The Federal Long-Term Care Insurance Program (FLTCIP) provides long-term care insurance to help cover the costs of care if you can no longer perform everyday tasks by yourself due to chronic illness, injury, or disability. This is something that you may need for the rest of your life, and it is important to ensure you’re well looked after. To help Michael, Tommy, and John discuss this topic more in depth is Jill MacNeil, LLIS’s long-term care insurance specialist. In this episode, she will be describing the emotional and financial needs of long-term care.
Listen in as Jill compares the benefits of Federal versus private long-term care insurance policies. You will learn what to do if you don’t have a large enough benefit to cover everything and how inflation may impact your rates later in life. No matter where you are in your career, consider the prospect of needing long-term care—and how this might significantly increase the quality of your life later in retirement.
Listen to the full episode here:
What you will learn:
- Introduction to Jill MacNeil. (1:30)
- The federal versus the private policy of long-term care insurance. (5:30)
- When it becomes no longer worth it to purchase long-term care insurance. (8:30)
- What long-term care insurance is. (10:30)
- The importance of using your policy now. (13:50)
- What you can do when your budget might not cover long-term care insurance. (19:15)
- What to be aware of with inflation in regards to insurance. (24:30)
- The importance of having a professional help you use your policy. (31:20)
- The average length of time people require care. (35:30)
- What the "stay at home benefit" is. (39:40)
- Who is eligible for long-term care insurance. (41:00)
Ideas worth sharing:
“Long-term care insurance is not health insurance.” - Mason & Associates, LLC
“The Federal policy looks just as good or better than a private.”- Jill MacNeil
“Use your policy now. Do not wait.”- Jill MacNeil
Resources from this episode:
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Read the Transcript Below:
Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.
Michael Mason: Welcome to the Federal Employee Financial Planning Podcast, hosted by Michael Mason, certified financial planner; John Mason, certified financial planner, and Tommy Blackburn, also, certified financial planner and certified public accountant.
Mason & Associates have over three decades of experience helping federal employees with their financial plans.
This podcast, Long-Term Care Insurance — not only Long-Term Care Insurance generally, but also, the Federal (very special plan), the Federal Long-Term Care Insurance plan.
John Mason: And today, Mike, it’s a really cool podcast because it's going to be the first time that we have a guest. So, we've recorded several of these now, but this is the first time that we've actually had a guest on the Federal Employee Financial Planning Podcast. We're really excited to welcome LLIS and Jill McNeil.
Michael Mason: Yeah, LLIS is a fee-only financial advisor, helps fee-only financial advisors connect our clients with the provider of life insurance, mostly life insurance, but long-term care insurance.
They’re a team of experts in the insurance process from planning to ongoing services, to free policy reviews for long-term care, disability annuities, and hybrids. We want to welcome Jill McNeil to the program.
ill, again with LLIS. She is active in tennis. She's a golfer, again, probably a better golfer than I am. Began in 1998, and since 2009, has been the go-to person for connecting our clients with their services to make sure they get the life insurance long-term care insurance that's right for them, that's not a product that was right for a commissioned salesperson, but one that's right in this fee-only world where you do absolutely what's right by your clients. And we outsource those insurance needs.
Jill, welcome to the program.
Jill MacNeil: Thank you, Mike. Nice to be here. Thank you for inviting me. Happy to take part.
John Mason: So, Jill this is our first time having a guest on the podcast. We were curious, have you ever recorded a podcast before?
Jill MacNeil: I've done one, probably about two or three years ago and it was with another financial advisor. And again, the specialty was long-term care, and her whole podcast revolved around wine. So, we kind of mixed the idea of drinking wine and talking financial. So, it was interesting.
John Mason: That's awesome. I think this one will have a little bit similar — we're going to have a little bit of a tilt towards a federal employee and jumping into it a little bit as like the need. Do they really need federal long-term care?
So, we're going to talk about the need, we're going to talk about the different products that are available, the specifics. So, we're going to get a little granular, but then also, talk at a pretty high level, I think, on the emotional and also, the financial need of long-term care insurance.
Michael Mason: A little background, Jill; Ken and I, my brother started the firm with me back in … well, Mason & Associates started in 2003, but we were doing this since 1987. We began long-term care, helping clients get long-term care in the nineties. And boy, those policies were tremendous, right?
Jill MacNeil: Yeah, the whole industry's changed a little bit, a lot. I shouldn't say a little bit — a lot. There are still some really good products on the market and we have different varieties of products, not just traditional long-term care. We have the hybrids now too.
