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Long Term Care Planning Information from American Health Care Assoc.

Long Term Care Tradeoff written by Robert Vaughn III

Robert Vaughn has written a very comprehensive trade off study of long term medical care and what options available.  It is about 16 pages with many options.  To open the Acrobat file press here.  To download the file to your computer right click the link and "Save Target As" then specify your folder.

An Excel file is also available that has a trade off study.  You can also put your own specific data into this file.

To open the Excel file with the trade off study press hereTo download the file to your computer right click the link and "Save Target As" then specify your folder.

Long Term Care by Robert Vaughn:

                A little over a year and a half ago (Nov. 2000), I became interested in the details of long-term care insurance and whether or not I should purchase a policy.  With the new initiative that REALM has started on Long Term Care Insurance (LTCI), the thought occurred that some of the members would be interested in the data that I obtained about LTCI. 

                The first thing to remember if you download these web-site files is that the information was collected for my own specific situation and may not be applicable to you, it should be used only as reference material.  You will need to gather your own data and make your own decision.

                Some authorities have stated as to the need for LTCI that you only should purchase a policy if you have moderate financial means.  If you have very few financial resources, you may expect Medicaid to take care of your long-term care needs, after you spend down to Medicaid financial limitations and thus do not need a LTCI policy.  Conversely, if you have from 1 to 1.5 million dollars of resources that may be invested, you can afford to self-insure and thus avoid the premium costs altogether.

                The cost of nursing homes in the Orlando area at the time of the study was about $3664/mo. for a semi-private room and about $4381/mo. for a private room.  These costs generally correlate with those for the South U.S.  The escalation of these costs appears to be much faster than that of the general economy.  Escalation of nursing home or Skilled Nursing Facilities in the South appears to be about 7.4% and in the U.S. as a whole about 8.1%.  These figures will probably get worse with the shortage of nurses, the general increase in health care costs and the impact as the baby boomers reach age 65 and may go to about 9% per year out to the year 2030.

                If you have decided that you need to purchase an LTCI policy there are certain things that you should keep in mind.  Although many insurance companies will claim that you should think about purchasing your policy around age 50, this seems awfully early to me unless you are in poor health anyway.  A more likely age to consider buying is around age 65 but of course the cost of the policy is increasing and at the same time the chance of being rejected is going up.  The age of 84 seems to be the maximum age for obtaining any policy.  For more data in this area see pg. 9 of the study.

                One of the major concerns about LTCI costs is possible later year increase.  Although the insurance company cannot currently increase an individual's rate, they can increase the rate of an entire group.  This could have the effect of making a barely affordable policy unaffordable in the future.  This is a realistic concern due to the baby-boomer age 65 explosion that is anticipated.

                An additional factor to consider is the applicability of the male to the nursing home.  The statistics that I found say that if a male uses a nursing home he's not likely to survive a ninety-day exclusion period (the deductible, so to speak).  About 73% of the 65+year old U.S. men either don't use a nursing home or don't survive beyond the 90-day exclusion period, two thirds never even enter.  On the other hand, about 40% of 65+year old women will be in a nursing home for longer than 3 months and greater than 13% stay more than 4 years. (See pg.6 of the study).

                Note that in Fig.3, on page 13 of the study, there is a depiction of the total out of pocket nursing home costs, including premiums paid, are for a four year term policy bought at age 67 and a three year actual nursing home stay starting at age 87. This shows that with a $200/day benefit you will still incur about $250,000 of out of pocket costs, in addition to the insurance benefits, (including $57,700 for the exclusion period) and will have paid $49,000 insurance premiums for a total cost of about $298,000.  If you had no insurance you would incur a cost of about $499,000 for this same stay.  This amounts to about a four to one payout.  Do you need LTCI?  You be the judge.

Robert Vaughan