BLOG POST BY:  Will Parrish

Here are some facts and fiction about Long-Term Care that you’ll find in many reports. The points I broke out are where reports/articles etc. are misleading.

These are generalities, not calculations, so I just explained them in the parenthesis. 

1. Median Cost

“Median cost” means half of the costs will be below the median and half will be above. The median auto accident is $7,500, how much liability insurance do you carry?

MY OPINION  (People generally carry a LOT more auto insurance, even though the median cost is only $7,500. If you take the same approach to LTC care, you could likely come up short.)

2. Unusually Bad Circumstances

I, personally, have $100,000 of liability insurance on my autos, and a $1 million umbrella over top of that, despite the median auto accident costing only $7,500.
An attorney friend of mine says the worst possible accident is running into a van full of lawyers, but we won’t go there.

MY OPINION  (At least SOME people will face unusually bad circumstances in auto accidents AND long-term care needs.)

3. Local Conditions

When I starting helping clients purchase long-term care insurance (LTCI) many years ago, I asked numerous facilities what the bills were at the highest — so I could be sure my clients could cover the cost. I also help them consider a 3- 5% inflation on their benefit, which can help keep up with the increase in costs but has JUST done so over the past 20 years.

4. Coverage-Goals Mismatch

I do not want my clients to find that their cash flow falls short between their available retirement income, the yield on investments, and the long-term care insurance that they buy causing them to use up assets or worse, spend down to Medicaid impoverishment.

I tell them about the median nursing home costs, assisted living, and home healthcare, per an actuarial Healthcare Assessment, and also about the high costs that some people are paying, then let my clients choose their coverage level.

MY OPINION  (People tend to “feel” the worst, but get cheap / overly optimistic when it comes to buying coverage and plan to rely on their retirement assets to make up the difference. The problem is that when people are ACTUALLY faced with this circumstance [using retirement funds to pay for their care] they regret that decisions and the insurance look cheaper, but by then it’s too late.)

5. Variability in Variability

The concept of wide variations in costs applies to assisted living costs, and this gets even more complicated since the amount of hands-on care provided is generally much less for assisted living care than for dementia care. Many sources tell me over half of the facility care is for dementias, indicating a need for more cash flow.

There is a greater variation in price and quality of life at assisted living facilities than at nursing homes.

MY OPINION  (AKA “the certainty of uncertainty” no one really KNOWS what type of care they will need, from little to comprehensive, so if a person plans for the median or minimal, their last year’s standard of living could be very low, not to mention placing a huge burden on their family/caregiver to stress about how to pay for their care.)