Inflation and Long Term Care

I am continuously appalled to find insurance agents offering Long Term Care  (LTC) insurance products that contain no 5% automatic, built in inflation on the amount the policy will pay when care is needed.  LTC insurance is purchased while still healthy enough to obtain it, and may not be used for 30 or more years.

If I tell you what LTC may cost 30 years from now, you may not believe me, so let’s go back and let history tell us about inflation.  30 years ago you could buy a new Ford Mustang coupe LX for $7189.  A first class US postage stamp was 22 cents, and a nursing home cost about $1600 a month.  You probably have some idea of what those cost today.

Most LTC workers are minimum wage employees.  The nurses and administrators are doing paperwork.  Minimum wage is going up by over 100% in several states to $15.00 per hour.  What will this do to the costs of LTC?

The New York Times published an article about a year ago saying that by 2020, more Americans would be employed as caregivers than work in retail.  What happens to wages in any industry when not enough workers apply for the jobs?  That’s right, wages go up.

I am getting bulk mail postcards in the mail, addressed to resident, from assisted living facilities asking if I will come to work, they are desperate for employees.

Now Medicare is making the problem worse.  Medicare has paid for short stays in nursing homes to finish recovering from a 3+ day stay as an inpatient in the hospital.  It is less costly to have you finish recovering in a nursing home, than in a hospital bed.  But the new system will give a capitated sum to the hospital for knee or hip replacements, and if the hospital can send you straight home, bypassing additional recovery in the nursing home, they get to keep more of the money.

Those short term stays were the only cash cow the nursing homes had.  They all employ marketing people to call on the hospitals and ask that recovering patients be sent to their facility.

The nursing homes lose money on the Medicaid reimbursements.  They made up for it by the healthy payments from Medicare for recovery care after a hospitalization.

Their cash cow is gone.

Their labor costs are increasing dramatically.

They cannot find enough workers, raising wages even more.

Americans are passing through age 65 at a rate of 10,000 every day.

Medicaid, which pays for LTC when your funds are completely exhausted down to $2000, does not have enough money to pay for all the baby boomers’ care.  Most boomers do not have enough savings to pay for their own LTC.  How do you plan to pay for the care you need when you are no longer able to take care of yourself anymore?

I bought a LTC insurance policy 15 years ago.  Initially, it would pay $4500/month for my care if needed.  It has the built in, automatic, compound 5% inflation factor on what it will pay for my care.  Today, 15 years later it will pay $9000/month for my care.  Along with my Social security and other income I can pay for my care.  I can go where I want to be cared for.  I can get the services I want and need.  Will you?

Don’t let an insurance agent who is not fully aware of the costs of LTC offer you a policy without the absolutely essential 5% automatic compound inflation benefit included.  Without this feature, it may well be a waste of money before many years have passed and costs continue to increase.

For more information, visit or call us to investigate at (920) 884-3030

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  1. […] with their policies, particularly on the 5% automatic & built-in inflation protection. According to Raabe, holders need to be wary of agents offering products without this important feature, that LTC […]

  2. […] with their policies, particularly on the 5% automatic & built-in inflation protection. According to Raabe, holders need to be wary of agents offering products without this important feature, that LTC […]

  3. L. Edwards on August 4, 2020 at 1:47 pm

    I have had ltc with genworth for 18 years…benefits of $242 per day, unlimited, 5% inflation. Premium is going through the roof. I could reduce premium if I would eliminate inflation benefit. The difference in premium would be significant. I am 77 years old, and based on my family history, would need ltc within the next 10 years, if at all.

    What is your advice?

    • Romeo Raabe on August 4, 2020 at 4:28 pm

      I’d suggest we have a conversation first (no cost) to help determine if you need all the benefit you currently have, along with other available income and interest available.
      At your age (I am 71) you still need some inflation protection as LTC costs will be accelerating.
      If lowering your daily benefit is not in your best interest, and the elimination period is appropriate, then let’s discuss the inflation percentage.
      Any option to lower benefits is available, not only what they might offer.
      Let’s make sure any changes leave you in the best place possible.
      Romeo Raabe LUTCF, LTCP
      920 884 3030