or estate planning.

  THE MISTAKE: I think it’s a good idea to use these attorneys but not make them an end all. In my experience of finding an elder law attorney to speak at 35 CLTC classes my firm taught in 2001, very few were qualified to thoroughly review LTCI policies in my opinion. For a listing of agents who have been through my training seminars, please click here to go to our Agent Finder Map.

The advice to go beyond ratings and look at the size of the company is near and dear to my heart.