The New York Times, December 7th, 2010

This fall, my father sat down for a semi-annual assessment with staff
members at his assisted living facility in Tinton Falls, N.J. They
decided his condition — at 72, he has advancing Parkinson’s disease —
necessitated an upgrade to the next level of care.

The meeting yielded an upgraded bill, too: a nearly 18 percent bump, about $12,000 a year.

Most assisted living residents foot the bill on their own or with
help from family. Cost increases typically come in two forms: annual
upticks to cover rising expenses, and more significant hikes
accompanying a move to the next tier of care, such as help with bathing
or dressing.

The annual rises can be daunting enough. The MetLife Mature Market
Institute recently reported that assisted-living costs climbed 5.2
percent from 2009 to 2010, to a national monthly average of $3,293,
outpacing both inflation and the interest earned on savings and bonds — a
problem for the elderly on fixed incomes.

But add a more expensive service package, and the bill can become
prohibitive. And as the costs soar, relations between families and the
facilities caring for elderly relatives can sour, said Miriam
Oliensis-Torres, who runs a geriatric care management firm, Geriatric
Support/Pathway Care, in Milwaukee.

Sometimes the reasons for the new status can be apparent, as when a
resident becomes incontinent. But the decision can also seem arbitrary.
If they disagree with it, residents and their families have to work at
maintaining quality care while simultaneously challenging the policies
of the institution providing that care. It’s a tricky balance.

The institutions often urge families to approach assisted living a
bit more realistically. “It’s important for people to remember that
their loved one is moving into assisted living because they need
services,” said David Kyllo, executive director of the National Center
for Assisted Living. “They’re not moving in because of a change in
address. It’s needs-driven.”

Those needs can change quickly. Residents average just 28 months in
assisted-living facilities, and their health almost always declines.

Such deterioration may shock the family; the consequences don’t have
to. Families should know ahead of time what will happen, and when, as a
resident progresses through care levels.

“In my experience, families at the time of admission are pretty
stressed,” said Ms. Oliensis-Torres. “It’s really worth their while to
step back and say, ‘Explain this contract in plain English.’ ” Lawyers
often prove helpful by reviewing a contract prior to moving in, she
added.

Read more of this article.

Long Term Care Insurance:  There is perhaps no greater argument for Long Term Care insurance than stories like the above.  Long Term Care insurance mitigates the costs of Long Term Care massively, and is therefore a vital component of any airtight retirement plan.

Reuters, November 22nd, 2010

We insure our homes against the risk of theft and fire, and our cars
for the risk of an accident. But how about insuring ourselves for the
risk of living too long?

The odds are rising that more Americans will run out of money in old age.
Average longevity is rising dramatically at a time when many older
Americans are struggling with damaged retirement accounts, unemployment
and rising expenses for healthcare.

Meanwhile, Social Security
is on track to replace less pre-retirement income in the years ahead,
due to a higher full retirement age mandated back in 1983 and Medicare
Part B premiums; any further cuts implemented now as part of
deficit-cutting would erode Social Security’s value even further.

Earlier this year, the Employee Benefit Research Institute (EBRI)
reported that many American households in all income brackets won’t have
enough cash in retirement to meet expenses in retirement. EBRI’s 2010 Retirement Readiness Rating
study projected that almost one-third of Americans in the
second-highest income bracket will run out money after 10 to 20 years in
retirement. And, nearly two-thirds (64 percent) of Americans in the two
lowest pre-retirement income brackets will run short 10 years out.

Think longevity insurance sounds like a good idea? If so, you’re in
league with a handful of major insurance companies who have started
offering such policies in the past few years. Longevity insurance
policies are deferred income annuities that issue payments only when –
and if — you hit an advanced age. It’s a variation on the plain-vanilla
single premium immediate annuity (SPIA), wherein you fork over a chunk
of cash to an insurance company at retirement, in return for lifetime
checks that start immediately.

Longevity policies are much less expensive than SPIAs because of the
deferred benefit feature – the insurance company gets to invest your
money for a longer period, and if you don’t hit the target age you’ll
never collect. For example, Hartford Financial Services Group
quotes a joint and survivor longevity policy for a married 65-year-old
couple at $49,779, which would pay a $1,500 monthly benefit when they
reach age 85. That’s far less than the $314,913 it would charge that
same couple for an immediate annuity offering the same monthly payout.

Read more of this article.

The New York Times, November 12th, 2010

November is long-term care awareness month, and to celebrate, a big player in the long-term care insurance industry announced on Thursday that it wanted to get as far away from the business as possible.

Citing well-known challenges to the long-term care insurance industry (but without really saying what they were), MetLife
said that it would stop underwriting new long-term care policies for
individuals after Dec. 30. The company will also cease new enrollments
to group and other plans, say, through an employer.

The company added that it would continue paying claims on existing
policies as long as customers continued paying premiums. Many of them
may not, however, since MetLife recently asked state insurance
regulators for permission to raise premiums on many policies by as much
as 44 percent.

It wasn’t the only company not charging enough for its policies. The two
leading players in the industry are trying to raise prices, too.
Genworth Financial is seeking an 18 percent increase on older policies
held by about 25 percent of its customers. And John Hancock has filed
for permission to raise premiums for about 80 percent of its customers
by an average of 40 percent. It has also temporarily stopped offering
new long-term care insurance plans through employers while it tries to
figure out what to charge.

State regulators may not bless these requests. But it suggests how far
off the companies were in pricing their products.

So now that you’re aware of the situation, a question presents itself: Is long-term care insurance doomed?

Let me start by saying that this is a separate question from whether you
should plan ahead for the possibility of many hundreds of thousands of
dollars in long-term care costs. You should. One big risk here is facing
down a $100,000 annual care bill for years on end and having no savings
or insurance. Even if you have a decent amount of savings, you could
spend everything and leave your spouse (more often than not a woman)
with nothing to live on.

Wealthy people can pay for their own care. And Medicaid
covers long-term care for people with no assets, though they may not be
able to get the care they want where they want it.

Everyone else either has to save for the possibility that they’ll need
care for years or buy insurance to cover the cost. If you’re wondering
how likely you may be to make a claim, well, the insurance industry has
had some trouble figuring that out, too.

Want some evidence? In the last decade, 11 companies that were once in
the top 10 in market share in this area have bailed out, according to
Limra, an industry research group.

A MetLife spokeswoman, Karen Eldred, didn’t want to add to the company’s statement from Thursday. She was more communicative earlier this month when I was finishing a column about long-term care planning.

Read more of this article.

Long Term Care Insurance:  What does this upheaval mean for those looking to purchase Long Term Care Insurance?  The market for programs is becoming tighter, and it might now be a good time to consider pulling the trigger on this insurance product.  Consider the options at NewRetirement.com