Long-term care: anecdotes and advice from an expert
This week’s blog is a guest post from Phil Seibel, an insurance planner with Collaborative Planning Group in Austin, Texas.
Our firm is frequently asked to help financial advisors and their clients evaluate the need for long-term care insurance. We go through many scenarios in this work: whether to buy or not buy, what type of insurance is best, what services are available, etc. The options and plans are seemingly endless, and the decision-making can be emotionally difficult
In fact, this post comes at an emotional time for long term care decision making in my own household. Currently, we are pursuing options for my wife’s stepfather, who unfortunately dealt with employment struggles over much of his career that left him without a clear plan in old age. Today, he does not have much in the way of means to provide for his lifestyle, let alone his mounting health issues. He is now in his late 70’s and has been struggling to take care of himself without supervision. While he still has most of his mental capacity, he has many physical challenges that make day to day functioning impossible without assistance. Right now, he receives part-time daily care to help him with dressing, bathing, and transferring. However, my wife constantly worries about what could happen to him in the absence of around-the-clock support or supervision.
We have had many calls with my wife’s stepfather about his current living situation, and he has asked her to help him with many things. These include qualification for a military benefit to help provide funds for his care, managing his bank account, and even help with paying bills. Despite his willingness to ask for help with his independent living situation, he refuses to acknowledge a need for more than the 4-5 hours of daily care he is receiving, and will not consider the option of moving to an assisted living facility. This is exceptionally worrisome for my wife, even knowing that assisted living would be an expensive proposition for someone in his financial situation. Still, it would offer us great relief to know that he is being looked after professionally.
My wife and I struggle greatly with her stepfather’s situation. Even though my wife does have power of attorney over his finances and living circumstances, it is a heartbreaking thought to pursue a transition that could cause resentment between them. We are still taking things one day at a time. I share this anecdote to illustrate that even experts like myself can find themselves deeply challenged by the pursuit of long term care. I truly wish we had started these conversations and considerations earlier in life, when the situation was less critical. I also recognize that our story is far from unique, and I want to share my knowledge and lessons learned to prevent others from enduring these hardships.
When I hear from my clients and their children, we discuss these same scenarios and try hard to prevent them on the front end. In my opinion, there is no “perfect plan”, but good planning can be done with the information presented. Put simply, it all starts with a willingness of the client to recognize that they will age, and also that they cannot fully predict how they will age. Mana has previously published some helpful pieces on some of the ways you can start these conversations with your family. If you set up a plan ahead of time, then you can mitigate some worst surprises and potentially avoid situations like the one my wife and I are going through.
Once a client does recognize these realities and agree to planning, I believe it is important to engage an advisor. The value of a third party planner cannot be understated in these emotionally-charged decision spaces. Most times, the best choice for this role is a financial advisor. Once a financial advisor is able to hear their client’s concerns and run some numbers on their plan’s ability to withstand a long-term care event, the client may then need to engage an insurance professional to review options with insurance. As I tell a lot of clients, insurance is not always the answer, but it should be considered to see if the leverage would assist the plan and/or emotionally ease anxiety. Our role would be to hear the goals of the client, gather health information and look at options with the insurance carrier that fit those goals.
For the purpose of this blog, I will not go into all of the details of the various types of insurance policies available, but instead I will give a high-level list of options to be aware of, as well as the triggers that initiate the benefit payouts.
Traditional Long-Term Care Policy – This style policy is similar in concept to a homeowner’s insurance policy. You pay the carrier a premium and, if you qualify for a long-term care benefit in the future, the carrier offers a benefit based on a defined schedule. Note that if you pass away without using any of your long-term care benefits, you will most likely not receive any benefits from the policy.
Asset Based or Hybrid Long-Term Care Policies – These policies have a long-term care benefit available and additional options to ensure a policyholder receives something for the premium they pay. This includes a small death benefit if the client dies before utilizing the long-term care, and a cash surrender value if the situation arises where they want to cancel the policy.
