WEBVTT 00:00:00.000 --> 00:00:02.160 Welcome back to The Deep Dive, the show that 00:00:02.160 --> 00:00:04.599 extracts the crucial nuggets of knowledge from 00:00:04.599 --> 00:00:07.379 stacks of sources so you can get well -informed 00:00:07.379 --> 00:00:10.160 fast. Today we're wading into a subject that 00:00:10.160 --> 00:00:13.720 sits right at the intersection of longevity, 00:00:14.099 --> 00:00:16.879 personal finance, and unexpected risk. We were 00:00:16.879 --> 00:00:19.699 talking about long -term care insurance or LTCI. 00:00:19.719 --> 00:00:22.320 And this is so much more than just an insurance 00:00:22.320 --> 00:00:25.059 product. It's a critical piece of asset protection. 00:00:25.219 --> 00:00:28.239 Right. The core assumptions so many people make 00:00:28.239 --> 00:00:30.519 that Medicare or your standard health insurance 00:00:30.519 --> 00:00:34.479 will cover chronic ongoing custodial care is 00:00:34.479 --> 00:00:36.899 completely false. They just won't. They won't. 00:00:36.899 --> 00:00:39.100 This deep dive is absolutely necessary because, 00:00:39.119 --> 00:00:41.520 look, the potential cost of care can easily wipe 00:00:41.520 --> 00:00:44.240 out decades of careful retirement saving. It 00:00:44.240 --> 00:00:46.359 can fundamentally change your legacy if you get 00:00:46.359 --> 00:00:48.409 the planning wrong. That's the perfect framing 00:00:48.409 --> 00:00:50.729 for this. Our mission today is to unpack why 00:00:50.729 --> 00:00:53.109 this insurance is so critical, how its coverage 00:00:53.109 --> 00:00:55.469 differs completely from general medical coverage, 00:00:55.590 --> 00:00:58.969 and maybe most importantly, the surprising technical 00:00:58.969 --> 00:01:01.409 and tax details that define your eligibility 00:01:01.409 --> 00:01:04.489 and, crucially, determine whether your benefits 00:01:04.489 --> 00:01:06.709 are taxable or not. And we're looking at this 00:01:06.709 --> 00:01:09.609 globally, too. We're covering policies sold across 00:01:09.609 --> 00:01:13.549 the U .S., U .K., Canada, and Germany. Because 00:01:13.549 --> 00:01:15.870 that global approach really shows you just how 00:01:15.870 --> 00:01:19.950 unique and complex the U .S. system has become. 00:01:20.109 --> 00:01:23.030 So let's start with the central, often misunderstood 00:01:23.030 --> 00:01:25.969 point. When we talk about the need for long term 00:01:25.969 --> 00:01:28.329 care, everyone immediately pictures, you know, 00:01:28.329 --> 00:01:30.980 nursing homes and people over 80. Right. And 00:01:30.980 --> 00:01:33.640 while it is true that a huge cohort, something 00:01:33.640 --> 00:01:36.640 like 70 percent of U .S. individuals over 65, 00:01:37.040 --> 00:01:39.980 will require some type of extended care services. 00:01:40.319 --> 00:01:43.140 The need is not purely an age issue. Not at all. 00:01:43.280 --> 00:01:45.120 OK, let's unpack this immediately because that 00:01:45.120 --> 00:01:47.780 changes the entire risk population. Long term 00:01:47.780 --> 00:01:50.900 care isn't just for retirement age. No, it's 00:01:50.900 --> 00:01:53.299 fundamentally about functional ability. Right. 00:01:53.400 --> 00:01:55.620 The data reveals a truly shocking statistic. 00:01:56.099 --> 00:01:58.819 Approximately 40 percent of those currently receiving 00:01:58.819 --> 00:02:00.769 long term care are actually. between the ages 00:02:00.769 --> 00:02:04.909 of 18 and 64. 40%. 40%. That's nearly half of 00:02:04.909 --> 00:02:07.049 all recipients receiving care before traditional 00:02:07.049 --> 00:02:09.830 retirement age. So we are discussing physical 00:02:09.830 --> 00:02:12.330 and cognitive impairment, whether it's from an 00:02:12.330 --> 00:02:15.189 accident, an early onset disease, or a chronic 00:02:15.189 --> 00:02:18.349 illness, not just the inevitable decline of advanced 00:02:18.349 --> 00:02:21.750 age. This shift in perspective really makes the 00:02:21.750 --> 00:02:25.250 product less about elder care and entirely about 00:02:25.250 --> 00:02:27.550 mitigating risk at any point in your productive 00:02:27.550 --> 00:02:30.650 life. Precisely. So if the need isn't solely 00:02:30.650 --> 00:02:33.449 defined by reaching a certain birthday, let's 00:02:33.449 --> 00:02:36.349 look at the drivers. Why is the discussion around 00:02:36.349 --> 00:02:38.789 long -term care becoming so urgent everywhere? 00:02:39.050 --> 00:02:41.469 Well, the primary driver is longevity. It's as 00:02:41.469 --> 00:02:43.150 simple as that. People are just living longer. 00:02:43.330 --> 00:02:46.490 Exactly. Advances in modern medicine are incredible. 00:02:46.710 --> 00:02:48.770 They allow us to survive catastrophic events, 00:02:48.949 --> 00:02:51.750 a major heart attack, a severe stroke, even late 00:02:51.750 --> 00:02:54.050 stage cancers that would have been fatal just 00:02:54.050 --> 00:02:56.210 a few decades ago. But surviving often leaves 00:02:56.210 --> 00:02:58.930 us needing help. Yes. Needing assistance with 00:02:58.930 --> 00:03:01.509 basic daily functions for an extended period, 00:03:01.650 --> 00:03:04.389 maybe for years. And this longevity creates a 00:03:04.389 --> 00:03:06.550 major demographic impact, doesn't it? It does. 00:03:06.669 --> 00:03:08.930 As the sources point out, specifically from around 00:03:08.930 --> 00:03:12.699 2016, women tend to live longer than men. This 00:03:12.699 --> 00:03:15.300 longevity means they are disproportionately affected 00:03:15.300 --> 00:03:18.680 by the need for long term care. But ironically, 00:03:18.979 --> 00:03:20.900 they're also frequently the ones who become the 00:03:20.900 --> 00:03:23.680 unpaid caregivers first. To partners, parents, 00:03:23.960 --> 00:03:26.259 friends. Right. Before potentially needing care 00:03:26.259 --> 00:03:29.639 themselves. This creates a dual burden on women, 00:03:29.759 --> 00:03:32.979 both physical and financial. That dual burden 00:03:32.979 --> 00:03:35.439 really highlights the human cost, not just the 00:03:35.439 --> 00:03:38.219 financial one. It's huge. I mean, when family 00:03:38.219 --> 00:03:40.500 members step in as caregivers, the emotional 00:03:40.500 --> 00:03:42.479 and professional sacrifices they make can be 00:03:42.479 --> 00:03:45.520 enormous. And we also have to acknowledge the 00:03:45.520 --> 00:03:48.560 specific medical conditions that, while they 00:03:48.560 --> 00:03:52.080 might be rare in their early onset, they definitively 00:03:52.080 --> 00:03:54.400 necessitate this type of care down the road. 00:03:54.560 --> 00:03:57.099 Things like early onset Alzheimer's and Parkinson's. 00:03:57.300 --> 00:03:59.580 Devastating conditions that can strike well before 00:03:59.580 --> 00:04:03.680 age 65. Whether the cause is age or trauma or 00:04:03.680 --> 00:04:06.680 cognitive decline, the insurance world has a 00:04:06.680 --> 00:04:09.599 single clinical standard for determining eligibility. 