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New Study Predicts LTC Costs and Odds

August 9, 2015 by Honey Leveen Leave a Comment

A recent Forbes article by Howard Gleckman announced the publication of a new study predicting the odds and costs of needing long-term care. Here’s a link to the new UE-ASPE (Urban Institute – Office of Assistant Secretary for Planning and Evaluation) Study.

Media and non-wonky people like me will find the survey difficult to interpret. I will share what I feel readers should take away from this study.

The study interprets the incidence of paid care only!

The statistics in the new study predict a lower incidence of long-term care (LTC) need, and less financial exposure than we expected. But it only deals with Long-Term Services and Supports (LTSS), which is paid care, typically funded by savings and government (Medicare and Medicaid). Despite this limited scope and possible bias (I will not comment on that here), it gives compelling reasons to own long-term care insurance (LTCi).

Actuaries should be able to use this new information to more accurately price LTCi policies. Hopefully, this will cause increased competition in the LTCi marketplace.

The study estimates about half (52%) of Americans turning 65 today will require LTSS. Make note: LTSS consists of paid care only!

The study fails to properly acknowledge the extremely high, often catastrophic incidence of non-LTSS (informal, unpaid care, typically provided by family and friends) and the physical, emotional and phychological havoc it creates. Long-term care insurance (LTCi) pays a high percentage of this type of care.

Two out of three (66%) of older people with disabilities who receive LTSS at home get all their care exclusively from their family caregiver, mostly wives and daughters. Another quarter (26%) receives some combination of family care and paid help; only 9% receive paid help alone.

Many people who need LTC do not need LTSS. They have dementia or a chronic need for assistance with their Activities of Daily Living (ADL’s). This is precisely what LTCi pays for. Most of us do not own LTCi. People often make makes excuses and rationalize not purchasing LTCi, often with later regret. Spouses, children, and siblings (most of them women) become caregivers, not by choice, and often at great financial sacrifice.

Lost income and benefits over a caregiver’s lifetime is estimated to range from a total of $283,716 for men to $324,044 for women, or an average of $303,880.

There are additional flaws with the new study. I will not address them here. I just hope academics will use this new information well. I also hope that media will pause and research carefully before writing about this study.

In the LTCi industry we always say you should look through the windshield, not the rearview. This study uses historical information. With the increasing incidence of single adult households, the emergence of increasing numbers of “elder-orphans” (those without, at distance, or estranged from children) plus my anecdotal observations, even the best studies may prove to be inaccurate.

Proof that Millionaires Need Long-Term Care Insurance

June 12, 2015 by Honey Leveen Leave a Comment

A recent New York Times article titled “Millionaires Who Are Frugal When They Don’t Have to Be” resonated with me. It describes the spending habits of many multi-millionaires and sheds light on why people of high net worth should definitely own long-term care insurance (LTCi).

The article confirms what I have seen over and over again during my 25-year career when very affluent people need long-term care.

From the article: “There were common threads in this group. These were people who had all made the money in their own lifetimes and done that as much by saving, investing and making careful choices about spending as by making large salaries.”

Such people create their own wealth and happiness step by step, painstakingly, responsibly, day-by-day. It’s hard! Money is happiness and security. They do not like spending it. Each dollar still has great meaning, even when you have more than enough money to buy just about anything you want, with no concern.

For many years in my practice, most of the time, people who can well afford to self-insure (pay all of their expenses themselves) for long-term care, choose not to!

I see this over and over again and have testimonials from very affluent clients admitting they would not be availing themselves of home care or assisted living were it not for their LTCi.

I have testimonials from children of affluent clients admitting their lives are much different, they are not bound and shackled into caregiving roles, because their parent owned and collected from their LTCi (check this site’s Testimonials page).

I see personal friends who had the opportunity to buy LTCi but did not when they were able to. I know they have the resources to pay for long-term care, but instead, the healthier spouse and/or kids are their caregivers. This outcome is stressful, regrettable, avoidable and undignified!

Long-Term Care Insurance Has a Bright Future

April 17, 2015 by Honey Leveen 2 Comments

I recently returned from a national long-term care insurance conference.

I noted the mood at this year’s conference seemed a lot less pessimistic about the long-term care insurance (LTCi) industry than it was last year.

In 2014 we saw continued poor press coverage of LTCi. Media gave mostly inadequate, usually negatively slanted, and sometimes incorrect explanations of LTCi rate hikes, with little advice on constructive ways to ameliorate them. New sales of traditional LTCi decreased. We saw higher premiums, tighter underwriting, and LTCi carrier withdrawals. 2014 was the worst year I can remember for LTCi in my 25 year-long career.

In short, the LTCi market just couldn’t get any worse than it was in 2014.

At the conference I learned that there were more legitimate reasons than my senses alone, to be hopeful about the future of LTCi. While my observations are based on anecdotal experience, it was very reassuring to learn that actuaries agree with what I think most full-time LTCi marketers observe.

