Comments on the finding – many do not understand the cost of long term care services and support.

I posted a Forbes article on Twitter a few days ago on people not understanding the cost of needed services and Long Term Care insurance. The article, by Howard Gleckman a Forbes contributor, included some research findings I want to comment on.

The article indicated more than 15,000 adults age 40 to 70 were surveyed in 2014 for the US Department of Health and Services. The findings revealed these interested things about people’s thoughts on long term care:

1. Want lifetime coverage
2. Low premiums
3. Want to stay at home if on-going assistance is needed, make needed modifications, and rely on family and friends.
4. Had little idea about the cost of long term services and support.
5. Believe [2/3 of participants] the government needs to make an effort to promote Long Term Care insurance and there should be tax subsides to encourage people to buy.

Note: A problem with the suggestion in # 5 was brought out  – over 2/3 of all individuals could not take advantage of it, if it were now available, since they do not file an itemized tax return.

My post today is to share a couple comments on these findings. First – on the cost of these special services here in CT:

• Having a certified home health aide in the Hartford area for six hours 4 times a week could grow to be over $5,500 a month in just 15 years.
• A Assisted Living Facility can now cost up to $6,600 a month in the Hartford area; to $6,900 in the New Haven area; to $6,600 in the New London/Norwich area; and to $8,000 in the Bridgeport/Stamford area.
• Skilled nursing facility costs in Connecticut are next to the highest in the U.S.! A semi private room is now over $146,000 a year.

Looking to the future in say 25 to 30 years when many may need on-going services with personal activities they may be three times higher. Paying directly would cause many people to quickly use up their savings nest egg and become poor!

Second – people expressed a desire for full coverage at a low premium. The facts however, tell us the cost of this special coverage, which I like to call long term health insurance, is high especially here in CT. Why? The need for one going help  is high today and will increase significantly:

• Over 80% of us have a relative, or know someone, who is or has received help.  Some because “parts wore out” and others who were having trouble with mental ability.
• 70% or more of us will need help by age 75! People by then have, on average, 2 or 3 chronic conditions and some as many as 10 or 12.

An observation about the cost of insurance vs the need for coverage:

When the risk of a claim is high the cost of insurance is high. For example, the cost for home owners insurance on a large home would be higher than coverage on a very small home. The large home has much more structure to replace and more things in it to cover if it burned down.  However, the risk for a home to burn down is low so home owners insurance is not that expensive.

Long Term Care insurance on the other hand is expensive because the risk help will be needed is quite high as mentioned above. But even though it costs a lot say in comparison to home owners insurance no matter how much your plan costs the amount you pay is just pennies compared to how much you would have to pay directly, based on the above costs, for all the help you need.

Want to also share an example of paying for coverage over time and then receiving benefits:

• If a person buys a Long Term Care insurance plan with a four year benefit period and certain coverage at age 55 and then say at 80 needs help all the money they paid over this 25 year period could come back in benefits in just 7 1/2 months! (227 days).

The overall findings in the survey reveal a big need for more education on the need to plan and prepare for long term services and support. This communication effort needs to be made by private organizations and state and federal level government.

The Forbes article I posted on Twitter can be found here.