00:04:10.120 --> 00:04:11.979 And it doesn't look for a traditional diagnosis 00:04:11.979 --> 00:04:15.979 of sickness. No, it looks at function. This brings 00:04:15.979 --> 00:04:18.480 us to the core threshold for traditional LTC 00:04:18.480 --> 00:04:21.360 eligibility, the famous acronym that defines 00:04:21.360 --> 00:04:25.060 your policy's activation, ADLs. Activities of 00:04:25.060 --> 00:04:27.910 daily living. What are they? And how many failures 00:04:27.910 --> 00:04:30.629 trigger eligibility? OK, so the standard consensus 00:04:30.629 --> 00:04:34.089 for traditional tax qualified policies is that 00:04:34.089 --> 00:04:36.990 eligibility is triggered when an individual is 00:04:36.990 --> 00:04:39.430 certified by a licensed health care practitioner 00:04:39.430 --> 00:04:43.149 as being unable to perform two of the six activities 00:04:43.149 --> 00:04:45.540 of daily living. So you could be medically stable, 00:04:45.660 --> 00:04:48.120 your vitals could be fine. Exactly. But if you 00:04:48.120 --> 00:04:50.620 cannot safely perform two of these basic tasks 00:04:50.620 --> 00:04:54.199 or you require significant supervision, you qualify 00:04:54.199 --> 00:04:57.399 for benefit payments. We need to detail those 00:04:57.399 --> 00:05:00.339 six ADLs, not just list them. We need to understand 00:05:00.339 --> 00:05:02.399 their real -world application because these are 00:05:02.399 --> 00:05:04.279 the words that define whether your policy pays 00:05:04.279 --> 00:05:06.199 out or not. Absolutely. We're talking about the 00:05:06.199 --> 00:05:08.259 basic fundamental actions for self -maintenance. 00:05:08.399 --> 00:05:11.100 First is dressing. The ability to put on and 00:05:11.100 --> 00:05:13.699 take off clothes, braces, artificial limbs. It's 00:05:13.699 --> 00:05:15.300 not just pulling a shirt over your head. It's 00:05:15.300 --> 00:05:17.540 the fine motor skills for zippers and buttons. 00:05:17.779 --> 00:05:21.300 Second, bathing. Getting in and out of the bath 00:05:21.300 --> 00:05:24.819 or shower, washing your body. This is a common 00:05:24.819 --> 00:05:27.600 early indicator of need. It requires stability, 00:05:27.959 --> 00:05:30.779 balance. I can see that. Number three. Eating. 00:05:31.220 --> 00:05:33.879 So getting food from the plate into your mouth. 00:05:34.269 --> 00:05:36.509 Now, this usually doesn't include preparing the 00:05:36.509 --> 00:05:38.670 meal, just the act of feeding yourself. All right. 00:05:38.850 --> 00:05:42.290 Fourth is toileting. The ability to use the toilet, 00:05:42.470 --> 00:05:45.990 manage clothing, clean up. Fifth is continence. 00:05:46.009 --> 00:05:48.350 Maintaining control over bladder and bowel functions. 00:05:48.569 --> 00:05:52.129 Or managing a capita or colostomy bag. And finally, 00:05:52.290 --> 00:05:54.829 number six is transferring. That's a big one. 00:05:54.990 --> 00:05:57.790 It is. The ability to move in and out of a bed, 00:05:57.829 --> 00:05:59.649 a chair, or a wheelchair. It's one of the most 00:05:59.649 --> 00:06:02.529 mechanically demanding ADLs. So to ground this 00:06:02.529 --> 00:06:05.449 for the listener, if I have a severe stroke and 00:06:05.449 --> 00:06:08.209 I can technically feed myself and maintain continence, 00:06:08.250 --> 00:06:11.529 but I need physical help to transfer to get out 00:06:11.529 --> 00:06:15.000 of bed, and I also need help with dressing. Because 00:06:15.000 --> 00:06:18.120 of paralysis, I failed two ADLs. That's my trigger. 00:06:18.240 --> 00:06:20.120 That's exactly right. And if you fail two of 00:06:20.120 --> 00:06:22.300 those six, the policy benefit clock typically 00:06:22.300 --> 00:06:24.459 begins, subject to the elimination period, of 00:06:24.459 --> 00:06:26.879 course. So that's one major trigger, the functional 00:06:26.879 --> 00:06:29.560 inability. What about the second one for cognitive 00:06:29.560 --> 00:06:32.339 decline? The second equally important trigger 00:06:32.339 --> 00:06:35.660 is the requirement for supervision due to severe 00:06:35.660 --> 00:06:38.389 cognitive impairment. This would be for conditions 00:06:38.389 --> 00:06:41.310 like Alzheimer's. Or severe dementia, advanced 00:06:41.310 --> 00:06:44.430 traumatic brain injury. In these cases, the person 00:06:44.430 --> 00:06:46.870 might be perfectly capable of performing all 00:06:46.870 --> 00:06:49.649 six ADLs physically. But they're a danger to 00:06:49.649 --> 00:06:52.209 themselves if left alone. Precisely. They might 00:06:52.209 --> 00:06:55.089 wander, forget to turn off the stove, misuse 00:06:55.089 --> 00:06:58.610 medication. The inability to safely reason or 00:06:58.610 --> 00:07:01.189 navigate their environment also qualifies for 00:07:01.189 --> 00:07:03.790 benefits under most plans. Okay, so here's the 00:07:03.790 --> 00:07:05.970 crucial point that ties back to our initial discussion 00:07:05.970 --> 00:07:09.149 of that 40 % under 64 statistic. Right. Once 00:07:09.149 --> 00:07:11.759 a major health change occurs. a stroke, a big 00:07:11.759 --> 00:07:14.600 diagnosis, even a series of falls LTC insurance 00:07:14.600 --> 00:07:17.560 may become completely unavailable in the U .S. 00:07:17.620 --> 00:07:19.560 Regardless of how much money you have, this is 00:07:19.560 --> 00:07:21.920 the absolute truth that underlies the whole market. 00:07:22.079 --> 00:07:23.939 It's not like regular health insurance. Not at 00:07:23.939 --> 00:07:26.139 all. Unlike standard health insurance, which 00:07:26.139 --> 00:07:28.040 has to accept you regardless of pre -existing 00:07:28.040 --> 00:07:31.019 conditions, long -term care insurance is underwritten 00:07:31.019 --> 00:07:32.899 based on your current health status when you 00:07:32.899 --> 00:07:36.000 apply. So if you wait until you are sick or even 00:07:36.000 --> 00:07:38.240 just showing signs of decline, you will likely 00:07:38.240 --> 00:07:41.339 be denied coverage entirely or you'll be offered 00:07:41.339 --> 00:07:44.759 an incredibly expensive policy with severe exclusions. 00:07:44.899 --> 00:07:47.839 This is why timing the purchase is paramount. 00:07:48.339 --> 00:07:51.139 So what is the ideal window, according to the 00:07:51.139 --> 00:07:54.560 experts? Because 61, that average purchase age, 00:07:54.720 --> 00:07:57.560 still feels like you're cutting it close. It 00:07:57.560 --> 00:08:00.259 is. Experts are very clear. You should be shopping 00:08:00.259 --> 00:08:03.019 between ages 45 and 55. That's the sweet spot. 00:08:03.220 --> 00:08:05.259 It's the sweet spot where you're most likely 00:08:05.259 --> 00:08:07.319 to qualify for the best health rating, often 00:08:07.319 --> 00:08:09.759 preferred, and you can lock in your eligibility 00:08:09.759 --> 00:08:12.980 at a far lower stable premium. So if you wait 00:08:12.980 --> 00:08:15.399 until your 60s... You risk encountering that 00:08:15.399 --> 00:08:17.980 one small health issue. Borderline high blood 00:08:17.980 --> 00:08:20.800 pressure, a minor mobility issue. Anything that 00:08:20.800 --> 00:08:22.959 could significantly increase your premium or, 00:08:23.100 --> 00:08:26.670 worse, render you uninsurable. So the single 00:08:26.670 --> 00:08:29.290 biggest financial mistake someone makes by waiting 00:08:29.290 --> 00:08:32.549 isn't just paying a higher premium. It's risking 00:08:32.549 --> 00:08:35.330 the possibility of being completely shut out 00:08:35.330 --> 00:08:37.509 of the market right when the risk is actually 00:08:37.509 --> 00:08:40.110 highest. It's about protecting your eligibility, 00:08:40.450 --> 00:08:43.169 not just your wallet. That's the key takeaway. 