 Welcome to Much More on Medicine. I'm your host, Catherine Noor. Much More on Medicine is an opportunity to learn about all aspects of health care. I talk with guests about medical and alternative care treatment, insurance, medication, surgery, rehabilitation, prevention, and much more. This is my last show before the holiday season and an opportunity to talk about the greatest gift. We're not talking about the latest smartphone, video games or a vintage wine. We're going to discuss a gift that could significantly impact the quality of life in years. Joining me in the studio is Robert Rich to talk about the greatest gift, a plan for long-term care. Robert Rich is an experienced financial services professional at Air Associates. His mission is to serve his clients and collaborate to develop uniquely tailored strategies to assure their stability and security. Robert. Yes. Welcome. Hi, Catherine. Thank you for having me. Well, it's great to have you today. Yes, yes. So tell us, what is long-term care? Yes. Well, long-term care is the idea that you're going to need someone to take care of you when you are unable to take care of yourself. And normally that will happen at a time when we're aged in life. Hopefully, if should you need care, it won't be until you're at least maybe in your 80s, but sometimes it can happen sooner and having a plan to cover the cost of that care is where people in my industry come in with planning for what we call long-term care insurance. And that is basically the idea that we're going to take the risk of paying for our care in the future and we're going to leverage it with a large insurance company so that when we do need that cost of care, we need in-home health care or we need a nursing home or we need someone to take care of us physically, will have the ability, the assets to pay for it. So let me ask you, do you have it yourself? I do, I do. I bought my first long-term care insurance policy when I was 40. Okay. I just bought what I could afford at the time and I figured, okay, well, it's going to cost a little more as I age. I've yet to pick up another policy, but I will be probably pretty shortly I think as we're getting close to 50 for myself. So I always said before I was 50, I would get some more coverage. Okay. So I'll let you know that I had it, I got it when I was 50. That was a high priority for me when I turned 50 because I felt that I might not have someone to take care of me when I get older and then what do you do? So let me ask you, at what age do you recommend that someone look into this? Yeah, well, that's a great question. The sooner, the better because I tell you one of the hardest parts about getting this insurance, this long-term care insurance is the underwriting. And as we age, we get more and more ailments, we might get some onset of dementia, all those things that would make it a bad risk for the insurance carriers to cover you. Underwriting is very strict on long-term care insurance. And honestly, the industry itself, it's relatively new as far as insurance products go. It's going back to the 80s. So we're only about 30 years in now. And when the idea of paying for this cost of care and providing policies that would cover that cost of care came into play, the insurance companies really had no idea on how to underwrite it and how to charge for it. And really a lot of the industry didn't do such a great job when they began. They basically based it on if we look back at the 80s, the interest rate environment was much different than it is today. A high interest rate environment. I know my dad who bought his house in 1982 was paying 17% interest on his home loan. And so you could get 12, 15% inside of a bank account. So when they started pricing long-term care insurance, they thought, okay, well, we'll take in these premiums, interest rates are high, so we'll be able to keep up with the pace of inflation and these things, the monies that we're putting aside for the future will be growing nicely and it won't be an issue. Unfortunately, what they didn't realize is that interest rates have been falling since the 80s and continue today. Actually, the Federal Reserve dropped yesterday as well. But as interest rates declined, the return on that investment for the companies didn't go so well. And the other interesting part about that was that they weren't sure on with the lapse ratio. Do you know what a lapse ratio? I have no idea. You'll have to clue me in. Yeah, so lapse ratio is the idea of how many people will at some point lapse their policies, stop paying premiums, right? That takes that money off the books and it could be afforded off to someone else. And so they had no idea about the lapse ratio that would occur inside these long-term care insurance policies and what they actually found was they based it on universal life at the time and 4 to 5% of universal life policies will lapse at some point in the future. So they based that lapse ratio. Well, 4 to 5% of these people will stop paying premiums at some point. That'll get us off the hook for their guarantees and we could pass that those savings on to the next guy. Well, it turns out that less than 1% of people who bought long-term care insurance have actually lapsed their policies because they realized how important it is to have that that policy in place to help pay for that care when you need it the most. Well, I'll tell you, I make sure that mine doesn't lapse because to me that's more important than any other insurance that I have because I am concerned about who would be taking care of me as I have problems. Now let me ask you, Robert, what type of medical conditions would someone have that would prevent them from being underwritten for this type of coverage? Well, it's a pretty long list. That's why it is difficult to get through the underwriting but you should always give it a shot no matter what. And there are multiple carriers so maybe one carrier may decline you, another