Jason and Emilia discuss long-term care insurance.
Below is the full transcript:
Announcer: Welcome back America to Sound Retirement Radio where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence and freedom as you prepare for and transition through retirement. And now here is your host Jason Parker.
Jason: Well hey there folks. Welcome back to another round.
Emilia: Very upbeat. Here we go.
Jason: I was telling Emilia that we need to be more upbeat on this program. We are going to put people to sleep with this stuff sometimes. Jason Parker here with Sound Retirement Radio. I have Emilia Bernal in the studio. Emilia welcome back.
Emilia: Thanks. Hello everyone.
Jason: We like to start out with a verse to renew our minds and I’m reminded that there is a lot of people that try to take information, whatever information it is and twist it around and try to make it say something that it doesn’t really say. So this verse is from second Peter, the second chapter, verse one. I think it really speaks to this. It says “but there were also false prophets among the people just as there will be false teachers among you they will secretly introduce destructive heresies even denying the sovereign lord who bought them swift destruction upon themselves.”
All right, that was awesome. And then, you know sometimes I need to be reminded of that too because you get some of these people and they can try to make you think anything sounds good and right and wholesome and pure and things we should be teaching our kids. It’s amazing what our culture and society, especially here in the very conservative state of Washington that we [inaudible 00:01:34].
Okay, I know everybody has different affiliations when it comes to their political beliefs so I don’t want to get too far down that rabbit hole.
Jason: But I do have a good joke…
Emilia: Here you go…
Jason: I know everyone enjoys a good joke regardless of their political affiliation. Emilia, what do trees drink?
Emilia: Tress drink? Well I know they can have water but…
Jason: They drink root beer.
Emilia: Ahhhh….much more tasty.
Jason: Root beer, of course. Your seven year old, six year old if you have one of those around the house they’ll appreciate that joke. Maybe over the holidays with your nieces and nephews.
Emilia: Yes that would be fun.
Jason: They’ll like that one.
Emilia: Maybe I’ll come back with some new ones myself.
Jason: Yes, please do. All right Emilia, this is episode 070. We are going to be talking about long term care. This is an issue most people don’t want to talk about actually but this is long term care awareness month and so I know we have addressed this topic in the past. We are always trying to bring experts on but this time I just want to have a dialogue between you and I because we look at long term care from a planning perspective. Not a buy an insurance policy perspective. We just want to understand how its going to impact peoples lives financially so we have a little bit of a different take on what long term care looks like and some of the different planning opportunities, some of the different tools you can use because we’re not from some captive agency that says you have to sell one product and that’s what a lot of people run into when they are looking at insurance solutions for long term care. And insurance isn’t the only solution but…
Emilia: Yeah, so…
Jason: You had a chance to read this chapter in book.
Emilia: I did. Yes.
Jason: And now you’ve got a couple of questions based on the chapter. And for those of you that have not yet read “Sound Retirement Planning” you can find this in chapter eight. It begins on page one hundred and fifty one and the tile is called “Long Term Care Insurance, Do You Really Need It?”.
Emilia: And that is where my question begins. Do you really need it? Where can our listeners go to learn more about, or to determine whether they do or don’t need long term care and how to begin that.
Jason: Well its kind of a slippery slope question because one of the challenges, I think Emilia, with science, technology, medicine keeping people alive longer than ever before, and we don’t expect that trend to change anytime soon, I actually think that the need for long term care is going to increase in the future. There are some tools that we can point people to, and I will in just a moment here, to give people the opportunity to go and do an analysis of their health, and their background and their families history to see what what their likelihood of needing long term care is. I think that’s an important exercise for people to go through but I would rely too heavily on it when making future decisions because what happened in the past may not be reflective of the future…
Emilia: Very true…
Jason: Especially with advancements that are taking place. One of the best tools, and I talk about this in the book, is just medicare.gov. Medicare has a long term care calculator, they over forty thousand people that have gone through this and they’ll ask you questions about your health. They will ask you questions about your families background, if anybody in your family needed long term care. They’ll ask questions about your lifestyle and then based on all the other people that have answered they questions they’ll give you some kind of probability of what the likelihood is that you may need care. As we stand back and we don’t think about it from just a one on one person solution but we look at the population as whole. Medicare did a study and they said that forty percent of people that reach age sixty five have a chance of entering a nursing home.