Michael Mason: And we're definitely going to want you to give the comparison at some point. Finishing that discussion, Ken and I were active in the long-term care business when the federal policy came out.
And what was so interesting is the federal government did all the advertising, their people needed long-term care. But at that time, the private sector contracts were so much better, we were like top two long-term care people in the country because of our specialty with federal employees.
John Mason: And Mike, as you told me those stories before, it was interesting like federal long-term care 1.0 didn't cover a hundred percent home healthcare. It was like 75% home healthcare, but a hundred percent for nursing home.
So, some of like the Genworth contracts and the John Hancock, they were actually richer in benefits than the policy that the federal government came out with. So, not only did it do the marketing for you and Ken back when we used to be able to offer commissions; the end product for federal employees was better by going outside of the government to private sector.
Michael Mason: Yeah. And that seems to have flip-flopped. Jill, preparing for this, I'm sure you've looked at the federal plan compared to what's available on the private side. What's your feelings there?
Jill MacNeil: In preparing for this, I did look at it and I've come up against it several times when we have clients come to us with their financial advisor that have the option to get the federal plan and want to compare it to an individual private policy.
And I hate to admit it, for us, the federal plan often looks very good because it has not quite as many bells and whistles as an individual policy. It used to be years ago, the individual private policies had more riders, had more options, but now, they've pared-down the private policies, so the federal plan looks really just as good or better than the private.
I noticed that up to $450 a day daily benefit available with the federal plan. With the companies I work with, the highest we can get is 300 with one company and 10,000 monthly benefit with another company. So, the federal plan does have very rich benefits.
I like the fact that the federal plan allows for some informal care. I think it's up to 500 days during the whole plan period, and private policies, many of them are reimbursement policies that do not allow for any informal care. So, the federal plan looks good. And with the group discount, it's hard to beat.
John Mason: Can you elaborate, Jill, a little bit more on that informal caregiver? Because I think that's a really cool rider that the three of us talk about all the time, but maybe is not as well known to our listeners.
Jill MacNeil: Okay. So, by informal care, that allows the policy holder to receive care from family, friends, neighbors, people that are not certified or licensed. Whereas, with the private policies, care has to be provided by formal caregivers, meaning licensed or certified caregivers. So, they can't use family or friends to provide the care.
So, again, I think that's a very nice feature of the federal program.
Michael Mason: And I think before this podcast ends, we'll probably do a quick lightning round that highlights what private sector may have that federal doesn't, and what federal has that private sector doesn't.
One other aspect while we're on this little piece of the comparison, once a person hits age 70 in private sector, do their options start to run out as far as being able to purchase long-term care?
Jill MacNeil: Mutual of Omaha is one company we work with and they will issue a policy up to age 79. So, they can get all of the benefits that younger ages can get, they're just going to pay a lot more for them.
So, once you get that age, 69, 70s — is it really worthwhile spending the money for a policy? You just really have to look at how much are they going to spend in premiums and what is the benefit they're going to get for it. So, yeah, they still do have options, but as I said, it just gets very expensive.
Michael Mason: And then one other thing that I've highlighted is private sector (and correct me if I'm wrong, that's why you're the expert here on the private side) — if I'm a 60-year-old male and my wife is 60-year-old female, we're going to pay the same premium inside the federal government. In private sector, what are we going to do?
Jill MacNeil: So, about seven, eight years ago, the private insurance companies went from using unisex rates to gender specific rates. So, now, females pay a lot more for their premiums. And that's because time has shown that females go on claim a lot more often and a lot longer.
John Mason: Well, guys and ladies, we've dove right in to a lot of good content already. So, let's recap: the goal of the podcast today is really to help federal as well as non-federal employees understand the benefits of long-term care.
whether that's monetary or emotionally, understand the differences between federal and private, and potentially, motivate some folks who are listening to maybe go and acquire that long-term care or submit an application to see if they're even eligible.
A lot of times, people think I'm just going to go get it at some point in the future, but unfortunately, you could have a medical event that could prevent you from even making it through underwriting.
So, we hope to not only provide world-class education, but maybe some motivation for those who have a long-term care need or concern to go ahead and apply for that coverage, whether it's through somebody like LLIS or through the federal long-term care insurance program.
But we've dove right in and we've talked about a lot of good stuff. I think we first need to define what is long-term care insurance and maybe some of those variables.