00:08:43.429 --> 00:08:45.509 So let's turn to what these policies actually 00:08:45.509 --> 00:08:48.529 cover, because the range of benefits is far broader 00:08:48.529 --> 00:08:51.409 and, frankly, more appealing than just to stay 00:08:51.409 --> 00:08:53.610 in a clinical nursing home. Right. What are the 00:08:53.610 --> 00:08:56.789 specific services that LTC insurance can cover 00:08:56.789 --> 00:08:59.809 which standard health plans just refuse to touch? 00:09:00.029 --> 00:09:02.970 The list is intentionally flexible. It includes 00:09:02.970 --> 00:09:05.470 the big ticket items like nursing homes and specialized 00:09:05.470 --> 00:09:07.909 Alzheimer's facilities, but also the services 00:09:07.909 --> 00:09:10.309 that let people maintain their dignity and independence. 00:09:10.750 --> 00:09:12.549 So we're talking about assisted living facilities, 00:09:12.889 --> 00:09:15.590 adult daycare programs, respite care. Which is 00:09:15.590 --> 00:09:18.509 so essential for giving the primary family caregiver 00:09:18.509 --> 00:09:22.600 a break. And critically. Home care. And that 00:09:22.600 --> 00:09:25.440 home care flexibility is really what sells this 00:09:25.440 --> 00:09:27.940 product for so many people. Awesome. Well, if 00:09:27.940 --> 00:09:30.580 you purchase home care coverage, the policy provides 00:09:30.580 --> 00:09:33.519 an extraordinary range of support. It can pay 00:09:33.519 --> 00:09:35.860 for a visiting or living caregiver, companions, 00:09:36.460 --> 00:09:38.940 certified home health aides. Therapists too, 00:09:39.080 --> 00:09:42.940 right. Physical, occupational, speech therapists, 00:09:43.100 --> 00:09:46.740 even private duty nurses. The goal is medically 00:09:46.740 --> 00:09:49.539 necessary services delivered in the comfort of 00:09:49.539 --> 00:09:52.759 your own home. Potentially 24 -7. Up to your 00:09:52.759 --> 00:09:56.360 policy maximum, yes. 24 hours a day, seven days 00:09:56.360 --> 00:09:58.440 a week. And what about that interesting benefit? 00:09:58.940 --> 00:10:01.220 Home modification. What does that practically 00:10:01.220 --> 00:10:04.419 mean? Home modification is key to aging in place. 00:10:04.679 --> 00:10:07.000 This can cover the costs of installing a wheelchair 00:10:07.000 --> 00:10:09.860 ramp, modifying a bathroom to be ADA compliant, 00:10:10.240 --> 00:10:13.220 installing grab bars, or even specialized medical 00:10:13.220 --> 00:10:15.120 equipment like lift systems. Things that can 00:10:15.120 --> 00:10:17.059 cost tens of thousands of dollars out of pocket. 00:10:17.200 --> 00:10:21.019 Easily. But the LTC policy allows for reimbursement 00:10:21.019 --> 00:10:23.519 of these necessary changes that enable a safer 00:10:23.519 --> 00:10:26.039 home environment. Okay, let's talk money. The 00:10:26.039 --> 00:10:28.159 foundational motive behind buying this product. 00:10:28.240 --> 00:10:30.799 We've established it's not about being sick in 00:10:30.799 --> 00:10:32.480 the acute setting. No, it's about asset protection. 00:10:32.840 --> 00:10:35.159 What exactly are we protecting our savings from? 00:10:35.320 --> 00:10:38.340 We are protecting decades of accumulated assets 00:10:38.340 --> 00:10:41.179 and savings from the crippling costs of extended 00:10:41.179 --> 00:10:43.919 care. That's the number one reason. And without 00:10:43.919 --> 00:10:46.480 insurance? Without insurance, the cost of a nursing 00:10:46.480 --> 00:10:49.200 home stay, which can easily exceed $10 ,000 to 00:10:49.200 --> 00:10:51.919 $15 ,000 a month in some areas, will quickly 00:10:51.919 --> 00:10:54.220 deplete most people's net worth. And the cost 00:10:54.220 --> 00:10:57.029 variability is staggering. It is. It differs 00:10:57.029 --> 00:10:59.850 drastically by region and by the type of care. 00:11:00.049 --> 00:11:04.049 For instance, in 2023, the median cost for a 00:11:04.049 --> 00:11:06.230 private room in a U .S. nursing home was well 00:11:06.230 --> 00:11:09.429 over $100 ,000 a year. Wow. A basic home health 00:11:09.429 --> 00:11:12.049 aid might be half that. But if you need round 00:11:12.049 --> 00:11:14.409 -the -clock care, those costs compound rapidly. 00:11:14.950 --> 00:11:17.370 The U .S. government has these state -by -state 00:11:17.370 --> 00:11:19.629 interactive maps. And they're pretty eye -opening. 00:11:19.879 --> 00:11:22.100 They are. You can see how a single year of nursing 00:11:22.100 --> 00:11:24.519 home care can just eliminate a middle class retirement 00:11:24.519 --> 00:11:27.460 fund. That desire to maintain financial independence 00:11:27.460 --> 00:11:30.940 is huge. But there's an equally important non 00:11:30.940 --> 00:11:33.200 -financial component, right? Avoiding reliance 00:11:33.200 --> 00:11:35.899 on family. That's right. The secondary benefit? 00:11:36.429 --> 00:11:38.950 Which is often just as important to policyholders 00:11:38.950 --> 00:11:41.769 is maintaining personal independence. And avoiding 00:11:41.769 --> 00:11:44.470 that strain on your kids or other family members. 00:11:44.590 --> 00:11:47.169 Exactly. The emotional and logistical strain 00:11:47.169 --> 00:11:49.289 that comes with relying on them for physical 00:11:49.289 --> 00:11:52.690 and financial support. It buys autonomy. It buys 00:11:52.690 --> 00:11:56.190 dignity. But we have to contrast this private 00:11:56.190 --> 00:11:59.710 insurance with the welfare safety net. Medicaid. 00:11:59.970 --> 00:12:03.230 If the costs are so high, why doesn't everyone 00:12:03.230 --> 00:12:05.600 just rely on Medicaid? The Medicaid comparison 00:12:05.600 --> 00:12:07.899 is essential because it shows the severe gap 00:12:07.899 --> 00:12:11.259 that private LTC insurance fills. Medicaid is 00:12:11.259 --> 00:12:13.399 a welfare program. It's funded by the federal 00:12:13.399 --> 00:12:16.059 and state governments, and it provides long -term 00:12:16.059 --> 00:12:18.480 care services only for the poor or for those 00:12:18.480 --> 00:12:20.700 who spend down all their financial resources. 00:12:20.960 --> 00:12:22.720 Tell us what spend down looks like in practice. 00:12:22.960 --> 00:12:25.659 It's brutal. To qualify for Medicaid long -term 00:12:25.659 --> 00:12:28.279 care benefits, you have to exhaust your non -exempt 00:12:28.279 --> 00:12:31.200 assets, often down to a maximum of just $2 ,000. 00:12:31.700 --> 00:12:33.620 So you're saving your investments? All of it. 00:12:33.960 --> 00:12:36.320 Now, there are rules allowing a living spouse 00:12:36.320 --> 00:12:38.740 or partner to keep an additional amount. But 00:12:38.740 --> 00:12:40.919 the applicant's lifetime savings accumulated 00:12:40.919 --> 00:12:43.679 through hard work must essentially be wiped out 00:12:43.679 --> 00:12:46.600 before the government steps in. So for most Americans, 00:12:46.860 --> 00:12:50.039 relying on Medicaid means intentionally impoverishing 00:12:50.039 --> 00:12:51.980 themselves. That's what it is. It's the option 00:12:51.980 --> 00:12:54.480 of last resort after you've effectively sacrificed 00:12:54.480 --> 00:12:58.000 your entire financial legacy. And what gaps does 00:12:58.000 --> 00:13:00.279 Medicaid leave in terms of the type of care people 00:13:00.279 --> 00:13:03.429 actually want? Well. Medicaid generally doesn't 00:13:03.429 --> 00:13:06.009 facilitate aging in place. It heavily favors 00:13:06.009 --> 00:13:08.389 institutional settings. So nursing homes. Right. 