Jason: No, I’m sorry, have a chance of…it says “People who reach age sixty five will have a forty percent chance of entering a nursing home.” Yeah, and about ten percent of the people who enter a nursing home will stay there five years or more.
Jason: Five years or more. Now, to put that in perspective imaging you got on a boat and the captain said there is a forty percent probability that this boat is going to sink. How would that make you feel?
Jason: Yeah, you wouldn’t get on the boat.
Jason: Right, yeah. If you’re going to get on the boat your going to be dressed in some like some kind of crazy wet suit and have all kinds of life vests around. What if you got on airplane. Imagine your are sitting on an airplane and you are getting ready to go visit your family at Christmas and the pilot comes on goes “Hey, good news everybody there is a sixty percent chance that we are going to make it to our destination, only forty percent chance we are not going to make it.”
Emilia: That percent is too high for me to be comfortable.
Jason: Or what if he said there is a forty percent chance we are going to make it to the destination and sixty percent chance we won’t make it. I mean, if you put those odds in any other form of your life…you get in your car. Hey, guess what, there’s a forty percent probability you are going to get in a car accident today if you get in your car. You would probably not get into your car. Those are really high odds but we insure ourselves for things that have much less probability. Car accidents, house burning down. Even health insurance, a major medical catastrophe is what most of us insure against and most of us don’t experience major medical catastrophes. Most of us its small ten, fifteen, thirty thousand dollars of expense but it’s not the two hundred and fifty thousand dollar brain surgery kind of thing.
Emilia: And I read in chapter that a lot of peoples, I guess, reason for not getting long term care insurance is because of the cost. Can you kind of break down what the cost are? Is it really that…
Jason: Yeah, and I should let our listeners know…you know there that old saying “you don’t know what you don’t know until you’ve walked in someone else’s shoes.” In fact I watched this movie recently from Adam Sandler called “The Cobbler.” Have you seen that movie?
Emilia: I have. I did see it.
Jason: What did you think of that?
Emilia: It was interesting. It was kind of okay, he is doing this old school but yeah. Who does that anymore?
Jason: It’s kind of a weird movie but it was fun. It’s on Netflix, is where I saw it. It’s one of those ones that I had to wait for the kids to go to bed but really kind of interesting…I like Adam Sandler, he’s funny. Where were we going with this?
Emilia: The cost.
Jason: Now I’m thinking about Adam Sandler…when he comes out in Happy Gilmore…”Why won’t you go in the hole…”
Emilia: Oh…”go to your home.” That movie too…
Jason: The cost, yeah…
Emilia: Yes, the cost.
Jason: The cost of long term care. There is two different costs and I think this is where people get confused. If you go into a nursing home today in the state of Washington, the average cost to go going into a nursing home is about nine thousand dollars per month. For an assisted living facility it might be more like four thousand five hundred dollar per month. That’s in today’s dollars, that’s right now today. That’s one cost. Right? How many people’s portfolio can withstand an additional nine thousand dollar per month expense on top of the other regular budget that they have because you still have a well spouse at home that needs to live and drive and car and put gas in it, and buy food and all that stuff. An additional nine thousand dollars a month is going to strain anybody’s portfolio.
That’s one cost. If you are going to have somebody at home care and is going to be twenty four hour nursing care, where you had an actual registered nurse, RN, in there that’s even going to be more expensive than nine thousand. That’s probably going to cost you more like twelve to fifteen thousand. That’s going to be very expensive. Long term care, that is the actual expense.
Now insurance on the other hand, and I am a believer in insurance. I own a long term care insurance policy. I bought a long term care insurance policy for my wife and I actually own two long term care insurance policies on myself. I was getting back to this walk a mile in another man’s shoes. Well, in my shoes as a company that specializes in working with folks who are getting ready to retire, I’ve just seen this so often where people come into my office and they are healthy as can be one day, six months later they come back in and something happened. They’ve had a stroke, they’ve torn a meniscus, now they’ve got sleep apnea, and they’ve got diabetes. I mean, just stuff happens as you get older.