Tommy Blackburn: So, thanks, John. That's great. Long-term care insurance is not health insurance. So, we'll just start off with that. So, your Medicare policies, your supplement, health insurance, that's going to pay for those medical expenses. This is going to be more of to cover those active-
Michael Mason: Activities of daily living.
Tommy Blackburn: ADLs, activities of daily living. So, two out of six, and those activities of daily living can be anything from like bathing, continence, transferring, toileting, eating. So, those are your ADLs.
And the whole purpose here with long-term care insurance is when you're having a problem doing these or you have a dementia beginning to set in, is to help you maintain that independence, to help you take care of yourself, and hopefully, alleviate some of that financial as well as physical and emotional burden that could fall onto others.
Michael Mason: Jill, I'm going to make a statement and I think you'll support this. First and foremost, the first person we helped get long-term care insurance was our grandmother. Then mom and dad have it. And the statement I'm about to make is a quote that my brother, Ken Mason came up with.
And he said, “I thought the most difficult thing about long-term care insurance was getting somebody to buy it.” And what we found is the most difficult thing is getting them to use it once they have it.
And so, to echo Tommy's activities of daily living, let me just give you an example. Mom had major surgery, dad was alive at the time, but very weak with his heart. And I just stepped in and said, “Dad is going to try to help and he can't. You will not be able to do this without supervision.”
And the rules of turning on your benefits were such that if you can't do it or you can't do it without substantial supervision — and for all those naysayers out there (and this was a Genworth policy) that say the company's not going to pay, they paid. They paid instantly because the proof was in the pudding.
So, it's not like you're just beat up and you can't get out of bed. These things kick in a whole lot sooner than most people think.
Jill MacNeil: Yeah, Mike, I agree with you. A lot of the times we have clients that come to us or we talk to clients and they say, “Well, I'm going to save my policy to use it when I really need it.”
And our feeling is use the policy now, take advantage of those benefits. And then if it runs out, then start to use your own assets to pay for your care.
I saw a figure the other day, only 16% of policies are exhausted because they run out of benefits. So, yeah, use the policy now. Yeah, I can't stress that enough.
John Mason: Well, and Jill, in my experience, Tommy and I have been doing this for 11 years and we have firsthand experience with some of these long-term care policies. They're complicated. Each contract's written differently.
Like some folks define an elimination period differently than other carriers do. Some have zero-day elimination period for home healthcare, others do not. So, it's very complicated. And I think ultimately, it's just not having an advocate.
So many people that have these long-term care policies today, the person that sold them that policy 20 years ago is either dead or out of the business. And let's face it, the folks who answer those 1-800 numbers aren't necessarily qualified to be giving advice on how and when, and maybe don't even have the experience to help guide clients through activating and using those policies.
Jill MacNeil: Right. Well, I think that's where care coordinators are very handy to have. So, a lot of the insurance companies have a care coordinator. So, once a policy holder files a claim, a care coordinator will come to the home and help the policy owner understand what they have.
It may have been 20, 25 years since they bought the policy and they don't remember what their elimination period is or how it works. So, the care coordinator can help them be more familiar.
Michael Mason: And again, the experience is tremendous. When we were helping mom and dad get these policies years ago, they thought the care coordinator was blocking their care. You know, they were going to be the ones … so they were like, “Do I really want to have that?”
But you're absolutely a hundred percent correct. That care coordinator has been a blessing the three or four times we've used them.
Tommy Blackburn: That is great to hear. I think that's part of that emotional side of it, of helping get that care in place and having somebody experience to coordinate all of it exactly as the title would suggest.
As we begin kind of talking about care and getting this care in place, Jill, what are you seeing as the cost per day or month? What has LLIS seen on the, the cost of care there?
Jill MacNeil: It really varies depending on where the client lives. I mean, if they're in New England I think the national average is over 108,000 for a private room in a nursing home. Home care, 59,500 for homemaker services.
So, if you're in New England area, California, even Florida, it's very expensive. If you're maybe in Texas or Oklahoma, it's not as expensive. Maybe about $250 a day for a private room in a nursing home in the Texas area, $130 for homemaker services.
So, again, you can't do a blanket number. You really have to look at cost of care where the proposed insured lives and see what it is for their area.
Tommy Blackburn: And so, it seems like we do need to understand the environment that we're going to be in. But even on the low end, all the way up to the high end, these are substantial costs that we're talking about if we get into the situation.
On the 108,000, you threw out, so that'd be $9,000 a month. So, it does seem like this is at least for us, from a financial planning perspective, this has got to be something that we at least look at and understand what could the impacts be on our financial plan.