one may pick you up. Always working with a broker who can handle multiple carriers is a good idea. But as far as medical underwriting risk, I mean some of the main ones are Alzheimer's and dementia, a lot of impairments to the body, so bad arthritis and things that would make you sort of invalid in the future. You know, I'm not really a medical underwriter so I leave that to them. Sure. Yeah, but there is a quite an extensive list that can really derail the idea of you getting a policy. You recommend that even if someone has a serious medical condition that they at least explore the option. Indeed, you should always explore the option and see what's available. Aside from just buying long-term care insurance, there's a number of other ways to really plan for that care. The best solution is, well, some will say the best solution is a long-term care insurance policy. I like to build combinations of different things that will pay out benefit for the need of long-term care. Aside from a long-term care insurance policy, there's many life carriers now that have built in what they call living benefits, things that will detract from the death benefit of a life insurance contract that you can utilize to help pay for care. There's a lot more creative ways now to actually ensure that you've got enough to cover the cost of care because in Hawaii, especially the cost of care, it can be quite exorbitant. Okay. And so what if someone tells you that I don't need long-term care insurance because the government will take care of me or I have health insurance? What would you say to that? Yeah. So, well, if we look just at standard Medicare, standard Medicare will cover, I believe, 90 days of intensive care. And then the whole purpose of when you're in the hospital is to get you out of the hospital. And so, beyond those 90 days, then there is no cost for coverage when you qualify for long-term care insurance. So, the idea when the payout comes is called activities of daily living. And there's six activities. And if you cannot do two of those activities, you qualify to start receiving your benefit. And those activities are bathing, toileting, transferring, walking, being able to dress oneself, continents, and being able to use the bathroom. Yeah, toileting, as I said. So, anyway, I digress from your original question. Sure. So, what if I tell you that I have children or a spouse that could take care of me? And why would I need long-term care? Because that's why I had children. Yeah. Take care of me. Yeah. Well, that sounds really unfair. And I think more and more people today are in that sandwich generation where they are not only raising their children and putting them through college, but also having to take care of their parents. And so, a lot of people have learned that lesson the hard way. When you say you've got family that can do it for you, would you prefer that your family actually manages your care or that your family actually provides the care? And managing care is a lot different. If you've got the assets in place to be able to pay for the help that you need, whether it's in the home or at a nursing home, it's important that you actually have someone there managing that care for you. If your 50-year-old daughter is going to have to quit her job so that she can stay home and take care of you, that's going to really put a burden not only on her, go for her future in her retirement, but also going to just put a burden on everyone in the downline of that family. Now, granted, if your daughter or son happens to not be working, well, hey, that's great, they can help you out. But there's not too many 50-year-olds out there who can afford not to work. And it really becomes, I've seen it time and time again. And just in my practice, where folks whose parents did not have long-term care, they really are suffering today trying to make up for not only whether they paid for the parents' care out of their own pocket, which then basically depleted their own retirement savings, or they're having to stop working and they can't contribute to retirement anymore. And now they're just breaking back trying to get dad in and out of the bed and bring him to the toilet. It's not a pleasant way to be living your life, especially when you're in that sandwich generation in your 50s and you're looking forward to your golden years. It really does set you back quite a bit. Okay, yes. And then nowadays, people live all over the place. So you could have your children living in another state or another country, so it would be very difficult. I remember when my dad had Parkinson's disease and his wife, she had a hard time lifting him or moving him or helping him because of the significant difference in weight. And he didn't have long-term care insurance. And he contracted Parkinson's when he was about 69 years old. And I think that that was something that he made a mistake about, that if had he had long-term care, it would have helped a lot. And so I see the importance. Okay, so we're going to take a short break. I'm Catherine Nora. This is much more on medicine on the ThinkTech live streaming network series. We're talking with Robert Rich about the greatest gift a plan for long-term care. Aloha. My name is Victoria and I'm a host at the Adventures in Small Business. This is a collaboration between U.S. Small Business Administration, Hawaii District Office, and its partners, where we showcase the stories of local entrepreneurs and small businesses, talk about how to start a business, talk about great tips for small business owners. Please join us every Thursday, 11 a.m. at ThinkTech, Hawaii. See you soon. Mahalo. Aloha. This is Rob Hack. My show is exporting from Hawaii every other Thursday from 12 to 12.30 p.m., where I bring in people involved in the entire exporting infrastructure in Hawaii, including government, academia, and manufacturers and shippers themselves. Please join me every other Thursday, 12 to 12.30 