Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Long-Term Care Planning

Why Long-Term Care Cost Reports Are Often Misleading

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Most cost survey teams post the median cost figures.
  • Half of the care providers have prices over the median level.
  • The price of assisted living facilities can vary especially widely.

There are many published reports of the median cost of long-term care (LTC) services available. Yes, costs do vary around the country, and must be taken into consideration — especially if your client may be planning to move in retirement.

However, my focus today is on the term “median cost.”

Here are five reasons why median cost figures can be misleading.

1. Median Cost

“Median cost” means half of the costs will be below the median and half will be above. The median auto accident is $7,500, how much liability insurance do you carry?

Thus, if the median cost of a nursing home is $8,821 per month, according to one survey, this means there may be some charging $6,450 per month and some charging $11,192 per month. This does not even begin to address the different needs of various residents.

2. Unusually Bad Circumstances

I, personally, have $100,000 of liability insurance on my autos, and a $1 million umbrella over top of that, despite the median auto accident costing only $7,500.

An attorney friend of mine says the worst possible accident is running into a van full of lawyers, but we won’t go there.

3. Local Conditions

When I purchased my long-term care insurance (LTCI) many years ago, I asked numerous facilities what the bills were at the highest — so I could be sure I could cover the cost. I also have 5% inflation on my benefit, which has just kept up with the increase in costs where I live over the past 20 years.

4. Coverage-Goals Mismatch

I do not want my clients to find that their cash flow between available income, yield on investments, and the LTCI that they buy to fall short causing them to use up assets or worse, spend down to Medicaid impoverishment.

I tell them about the median nursing home costs, per a survey, and also about the high costs that some people are paying, and let the clients choose the coverage level. If they want to plan for just the median cost, they initial an item showing that planning for just the median cost is their choice. If they want to be sure their insurance will cover the bills, just like auto insurance, they plan for the highest likely cost.

5. Variability in Variability

The concept of wide variations in costs applies to assisted living costs, and this gets even more complicated, since the amount of hands-on care provided is generally much less for assisted living care than for dementia care. Many sources tell me over half of facility care is for dementias, indicating a need for more cash flow.

There is a greater variation in price and quality of life at assisted living facilities than at nursing homes.

So, learn what expectations your clients have for care, and how certain they want to be that their cash flow plus insurance will cover what they expect before they choose amounts of LTCI coverage.

Romeo Raabe Romeo Raabe LUTCF, LTCP, has been an LTCI specialist in Wisconsin for 30 years..

(Featured Photo: Katarzyna Bialasiewicz/iStock)


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.