Care Costs Are Crazy — Why Insurance Might Save Your Family

Sam.

Welcome to becoming financially confident.

I'm Ralph Estepp Jr.

I'm an accountant, financial counselor, and I'm your host.

And I'm Juliette.

I'm just a regular person asking all of the questions.

We're here to help you break the cycle of financial shame one conversation at a time.

No shame, no judgment.

We're on this journey together, and it's going to be okay.

Well, hello and good Saturday morning to everybody.

Just going to be me today.

So let me change that on the screen.

But I just wanted to take a few minutes today and just sort of do a quick reflection episode.

You can see I'm.

I'm donning my University of Delaware gear.

Today is homecoming game starts at 3pm so I'll be heading out that way.

But I just want to take a quick look and look back over this past week.

I want to talk about the things that hit, the things that landed.

And I want to say one thing from Friday's show because I asked a question on the air, and unfortunately, our guests never really answered it.

So I really want to get into that today.

But let's talk about the best of the week now, Monday.

I think we started off strong.

You know, was that reflection about almost deciding to buy that iPhone Pro Max 18 and when I shared on the show, and I still believe this to this minute, when we think about spending most of the time, it's not a math question, it's not a money question.

It's an emotion question.

And I found myself sort of feeling in the doldrum, sort of had a rough weekend.

And I said, you know what?

I can sue that by buying that new iPhone 18 Pro Max.

And the way I got past that and the way I'm gonna encourage everybody get past that is start by naming that emotion.

And that's exactly what I had to do.

I said, I'm bored.

I'm bothered by something.

I'm emotionally, I was kind of drained.

But I named the emotion first.

And then I said, well, let me.

Let me think about it in logical sense.

Should I do this?

Should I make this purchase?

And when I did that, I said, you know what?

I don't really need it.

So in my big takeaway from this week for that is as you think about spending money and all of us are faced with this because, face it, you know, it's kind of like eating.

I was on Dutchess and John show the over 50 overhaul the other day, and I'm encouraging you to check it out.

And we talked about this.

Eating is one of those Things that you have to do to survive, you don't have the ability to just say, well, I'm not going to do it.

Well, spending works the same way in the world that we have.

You're going to be faced with spending money.

You're going to spend money probably daily.

And so my big encouragement is to just name the emotions that you're feeling.

And when you name those emotions, I truly believe it's going to help you get past those.

I'll call them poor spending decisions.

Well, now, Tuesday, we talked about hidden debt.

And as you know, I talked about myself first because on the show, I always want to be transparent.

I always want to tell you about those things that I did.

And I shared a very honest conversation that day, how when I was first married, you know, I kept those things to myself.

I kept them concealed from my wife because I didn't want to look like I wasn't being successful.

And again, it goes back to the emotion.

It goes back to that emotion of feeling, am I enough?

Am I doing enough?

Does my partner, does the other person that I'm sharing my life with, do they see me as being successful?

And I think it's really easy to get ourselves caught up in that.

So it's so important that we.

Again, I go back to the emotions and measure your emotions.

And if you're hiding that we had, we had an interesting story.

Remember, we had that couple.

And if you didn't watch the show, you can check out all of this week's show@becomingfinanciallyconfident.com and while you're there, hey, go to becomingfinanciallyconfident.com connecting and write to us.

Send us a message.

You'll see our live shows.

You'll see all the things we did this past week, but it's all about being transparent.

Now, Wednesday, we got into the explain it like I'm broke.

And we had a very frank conversation about raising kids and how it was so much easier to go to the office.

And again, what are we talking about?

Again, we're talking about emotions.

Now, Thursday show was a lot of fun.

We had the account reacts.

And honestly, I've said it on the show many times.

That's probably my favorite segment of the show because I don't know what's coming.

And Juliet sets me up and we have a frank discussion.

We talked about the repo man.

Yes, I've actually played a role as a repo man.

We talked about repossessing that mustang.

And then we had a really interesting Discussion about bankruptcy.

Now again, I'm going to say it again.

I am not a bankruptcy.

Bankruptcy attorney.

I don't play one of those on tv.

If you're thinking about bankruptcy or if you want bankruptcy information, you need to talk to an attorney.

But we had a really interesting discussion about it.

Now, Friday, before we get to our long term care discussion, remember we had that person write in named Jordan.

And Jordan had talked about how he went from making $54,000 a year to $185,000 a year.

