Long Term Care Insurance calculator?
March 6, 2024 8:56 AM Subscribe
Does anyone know of an online calculator that can do NPV/FV-stye calculations for long term care insurance?
I'm helping a neighbor sort out their finances a bit, and while I can do the math myself I would prefer it if there was somewhere I can point them online, so that any "recommendation" isn't coming directly from me and I'm not the one making any assumptions about anything ever.
Basically, I want them to be able to play around a bit, to see if they receive a better "return" on their money by investing $X every month or putting it into an LTC insurance premium.
...the sort of thing where they can run numbers, and realize if they invested that $X they'd likely have more than the insurance payout by the time they need it. Or the reverse!
Note: we are in a location that is expected to soon'ish impose a tax penalty on anyone of their income level that doesn't have LTC insurance, so they will have to buy some level of insurance. The real question is how much they should get, and I don't wanna be seen as responsible for their decision (not even to the point of making them a spreadsheet), so a nice online calculator would solve everything. They don't have a CFP or the like, which is a whole separate discussion we're having.
Basically, I want them to be able to play around a bit, to see if they receive a better "return" on their money by investing $X every month or putting it into an LTC insurance premium.
...the sort of thing where they can run numbers, and realize if they invested that $X they'd likely have more than the insurance payout by the time they need it. Or the reverse!
Note: we are in a location that is expected to soon'ish impose a tax penalty on anyone of their income level that doesn't have LTC insurance, so they will have to buy some level of insurance. The real question is how much they should get, and I don't wanna be seen as responsible for their decision (not even to the point of making them a spreadsheet), so a nice online calculator would solve everything. They don't have a CFP or the like, which is a whole separate discussion we're having.
Best answer: Here is some data about the probably of needing long term care. Here are some key finding - most adults (70%) over 65 will eventually need some long term (over 90 days) support services but in most cases those service are provided by family member. only 48% get some paid services, with 29% getting paid home care, 5 percent receive residential care, and 28 percent receive at least 90 days of nursing home care, including 13 percent who receive long-term Medicaid-financed nursing home care.
... Lengthy spells of PAID LTSS care are even less common. Only 24 percent of older adults receive more than two years of paid LTSS care, and only 15 percent spend more than two years in a nursing home.
posted by metahawk at 5:20 PM on March 6, 2024 [1 favorite]
... Lengthy spells of PAID LTSS care are even less common. Only 24 percent of older adults receive more than two years of paid LTSS care, and only 15 percent spend more than two years in a nursing home.
posted by metahawk at 5:20 PM on March 6, 2024 [1 favorite]
Best answer: One point that was important to us was to make sure the policy paid for home, as well as institutional care. Much insurance in the US has an institutional bias, where they only pay out if you're in a nursing home or a SNF. We really want to have the choice to receive care at home so we could stay in the community if possible.
Another important issue is to look at the kind of care that could be eimbursed. We didn't want just medical care, but also help with daily activities. There's care for Activities of Daily Living (ADLs - like bathing, transferring, etc) but you might also want to get reimbursed for IADLs, which include things like shopping, etc.
posted by jasper411 at 5:59 PM on March 6, 2024 [2 favorites]
Another important issue is to look at the kind of care that could be eimbursed. We didn't want just medical care, but also help with daily activities. There's care for Activities of Daily Living (ADLs - like bathing, transferring, etc) but you might also want to get reimbursed for IADLs, which include things like shopping, etc.
posted by jasper411 at 5:59 PM on March 6, 2024 [2 favorites]
Response by poster: For the benefit of any future searchers, the concern here seems to have been prompted by the recent publication of the actuarial report for AB567, which appears to have triggered a small wave of concern amongst folks who don't pay enough attention to legislative affairs (or their finances, tbh). This has probably been helped along by LTC insurance sellers misrepresenting the potential financial cost, should the whole AB567 thing eventually end up creating a California LTC program (which may or may not happen).
...long story short, my neighbor seems to have come around to the idea that while the LTC insurance being offered was legit, they'd be better off self-funding via a Bogleheads-style 3-fund strategy since they already have a reasonable pile of ill-managed assets (that is to say, see the post from praemunire above; this person does not fall into the gap where LTC insurance is a reasonable gamble). Near as I can tell from reading the materials, the insurance is one of those "hybrid" plans that ends up just being an unnecessarily-complex investment strategy, in which case one should simply invest more directly and not pay an insurer to do it for them.
Moreover, if California DOES create an LTC insurance mandate, it appears likely it will be a full program that will crater the private LTC insurance market in California, in which case you'd have to be a lunatic (or quite wealthy) to try to opt out of it just to save a quarter-percent marginal tax increase. This is probably why the LTC insurance salesmen are getting more aggressive while they still have a market to sell into.
I also relayed some tales from my community regarding people getting entirely screwed by their insurer (because, y'know, America!) and losing the coverage they thought they'd paid for all these years via fine-print, ever-changing payment deadlines, "accidental" failure to mail notices, and so on. Most saliently, relating to a point made by metahawk above, many plans have payment delays (the plan only starts to pay out after X days of treatment) that are intentionally designed such that most customers die before the insurer has to start paying out.
posted by aramaic at 9:08 AM on March 7, 2024
...long story short, my neighbor seems to have come around to the idea that while the LTC insurance being offered was legit, they'd be better off self-funding via a Bogleheads-style 3-fund strategy since they already have a reasonable pile of ill-managed assets (that is to say, see the post from praemunire above; this person does not fall into the gap where LTC insurance is a reasonable gamble). Near as I can tell from reading the materials, the insurance is one of those "hybrid" plans that ends up just being an unnecessarily-complex investment strategy, in which case one should simply invest more directly and not pay an insurer to do it for them.
Moreover, if California DOES create an LTC insurance mandate, it appears likely it will be a full program that will crater the private LTC insurance market in California, in which case you'd have to be a lunatic (or quite wealthy) to try to opt out of it just to save a quarter-percent marginal tax increase. This is probably why the LTC insurance salesmen are getting more aggressive while they still have a market to sell into.
I also relayed some tales from my community regarding people getting entirely screwed by their insurer (because, y'know, America!) and losing the coverage they thought they'd paid for all these years via fine-print, ever-changing payment deadlines, "accidental" failure to mail notices, and so on. Most saliently, relating to a point made by metahawk above, many plans have payment delays (the plan only starts to pay out after X days of treatment) that are intentionally designed such that most customers die before the insurer has to start paying out.
posted by aramaic at 9:08 AM on March 7, 2024
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You don't need to do a calculation for this - the answer is obvious. All insurance products have expected net negative return for the people buying them. If there was expected positive return, the insurance company would immediately go bankrupt.
That doesn't mean the products aren't worth getting. Those investments may not pay off, or potentially may lose money. The person may not be able to afford LTC with their investments, regardless of what they do. The person may be more comfortable knowing their costs are covered, even if they pay more to do so.
If your neighbor is in a position where they can easily afford LTC, they don't need LTC insurance (beyond any state minimum's required). LTC insurance is for folks that don't know if they can afford LTC or not, in which case any expected return calculations are meaningless because they need LTC regardless of whether their expected return occurs or not.
posted by saeculorum at 9:51 AM on March 6, 2024 [3 favorites]