Do we use insurance? Do we take another method? So, thank you for illustrating kind of geographically, what those expenses, how they can vary as well as high end national averages, what they could look like.
John Mason: It's not an insignificant cost by any means. I mean, when you're talking a hundred grand on a million-dollar portfolio, that's 10%, right? And when you get down to those last 3, 5, 10 years of that retirement plan, and then all of a sudden, there's a long-term care event, that's a big number.
Tommy Blackburn: And I think what concerns us the most is what if it's a catastrophic situation. So, it's not the we go in for one year, but it's what if we're in there for 5 or 10 years, what does that do to a portfolio? What does that do to your spouse, to that whole situation?
Jill MacNeil: Both of them are on there.
John Mason: Exactly. Yeah, exactly. If both people require care, that's a game changer. So, this is talking specifically about federal long-term care. The website for federal long-term care is ltcfeds.com.
What's neat about that, Jill, is in their like calculator or resources section. They have a calculate the cost of care in my area. And at least in Hampton Roads, Virginia, where we're recording this podcast right now, in Newport News, the cost of care appears to be very, very accurate. So, that's a good tool for federal employees.
108,000 is the national average. If you want to get a little more granular on what a nursing home costs near you, ltcfeds.com, in their calculator resource section, you can run that quote for your specific area.
Michael Mason: And Jill, my question to you is when we help our federal employees, we're always going to go first to the federal long-term care, it makes sense. But sometimes, you have to make sacrifices. Sometimes, you have to look, can I insure? Can I afford today to insure the full amount of the care in my area?
So, when the budget starts getting tight when you're helping clients, what mechanisms do you use to kind of try to get this premium into an affordable stage?
Jill MacNeil: Well, most people, if they're looking at long-term care, they probably have some assets. If they can plan on paying their premiums on long-term care, they have some assets, they may not need a policy to cover a hundred percent of costs.
So, it used to be, we would recommend people look at a policy that would cover 80% in nursing home costs. But now, as nursing home costs have risen, premiums have risen, a lot of times, we look at covering maybe 50% of nursing home costs, because when you have 50% of nursing home costs, you probably have a benefit high enough to cover a hundred percent of home health care costs.
And I think it's like 70% of claims begin in the home. So, if they have a benefit high enough to cover home healthcare or assisted living, and then worst-case scenario, if they do eventually go into the nursing home, even if they have 50% of nursing home costs covered, that's going to be a big help better than not having anything.
So, we try to encourage clients to get some form of coverage. Again, it may not need to be 80, a hundred percent, but having something is always better than nothing.
Michael Mason: That's like every morning when I get up to either take my walk or get on the elliptical, and I dread a two-hour walk, I think, well, if all I get’s an hour; an hour is better than no hours. Right.
So, the same thing, here's the strategy we use, and I want your opinion on this. As federal employees, they have nice pensions. So, they have their pensions and they have social security. And let's say that for a second that you and I are married and I'm a federal employee and I have a pension, let's say it's 50,000, and I have a social security check that's 36,000, and you have a 36,000 social security check.
We've done our financial plan and we know at my death, when half of my pension continues to you, because I took survivor benefits — we know that you're going to be okay.
We know that when none of my social security continues to you because you have your own, you're going to get your social security and half of my pension, and we've done the plan and you're okay. So, I have this statement that says, if you're dead, your spouse is going to be okay, but what if you're alive and wish you were dead? Is she going to be okay?
And as long as I have enough insurance to cover half of the long-term care, it didn't suck up my entire pension and my social security check while I'm alive. As long as it only sucks up half, then it's like I'm dead, and we've already proved that that's going to work. Does that make sense?
Jill MacNeil: It does, it does. Yeah, it's kind of like I said, you don't have to cover a hundred percent of expenses, but 50% would certainly be better. Nothing, yeah.
John Mason: You mentioned something Mike, as, as you and Jill were having a nice dialogue there about survivor benefits. And we have a whole separate podcast on survivor benefits and the impact of why taking survivor benefits make sense.
But unfortunately, people still decline it all the time. Whether it's retiring military, retiring federal, retiring from any location that has a pension; Huntington Ingalls, Sentara locally, all these folks have pension. So, we have to think about taking survivor benefits. Unfortunately, people don't.
So, in the scenario you just painted where you and Jill were married, well, what if you went into a long-term care facility, you did not have long-term care insurance, you had to spend all of your Thrift Savings Plan because you were in there, and at your death, both your social security check went poof, your federal employee retirement system pension went poof.