p.m., on exporting from Hawaii. Mahalo. We're back. We're live. I'm Catherine Nora, and this is much more on medicine on the ThinkTech live streaming network series. And we're talking with Robert Rich about the greatest gift, a plan for long-term care. Robert, so if I am having problems and I'm having medical issues, and I remember that way back 20 years ago, I bought a policy of long-term care insurance. I might give you a call and say, you know what? I'm having some problems. How does this insurance policy get triggered? Yeah, good question. As we mentioned earlier, the six activities of daily living. So when there's toiletting, bathing, eating, dressing, transferring, walking, or moving, when you are unable to perform two of those six activities, and it's written off by your physician, you then qualify to start receiving the benefit that comes out of your long-term care insurance policy. Okay, so the doctor would provide a note to certify that you cannot do two ADLs or two activities of daily living. That's correct. Very correct. Okay. Yeah, it's funny because actually I was just home for Thanksgiving visiting my folks, and they bought a real nice policy 35 years ago that's been compounding all these years. And my dad, he's not in the best shape, and every time I go home, I try to tell them, like, you know, you could probably get your doctor to write off on two of these activities, start utilizing that policy, you've been paying it for it for 30 years. Oh no, no, no. And it's like, oh man, use it, use it, use it. Dad could barely breathe, dad could barely walk. My dad's having a hard time eating, so yeah, it's funny how even folks who have been paying in all these years just still don't see the, don't want to go there to the idea that they're actually needed. Okay. And he's pretty darn close, so hopefully they kick that thing in pretty soon. Now, okay, when you get to the point where your doctor actually certifies that you cannot do two of those important tasks, then what is, what might be provided to you? Yeah. Do you have to go into a home or does someone come to you? What happens? Yeah, no, there's different levels of care. You know, I think everyone I speak to about the idea of needing assisted care in the future, where's the first place everyone wants to be? Home. Yes, home. Okay. Yeah, so if we can really make it work with home healthcare, providing nurses that can come out and take care of us in the home, that's the ideal situation. A lot of policies these days are being built with the idea that we're going to try to utilize home healthcare first and really the benefits of getting there, like there's, some policies have a 90-day waiting limit for you to be able to start getting care, kind of look at it like a deductible. Okay. I know some policies that have 20 days for home healthcare. So you can 20 days with two of those six activities of daily living checked off. And then once that 21st day kicks in, you can start receiving benefit. And then it goes back to the idea of your family managing your care. They're going to go out and they're going to find a nurse to come in and take care of the family. And some policies too, companies, they have great assistance in helping you track down what it is you need to do to find people to come take care of those inside the home. And then at some point maybe transition to a nursing home. But for the most part, people really do want to age in home and they want to have care in home. So if we can provide that benefit to them, that's much better than getting them moved out and off to a place where they're not familiar and really struggling with that whole idea. But then would it cover the home if they have to be in a particular location where they're taking care of 24-7? Yes, up to the benefit amount, whatever amount has been purchased. Today in Hawaii, the average monthly nursing home cost is, sorry, it's hard to get out, is $9,500 a month. Yeah, so that's on average. That's for a private room in a nursing home. It's anywhere from $4,000 to $6,000 inside of a residential home. We see those popping up in our neighborhoods, you know, residential nursing home, five beds inside the home. That's actually a very good business. Because the baby boomers continue to age. But yeah, so those are two of the options aside from getting a nurse to come and take care of you inside the home. And even with that, maybe you don't have enough benefit to cover a full nursing home. But you've provided yourself with enough benefit to pay for a nurse and take an eight or 10-hour shift away from either your spouse or your children. Give them a break so they don't have to constantly do that for 24-7. Sure. Well, that reminds me of my stepdad, Ed, who was just put in a nursing home. And he has dementia, unfortunately, but had the good fortune of being taken care of by my co-conservators who had him in their home. And he had his nice bedroom and his own bathroom in their home. And we arranged for them to get money each month. But then it got to the point where after about five years of that, it was just too much for them. And so they did a lot of research and found a home for Ed. And fortunately, it's a good place. But if someone doesn't have the resources, I could imagine that that would be a very difficult situation. It can indeed. In fact, having resources is what can help you get into a home. Your question earlier about the government will pay for it, that's relying on Medicaid. And yeah, there is an overwhelming need for people who need care on the Medicaid system. So is there enough rooms available for folks who are only caring Medicaid? A lot of ways you can get into a nice home is to have the resources to cover those first or two years, one or two, maybe three years. And then once you're in, I've been told that you're able to stay and maybe switch the Medicaid program should you run out of all of your benefits. Whether it's long-term care insurance or you're