And what he said, and this is the part I really didn't like get into, that I should have gotten into, because what I was, I was sort of ready for the interview with Raymond.

So I wasn't really thinking, but here's what Jordan was really saying.

What he was saying is he still got his main job, but he's got this side business that's really taken off.

And I didn't really spend enough time talking about the big tax problem that he might have.

Now he did mention he's got $22,000 sitting in his checking account.

But if I do the math, I'm not even sure that's enough.

When you are self employed, no one is sitting there and taking money from you.

They're not going to give you a paycheck at the end of the week.

They're not going to.

You're not going to put side of money for taxes.

So if you're doing this thing, and I see a lot of people doing this, when the economy gets tougher, when it's harder for people to make ends meet and they look to go into the side business or what they call the side hustles, you got to remember something, and this is one of the things, this is a very strong takeaway for today if you do that.

The second move, once you decide to do that is set up a separate bank account.

And hear me on this, this is going to pay you dividends in the future.

Set up a separate bank account and put a percentage of every single dollar that you earn.

Don't worry about the net income.

I'm talking about the gross dollars.

Whatever you're collecting in revenue, put a percentage of that aside into a separate account for taxes.

Now, I don't know your exact situation, so I can't tell you a percentage, but here's what I would Recommend.

Put about 30% aside.

You might be saying, ralph, that's a lot of money.

Yes, but here's the thing you need to understand.

You're going to pay federal income tax and you're going to pay self employment tax.

And if you missed the show, I've talked about self employment tax many times.

So that's why I say 30%.

Now if you're in a state that has state income tax or you are living in a town that has income tax or earned income, it could be even higher.

But I think right now, if you're doing nothing else, and I really wish I had said this to Jordan when we talked about this on Friday, I think that's your big stumble point.

Because if I do the math, if he went from a 54,000 to 185,000, that's like $130,000 in more income.

Well, if you multiply that times 30%, 22,000 in the checking account's not going to cover it.

So I got to be worried about that.

And I said, you know what, I better bring that up.

But while we're talking, the other thing that I really want to spend a few minutes on today, and this is the reason I decided to go live today because I felt like Raymond did a great job on this show.

But he didn't answer my question.

And I asked him point blank, I said, List, I'm 54 years old, Raymond, is it too late for me to get long term care insurance?

And I use myself as the example.

And you know, he answered me sort of in a generic way.

And again, I'm not picking on the guy, but let's talk about his story because we really didn't get into this either.

And you could probably figure out the nuances if you read between the lines.

But Levine's mother is, we talked about, she was an attorney.

He said his, his father had passed away and when she was paying into this long term care, she sort of resented making those premium payments.

I don't know about you, but a lot of people who are paying for insurance, sometimes you feel like I pay for insurance, but I never use it.

Maybe that's a good thing.

But I think in Levine's mother's case, she resented paying those premiums because it's kind of betting against yourself.

But think about what happened in his case.

And he didn't spend a lot of time talking about it, but she actually collected benefits for 18 years.

She collected them from her late 80s until she died at 103.

So those premiums that she complained about, they actually bought her family 18 years of not writing checks in a crisis.

And that's the biggest takeaway for me because listen to this caregiver math.

What I found out I looked at aarp.

AARP says that the caregivers, these are the people who are caring for the people who are struggling.

Caregivers spend about $11,508 a year out of pocket helping a family member.

Now that's a big number to begin with.

But let's go a little deeper.

A working caregiver, a person that gives up their career, gives up their time, gives up roughly a hundred and twenty thousand five hundred dollars in lifetime earnings and benefits and they leave work full time.

It sometimes is two and a half years of that.

So if you do that for two and a half years, you're talking about potentially losing $446,000, even a little bit more than that.

And then we also mentioned this on the show, the big number that around the clock home care can run up to $30,000 a month.

That's not a year, that's a month.

Now when we get practical about this, there's only four ways to pay for this.

Let's be blunt.

You can pay for it with your own money, which is going to eat up your savings.

Maybe you have to sell assets.

You may have to sell your home, sell your retirement investments, sell your stock portfolio, whatever those things are.

Maybe you're lucky and you're a member of the va.

If you qualify, they could pay for some of it.

Insurance clearly is going to pay for some of it.

We're going to talk about that in a few minutes.

Or Medicaid.

Now Medicaid is the one we didn't talk about.

We talked about Medicare.

And we need to understand the difference between Medicare and Medicaid.

Medicaid is what will pay once you've extinguished all your assets, once you've sold all your assets.