And oh, by the way, that long-term care/your eat, drink, and be merry fund, that TSP vacation fund, you had to use all that too. And now, Jill, the healthy spouse does not have the same security.
So, if you decline (we've said this a lot) survivor benefits, it's almost like mandatory that you have to at least pick up long-term care insurance on the other side.
Michael Mason: That's a great point.
Jill MacNeil: The other scenario is what happens if you have a long-term care event and then you recover, and you've used a lot of your assets to pay for that long-term care event. That's another issue.
Michael Mason: Good point.
Tommy Blackburn: Absolutely. And I think we'll get to this later in the podcast; when we do our financial plans for clients, not only do we talk about this, but we bring this into that financial plan projection, maybe not necessarily in the first projection because we're already covering a lot of material.
But we do look at what is the national average, what does this do to your plan? And let's talk about ways to deal with this if it presents itself and go from there. And a lot of times it involves putting in an application requesting a quote just to see what is the insurance cost.
Which as we try to craft these policies, working with LLIS or shopping Fed LTC, one thing we think about too, and another question mark, is not only daily benefit amount and duration of it, but is what do we assume for inflation?
o, there's some interesting inflation options that we have for Fed LTC. Before we go into that, Jill, I was curious if we could get your thoughts on inflation and these policies, and maybe what your advice or assumptions are.
Jill MacNeil: We highly recommend that a client add on an inflation rider, especially if they're purchasing their policy in their fifties and sixties. I mean, it could be another 20 or 30 years before they go on claim.
If they don't have an inflation rider on the policy, the benefit's not going to keep up with inflation. So, when they go on claim age 85, their $200 a day daily benefit they’ve got today is not going to be worth nearly as much or cover as much as their costs are at that time.
John Mason: And I think we, as a team, guys have been assuming inflation, 2.5, 3% is what we've been assuming long-term care has been going up by each and every year. Conversely, for like medical expenses, health insurance premiums, going to the doctor, we assume in our financial plan, that that goes up by 5%.
So, Jill, I'm curious if our medical expenses, we're assuming go up by five, what do we think is actually happening to long-term care expenses? Are those 2.5% CPI type numbers or are you seeing like double CPI like we would with medical?
Jill MacNeil: I look at the General Cost of Care study quite often and they just came out with the numbers for this year.
Based on last year's, nursing home surprisingly, I think they were only up under 3%, but home healthcare was up over 12%, and homemaker services over 10%. And I think that has to do with the pandemic.
So, those are unusual numbers. You usually don't see it that high, but nursing home is usually between 3 and 5%.
Michael Mason: And Jill, that's exactly what I experienced in 2019 when dad needed home healthcare. We used this agency in Fredericksburg, Virginia, and it was $20 an hour, and then just four months ago, mom needed it from the same carrier and it was $30 an hour. So, yeah, and it’s definitely COVID-driven.
John Mason: So, since we're talking about inflation, there's two options. So, federal long-term care, we are on policy, Mike, 3.0 now. So, I think federal long-term care 1.0 was launched in like 2001, then federal long-term care 2.0, came out sometime later. And then 3.0, I believe, switched in 2019, is when that became available.
So, two rules with inflation riders for federal long-term care 3.0, an automatic compound inflation adjustment of 3% or FPO (Future Purchase Option). Let's have some discussion around the table here. What do we think about these options: automatic compound inflation option and future purchase?
Michael Mason: And let me lead this and then I want to get to your opinion. And I'll tell you, experience is beautiful.
I bought a federal long-term care policy. We'll discuss more about who's eligible before we end this podcast, but I was eligible because dad was a federal retiree. So, I bought one at age 55. I bought the 2.0 John, and I got the future purchase option. And the strategy I used then was buy as much as I could buy.
So, I bought $450 a day with Future Purchase Option, five-year plan. I figured I was just buying future inflation. You know, because when you put that 3 or 4% rider on there, it got very expensive. The 2.0 FPO (Future Purchase Option) would allow me to turn down as many as I want and then step in at the last second and take the next one.
So, that's the direction I helped a lot of clients go. Under this new version, that Future Purchase Option, if you turn down three of them — and it doesn't matter whether it's three in a row; if you turn down three, you don't get anymore.
So, I've kind of reverted under 3.0 to getting that $250 a day with the 3% cost of living or even if I ensure half of it, adding the 3% cost of living.