00:13:08.429 --> 00:13:11.169 It generally does not cover long -term care provided 00:13:11.169 --> 00:13:14.669 in a home setting unless the state has a specific 00:13:14.669 --> 00:13:17.610 limited waiver program in place, and those often 00:13:17.610 --> 00:13:19.789 have long waiting lists. And what about assisted 00:13:19.789 --> 00:13:23.070 living? Medicaid typically does not pay for assisted 00:13:23.070 --> 00:13:25.070 living facilities, which are often the preferred 00:13:25.070 --> 00:13:27.710 middle ground between home care and a full nursing 00:13:27.710 --> 00:13:30.289 home. So if you want to stay in your home or 00:13:30.289 --> 00:13:32.710 move into a private room, in an assisted living 00:13:32.710 --> 00:13:34.950 facility, you have to have private funds. Or 00:13:34.950 --> 00:13:38.549 private LTC insurance. Medicaid forces people 00:13:38.549 --> 00:13:41.610 into a very specific and often less desirable 00:13:41.610 --> 00:13:44.309 institutional setting. Private insurance bridges 00:13:44.309 --> 00:13:46.929 that huge preference gap. It ensures you retain 00:13:46.929 --> 00:13:49.970 control. Over where and how you receive care. 00:13:50.149 --> 00:13:52.309 Yes. Now, here's where it gets really interesting 00:13:52.309 --> 00:13:55.919 for the financially savvy listener. The tax advantages. 00:13:56.600 --> 00:13:59.059 This is often the hidden benefit that makes the 00:13:59.059 --> 00:14:02.720 economics of securing a qualified policy so compelling. 00:14:03.039 --> 00:14:05.379 There are three main buckets of tax benefits 00:14:05.379 --> 00:14:07.559 provided by the federal government for qualified 00:14:07.559 --> 00:14:10.799 policies. First, the premiums you pay. These 00:14:10.799 --> 00:14:13.299 may be eligible for an income tax deduction, 00:14:13.620 --> 00:14:16.860 much like itemized medical expenses. Now, this 00:14:16.860 --> 00:14:19.059 deduction isn't unlimited. The amount you can 00:14:19.059 --> 00:14:21.539 deduct is based entirely on the age of the covered 00:14:21.539 --> 00:14:23.840 person. The older you are, the more you can deduct. 00:14:24.350 --> 00:14:27.389 Right. The IRS sets these limits annually, creating 00:14:27.389 --> 00:14:30.009 a direct financial incentive to purchase while 00:14:30.009 --> 00:14:32.120 you're still relatively young and healthy. And 00:14:32.120 --> 00:14:34.539 when the policy actually pays out, how is that 00:14:34.539 --> 00:14:37.240 benefit taxed? This is critical. The benefits 00:14:37.240 --> 00:14:40.139 paid from a tax qualified long term care contract 00:14:40.139 --> 00:14:42.700 are generally excluded from your income. They're 00:14:42.700 --> 00:14:45.519 tax free. They are tax free. If you're paying 00:14:45.519 --> 00:14:47.519 for care out of your own retirement savings, 00:14:47.840 --> 00:14:50.379 every dollar of care has to be paid with after 00:14:50.379 --> 00:14:53.419 tax money. If the policy pays out, those benefits 00:14:53.419 --> 00:14:55.740 are tax free up to a daily limit, which is also 00:14:55.740 --> 00:14:58.100 set by the IRS. So the government is essentially 00:14:58.100 --> 00:15:02.159 subsidizing a portion of your care costs. by 00:15:02.159 --> 00:15:04.620 not taxing the benefit. It's a massive difference 00:15:04.620 --> 00:15:07.259 in the math. You could be avoiding a 25 % or 00:15:07.259 --> 00:15:10.580 30 % tax burden on those payout dollars. That's 00:15:10.580 --> 00:15:13.419 powerful. A powerful incentive, especially for 00:15:13.419 --> 00:15:15.440 high net worth individuals. And finally, that 00:15:15.440 --> 00:15:18.639 third component, business deductions. This is 00:15:18.639 --> 00:15:21.590 a major perk. A way for businesses to attract 00:15:21.590 --> 00:15:24.750 and retain key personnel tax efficiently. How 00:15:24.750 --> 00:15:27.070 does that work? Premiums paid by a corporation 00:15:27.070 --> 00:15:30.289 for an employee are generally 100 % deductible 00:15:30.289 --> 00:15:32.009 for the business, similar to health insurance 00:15:32.009 --> 00:15:34.529 premiums, as long as the premium is not included 00:15:34.529 --> 00:15:37.429 in the employee's taxable income. So it's a highly 00:15:37.429 --> 00:15:39.990 tax efficient way for a business owner to provide 00:15:39.990 --> 00:15:42.669 a serious, valuable, and deductible benefit to 00:15:42.669 --> 00:15:45.250 themselves and their top executives. A win -win. 00:15:45.740 --> 00:15:48.440 Now we need to discuss the policy types, because 00:15:48.440 --> 00:15:50.559 the structure of the insurance market has changed 00:15:50.559 --> 00:15:53.059 fundamentally over the last decade or so. It 00:15:53.059 --> 00:15:55.919 really has. We know that premium volatility has 00:15:55.919 --> 00:15:58.500 scared some people away, forcing the market to 00:15:58.500 --> 00:16:01.139 innovate. Traditional policies became expensive, 00:16:01.279 --> 00:16:04.620 and even existing policyholders saw these dramatic 00:16:04.620 --> 00:16:08.679 premium increases. Sometimes over 50%. Yes. It 00:16:08.679 --> 00:16:11.320 led to a lot of consumer anxiety. So let's start 00:16:11.320 --> 00:16:14.529 with the classic design. The traditional policies. 00:16:14.789 --> 00:16:17.730 Traditional policies are purely indemnity products. 00:16:18.129 --> 00:16:20.389 You pay premiums continuously, much like car 00:16:20.389 --> 00:16:22.830 insurance. And if you never need the care? No 00:16:22.830 --> 00:16:25.429 premiums are returned. The contract simply lapses 00:16:25.429 --> 00:16:28.289 upon death. You paid purely for that risk mitigation. 00:16:28.710 --> 00:16:30.769 But there was an option to mitigate that use 00:16:30.769 --> 00:16:33.169 it or lose it risk. Yes, the return of premium 00:16:33.169 --> 00:16:36.649 or ROP, Ryder. If you purchase this, a death 00:16:36.649 --> 00:16:38.929 benefit would be paid to your beneficiary. And 00:16:38.929 --> 00:16:40.509 that would be equal to the premiums you paid 00:16:40.509 --> 00:16:43.679 in. Typically, the excess of the total premiums 00:16:43.679 --> 00:16:45.639 you paid over any benefits you might have already 00:16:45.639 --> 00:16:48.240 received. It's a risk mitigation feature for 00:16:48.240 --> 00:16:50.100 those worried about wasting money, but it adds 00:16:50.100 --> 00:16:52.259 substantially to the annual premium. Okay, so 00:16:52.259 --> 00:16:54.480 the market responds to that premium volatility 00:16:54.480 --> 00:16:58.960 and the... use it or lose it anxiety has been 00:16:58.960 --> 00:17:02.080 this massive shift toward the combination or 00:17:02.080 --> 00:17:04.200 hybrid policy. This is what's driving the market 00:17:04.200 --> 00:17:06.480 now. What are they exactly? Combination or hybrid 00:17:06.480 --> 00:17:09.480 policies link the LTC benefit to a pre -existing 00:17:09.480 --> 00:17:11.720 financial instrument, usually life insurance 00:17:11.720 --> 00:17:14.380 or an annuity. So that provides certainty. It 00:17:14.380 --> 00:17:17.519 does. If you need long -term care. the policy 00:17:17.519 --> 00:17:20.160 accelerates the death benefit or annuity value 00:17:20.160 --> 00:17:22.960 to pay for care. If you die without needing care, 00:17:23.140 --> 00:17:25.500 the full death benefit or annuity value goes 00:17:25.500 --> 00:17:28.119 tax -free to your beneficiary. So it addresses 00:17:28.119 --> 00:17:30.160 that core consumer fear. They know the money 00:17:30.160 --> 00:17:32.500 will go somewhere valuable, either to care or 00:17:32.500 --> 00:17:34.799 to their heirs. Exactly. And the market data 00:17:34.799 --> 00:17:37.019 reflects this preference. The vast majority, 00:17:37.299 --> 00:17:40.839 84 % of new policies sold annually, are now linked 00:17:40.839 --> 00:17:43.900 benefit or hybrid policies. It's the dominant 00:17:43.900 --> 00:17:46.519 structure in new sales today. So we have policy 00:17:46.519 --> 00:17:49.099 types based on structure, traditional versus 00:17:49.099 --> 00:17:52.380 hybrid. But there's a second, far more critical 00:17:52.380 --> 00:17:55.000 distinction based on regulation that determines 00:17:55.000 --> 00:17:58.019 your tax liability and how difficult it is to 00:17:58.019 --> 00:18:00.259 actually access the benefits. The distinction 00:18:00.259 --> 00:18:03.339 between tax -qualified and non -tax -qualified 00:18:03.339 --> 00:18:05.900 policies. This sounds like the taxpayer's ultimate 00:18:05.900 --> 00:18:08.400 dilemma. It is. This is the critical juncture 00:18:08.400 --> 00:18:11.880 where good counsel is paramount. Consumers instinctively 00:18:11.880 --> 00:18:14.339 want that tax deduction available from TQ policies. 