Life Insurance with a Long-Term Care Rider – This option is fairly straightforward. The client purchases a permanent life insurance policy that offers a long-term care rider. If the client has a qualified long-term care claim, they can use some, or all, of the death benefit for their long-term care needs.
Outside of the different styles of policies, there are also different options (based on carrier) for ways to set up the plan.
Reimbursement vs. Indemnity
Reimbursement policies are designed for a policyholder to be reimbursed for qualified long-term care expenses.
Indemnity style plans pay the monthly benefit available on the policy, in full and tax-free, to the client when they qualify for a claim.
State-Partnership Protection
Medicaid’s overarching theme for qualification is being financially destitute. Plans that offer State-Partnership Protection can save a portion of a client’s assets from having to be spent down in order to qualify for Medicaid assistance. As of today, only traditional long-term care policies offer this option.
Important note: this is just a very high-level overview of complex policy options. Each carrier has different ways of designing them. There is never a “one size fits all” to these plans, so they should be analyzed thoroughly before making any decisions. For additional reading in this space, Mana recommends starting with this article.
To qualify for benefit, the long-term care insurance policies have main qualifications for a client, including an evaluation by your doctor that either demonstrates your inability to perform 2 of 6 activities necessary for daily living (bathing, dressing, eating, transferring e.g., getting out of bed or chairs, toileting, and continence) OR a severe cognitive impairment such as Alzheimer’s disease or dementia.
Once we review the options above with the client and financial advisor, most clients can begin to understand the concrete decisions that they need to make. Following this decision making process, it is exceptionally important to document the wishes of each client so that their children, or other loved ones, have a road map to follow. An attorney may also be hired to help with this documentation, as some wishes need to be legally implemented. All plans are different, but it is important to make sure that bases are covered in each case.
Finally, the client needs to personally articulate their wishes to others in their life that they care about. Many times, this means talking about it with their grown children, but I have also seen these wishes shared with other family members and even friends. Doing this early, while the client is healthy, can alleviate the need for just-in-time decision making in older age. In the worst case scenarios, clients will never get the long term help they might need, or otherwise may be forced into a situation that they have no control over in order to protect their safety and wellbeing. It is tragic that this commonly occurs, and I believe it is important to emphasize that these difficult end of life situations are entirely preventable with a small amount of forward thinking.
Of course, each and every family is different in how they plan for a long-term care event. Interpersonal relationships and openness to conversation varies widely. Unfortunately, not planning is a plan too - and it rarely ends well. Speaking from a place of regret about my wife’s and my own situation with her stepfather, I implore readers to involve trusted family members in these decisions, and make your intentions known before there is an urgent need for action. Whether you buy a long-term care policy or not, remember that having a plan and holding these difficult conversations is an act of radical love for your aging family. These discussions may not be easy to initiate, but will ultimately bring comfort and stability to your lives at the time when it matters most.
Phil Seibel’s professional life has been one wild ride. He attended the University of Texas on a pitching scholarship and was drafted by the Montreal Expos, where he was fortunate enough to play for 7 years. The highlight of his baseball career came when he was able to be a member of the 2004 World Series Champion Red Sox. After a constant string of injuries Phil retired, switching over to the front office of the Arizona Diamondbacks where he helped manage the Scouting and Player Development offices. After a year and a half, Phil realized that he needed to make a change to be able to balance work and raising a family. Following in his father’s footsteps, he joined the insurance world. Since 2009 he has been fortunate enough to work with some of the best mentors in the industry, allowing him to build a practice and skill set that serves financial advisors and clients alike. Phil joined Collaborative Planning Group in 2020 where he wears a few hats – client relationship manager, advisor relationship manager, and life insurance planner. His goal is to bring the ultimate level of excellence to the insurance world, a challenge he gladly welcomes. He currently hangs his hat in Austin, Texas with his wife and two daughters who keep him on his toes.