Jill MacNeil: On the private policies, the companies we work with no longer offer that FPO. The only option is the automatic. The Mutual of Omaha does have one. They have you buy the automatic compound inflation, you can start at 1% and you can increase it up to 5%.
So, yeah, FPO is nice because you can do it, but when you're limited on how often you can decline it, I think that's not a good option. And I think people will sometimes forget like, “Oh, I missed it this year. Well, maybe I'll do it in two years’ time.” But then by then, it's too late.
Michael Mason: The neat thing about FPO federal is it's automatic. You know, if you don't turn it down, they are going to increase your premium. And that's positive. You go back in there, I think you've got like 90 days to go back in and reverse it.
And of course, you can always reduce a long-term care benefit. It's just when you go in and want to increase it, that they're going to want underwriting.
John Mason: So, that negative consent letter basically goes out. It's like, “Hey, we're increasing your benefit unless you tell us not to.”
So, it's confusing. We were on the phone with LTCFEDS today. Jill, you weren't a part of that phone call, but the three of us called LTCFEDS just to brush up on some facts. And we got the benefits booklets and we were refreshing our memory on 1.0, 2.0, and 3.0.
All three of them have different rules for future purchase option. So, under 2.0, you get unlimited declines, under 3.0, it's a different set of rules, under 1.0, it's a different set of rules. Why are we bringing this up?
We're bringing this up because ultimately, many of our listeners will find themselves in either having a long-term care event and having a policy or having a long-term care event and not having one.
And the first step is to pick it up and read it and make sure that we have somebody that can actually digest the material on those contract pages. And maybe that's a good time to also mention, making sure you have your power of attorney and your authorized people on file, whether that's through Mutual of Omaha or Fed LTC.
That way, you can have somebody help you if you have physical or cognitive impairment; help you actually use your policy in times of need.
Tommy Blackburn: And one thing, we've tried to understand on these policies, this person that can help you understand it as well as yourself as you’re shopping, is going to be, what is this daily benefit, and this duration mean? What does this all equate to?
So, daily benefit, that's the maximum amount that policy's going to pay out per day. We're going to take that and we're going to multiply it by the amount of time that you've purchased.
So, in Mike's example, we had an example of $450 a day with five-year benefit. So, what that equates to a pool, a lifetime pool of money of $820,000. We then look at that and we say, okay, if Mike had a situation where he was only using half of that daily benefit amount, the insurance company is going to reimburse that half. They're not going to give him the full 450, they're going to give him half of it.
But his policy now could effectively run for 10 years. So, we take daily benefit times the duration, gets that lifetime. And then that daily benefit is almost like the speed limit amount that it's going to come out. But we pull from that pool of money. And as long as there's still a pool there, that policy continues to run.
Michael Mason: And at the federal level, it's just me. It's just me. If I don't use any of that pool and die, my wife's not going to get any benefit from that other than peace of mind from having it. But Jill, in private sector, we've got these shared care type things. So, let's discuss how that might work different in the private sector.
Jill MacNeil: Shared care is an extra rider that you can add on to the policies. And it increases the likelihood — we feel that it increases the likelihood that the benefits will be used. So, and the shared care works different with the different companies.
With one company, when you add it on, it allows them to share benefits. So, let's say a husband or wife each have three-year benefit period, add the shared care rider on, they can share all six years. But they have to leave one year each to use themselves.
So, the husband could use five years, the wife would have one year. When one spouse passes away, their surviving spouse then inherits all the benefits and only has to pay their portion of the premium.
So, what happens many times, is the husband becomes sick, wife takes care of him. He passes away, and then she's by herself. And if he's only used one or two years, then she now has four or five years of benefits.
Another company we work with, their shared care rider adds a third pool of benefits. So, if they each have three years, then they have a third pool of three years. So, again, the husband could use six years, leaving the wife with her three years.
So, when we have couples apply, we strongly recommend they purchase that shared care rider.
John Mason: I remember before Jill, it was like the average day in a nursing home is less than two years. So, standard kind of practice in the industry is a three-year benefit duration should be solid enough, should be big enough for most events.
We've always said in our office that yes, the average day in a nursing home is maybe 18 to 24 months, but that doesn't mean you didn't need care at home for a longer period of time.
So, when you're talking about duration, I'm a huge fan of shared care. And I think sometimes it may even move the needle with a company like Mutual of Omaha being more expensive. And that may move the needle enough to look at that over Fed LTC just for that shared care benefit.
But what do you think about duration? Are my stats pretty correct? And what are you guys typically recommending there?