And honestly the way I look at that is once you're penniless, they're not going to kick you out on the street.

That's when Medicaid is going to kick in.

So think about Medicaid being like a social welfare, whereas Medicare is more of an elderly insurance.

But that's the whole list.

Either your own money, the VA if you qualify, insurance if you've purchased it, or Medicaid.

Now remember, Medicare does pay for recovery.

I want to make clear about that.

Medicare is not going to kick you out of a recovery hospital, but what they only pay for a rehab after a hospital stay.

It's a very short window.

It's not long term care.

I shared on the show, my mother in law has dementia.

Well, Medicare paid for her when she fell and broke her arm or Broke her hip, it paid for her rehabilitation stay.

But there's a short window for that.

It doesn't pay for care for the long run.

It doesn't pay for that day to day help.

It doesn't pay for those long term things.

And unfortunately, what I've seen in my practice and what I've seen in my own family, it's that decision that you get in the hospital hallway when the doctor says to you, mom's not going to be able to live on her own anymore.

And then you're scrambling.

So let's talk about how an actual long term care policy actually works.

And this is the part that honestly I wish we had spent more time talking about on Friday.

But let's get right into it.

Long term care insurance pays for help with daily living.

When you can't do it yourself anymore, think of a home, healthy, somebody that comes in and helps you bathe, helps you eat, helps you do those necessities of life.

Now sometimes that's done in your own home, sometimes it's done in an assisted living facility where you're still able to do some things for yourself, but not everything.

Sometimes it's in a nursing home where you get more 24 hour seven day care and sometimes it's simply adult daycare so that during the day you can be somewhere where somebody can take care of you.

Because then somebody might be able to be there in the evenings and weekends to help you.

But again, this is not medical insurance.

This is, this is long term care insurance.

And think about it like this.

What it does is pays for the hands and the supervision.

It's not for the doctors in the surgery, your doctors, your surgery, Those medical items, those are going to be covered by either Medicare or covered by traditional insurance or supplemental insurance, if you have it.

Now let's talk about how you get those benefits.

Because you might be thinking, okay, Ralph, if I buy this policy, what actually triggers it?

So here's what triggers it.

Here's what has to happen.

A licensed healthcare practitioner, this is somebody who is trained, has credentials, has to certify one of two things.

And it's very specific what it is.

Either you can't perform at least two of the six activities of daily living.

Let's talk about what those things are.

These are, these are the activities of daily living.

And a person who's a medical professional has to say that you can't do these things.

They include bathing yourself, dressing, eating, toileting, transferring, meaning going from the bed to the chair and continence.

Now this is expected to last at least 90 days.

So there's two qualifications.

You can't do at least two of these six things.

And I'll go through those again.

Bathing, dressing, eating, toileting, transferring, meaning going from bed to chair and continence.

And it has to last at least 90 days or the other one.

That's why I said there's one of two.

You could have a severe cognitive impairment like I talked about with my mother in law.

Dementia, Alzheimer's, one of those things where you need supervision for your own safety.

It's not safe for you to be on your own.

Maybe physically you can handle those things, but mentally you can't.

And then once that happens, once that trigger happens, then the company that you bought the insurance from approves a plan for care.

So you understand what we got to do here.

If there's no trigger, there's no benefits.

That's the gate that we really didn't talk a lot about on Friday.

But it's important that we address that now.

The other thing we need to talk about is the time frame.

Because Levine mentioned this thing called an elimination period.

And I just want you to think about it in terms of a deductible.

Most of us that have insurance understand what a deductible is.

Now for long term care insurance, it's measured in the number of days, not dollars.

So basically when you go into a long term care insurance program, you decide on how many days you want this, this, this waiting or this elimination period to be.

It could be zero days, could be trigger rate.

As soon as somebody says, as soon as somebody says, hey, I'm a health care provider, this person can't do two out of those five things.

It could be 30 days, it could be 60 days, 90 days, 180 days.

Now when I did my research, what I found is 90 days is the most common.

So think about it in terms like this.

If you have a long term care insurance plan that's going to have this elimination period of 90 days, that means that during that 90 day period, you're on your own to pay for those expenses.

And think about it today, at Today's prices, a 90 day wait can be 20,000, $25,000 out of pocket before the policy even pays a dime.

So understand that if you have a shorter wait time, you're going to pay more for the insurance because the insurance is going to kick in closer.

