(note: this is part 1 of a two part post)
In early December my wife had that dreaded middle of night phone call from her 89-year-old father. He fell in the night and couldn’t move and called in pain. My wife immediately called 911 and rushed to his house to meet the paramedics to bring him to the hospital.
The hospital still had COVID protocols that had limited access in place which meant I couldn’t meet my wife there and she would have to go this alone. After several days the hospital diagnosed him with having a broken bone in his neck and would require a neurosurgeon to advise for treatment. With no neurosurgeon available the hospital discharged her father to a nursing home. Shortly after being transferred to the nursing home, my wife discovered the entire neurosurgeon practice was closed and would not return until January. This meant at a minimum he would be at the nursing home for 2 months.
After 2 weeks in the nursing home my wife received a letter from Medicare that they would no longer pay for the cost and care in the nursing home. My wife and her two sisters were suddenly in panic mode and I could tell it was affecting their decision making. In the area we live nursing home costs on average run $15,000 per month. Thankfully my wife was levelheaded enough to explain that until they receive the neurosurgeon examination there was little that they could do (or change). My father-in-law had enough cash on hand to handle costs for a couple of months and the decision was postponed.
After the diagnosis from the neurosurgeon it was determined the break was inoperable. He would be in a cervical collar for the remainder of his life and will also have difficulty walking on his own or feeding himself in addition to his other frailties he had before the accident. It is now a level of care that is beyond our capabilities and long term care is his only option. At this point we have used the last of the cash and are now filling out the paperwork for Medicaid assistance (Title 19). My wife has been a caregiver to her parents for so long I can see this decision really hurt her emotionally. I can tell at times she feels that she has failed her father by not being able to care for him herself. I try not advise in times like this and try to just be there for her and provide a shoulder to lean on or lend an ear to listen. There is nothing easy about this, it is part of life, we just have to endure and be there for one another.
Throughout this time I kept placing myself in my father-in-law’s shoes and asked what could I have done that could have avoided some of this or made decision making much easier for my children?
My knee jerk reaction was to get long term insurance. It has been the generic advice that you can find in every finance article or recommended by most financial advisors as far back as I could remember. But as I researched long term care insurance, I discovered it not as beneficial as I had thought.
First let us begin with premiums. Most articles I found quoted premiums for someone my age at $3500/year (sounds reasonable) however, I discovered these quotes were from 4 to 5 years ago and the landscape has drastically changed. As the age 65 and above group rapidly expands with the baby boomers, many insurance companies are opting out of offering long term care insurance because of rising costs. The few insurance companies that remained have since doubled the annual premiums which are closer to $7,000 annually and if you have any pre-existing health condition they can deny you coverage. Of course, COVID has not made things easier and there is now speculation that premiums may increase to $11,000 annually.
The second big discovery I made was when and how much in claims are paid out. Insurance companies do not pay out the first 90 days of nursing home care, this is for a good reason. A large percentage of people admitted into a nursing home die within the first 90 days. Remember insurance companies have actuaries who predict this, the policy is geared toward their benefit not yours. Assuming you make it past the first 90 days and the policy kicks in, there is a cap of how much can be claimed and that typically falls in the $270K-$300K range. Going back to my area where nursing home prices are $15K/month that would equate to just 18 months of coverage.
What I thought was a simple slam dunk answer has suddenly become more complicated. Given the health care costs in my area as well as the fact that my wife would be denied for a pre-existing illness leaving just myself, long term insurance doesn’t seem to be the answer. Assuming I would sell my house if this ever happened to me, the funds from that plus my portfolio should be able to easily cover long term costs. Only concern is what to do until then as I would need some cash on hand until assets can be liquidated allowing my children to make stress free decision making. To do this I really need to re-think about my emergency fund.