by Romeo Raabe June 15, 2021 at 03:47
PM
What You Need
to Know
o
Most cost survey teams post the median cost figures.
o
Half of the care providers have prices over the median level.
o
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 LUTCF, LTCP, has been an LTCI specialist
in Wisconsin for 30 years..
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