00:18:14.700 --> 00:18:16.859 But paradoxically, the benefit triggers might 00:18:16.859 --> 00:18:19.880 be broader and easier to meet in the older NTQ 00:18:19.880 --> 00:18:22.099 policies. Let's start with the tax -qualified 00:18:22.099 --> 00:18:25.200 TQ policies. These adhere strictly to federal 00:18:25.200 --> 00:18:27.259 high -pay rules, ensuring tax -free benefits. 00:18:27.599 --> 00:18:29.259 Correct. So what are the three strict... federal 00:18:29.259 --> 00:18:32.140 rules that define TQ eligibility? To be certified 00:18:32.140 --> 00:18:35.160 as TQ, the policy has to meet stringent criteria. 00:18:35.460 --> 00:18:38.519 First is the duration requirement. The person 00:18:38.519 --> 00:18:40.980 must be certified by a physician as needing care 00:18:40.980 --> 00:18:43.920 for a period expected to last at least 90 days. 00:18:44.079 --> 00:18:47.579 The ADL requirement. They must be unable to perform 00:18:47.579 --> 00:18:50.220 two or more ADLs without substantial assistance. 00:18:50.759 --> 00:18:53.200 The alternative is needing substantial assistance 00:18:53.200 --> 00:18:56.500 for 90 days due to severe cognitive impairment. 00:18:57.309 --> 00:19:00.230 And third. A plan of care. A licensed health 00:19:00.230 --> 00:19:02.450 care practitioner must provide a written plan 00:19:02.450 --> 00:19:05.049 of care certifying that the services being received 00:19:05.049 --> 00:19:07.910 are medically necessary. Let's drill into substantial 00:19:07.910 --> 00:19:10.009 assistance. This isn't just someone standing 00:19:10.009 --> 00:19:13.650 nearby, is it? No. The IRS standard for substantial 00:19:13.650 --> 00:19:16.369 assistance is very specific. It means two distinct 00:19:16.369 --> 00:19:18.950 things. Which are? Hands -on assistance, where 00:19:18.950 --> 00:19:21.309 the physical presence of another person is required 00:19:21.309 --> 00:19:24.269 to help you perform the activity. Or standby 00:19:24.269 --> 00:19:26.309 assistance. Standby assistance. The presence 00:19:26.309 --> 00:19:28.789 of another person within arm's reach is necessary 00:19:28.789 --> 00:19:31.450 to prevent injury while you perform the activity. 00:19:31.890 --> 00:19:35.089 For example, supervising someone who is unsteady 00:19:35.089 --> 00:19:37.509 while bathing. And that need for supervision 00:19:37.509 --> 00:19:40.950 must be constant, not occasional. Okay, so if 00:19:40.950 --> 00:19:43.509 I can mostly dress myself, but I sometimes lose 00:19:43.509 --> 00:19:45.490 my balance and need someone ready to catch me, 00:19:45.609 --> 00:19:48.349 I meet the standby assistance definition for 00:19:48.349 --> 00:19:51.140 dressing. That's right. But I must fail. Two 00:19:51.140 --> 00:19:54.660 of the six ADLs at this level of need or suffer 00:19:54.660 --> 00:19:57.880 severe cognitive impairment to activate a TQ 00:19:57.880 --> 00:20:01.759 policy. Correct. The threshold is high, but the 00:20:01.759 --> 00:20:05.240 reward is guaranteed. The benefits you receive 00:20:05.240 --> 00:20:08.339 are non -taxable under current federal law. So 00:20:08.339 --> 00:20:11.160 now we move to the non -tax qualified or NTQ 00:20:11.160 --> 00:20:14.339 policies. These were common before the IPA guidelines 00:20:14.339 --> 00:20:17.079 established the TQ standard. Why would anyone 00:20:17.079 --> 00:20:19.720 risk buying a policy whose tax status is ambiguous? 00:20:20.329 --> 00:20:22.410 The appeal is the benefit trigger mechanism. 00:20:22.710 --> 00:20:25.670 It's easier. Much easier. NTQ policies often 00:20:25.670 --> 00:20:28.029 include what's called a medical necessity trigger. 00:20:28.269 --> 00:20:30.569 This is much broader and more flexible than the 00:20:30.569 --> 00:20:33.549 TQ standard. A doctor can simply state that the 00:20:33.549 --> 00:20:35.670 patient needs care for any medical reason and 00:20:35.670 --> 00:20:37.390 the policy will pay. It's based on professional 00:20:37.390 --> 00:20:39.609 medical opinion, not a strict 2 -ADL minimum. 00:20:39.710 --> 00:20:41.750 Exactly. And their ADL requirements are typically 00:20:41.750 --> 00:20:44.509 much more lenient, too. How so? Well, NTQ policies 00:20:44.509 --> 00:20:47.289 often only require the inability to perform one 00:20:47.289 --> 00:20:49.720 or more ADL compared to the TQ requirement. of 00:20:49.720 --> 00:20:52.660 two or more. And importantly, NTQ policies often 00:20:52.660 --> 00:20:55.319 include walking or mobility as an ADL. Which 00:20:55.319 --> 00:20:58.619 is specifically excluded from the core six ADLs 00:20:58.619 --> 00:21:01.380 used by the TQ standard. Right. This sounds fantastic. 00:21:01.680 --> 00:21:04.460 Easier to qualify, broader triggers, greater 00:21:04.460 --> 00:21:08.039 flexibility. So what is the massive risk here? 00:21:08.140 --> 00:21:11.059 Why is it a dilemma? The risk lies entirely with 00:21:11.059 --> 00:21:13.579 the tax man, the Treasury Department. I see. 00:21:13.880 --> 00:21:16.480 They have not clarified the tax status of benefits 00:21:16.480 --> 00:21:20.180 received under a non -tax qualified plan. This 00:21:20.180 --> 00:21:23.000 means the taxability of those benefits is completely 00:21:23.000 --> 00:21:26.589 open to interpretation by the IRS. What does 00:21:26.589 --> 00:21:28.789 that financial risk look like in hard numbers? 00:21:28.910 --> 00:21:30.930 I mean, how bad could it be? It could be devastating. 00:21:31.250 --> 00:21:34.450 Let's say you receive a large payout, maybe $500 00:21:34.450 --> 00:21:38.049 ,000 over five years of care. OK. If the IRS 00:21:38.049 --> 00:21:40.710 decides that those benefits are taxable income, 00:21:40.950 --> 00:21:43.049 treating them like an annuity payout, for example, 00:21:43.250 --> 00:21:46.029 you could suddenly face a massive surprise tax 00:21:46.029 --> 00:21:48.410 bill. You could lose 20 % or 30 % of your benefit 00:21:48.410 --> 00:21:51.690 just to taxes. Or more. It fundamentally changes 00:21:51.690 --> 00:21:53.769 the math of your coverage and could force you 00:21:53.769 --> 00:21:55.750 to spend down your assets anyway just to cover 00:21:55.750 --> 00:21:57.789 the tax liability. So you think you've protected 00:21:57.789 --> 00:22:01.049 your assets only to find the benefit. Money is 00:22:01.049 --> 00:22:03.569 itself subject to a substantial tax claim. It 00:22:03.569 --> 00:22:05.809 forces the consumer into an agonizing choice. 