Author Topic: Long-Term Care study  (Read 1878 times)

dude

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Long-Term Care study
« on: August 05, 2015, 07:49:54 AM »
http://crr.bc.edu/wp-content/uploads/2014/11/IB_14-18_508_rev.pdf

The brief’s key findings are:
•Long-term care is expensive, but only 13 percent of single individuals over 65 have long-term care insurance.
•Previous models of care usage appear to understate the risk of going into care and overstate the duration of care for those who require it.
•If long-term care is a more likely, but less expensive, event, fewer people may benefit from insurance than previously estimated.
•Our analysis shows that it is optimal for only about 20-30 percent of single individuals to buy insurance.
•This result strengthens the finding of previous research that Medicaid crowd-out can explain why most households do not buy insurance.

bogart

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Re: Long-Term Care study
« Reply #1 on: August 05, 2015, 08:15:49 AM »
Interesting.  I'd add the note that this study focuses exclusively on single people, so the results would not generalize to married folk, who may have a concern about (among other things) ensuring a non-institutionalized spouse can keep enough assets/income to remain FI -- as that (married couples, Medicaid, and LTC) has recently been the topic of another thread in this forum.

Retired To Win

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Re: Long-Term Care study
« Reply #2 on: August 05, 2015, 10:11:04 AM »
No matter how one slices it, longterm care is a very powerful wealth destroyer.

Right now, my father in law is racking up $5000 a month in LTC costs at a nursing home.  He is in hospice care, which means he is there in minimum maintenance mode until he ends.  I think it was assumed that would happen within a few months, but it's already a year and he is still hanging in there.  Without his LTC policy, his wife's inheritance would be suffering big time.

I carry an LTC policy and so does my wife.  Combined, the policies cost $350 a month in premiums.  That's about $4200  a year.  One month's stay by just ONE of us at a nursing home would cost more than that.

So... FWIW, we'll stick with carrying the policies.

FinancialIndependent

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Re: Long-Term Care study
« Reply #3 on: August 05, 2015, 12:39:49 PM »
I agree that the costs of long-term care can wipe out a family's fortune in just a few short years (or even months for some). 

I work in healthcare and see the effect that long-term nursing home stays have on families.  I'm still relatively young (38), but I am already planning for long-term care costs in the form of my HSA account.  I max out my HSA account every year, and use very little of those funds throughout the year, thus protecting the balance of the account.  I have the funds invested in a Vanguard fund and will allow it to grow through the remainder of my life. 

Under current IRS rules, you are allowed to use your HSA account to purchase long-term care insurance.  If I am able to continue to keep my HSA (who knows what healthcare will look over the next 22 years), then I will purchase a 5-year long-term care insurance policy at age 60 and use my HSA funds to pay for it.  If I need additional care after the 5-year policy is exhausted or if I need care not covered under the LTC policy, I will have the funds in my HSA to cover those expenses as well. 

I just used HSA Bank's online calculator to see what the balance of my HSA account would be in 25 years if I had no existing HSA savings and started fully-funding an HSA account each year over the next 25 years (using the current contribution limit of $3,350.00 per year for an individual).  Assuming an 8% annual rate of return, that account would look as follows: 

Net Contributions:  $83,750.00
Net Contributions Per Year:  $3,350.00
Tax Savings on Contributions (Assuming Federal Tax Rate of 28%):  $23,450.00
Tax Savings on Tax-Deferred Growth:  $45,123.37
Future Value:  $244,904.90

I'm sure long-term care will be even more expensive in 25 years from now, but $245K will go a long way in covering those costs, especially if you pair it with a Long-Term Care policy.  With people living longer lives (but not necessarily higher-quality lives), it seems like it's never too early to prepare for long-term care. 

dramaman

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Re: Long-Term Care study
« Reply #4 on: August 05, 2015, 01:02:16 PM »
Given the fact that the odds are that I won't need LTC and my lack of trust in the insurance companies providing LTC insurance, I'd rather just accept the risk that if the worst happens, I'd end up on medicaid. If the worst did happen, I'd likely have plans drawn up for a trip to Oregon...