Jill MacNeil: Your stats are very correct from what I've read. Another figure that I've read recently is the average amount or length of care for a female is 3.7 years. So, that takes into home healthcare and nursing home, and for a male 2.2 years.
So, that's why we strongly recommend with a couple, three years each with a shared care, that sort of covers more the female needs and the male needs less.
Michael Mason: And one of the biggest benefits I've had in private sector with mom and dad was the waiver of elimination period for home healthcare except under a very small circumstance with the federal. And we'll cover that in the lightning round.
You have to go through that 90-day elimination period with the federal government, whether it's home care or nursing home. Does private sector still give a waiver of home healthcare elimination period?
Jill MacNeil: Yes, some of the companies still offer it. I don't know if they all do, but some of them still do. But the private companies have 30, 60, 90-day elimination, 180, 365, — so, you have a choice of elimination periods.
Michael Mason: And let's talk about what a day is. You know, if mom had somebody come in for two hours with Genworth, that was a day. And I know in the past, like John Hancock, sometimes one or two days meant a week.
So, why don't you highlight us on what's currently happening? What is a day of care, and how do we get through that elimination.
Jill MacNeil: Oh, I think it comes down to how the insurance companies base their elimination period. So, companies that use days of service, when you receive care that day, I think it's usually, you have to have at least two hours of care in the day, that day will count towards elimination period.
So, for example, if a policy holder’s receiving care in their home and they have a nurse come in three days that week, only those three days count towards elimination period. Versus other companies uses calendar days for elimination period.
So, once they start to receive care, that would normally be covered by the policy, every day on the calendar counts towards elimination period. So, with my example, received care three days in the week, but all seven days are going to count towards elimination period with Mutual of Omaha. So, it really depends on how the company calculates it.
John Mason: And Jill, you probably wouldn't be surprised to hear this, but guess what? Plan 1.0, plan 2.0, and plan 3.0 at the federal government, all define elimination periods differently as well.
So, I think on federal loan term care 3.0, you just had to be eligible for receiving care. And then it was 90 calendar days if I'm not mistaken. But then I believe under 1.0 or 2.0, you actually had to be paying and receiving care to satisfy your elimination period.
So, similar to the private sector, the government's changed it a couple times over their various plans as well.
Michael Mason: But obviously, the calendar day, is the one you want because as I just read on actually 2.0 and 3.0, if you went in and applied and they did the health assessment and they go back in time and say, “Well, you needed this care 90 days ago,” then you've been through your 90-day elimination period, whether you spent a dime or not.
John Mason: And with the federal government, Mike, isn't it true that you only have to satisfy your elimination period one time?
Michael Mason: I can't confirm a hundred percent. I believe that's accurate folks, but fact check us at federal-
John Mason: Ltcfeds.com.
Jill MacNeil: With private policies, it's that way. You only have to satisfy the elimination period once in your lifetime and it does not have to be consecutive. So, you could satisfy 30 one time of illness, and then two years down the road, you could satisfy the other 60 days.
Michael Mason: So, we're going to wrap up or we'll go too long for our listener. As we're talking about the elimination period, let me just say this: stay-at-home benefit for the federal plan which preparing for this show, I came across this, so I didn't know it before.
The stay-at-home benefit is not subject to the elimination period, and the stay-at-home instant coverage for things like care planning visits, and that's your care coordinator, home modifications, emergency medical, response systems, durable medical equipment, caregiver training, home safety checks — you can get up to 30 times your daily benefit for those things immediately. It's only the actual care that you have to go through that 90-day elimination period.
Alright, folks, as we begin to wrap this up, I want to kind of do our lightning round. Let's start the lightning round ladies and gentlemen with eligibility. This is where you can be somebody's heroes.
So, you shouldn't just think that boy, I'm a federal employee or a military, and I've got access to the long-term care. You should think who you have given access to. I have long-term care insurance because my dad was a retiree. And if dad passed away, which he did and left mom a survivor benefit, I would still have access as mom has that survivor benefit.
In the military, if a spouse only has dependence indemnity compensation, which means maybe their spouse didn't take survivor benefits but was disabled, so there is a check from the VA coming in.
So, children have access because of their retired parents or active parents, parents and parents-in-law. If I was a federal employee, 45-years-old, my mom and dad and my wife's mom and dad would have access to the federal long-term care policy.
I'm extremely pumped at this point in the financial planning career that federal long-term care (and Jill, I think you've echoed this) is a really, really good option. You don't have to just be federal to get it.
