Long Term Care Inflation

Inflation is low, inflation has been low for some time.  Those of you living on the interest from your CD’s will attest to this.  However, in one area of the economy, things are picking up rapidly.

Assisted living facilities, the nice looking places that will help you with bathing, dressing, medications and more, are going up like mushrooms.  Little Green Bay, WI has about 3 built every year.  They seem to be filling them with not much difficulty as the baby boomers just start turning 65 at a rate of 10,000 a day, and will through the year 2032.

Most of these baby boomers are healthy, so far.  However, I read more and more articles about how people with multiple chronic conditions are spending a significant portion of the Medicare dollars on their care.  Chronic conditions are what cause us to consider moving into one of those shiny new assisted living type facilities.

That industry is having a heck of a time hiring enough staffing for the influx, and the worst is still ahead of us.  Last year the New York Times said that by 2020 there will be more people working as caregivers, than work in retail.  This morning’s Wall Street Journal said that the county of Los Angeles voted to raise the minimum wage to $15 per hour over the next couple of years.  Currently the minimum wage is $7.25 so that will be more than a 100% increase.  I read that Seattle has done something similar.  Congress wants to raise the minimum wage by about 50% if they can ever come to agreement. Most LTC is done by minimum wage workers, a lot of them.

Thus, the opinion of this LTC financing specialist is that we will not maintain the low inflation of the last 8 years, but will see significant increases in the costs of LTC due to the higher wages and worker shortages.  I do not agree with the LTC insurance companies telling agents to offer 3% inflation LTC insurance as that is what inflation HAS BEEN in the past few years.  Sure, it makes the premiums cheaper, so more can be sold, but is it as good for the consumer as it is for the agent making a sale?

These are insurance policies that we will use in the coming 15-20-25 or 30 years and I want to be sure the coverage works then.  My own LTC policy has a 5% automatic inflation rider on it.

Premiums will probably remain fairly level now that underwriting has gained enough experience to know who they should accept and whom they should decline coverage to. Thus beware the (relatively inexpensive) policies where when the benefit goes up to keep up with inflation, the premium goes up the same percentage as well.  These will become too expensive, probably about the time when you need to use it.  That will not be good for consumers.

For more information, or to learn more about how to investigate LTC insurance, visit  www.TheLongTermCareGuy.com

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