00:22:06.289 --> 00:22:09.589 Choose the TQ policy with its stricter, harder 00:22:09.589 --> 00:22:11.950 -to -meet triggers to guarantee tax -free benefits 00:22:11.950 --> 00:22:15.009 or... Or choose the NTQ policy with easier, broader 00:22:15.009 --> 00:22:18.309 triggers but risk that significant, unquantified 00:22:18.309 --> 00:22:20.880 tax exposure. And most people don't even know 00:22:20.880 --> 00:22:22.859 which one they have. That's the shocking part. 00:22:22.980 --> 00:22:26.559 A survey found that 65 % of purchasers did not 00:22:26.559 --> 00:22:28.380 even know whether the policy they bought was 00:22:28.380 --> 00:22:31.279 tax qualified or not. If you don't know the regulatory 00:22:31.279 --> 00:22:34.519 status, you can't possibly weigh the risks. It 00:22:34.519 --> 00:22:36.640 just underscores the need for informed advice. 00:22:37.019 --> 00:22:39.500 Let's move past the tax trap and look at the 00:22:39.500 --> 00:22:41.700 actual policy mechanics once the contract is 00:22:41.700 --> 00:22:44.420 signed. What kind of long -term stability can 00:22:44.420 --> 00:22:47.259 a policyholder expect? This is where the product 00:22:47.259 --> 00:22:49.279 is very strong in terms of consumer protection. 00:22:49.619 --> 00:22:52.380 Once you purchase a policy, the language and 00:22:52.380 --> 00:22:54.400 core benefits cannot be changed by the insurance 00:22:54.400 --> 00:22:57.480 company. They can't retroactively alter the ADL 00:22:57.480 --> 00:23:00.279 definitions or reduce your benefit amount. That's 00:23:00.279 --> 00:23:03.259 a huge safeguard. It is. Furthermore, the policy 00:23:03.259 --> 00:23:06.079 is usually guaranteed renewable for life. It 00:23:06.079 --> 00:23:07.900 can never be canceled by the insurance company 00:23:07.900 --> 00:23:10.400 because your health gets worse or you get a new 00:23:10.400 --> 00:23:12.720 diagnosis. The only way they can cancel is if 00:23:12.720 --> 00:23:14.980 you don't pay. For non -payment of premiums, 00:23:14.980 --> 00:23:17.160 that's it. It gives the policyholder immense 00:23:17.160 --> 00:23:20.299 peace of mind. So, if the language is stable, 00:23:20.519 --> 00:23:23.059 how are the rates determined? What are the six 00:23:23.059 --> 00:23:25.279 core factors and why are they so sensitive to 00:23:25.279 --> 00:23:27.579 age? The rates are determined by six interacting 00:23:27.579 --> 00:23:30.839 factors, first and most important. The person's 00:23:30.839 --> 00:23:33.319 age at purchase. The younger you are, the lower 00:23:33.319 --> 00:23:35.779 your rate. And it's locked in for life. Second, 00:23:35.920 --> 00:23:38.460 the daily or monthly benefit chosen. How much 00:23:38.460 --> 00:23:40.640 the policy will pay out. Higher benefit, higher 00:23:40.640 --> 00:23:43.539 premium. Right. Third, the benefit duration. 00:23:43.720 --> 00:23:46.480 How long the benefits will pay. Two years, five 00:23:46.480 --> 00:23:48.480 years, lifetime. Lifetime is obviously the most 00:23:48.480 --> 00:23:50.819 expensive. What's number four? The elimination 00:23:50.819 --> 00:23:54.119 period. This is your deductible. A shorter elimination 00:23:54.119 --> 00:23:57.180 period means a higher premium. Fifth is inflation 00:23:57.180 --> 00:24:00.299 protection, which is crucial. And sixth is your 00:24:00.299 --> 00:24:02.640 health rating from underwriting preferred, standard, 00:24:02.859 --> 00:24:06.369 or substandard. That age factor just reinforces 00:24:06.369 --> 00:24:09.450 the 45 to 55 recommendation, doesn't it? It does. 00:24:09.589 --> 00:24:12.009 The fact that the average purchasing age dropped 00:24:12.009 --> 00:24:17.589 from 68 in 1990 down to 61 in 2005 shows buyers 00:24:17.589 --> 00:24:19.890 are responding to these market signals. Trying 00:24:19.890 --> 00:24:22.910 to lock in better rates earlier. And beyond individual 00:24:22.910 --> 00:24:26.170 rates, many companies offer incentives for couples. 00:24:26.509 --> 00:24:29.230 Most will offer couples and multi -life discounts, 00:24:29.549 --> 00:24:32.190 often 10 to 30%. And what's fascinating is the 00:24:32.190 --> 00:24:35.569 modern interpretation of couples. It's very broad. 00:24:35.769 --> 00:24:38.369 Some companies include not only married spouses, 00:24:38.410 --> 00:24:41.509 but also two people who meet criteria for living 00:24:41.509 --> 00:24:43.609 together in a committed relationship and sharing 00:24:43.609 --> 00:24:46.490 basic living expenses. It's the market adapting. 00:24:46.769 --> 00:24:49.430 Let's tackle that fourth factor in detail, the 00:24:49.430 --> 00:24:51.970 elimination period. We know it's the deductible, 00:24:52.049 --> 00:24:54.769 but how does it actually function? The elimination 00:24:54.769 --> 00:24:58.210 period is the waiting period, typically 30, 60, 00:24:58.250 --> 00:25:01.250 90, or 120 days, during which you have to pay 00:25:01.250 --> 00:25:03.289 for care out of your own pocket before the insurance 00:25:03.289 --> 00:25:05.309 benefits begin. It's a cost -sharing mechanism. 00:25:05.690 --> 00:25:08.309 Exactly. It reduces the insurer's initial exposure. 00:25:08.690 --> 00:25:11.710 But what's the critical detail most people miss 00:25:11.710 --> 00:25:14.670 about satisfying this period? It's not just calendar 00:25:14.670 --> 00:25:17.089 time, is it? No, and that's the insider detail. 00:25:17.680 --> 00:25:20.140 While some policies use simple calendar days, 00:25:20.339 --> 00:25:23.380 many require you to provide proof of 30 to 120 00:25:23.380 --> 00:25:26.599 service days of paid care before any benefits 00:25:26.599 --> 00:25:29.140 will be paid. So if you only receive care three 00:25:29.140 --> 00:25:32.119 days a week. A 90 -day elimination period could 00:25:32.119 --> 00:25:34.799 take months to satisfy. You have to be paying 00:25:34.799 --> 00:25:36.980 out of pocket for the required number of service 00:25:36.980 --> 00:25:39.259 days before the insurance officially kicks in. 00:25:39.420 --> 00:25:42.259 That is a major financial distinction. It means 00:25:42.259 --> 00:25:45.099 you must have a substantial emergency fund reserved. 00:25:45.799 --> 00:25:48.420 specifically to cover those initial payer costs. 00:25:48.700 --> 00:25:51.539 Absolutely. However, there is a flexibility option, 00:25:51.700 --> 00:25:53.960 which is particularly popular for people who 00:25:53.960 --> 00:25:56.680 want to age in place. What's that? The option 00:25:56.680 --> 00:25:59.440 may be available to select zero elimination days 00:25:59.440 --> 00:26:02.319 for home care services as long as those services 00:26:02.319 --> 00:26:04.500 are delivered in accordance with a plan of care. 00:26:04.720 --> 00:26:07.839 That zero elimination option for home care must 00:26:07.839 --> 00:26:09.960 drastically increase the likelihood of using 00:26:09.960 --> 00:26:12.279 the benefits. It does. It removes the barrier 00:26:12.279 --> 00:26:15.339 to entry. This is precisely why someone purchasing 00:26:15.339 --> 00:26:18.619 coverage at age 65 has a 50 percent likelihood 00:26:18.619 --> 00:26:21.019 of using their policy benefits, especially if 00:26:21.019 --> 00:26:23.339 they select that option. It makes activation 00:26:23.339 --> 00:26:26.779 much easier. Speaking of activation, we need 00:26:26.779 --> 00:26:29.420 to connect private insurance back to the welfare 00:26:29.420 --> 00:26:31.720 system through something called partnership plans. 