Here is why there’s cause for optimism about LTCi:

The problem of who will provide LTC and how to pay for it is not going away. In fact, it’s like a freight train coming at us.

The LTCi market is now expanding, no longer contracting; two new LTCi carriers are in the process of entering the LTCi market.

In the news you will now find plenty of stories advising people that Medicare cannot and will not pay for LTC. You will also find articles about looming budget shortfalls and cutbacks. You will find stories graphically describing the sacrifices families make to provide care for loved ones who don’t own LTCi. You will find stories about our rapidly aging population, lack of caregivers, and impending Alzheimer’s epidemic. After all these years, most journalists still have scant understanding of how LTCi works; LTCi is seldom mentioned in news stories and still doesn’t get the accolades it deserves. But all other indications look good for the future of LTCi.

In his general session presentation at the ILTCI Conference, Roger Loomis, an actuary with ARC (Actuarial Resources Corporation) explained why I believe my suspicions about LTCi’s brighter future are correct. Mr. Loomis’s presentation was about the actuarial outlook on the stability of current LTCi rates. He made several key points. Higher LTCi prices are obviously more stable. The industry has now had time to learn and benefit from its experience. The LTCi industry has more data to support pricing assumptions, less risky product designs are being offered, skill at managing LTCi is better now, and there are better modeling tools. Mr. Loomis used reporting from seven large insurers who have been in the LTCi market continuously for at least 15 years to back up his statements. He concluded that LTCi presently sold has a relatively low (approximately 12%) probability of a rate increase, due to near rock-bottom lapse and interest rate assumptions, plus other factors.

Anyone wanting the slides from Roger Loomis’s presentation should email me at honey@honeyleveen.com.

Impending Alzheimer’s Disease Epidemic

April 17, 2015 by Honey Leveen Leave a Comment

We talked about the immense physical, economic, and psychological toll Alzheimer’s Disease (AD) will take on caregivers.

Also from the newly released 2015 Alzheimer’s Disease facts, we learn AD will cost our nation dearly.

In 2015, the direct costs to American society of caring for those with Alzheimer’s will total an estimated $226 billion, with half of the costs borne by Medicare.
Average per-person Medicare spending for people age 65 or older with Alzheimer’s and other dementias is three times higher than for seniors without dementia. Medicaid payments are 19 times higher.
Nearly one in every five Medicare dollars is spent on people with Alzheimer’s and other dementias. In 2050, it will be one in every three dollars.

Unless something is done, in 2050, Alzheimer’s is projected to cost over $1.1 trillion (in 2015 dollars). This dramatic rise includes a five-fold increase in government spending under Medicare and Medicaid and a nearly five-fold increase in out-of pocket spending.

This blog often correlates tragic long-term care (LTC) outcomes with Medicaid’s low nursing home reimbursement. Medicaid pays for most of our nursing home care.

Expect an Alzheimer’s Epidemic

April 2, 2015 by Honey Leveen Leave a Comment

2015 Alzheimer’s Disease Facts and Figures were just released.

Between 2000 and 2013, the incidence of heart attacks, cancer, and other diseases fell, while the incidence of AD increased by 71%!

Prepare for the Alzheimer’s Disease (AD) epidemic. It’s coming.

In 2014, friends and family of people with Alzheimer’s and other dementias provided an estimated 17.9 billion hours of unpaid care, a contribution to the nation valued at $217.7 billion. This is approximately 46 percent of the net value of Walmart sales in 2013 and nearly eight times the total revenue of McDonald’s in 2013.

Approximately two-thirds of caregivers are women and 34 percent are age 65 or older.
Forty-one percent of caregivers have a household income of $50,000 or less.
Over half of primary caregivers of people with dementia take care of parents.
It is estimated that 250,000 children and young adults between ages 8 and 18 provide help to someone with Alzheimer’s disease or another dementia.

Alzheimer’s takes a devastating toll on caregivers. Nearly 60 percent of Alzheimer’s and dementia caregivers rate the emotional stress of caregiving as high or very high; about 40 percent suffer from depression. Due to the physical and emotional toll of caregiving, Alzheimer’s and dementia caregivers had $9.7 billion in additional health care costs of their own in 2014.

If you want to read an article that makes the physical and emotional costs of caregiving real, read “Caring for Alzheimer’s: How Three Families Cope” from this week’s Wall Street Journal.

My advice for middle- and upper middle-class Americans is to prepare now, with long-term care insurance (LTCi), while you can qualify and find reasonable rates.

Request a Free, No-Obligation LTCi Quote

New Study Predicts LTC Costs and Odds

Proof that Millionaires Need Long-Term Care Insurance

Long-Term Care Insurance Has a Bright Future

Impending Alzheimer’s Disease Epidemic

Expect an Alzheimer’s Epidemic

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