Jason: And all of a sudden they are not insurable anymore and that what we’ll share a story here in a little bit about my own families experience with this. I own two policies. When I bought my policy for my wife and I we were in our thirties at the time. Some people say well if you’re going to buy insurance, when should you buy it? Some people they recommend that you wait until you’re sixty years old to buy it and I disagree with that advice because if your health changes before you are sixty you may not be able to qualify for plans. What I tell people is you should buy long term care insurance when you afford it without it changing your lifestyle. When you’ve accumulated enough assets, where you say I’ve got something to lose here and I want to protect my family…I don’t want them to ever have to become caregivers on my behalf and I want to know that if that time ever comes that we’re going to have a back up plan in place.
For my wife and I, we only pay about two thousand two hundred dollars per year for, maybe two thousand four hundred dollars per year, that’s combined for both of us to be insured…
Jason: When you compare that to my health insurance premiums, I’m paying almost eight hundred dollars per month for a very high deductible health insurance plan that doesn’t hardly cover anything. Long term care insurance in my mind, it’s a bargain compared to my health insurance premiums.
Emilia: Yeah, and it’s definitely going to be helpful because I…and you mentioned that you were going to share some experiences that you had so have you had any direct experience with the need for long term care insurance.
Jason: All the time, yeah. Again, as a firm that specializes in working with retirees, I’ll never forget well a couple of different stories here. One time I was meeting with a gentleman, they really wanted long term care insurance. They seemed pretty healthy from a distance and you ask anybody if they’re healthy and everybody says “Oh yeah, I’m healthy.” But in the eyes of an underwriter are you healthy? And so this one gentleman I remember he ended up, he had sleep apnea and high blood pressure. Each one of those by themselves is not a big deal, and the high blood pressure was under control with medication but when you combine those two things together, he was ineligible for coverage. He couldn’t qualify for long term care insurance. That was one story.
I remember another gentleman. He was in great shape, he was a mountain climber. He was about seventy years old, played golf several days a week. Took really good care of himself. Went in for a routine procedure at the doctors office, three days later has a small stroke and changed his life. He couldn’t walk for about three months. The first time that he and his wife came into the office they were in a wheelchair and today he has started to regain some of that. He works hard…just the hardest working guy I know…just really battles to regain some of that strength. It’s not the same, it’s never going to be the same so that’s an example of seeing somebody’s health change literally over night.
Then in my own family, we’re going through this right now. Right now today in fact my wife is down at the hospital with my father in law and we are preparing to move him to a health and rehab facility and he can’t go home. Things are changing and so unfortunately he’s at a place now where his health has deteriorated. He has been diagnosed with dementia so it see it own family. One of the challenges that we have with this topic is that people say “I take good care of myself, I eat right, I exercise and I’ve never seen it in my family so as a result, I don’t have to worry about it.” I think that is very short sided.
Emilia: Yeah, and I think in the chapter it also mentions the governments…I guess how they deal with long term care for the elderly. Is that an excuse they use too? They go “I have the government to pay for medicaid and all that.” Does that covert the expenses as well?
Jason: It’s a good question. So some people say “Well I’ll have medicare or I’m retired from the federal government so I’ll have my federal employee health insurance.” Those things don’t cover long term care. What you need to understand about long term care is Medicare does have a small provision in there for long term care. If you qualify for the benefit, which we are reminded of this this week because you have to spend at least three midnight’s in the hospital to qualify for the long term care benefit and be showing signs of improvement in these things. Then Medicare can potentially pay one hundred percent of the cost for the first twenty days of care.
Emilia: Oh, just twenty days?
Jason: Twenty days.
Emilia: When you are talking long term, that’s not very long term.