00:26:31.980 --> 00:26:35.240 Yes. Partnership plans are a direct outcome of 00:26:35.240 --> 00:26:38.059 the Deficit Reduction Act of 2005 designed to 00:26:38.059 --> 00:26:40.380 solve that spend down problem. They bridge the 00:26:40.380 --> 00:26:42.700 gap between private insurance. And Medicaid. 00:26:42.920 --> 00:26:44.700 For middle class families, they're essential. 00:26:45.000 --> 00:26:47.380 So how does this mechanism work to protect assets 00:26:47.380 --> 00:26:50.740 from that Medicaid spend down? It provides dollar 00:26:50.740 --> 00:26:54.299 for dollar lifetime asset protection. For every 00:26:54.299 --> 00:26:56.920 dollar of private LTC insurance benefits you 00:26:56.920 --> 00:27:00.099 use, that same dollar amount is disregarded when 00:27:00.099 --> 00:27:02.319 calculating your eligibility for Medicaid later 00:27:02.319 --> 00:27:04.460 on. Can you give us an example of how that saves 00:27:04.460 --> 00:27:06.599 someone from impoverishment? Sure. Let's say 00:27:06.599 --> 00:27:08.640 you bought a partnership policy with a total 00:27:08.640 --> 00:27:12.329 benefit pool of $300 ,000. You use that entire 00:27:12.329 --> 00:27:15.230 amount for care over several years. Even if you 00:27:15.230 --> 00:27:18.809 needed Medicaid later, that $300 ,000 is protected. 00:27:19.130 --> 00:27:21.470 It will not need to be spent down before Medicaid 00:27:21.470 --> 00:27:24.470 kicks in. So you can keep $300 ,000 in assets 00:27:24.470 --> 00:27:26.549 that you would otherwise have had to exhaust. 00:27:26.950 --> 00:27:31.410 Exactly. As of 2014, 41 states had active partnership 00:27:31.410 --> 00:27:34.690 programs, making this a widely available, powerful 00:27:34.690 --> 00:27:37.569 incentive to buy private coverage. That's the 00:27:37.569 --> 00:27:40.210 government explicitly rewarding proactive planning. 00:27:40.619 --> 00:27:43.619 So to wrap up the U .S. snapshot, let's look 00:27:43.619 --> 00:27:45.960 at the sheer scale of the market. It's a vast 00:27:45.960 --> 00:27:48.740 market. Currently, about 7 million individuals 00:27:48.740 --> 00:27:51.700 have some form of long -term care coverage. And 00:27:51.700 --> 00:27:54.150 the claims being paid... Demonstrate that this 00:27:54.150 --> 00:27:56.630 is a system in action, not just theory. Definitely. 00:27:56.849 --> 00:28:00.089 $11 billion in claims were paid in 2019 to some 00:28:00.089 --> 00:28:03.869 310 ,000 policyholders. The benefits are being 00:28:03.869 --> 00:28:06.250 used heavily, which validates the necessity of 00:28:06.250 --> 00:28:08.789 the product. Moving beyond the U .S., let's look 00:28:08.789 --> 00:28:10.569 at how other developed nations approach this 00:28:10.569 --> 00:28:13.250 specific universal need. It provides crucial 00:28:13.250 --> 00:28:16.269 context. Especially when you compare mandatory 00:28:16.269 --> 00:28:19.109 versus voluntary systems and how they approach 00:28:19.109 --> 00:28:23.890 consumer risk. economies structure their approach. 00:28:24.170 --> 00:28:26.829 The U .S. relies heavily on a complex private 00:28:26.829 --> 00:28:29.650 market contrasted with a welfare floor. Right. 00:28:29.769 --> 00:28:32.349 Whereas Canada and Germany offer different models. 00:28:32.490 --> 00:28:35.190 Starting with Canada, the policies are structurally 00:28:35.190 --> 00:28:37.910 similar to U .S. traditional models. But what 00:28:37.910 --> 00:28:39.750 are the common riders or consumer protections 00:28:39.750 --> 00:28:42.440 available there? Canadian policies frequently 00:28:42.440 --> 00:28:45.500 emphasize certain risk mitigation riders. The 00:28:45.500 --> 00:28:48.660 first is the ROPD return of premium on death. 00:28:48.880 --> 00:28:52.059 Similar to the U .S. ROP rider. It is. If you 00:28:52.059 --> 00:28:53.859 pass away without using the policy benefits, 00:28:54.160 --> 00:28:56.440 a portion or all of the premiums are returned 00:28:56.440 --> 00:28:58.880 to your estate. It provides that certainty that 00:28:58.880 --> 00:29:00.960 the money won't be wasted. And the second essential 00:29:00.960 --> 00:29:03.619 protection focuses on the rising cost of care. 00:29:04.079 --> 00:29:06.440 That's the protection from inflation rider. In 00:29:06.440 --> 00:29:09.259 Canada, this is extremely common and highly recommended. 00:29:09.480 --> 00:29:11.960 Because long -term care costs rise faster than 00:29:11.960 --> 00:29:14.480 general inflation. Much faster. So this rider 00:29:14.480 --> 00:29:17.019 ensures that the policy benefit grows at a set 00:29:17.019 --> 00:29:19.720 rate, often 3 or 5 percent compounded annually 00:29:19.720 --> 00:29:22.859 over time. So a policy you buy at age 50 with 00:29:22.859 --> 00:29:25.819 a $200 daily benefit. By the time you need it 00:29:25.819 --> 00:29:30.920 at age 80, might be paying $450 a day. It's vital 00:29:30.920 --> 00:29:33.519 for keeping up with the true cost of care decades 00:29:33.519 --> 00:29:36.700 later. Let's pivot to Germany because the German 00:29:36.700 --> 00:29:39.140 system is a completely different approach. They 00:29:39.140 --> 00:29:42.099 mandate a baseline of coverage. Germany is a 00:29:42.099 --> 00:29:44.940 fascinating case study in integrated social welfare. 00:29:45.160 --> 00:29:48.299 They mandate. Basic care insurance for all citizens. 00:29:48.640 --> 00:29:50.599 It's one of five pillars of mandatory social 00:29:50.599 --> 00:29:52.819 insurance there. Along with health, accident, 00:29:53.000 --> 00:29:55.599 unemployment, and pension insurance, this ensures 00:29:55.599 --> 00:29:58.980 everyone has a fundamental basic floor of coverage. 00:29:59.240 --> 00:30:02.599 And it avoids that moral hazard of a large population 00:30:02.599 --> 00:30:05.160 spending down their assets to reach the welfare 00:30:05.160 --> 00:30:07.559 net. Exactly. And how is the cost structured 00:30:07.559 --> 00:30:09.859 for that mandatory coverage? It's a shared financial 00:30:09.859 --> 00:30:12.500 responsibility model. The costs for the mandatory 00:30:12.500 --> 00:30:15.380 care insurance are evenly split between employers 00:30:15.380 --> 00:30:17.960 and employees. So it spreads the burden across 00:30:17.960 --> 00:30:20.279 the working economy. Right. Rather than placing 00:30:20.279 --> 00:30:23.140 it solely on the individual or the state. But 00:30:23.140 --> 00:30:25.900 even with that mandatory coverage, there's still 00:30:25.900 --> 00:30:29.809 a voluntary private market to supplement. The 00:30:29.809 --> 00:30:32.589 basic state -mandated care. That's correct. The 00:30:32.589 --> 00:30:35.630 mandatory coverage provides a floor, but it often 00:30:35.630 --> 00:30:37.690 does not cover the full cost of high -quality 00:30:37.690 --> 00:30:40.549 facilities or private rooms. So the private market 00:30:40.549 --> 00:30:43.349 exists to provide supplementary options. And 00:30:43.349 --> 00:30:45.650 there are three distinct types of voluntary private 00:30:45.650 --> 00:30:48.269 insurance available in Germany. Each addressing 00:30:48.269 --> 00:30:50.569 a different risk preference. Let's define those 00:30:50.569 --> 00:30:53.109 three. Type 1 is the most expensive, right? Yes. 00:30:53.109 --> 00:30:55.730 Type 1 is often called the life insurance hybrid 00:30:55.730 --> 00:30:59.269 or fixed pension model. It's the most expensive 00:30:59.269 --> 00:31:02.289 because it pays the insured a fixed monthly pension 00:31:02.289 --> 00:31:04.710 amount predetermined when the contract is made, 00:31:04.769 --> 00:31:07.450 when they need care. And it pays this fixed amount 00:31:07.450 --> 00:31:10.069 regardless of what the actual care costs are. 00:31:10.250 --> 00:31:12.730 Right, based purely on the chosen care level. 