John Mason: And Mike, to your point, I think all of our listeners can check this out for themselves on the LTCFEDS website, so it's the qualifying relatives. And I think you hit it well: spouses, adult children, parents, parents-in-law, step parents — there's a whole slew of folks that can get qualified.
And one of my favorite stories, which you probably remember, back in 2013 or 14, I had a client who was retiring from Langley Air Force Base, leaving the military, leaving active duty. And I think when she was on terminal leave, we were able to get her mom in to apply for federal long-term care.
And now, her mom's got that policy for the rest of her life. And she was able to get that basically in the 11th hour as her daughter was leaving active military service.
Michael Mason: Yeah. One other interesting fact on the lightning round is if you just now start federal, and many people do. Military members retire and they just start federal employment. That first 90 days, you get to do the short application for your long-term care.
So, if you have some issues, basically as long as you're not receiving long-term care, you're going to qualify for the federal long-term care plan if you apply in those first 90 days of employment.
Tommy Blackburn: I think another thing as we think about this conversation and this lightning round as we're wrapping up, is we kind of hinted at earlier was the emotional side of things. And you may be wondering, what do we mean by that?
And we threw out some huge costs. That's part of what we're talking about here, is some folks will be compelled to not get care that they should be getting for their own wellbeing and their family's wellbeing.
And having some plan in place, which may be an insurance plan may empower you and the loved ones around you to get that care in place, to say, “Mom cannot pick dad up off the floor, we need to get somebody in the house. And because we've paid for this already, maybe we're more likely to go get this in place. And at least get it started. And if we exhaust the insurance benefits, then we do, and we've hopefully got backup plans in place.”
But that's some of what we think the emotional side of it is, is just allowing you to take some of that stress off of what if it happens and maybe empower us to take action if something happens.
John Mason: And to that point, Tommy, because the emotional side of long-term care is one of the highest emotions that we see in clients, because they've either experienced it with a family member. There's some deep-rooted reason why they have that concern.
And especially federal employees who have all these great pensions, they have the big social security — unfortunately, they're looking at their TSP as their long-term care plan one day, and they can't get out of their own way, and they're not able to enjoy themselves in retirement because they think they need to save that TSP for later.
So, we've seen across our client base that sometimes just having that long-term care policy allows them to enjoy that much more of retirement, enjoys them the freedom to take a 3, 4, or 5% distribution from Thrift Savings Plan, because their TSP is not their long-term care plan. Their long-term care is their long-term care plan.
And oh, by the way, because we have survivor benefits, we also don't have to worry about TSP being the entire survivorship income to our surviving spouse. So, survivor benefits, long-term care insurance, empowering our clients to live their best life with as little care and concern as possible is what we're trying to do.
Michael Mason: Yeah, I like to say you just can't work your cash to death. You can't work your cash to death. You can't ask your cash to be your fund money, your survivor benefit to your spouse, your long-term care. When you give it that many jobs, it is going to fail. So, you can't work your cash to death.
John Mason: And Jill, we'd like to hear any closing comments that you have for us tonight. You've been an awesome first guest on our podcast. Thank you so much for that. Any closing comments that you'd like to share with our audience?
Jill MacNeil: Well, I think you should encourage your clients to purchase a long-term care policy as a gift to their family. Because by purchasing a policy, they're taking care of their family. They're not going to depend on their sons and daughters so much to be their caregivers, more their care coordinators to help them get the care in place that they need.
And thank you for inviting me, I've enjoyed it.
John Mason: Well, thanks again, Jill, for being here for LLIS, for allowing you to be such a valuable member, not only of our financial planning firm, but contributing to the podcast tonight, being our first guest on the Federal Employee Financial Planning Podcast.
We're going to include in the show notes some details on LLIS, how you can reach out to them. But we really, guys, recommend that you work with a fee-only financial planner who is going to help you design that comprehensive financial plan. And then, that particular certified financial planner, fee-only planner can reach out to LLIS or someone like them to help design and get you that exact coverage that fits in your financial plan.
And if you don't have a fee only financial planning firm in mind, you can reach out to us at Mason & Associates, masonllc.net. That's masonllc.net.
On our homepage, there's a button, request an introductory phone call; 15 to 30 minutes, no fee, can we help you? Can you help us? And do we get along? So, if there's not a fee-only planning firm that you feel like you're connecting with already, we'd love to hear from you at masonllc.net.
Thanks again for listening to another episode of the Federal Employee Financial Planning Podcast. We hope you're enjoying the show, our unique perspective, planning specifically for federal employees.
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