So if you've got family that can't help you, then you might need to think about doing that zero or 30 or 60 day policy.

If you've got family that can step up and help you, then maybe you buy a policy with a longer period.

But understand you're going to pay for that.

Now the other thing that Raymond mentioned was the lifetime benefits.

And I want to really explain that because honestly, Even I wasn't 100% certain on this.

So that's why I want to do a little homework and get you the right answer.

So the lifetime benefits means this, the benefit period and the pool.

So think about it like a pool.

A policy that you take out long term care policy is really a pool of money.

It's basically a decision of how much are you going to pull for daily benefit times the benefit period.

So for example, let's say that you need a benefit of $150 a day for three years.

I'll do the math for you.

That's $164,000 in that pool.

That's how much money you need.

If you want to have $150 for three years, it'd be $164,000.

If that jumps to $200 a day for five years, that's about $365,000.

And that period can run two, three, five years or lifetime unlimited, which is what Levine was talking about.

Those type of plans exist, but they're more limited now, they're rare and they are super expensive.

Because if you think about it, what you're saying to the insurance company is once I get that, that determination, you are going to pay a fixed amount every single day for the rest of my life.

And there's no, there's no end to that.

So insurance companies look at that, hey, wait a minute, how can we even insure against that?

How could we figure out what the premium would be for that?

Now what they have found is most claims don't run past three to five years.

Because if you think about why that is, and this is not a fun thing to talk about, it doesn't run past that because the person ends up dying.

Because these things are the things that usually are coming at the end of your life, at the end of your life cycle, basically.

Now Levine's mother made out like a bandit.

His mother got this for 18 years now.

But again, I want you to understand, she's the exception to the rule.

But I will tell you this, like going through this at my mother in law and I don't know the exact number, but I think in her nursing care it's about $450 a day.

That's a lot of money.

It's like $15,000 a month.

Now let's talk about how it actually works.

So how it pays.

Most policies reimburse you.

So what they do is you pay the actual cost as you're going through this and then you submit those things for reimbursement.

And there's a monthly limit, but you have to submit the bills.

Now there are some depending upon the insurance company that pay cash directly, that full daily amount once you've, once you've reached your claim and then you can spend how you need it.

What I have found in my research is reimbursement is cheaper, cash is more flexible.

Now the other thing that Raymond talked about, he started talking about inflation protection.

I think he used a different term.

He said in real dollars, meaning that this, this make or break thing, well, right now care, that costs $7,500 a month today.

It's not going to cost that in 20 years.

It's just a simple truth.

Like when Raymond, I think he's 77 years old, when he was talking about he had rent when he was, he said in North Hollywood he rented an apartment, was $200 a month.

Now it's almost $3,000 a month.

Well, health costs are going to do the same thing.

So you want to be careful about the inflation protection you build into this because right now we're seeing a 3 to 5% inflation thing that goes on top of it.

So with this insurance, you can put on what's called a rider and basically the rider grows the benefit while the inflation goes.

So let's say you buy $150 a day at 54, if you don't add a rider to that, that, that when you turn 80, it's still going to be $150 a day.

But we got to ask ourselves, when I'm 54 now, in 30 years, what is that same amount of money going to cost?

And right now I'm just going to throw a simple number out there.

I mean I, when I did the research, it could be $350 a day.

So for a 54 year old man, I'm using myself as an example.

This rider is so important because it grows the size of a pool.

Now if you're older and you're buying it late, it's difficult to get this.

There's one more thing we need to mention and Raymond and I didn't even hit on this.

There is a use it or lose it problem and that's why he mentioned the word hybrid, but he didn't really elaborate on it with a Traditional policy, if you never die needing care, in other words, you never get to the point where somebody says you can't do two out of those six things, the premiums are spent.

You don't get anything from it, it's gone.

So you think about that resentment now, Lamine's mother felt that resentment.

Now she ended up cashing in to be able to use it.

But imagine if you paid for this policy and never used it.

Now some of us might say, well that's great, I never got sick enough to where I needed it.

That's a beautiful thing.

But what hybrid policies do is they pair life insurance with a long term care benefit.

If you need to care, it pays for care.

If you don't, it accumulates a death benefit for your family.

Again, understand something, hybrids are going to cost more and the care pool is usually smaller because again, you're making the insurance company fit into a box.

But a lot of times that will, that will answer the objection.

As some people say, well, if I never get sick and I don't need it, then I've lost the money.

That's a decision you need to make.

