Do I Need Long-Term Care Insurance?

It’s a fact that about 50% of people will have some sort of long-term care event in their lives—before or after retirement. According to the Administration on Aging, about 40% of people receiving long-term care today are between 18 and 64. It can happen to anyone, anytime. That alone makes deciding how to fund this very real possibility a crucial part of every physician’s comprehensive financial plan.

As a physician, you can probably guess that nursing care costs are nothing short of exorbitant. In Southern California today, you can currently expect to pay between $5,000 and $7,000/month for care in a skilled nursing facility. Round-the-clock care in your home costs slightly more, ranging from $7,000 to $9,000/month. Note that this is just for physical care of the patient; that cost does not include food, home upkeep, or general healthcare. That means that a long-term healthcare event has the potential to strip away more than $100,000 from your savings every year. What’s a doctor to do?

One of the most well-known options is to take out a long-term care (LTC) insurance policy. LTC policies are designed to pay for the long list of services that are not covered by health insurance, Medicare, or Medicaid if (or when!) illness, accident, or age makes you unable to care for yourself. It’s an option that definitely has its issues.

I first heard about LTC insurance back in the late nineties when it was first becoming available. I was picking up my then-fiancée (now my wife) at the Huntington Hospital residency lounge to take her to dinner. When I opened the door, I was surprised by the glorious smells of our favorite Thai restaurant nearby. When I asked someone what was going on, I was told that an insurance agent was hosting an event to talk about different types of insurance—and that Tracy and I should stay.

I admit it wasn’t the dinner date I’d had in mind, but we were both interested, so we changed our plans and feasted on shrimp pad thai, chicken satay, and a whole lot of new information. One of the things I remember most was the discussion about a life insurance policy that also covered some of the expenses of a nursing home. It sounded like a pretty good deal to me! Luckily, one of Tracy’s fellow residents who was sitting with us whispered an excellent piece of advice. “If you’re going to work at Kaiser,” he said, “you’re better off waiting until you get there to buy any kind of insurance.” We took his guidance, and now that I’m well versed in the scope and coverage provided by partner physician insurance, I can attest that he was absolutely correct—not only because of the excellent coverage at Kaiser, but also because of something our friend couldn’t have predicted: the implosion of the long-term care insurance market.

It turns out that LTC was a great deal for the buyer, but not such a great deal for the insurer. Between the late 90s and today, lifespans have gotten longer, and the cost of care has risen higher than anyone had dreamed. As a result, premiums have skyrocketed (by as much as 90% in a single year!), and many insurers are no longer offering LTC products at all. In fact, an article in Forbes recently noted that, “Sales of traditional policies have declined by more than 90 percent over the past decade and fewer than a dozen carriers still are selling the product.” That reality has prompted a search for new solutions to help fund this high-cost care. In January, Congress and the Trump Administration made a change that, for the first time ever, allows Medicare Advantage plans to offer non-medical support services such as transportation and home meals. It’s one of the first signs that change is afoot to expand Medicare supplemental plans to cover support services—potentially including coverage for long-term care.

Knowing all that, do you need a long-term care insurance policy?

As a partner physician, as long as you are breathing and are fully vested, you will receive some sort of defined benefit payout from the partnership in the form of a payout, your Common Plan, or a pension. In many cases, this income combined with your retirement investment portfolio may be enough to cover a long-term care event. In other cases, an LTC policy—at any price—may be a smart option. But the real answer depends on your own numbers. To find the answer that’s right for you, ask your advisor to include scenarios for long-term care in your written financial plan. By fully understanding how LTC costs fit into the big picture of your finances, you can plan well and wisely for the cost of a long-term care event—whenever it happens!

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