Jason: Twenty days isn’t very long term. Now Medicare will continue to pay for days twenty one through one hundred but they only pay, I think it’s eighty percent. It’s an eighty twenty split there so there is going to be a deductible that’s going to be required for days twenty one through one hundred. Then after one hundred days your health insurance doesn’t cover this and your Medicare doesn’t cover this so now you’re on your own. Even if you bought a Medicare supplemental policy it’s not going to cover long term care. After you have basically twenty days of one hundred percent coverage, eighty days of eighty percent coverage and then you’ve got to figure it out.
Emilia: And it’s a huge impact on families. Even in my own family I’ve seen what rehabilitation takes and it’s a lot of work and you really want to be prepared.
Jason: Let me just say to nurses out there. The work that they do is amazing.
Jason: I am so amazed when I went into the ICU last night. These women, and it was mostly women there the night that I showed up, they work really hard. I heard one of the women kind of shout across the room, “Hey room what ever and ever needs bed pan changed.” This woman, it was the nurse, she kind put her hands on her face, like you could tell she’s probably been in there multiple times in the last couple of hours but she jumped right up she went in and she took care of that person. They’re compassionate and it’s just amazing. I could never do that work but I really, really admire people in that industry and the doctor too. We have a wonderful experience at the local hospital.
Emilia: That’s good to hear.
Jason: But I wanted to talk one more thing about the government. The other option is Medicare is what everybody has paid into their entire life, the other piece there that we have is the safety net for people called Medicaid. Medicaid is available for people once you’ve diminished or lost all of your assets, basically your money is all gone and your health has deteriorated to the point where you can’t provide for yourself anymore then we have this state and federally funded welfare program called Medicaid comes in and they help pick up the pieces.
I’ll tell you that’s not an easy path to do down because like here in Kitsap County where we live there aren’t that many places that we find that actually accept Medicaid. When you’re looking at these different options, if you’re planning on Medicaid being your option just be prepared you have to go where there is availability and that might be a long distance away from where you would like to receive your care. It’s important to understand…the other thing is and I think this is sad but if you get to the point of needing Medicaid that basically means that your entire life savings, everything you’ve worked for, basically the last anywhere from six months to three years or however long you need care…all that wealth gets transferred to a nursing home at the end of your life.
I can’t think of anybody that would tell me that the reason that they go to work everyday and that they work so hard and that they save when everybody else is out having a spending party. And they are driving old used cars when everybody else is driving brand new cars and they’re not racking up the credit cards when their friends are racking up the credit cards and filing bankruptcy and buying house they can’t afford and they’re living conservatively. I can’t imagine one of those people that would say the reason that I have lived my life this way so that at the end I could give it all to a nursing home.
Jason: Nobody wants that. Nobody does.
Jason: That’s not the reason we do, that’s not the reason we sacrifice, that’s not the reason we work hard is to fill up the nursing homes piggy bank at the end of our lives and that’s what happens to a lot of people. I see it happen so that’s why I’m passionate that I think more people should look into long term care insurance. Now, I will say as a planner it’s not appropriate for everybody. We meet with people where it’s just not the right solution but I think for a lot of people their being selfish and maybe even a little bit greedy by not considering purchasing long term care insurance.
Emilia: I think you kind of touched all over on my next question about the responses you get when you bring up long term care insurance to your clients. Is this something that usually you start off with after you develop a plan because you say it’s not for everyone.
Emilia: How do you determine…
Jason: Here is the common excuses that we hear…”The government will take care of me”, “my parents never needed long term care”, “if I need care, my kids can take care of me. They owe it to me, we put them through college and bought them their first house.”
Gosh, isn’t that horrible to think?
Emilia: Yeah. I guess because I can relate to that. My dad has always just been you know “I don’t want to ever be a burden to my kids”, so he has planned this out really well. But to say that and expect that is a lot.
Jason: Hopefully they are having that conversation with the kids beforehand and say “Hey, just want to let you know what coming.”
“I exercise right and eat right so I’m never going to need long term care” that just complete denial you know?