00:31:13.109 --> 00:31:15.690 This offers certainty, but if care costs rise 00:31:15.690 --> 00:31:17.849 faster than expected, you may still have a gap. 00:31:18.069 --> 00:31:20.009 What about the second form, the percentage payer? 00:31:20.380 --> 00:31:22.400 The percentage payer is highly sophisticated 00:31:22.400 --> 00:31:25.799 for managing inflation risk. This insurance pays 00:31:25.799 --> 00:31:28.259 a certain percentage of the actual cost of care, 00:31:28.440 --> 00:31:31.000 but only after the mandatory state insurance 00:31:31.000 --> 00:31:34.420 has paid its share. That structure seems inherently 00:31:34.420 --> 00:31:36.980 protective against the unexpected rise in medical 00:31:36.980 --> 00:31:40.599 service costs. It is its core advantage. Because 00:31:40.599 --> 00:31:43.660 it's tied to the actual cost of services, the 00:31:43.660 --> 00:31:45.859 insurance pays more money when the care costs 00:31:45.859 --> 00:31:49.480 more. It effectively lowers the insured person's 00:31:49.480 --> 00:31:51.980 risk of being ruined by raised prices in the 00:31:51.980 --> 00:31:54.339 care market. It ensures the coverage maintains 00:31:54.339 --> 00:31:57.279 its relative value. Exactly. And the third and 00:31:57.279 --> 00:32:00.420 most common private policy type. That is the 00:32:00.420 --> 00:32:03.500 per diem model. This is the simplest to understand 00:32:03.500 --> 00:32:05.859 and most common choice for supplementing the 00:32:05.859 --> 00:32:08.289 German mandatory system. How does it work? It 00:32:08.289 --> 00:32:10.390 pays a certain fixed amount of money for each 00:32:10.390 --> 00:32:12.450 day that the insured is being taken care of. 00:32:12.569 --> 00:32:15.309 It's simpler than the percentage model, but requires 00:32:15.309 --> 00:32:17.690 the policyholder to adjust the fixed benefit 00:32:17.690 --> 00:32:20.390 over time to keep up with inflation. Or risk 00:32:20.390 --> 00:32:21.750 having the coverage amount become inadequate. 00:32:22.130 --> 00:32:24.490 So even in a country with a socialized floor, 00:32:24.750 --> 00:32:27.369 the complexity of private planning still exists, 00:32:27.710 --> 00:32:31.230 driven by the desire for quality control and 00:32:31.230 --> 00:32:33.150 inflation protection. That's the bottom line. 00:32:33.289 --> 00:32:35.829 This has been a critical exploration into what 00:32:35.829 --> 00:32:39.130 is. arguably one of the most essential yet poorly 00:32:39.130 --> 00:32:41.549 understood financial planning tools available. 00:32:41.829 --> 00:32:44.529 Let's synthesize the major themes for our listener. 00:32:44.730 --> 00:32:47.809 The key takeaway is that LTC is fundamentally 00:32:47.809 --> 00:32:51.029 a financial tool. It's driven by increasing human 00:32:51.029 --> 00:32:54.250 longevity, and its sole purpose is asset protection. 00:32:54.490 --> 00:32:56.289 And its benefits are defined not by traditional 00:32:56.289 --> 00:32:59.440 sickness, but by functional loss. The specific 00:32:59.440 --> 00:33:01.700 clinical language of the activities of daily 00:33:01.700 --> 00:33:04.759 living. And for any U .S. purchaser, navigating 00:33:04.759 --> 00:33:07.339 the complex distinction between tax -qualified 00:33:07.339 --> 00:33:10.279 and non -tax -qualified policies is the highest 00:33:10.279 --> 00:33:12.740 hurdle you have to clear. To ensure your financial 00:33:12.740 --> 00:33:15.940 protection is secure and tax -free. And the central 00:33:15.940 --> 00:33:17.720 action point, whether you're in the U .S. or 00:33:17.720 --> 00:33:20.319 navigating a supplementary market abroad, is 00:33:20.319 --> 00:33:22.440 timing. It's everything. The importance of shopping 00:33:22.440 --> 00:33:26.720 early. Ideally, between ages 45 and 55, to secure 00:33:26.720 --> 00:33:29.279 the lowest rates and lock in the policy structure 00:33:29.279 --> 00:33:32.140 before a major health change occurs is paramount. 00:33:32.240 --> 00:33:35.299 Because once your health status shifts, the policy 00:33:35.299 --> 00:33:37.940 you need may become financially prohibitive or 00:33:37.940 --> 00:33:40.690 completely unavailable. Exactly. Before we wrap 00:33:40.690 --> 00:33:42.789 up, I want to leave you with one final provocative 00:33:42.789 --> 00:33:44.789 thought that builds on the U .S. market structure 00:33:44.789 --> 00:33:48.089 and consumer protection. OK. We spent a lot of 00:33:48.089 --> 00:33:50.490 time noting that policies purchased from state 00:33:50.490 --> 00:33:52.589 regulated insurance companies are guaranteed 00:33:52.589 --> 00:33:54.849 renewable and the language can't be changed. 00:33:55.150 --> 00:33:57.450 But there's a loophole for large groups, isn't 00:33:57.450 --> 00:33:59.630 there? There is a serious risk for those who 00:33:59.630 --> 00:34:02.029 obtain coverage through large retirement systems 00:34:02.029 --> 00:34:05.599 or major employers like CalPERS. How so? Because 00:34:05.599 --> 00:34:07.940 these organizations often create their own group 00:34:07.940 --> 00:34:10.940 -like LTC plans, they are often not regulated 00:34:10.940 --> 00:34:13.559 by the state insurance departments. They operate 00:34:13.559 --> 00:34:16.079 outside that critical consumer protection safety 00:34:16.079 --> 00:34:18.980 net. What's the consequence of that lack of oversight? 00:34:19.420 --> 00:34:21.500 The consequence is that these non -regulated 00:34:21.500 --> 00:34:25.179 groups can increase rates and in some cases make 00:34:25.179 --> 00:34:27.960 changes to the actual policy structure without 00:34:27.960 --> 00:34:30.539 the rigorous state scrutiny and approval that 00:34:30.539 --> 00:34:32.840 traditional carriers must submit to. So we've 00:34:32.840 --> 00:34:35.780 seen massive unexpected rate hikes in these non 00:34:35.780 --> 00:34:39.880 -regulated plans. Yes. Your policy might be guaranteed 00:34:39.880 --> 00:34:42.320 renewable, but that guarantee does not necessarily 00:34:42.320 --> 00:34:45.239 extend to guaranteed rate stability. That raises 00:34:45.239 --> 00:34:47.920 a critical question about oversight. If you're 00:34:47.920 --> 00:34:50.739 offered coverage. through a large employer or 00:34:50.739 --> 00:34:53.300 a retirement organization, you need to verify 00:34:53.300 --> 00:34:56.260 precisely which regulatory body is scrutinizing 00:34:56.260 --> 00:34:58.159 the policy. And the rate increases before you 00:34:58.159 --> 00:35:00.460 commit. Because your guarantee of stability might 00:35:00.460 --> 00:35:03.000 not be as solid as you assume. Protection isn't 00:35:03.000 --> 00:35:04.699 just about the policy language. It's about the 00:35:04.699 --> 00:35:06.880 regulatory framework surrounding it. Food for 00:35:06.880 --> 00:35:09.039 thought, indeed. That's all the time we have 00:35:09.039 --> 00:35:11.760 for this deep dive. We hope this knowledge empowers 00:35:11.760 --> 00:35:13.920 you to plan ahead and secure your future.