Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)
Infographic source: LTC Commission report pg 23
Sources: Congressional commission report pg 4 Congressional Research Service report pg 10
Source: Congressional Research Service pg 10
Image is clipart
Source: Congressional commission report pg 27
Photo is from Fool editorial Flickr account
Link 20% stat to Patrick’s article?
Source: Genworth Financial annual review of LTC costs (2014) https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html
Are You Paying Too Much For Long-Term Care?
Are You Paying Too Much
For Long-Term Care?
First things first…
Give yourself a round of applause
for making preparations for your future care needs
Source: Flickr; tec_estromberg
According to a
on long-term care, 65% of
Americans over 45 have
completed little or no
planning for ongoing living
The needs of the many…
Though few Americans are
thoroughly prepared, nearly 70%
of people will need some form of
of long-term care during their
retirement years, with 20%
needing 5+ years of care
Data source: Congressional Commission on Long-term Care 2013
Long-Term Care Insurance
Annual private and out-of-pocket spending on long-term care needs
top $70 billion, yet only 10% ofAmericans over 50 own a LTC
And there’s one HUGE reason for LTCI’s
Cost of Coverage
A study of LTC insurance applicants reported that among those
who did not purchase a policy, 87% cited high annual premiums as
an “important” or “very important” reason for their refusal to buy
This makes cost of coverage the top deterrent to increasing LTC
insurance use among Americans.
Over the past few two decades, rates
have increased dramatically – making
annual premiums for LTCI increasingly
less affordable for the average American.
Data source: Congressional Research Service report 2012
3 Big Reasons You’re Paying More
Long-term care insurance was introduced in the 1980s, but several big
changes over the past two decades have sparked higher annual
premiums for policyholders:
1. A condensed field of providers
2. Low interest rates
3. Low policy lapse rates
1. Less competition
Though a once popular offering from insurers, long-term care policies fell out of
favor due to their tendency to be unprofitable and difficult to underwrite.
A large field of insurers at the industry’s start has been reduced to a select handful of
This reduces a consumer’s ability to shop for better rates and for the market to
dictate fair pricing.Though the necessary personalization of each policy would often
make those market functions difficult.
Keep reason No. 1 in mind: both reasons No. 2 and 3 play back into the reduction of
insurers offering LTCI policies.
2. Low interest rates
Since the financial crisis, ever insurance company has had to deal
with the low interest rate environment eating away at investment
returns – a key to any insurer’s profitability.
With the added pressures of low returns from traditional
investments, there is higher risk in offering the highly-specialized
and individualized policies needed to prepare for long-term care
3. Low termination rates
Every insurer depends on policyholders terminating a select number
of unprofitable contracts within the ordinary course of business. But
LTC insurers have found that this product has a lower likelihood of
cancellation or lapse.
Since firms in the insurance industry cannot rely on a statistically
consistent number of terminations if their product is
underperforming, many insurers simply choose not to offer the
Ways to Reduce Your Costs
Since LTCI is so personalized, there’s no singular approach to
reducing you annual premiums. But with some data crunching and
planning, you can certainly make sure that the premiums you pay
are appropriate for your needs.
Statistics prove that when you begin investing early, your portfolio
will grow much larger than if you wait a few years.The same
principle applies to planning for long-term care needs.
As the average premiums show, by purchasing a LTCI policy in your
60s versus your 70s you’ll not only save over $1,000 annually, but
also 20% by the time you’re 80 years old.
Starting earlier also gives you a better chance of passing medical
evaluations during the underwriting process – another key factor in
LTCI’s low usage across the American population.
Do Your Homework
Thanks to Genworth Financial’s annual
review of long-term care costs across the
U.S., there’s plenty of data available for
consumers to review in preparation for
buying a LTCI policy.
The values to the right are the national
averages, but Genworth also provides
state-by-state data, giving you a great look
at the future costs you might face.
By determining the type of care you
would want, the going rate in your state,
and an estimate of care duration, you’ll
have a much better handle on your
Review, revise, revisit
Each LTCI provider will have a number of options for you to choose– from daily
maximum benefits to protection against inflation.Review and select these
choices carefully, as they will likely raise your premiums.
Also review all notifications from your insurer to make sure that no changes have
been made that will substantially alter your policy.
If you have any changes to your medical conditions, be sure to revise your policy
(as applicable) to sufficiently cover any increased future needs.
Revisit you policy annually – think of it as an insurance check-up.
Making sure you’re covered for long-term care needs is
only part of the retirement puzzle. Here’s another key
piece: getting the IRS to work for you. We’ve found a
simple way to make sure you’re getting all the social
security benefits you deserve…