“I’ll never go to a nursing home, I’ll stay in my own home.” Even as I think about my father in law, because you know we had him in, as some people know that anytime that I have a meeting with somebody I record every meeting that I have. He said “Well I’m never going to need long term care.” And I said “Okay, well you know what happens if you do?” And he said “Well I’ll just go fishing.” Well, that’s not reality. It’s fun to say that but that’s not reality.
Here we are. We’re in this process right now and we’re having to figure out what is next. It’s not easy it’s very hard. Even as somebody that…I would actually have to say that it is easier for me to help people go through this process when I’m not related to them. It’s much easier to do it than it is for family members that I’m related to because there is so much more emotion associated with decisions and it’s hard. It’s hard to figure out the best thing to do for somebody else and it’s a lot of responsibility.
Emilia: And it sounds like even when you are somewhat prepared, those decisions are huge. What kind of facility you want to go to and that you feel comfortable with. I guess that was you know…just wrapping it up here but the last questions is if you are looking, if we have listeners that are looking to purchase long term care insurance, what are some steps that you recommend for that?
Jason: Well, so the first thing is one of the reasons that people are reluctant to this is because insurance people are seen sometimes like car salesman, you know? They feel like they are going to be pressured into buying something that they don’t want. Someone is going to come to their house and sit at their kitchen table and arm wrestle them until they buy a policy. I’ve even heard stories about these guys that go on for these long term care insurance appointments and they’ll sit there in somebody’s house for three and four hours talking about this and it’s like people have a life. They don’t want to do that.
What we did was develop a website. Make it really easy for people just to get some quotes so that they can get a feel for what the cost are for a long term care insurance. And the website is ltc-expert.com. They can get a free chapter of my book when they get a quote. We talk about some of the things that they should be looking for. One of the things I just want to touch on this briefly too because the insurance industry has been very responsive and they are always responsive to people’s needs. One of the concerns people have is they say “Well what if I buy insurance and I never need it?” And they die and its just wasted premium. That’s true with all insurance. With your homeowner’s insurance, your car insurance and your health insurance. Well what if you pay for it and you die and never need it? Well….
Emilia: Same thing.
Jason: Same thing but for long term care insurance people think they should get something back. There are policies that offer return of premium so you can pay in a little bit extra to have all of your premium paid back to your estate if you don’t use it.
Emilia: Wow, that’s good.
Jason: There are also these new hybrid contracts that a lot of people have been interested in. What these are, they can be two different types really. They’re still insurance contracts but one is a life insurance policy that gives you leverage. Lets say this is for more higher net worth individuals but maybe they fund it with a hundred thousand dollars and that hundred thousand dollars is leverage up to three hundred thousand dollars so if they need long term care they have access to three hundred thousand dollars for that expense. But, if they die, it’s still going to pay a death benefit to their estate and that death benefit might be a hundred and fifty or two hundred thousand or somewhere in there so it has all the provisions of traditional life insurance, guaranteed not to lapse and it’s going to last until age one hundred. If they need long term care they can access this extra pool of money to pay for long term care. That has been popular with folks.
The other one is there are annuity contracts that work similar to that. Again, an annuity is a life insurance contract. Annuity might work in a similar way. You put a hundred thousand dollars in and it’s going to give to some leverage of one to two times that pool of money. It’s going to pay a fixed interest rate so if you never end up needing long term care, whatever money you put into it basically going to go to your main beneficiaries at the time you die if you never end up using the money to pay for care. There is some neat alternative options that exist today that didn’t exist in the past. For just basic LTC quotes, go to ltc-expert.com and run a quick quote and find out what the costs are.
Emilia: Sounds great.
Jason: We are out of time.
Emilia: A lot of great options.
Jason: Yeah, Emilia thank you for being a guest with me today.
Emilia: You’re welcome. Thanks for having me again.
Jason: Until next week this is Jason Parker signing out.
Announcer: Information and opinions expressed here are believed to be accurate and complete. For general information only and should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or it’s affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subjected to claims paying ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, an independent fee based wealth management firm located at 9057 Washington Avenue Northwest, Silverdale Washington. For additional information, call 1-800-514-5046 or visit us online at soundretirementplanning.com.