simply taking money out of your savings to cover the cost of care. Sure. And then with the aging population, I would imagine that we can't always count on monies being available. Correct. Yeah. And really, when it comes down to it too, I always hear people say, well, I'm going to self-insure. I've got plenty of money in my 401k or I got money saved up or I got stocks. I'll sell a house, whatever the case may be. That's kind of, I understand the skepticism of the industry as a whole. Yes, there have been some very predatory companies out there that maybe worn up and up. But if you can get on with a good company that really provides a guaranteed benefit and will take care of those costs, why not leverage a little bit of money into the risk with the insurance company and let the insurance company pay for it in the future? Just the idea that you're going to pull money from your 401k so that you can pay for the cost of care. Well, for every dollar you pull out of that 401k, it's costing you $1.30 because you got to pay taxes on that dollar. So you're actually talking about risk management of your own person. You are talking about transferring risk to an insurer rather than accepting that risk yourself. Exactly. Well said, like an attorney. Okay. And that comes down to peace of mind, is that right? Oh, indeed. To know that what you have built up, either for your spouse or for your heirs, is going to be there and it's not going to get wiped out by the cost of care in the future. Basically, what you're doing is you're taking with a long-term care insurance policy, you're ensuring that you will have cash flow in the future to pay for that care without having to deplete your assets, without having to sell your home, without having to just drop everything that you've got built up over the years, because nothing will wipe it out faster than that cost of care in the future. And this allows you to bequeath your estate to your children, correct? Absolutely, yes. So there's a lot of benefit aside from just making sure you're comfortable, but also making sure that what you worked for is sustained. Right. What you've built up over your lifetime is not going to be completely annihilated by the cost of care in the future. Okay. So now let's talk about another money issue. What is the range of premium that you've seen for this care? Yeah. Well, it depends on when we're purchasing and how much. I always say, if you want the good old Cadillac plan, you could pretty much count on anywhere from $5,000 to $9,000 per individual, I would say ranging from age 55 to age 75. Now, what do you mean by $5,000 to $9,000? Is that per year? Per year. Oh, okay. How does that break down per month? Oh, well, $5,000 would be about $600 a month. Okay. But if you're just getting something that is sort of basic, decent coverage, what would a monthly plan be? Well, again, there's so many factors that are involved, like health, age. But yeah, I mean, whatever you can afford to, I guess, to throw at that idea is probably a good idea. So really, it depends on one's budget, right? So if we're talking monthly, you know, if you can do $200 a month into a plan, well, then at least you're getting something. Okay. And no matter what age you are, right? So my first policy that I bought when I was 40 cost me $100 a month. Okay. Yeah. And it gets me, I think, the daily benefit of $150 a day, right? Right. Yeah. So I will need more in the future. Today it costs you about $300 a day for the cost of care. So I'm definitely going to need some more in the future and I will buy more when the time comes. Sure. Yeah. I'll eat tomorrow now. Now that you're thinking about it. Now that we're talking about it. Right, exactly. Yeah. I'm at risk. I'm at risk. Sure. Yeah. And you know, and I think we all know what our potential health risks are in terms of what runs in our family, what we might be facing. Right. To, I mean, you have a little bit of a clue how well you treat your body if you exercise, if you eat right. And, you know, that and you're basically your lifestyle. So that might tell you how much your risk a little bit. But I always say buy as much insurance as you can afford in terms of when you're looking at any type of insurance policy, what can you afford and try to get enough so that you can consider this, these risks. And do you have a last word for us? Well, I just, you know, when it comes to planning, the solution isn't always just a long-term care insurance policy. There's many ways to layer other assets and other things in place to help you cover that care. So whether or not it's going to cost you $10,000 a year and you go, Oh, that's too much. Okay, fine. Let's make it five. And then let's come up with other solutions that can help you cover that care when the time comes. Because basically it comes down to four things, you know, who, who's going to provide you care? Think about that. Who is going to provide the care for you? Is it your spouse? Is it your kids? What does it mean to them? And where, where do you want the care in home or inside a facility? And then how, how are we going to pay for this care? If we can move assets around and leverage it into the risk for the insurance company, it's a much better situation to be in. Fantastic. Well, Robert, you've told so much about long-term care insurance. Now it really motivates me to make sure that I have enough. So okay, we're out of time and we'll have to wrap it up. I'm Catherine Norr. This is much more on medicine on the Think Tech live streaming network series. We've been talking with Robert Rich about the greatest gift, a plan for long-term care. Thank you for joining us today. And I wish you and yours Merry Christmas. Happy Hanukkah and happy holidays and a happy new year. And I'll see you again in 2020. Thanks to our broadcast engineer, our floor manager, and to Jay Fidel, our executive producer, who puts it all together. Please join us for future Think Tech productions.