Now, because I'm a tax guy.

Let's talk about some tax things.

Benefits from tax qualified policies are generally received income tax free.

The other benefit to these things is premiums can be partly deductible within age based limits, depending upon your age.

And if you're able to itemize or not.

Now that's not a reason to go buy it.

But just understand when you're doing your taxes or you're sharing your tax information with somebody, if you have long term care and policy and in place, you might want to consider mentioning it to them.

Now the other thing that Raymond said, and he was very honest about this, he said, well, I'll just self insure, I've got enough money in the bank that I need to worry about it.

And that is an option if you have enough resources.

If you're not worried about that, you could do that.

But think about $7,500 a month, that's $90,000 a year that you would have to pay for care.

And $7,500 a month, even right now for full time care, is only going to get you about halfway there.

So if you need $90,000 a year for five years, that's $450,000.

But the thing that a lot of people don't think about, that's coming out of the same money that you plan to live on, that pay the mortgage or pay your electric or Pay your car payments.

It could also be the money that your spouse needs to live on.

And maybe you're one of these folks who wants to leave something for your heirs.

So really think about it.

Don't just put your head in the sand and say, well, I'll figure it out if I ever get sick.

That's not a good plan.

Now, one of the things that Raymond talked about was thinking about adding this as benefits for employment.

I think that's actually a very good idea.

I don't see a lot of employers doing that, so maybe that's something that we should talk about.

Now, I want to get into my specific situation, because I asked Raymond a couple times, I said, look, how much would it cost me if I needed to set aside 5,000 or $6,000 a month of coverage?

The thing you need to understand, and this is the whole key thing to this whole thing, the earlier you do it, the cheaper it's going to be.

It's kind of like life insurance, because as you get older, the likelihood that you're going to use it is more likely.

So there's also health decisions.

So it really depends on your particular situation.

That's the thing that I think Raymond actually landed really well.

It depends on your particular situation.

So this is one of those conversations that ends like this.

Go talk to an expert.

Go meet with somebody.

But if your family members haven't ever talked about this, you've never had these conversations with your parents or your grandparents, start having these conversations.

See, that's the one thing you can do right now.

You don't have to do this alone anymore.

But understand who's going to pay for what, how you're going to work through this.

And it may be simply saying to your parents or your grandparents, have you ever considered this policy?

Do you have this type of policy?

Have that decision, have that conversation before you're in the hallway, before you're faced with that crisis?

Because I've been in that hallway.

I shared it on the show before my mother went through and she had a tumor in her brain.

And my mother was cognizant enough to make the decision that she wanted to have surgery.

And we all supported that because she was able to make that decision.

But after the surgery, and the surgery did not go well, it lasted a lot longer than they were expected to do.

And the doctor pulled my sister and I aside and said things did not go well.

And it was at that moment we had to have a tough decision.

It's okay, well, how are you going to pay for this?

Now in my mom's case, she had an advanced medical director that she didn't want to live on life support.

So that was a really simple decision.

And because she was coming out of surgery, her expenses were covered as part of that.

But my sister and I had to have a sort of a decision point of like, okay, if mom wanted to live or to try to come out of this, what was that going to look like?

Because honestly, my mother didn't have a ton of assets.

My mother didn't have a long term care insurance policy.

And don't get me wrong, that's not why she made that decision.

But that's the kind of crisis point that comes in the hospital hallway when you're trying to figure out what do we do next.

So if you take nothing else from today's conversation, understand what long term care insurance is.

See if it fits with your life, see if you can, if it makes sense for you, talk with somebody who's an expert on this and make an informed decision.

Now before we close out today, I want to talk about next week.

Next week we're going to call our tax smart week and we're going to talk about all kinds of tax smart things because right now is when you can actually make tax decisions that will help you before tax time.

Because once December 31st comes, it's too late for that.

And then our money move.

The next week is going to be the Christmas budget.

We're actually going to talk about how to come up with a budget for Christmas so you don't go into the new year in debt or trying to figure out like what do I do now?

That's exactly.

We're going to talk about next week.

And I got a special treat for you on Wednesday.

We're actually going to have somebody come and visit us.

His name is Rob Talman and he's going to join us to talk about something called a 72T plan and a self employed pension plan that basically allows you to take money out without penalty before age 59 and a half.

Because right now at 59 and a half before that you have to pay a 10% penalty.

And don't forget, before you close out today, I want to mention this.

Our Christmas bonus is going to be coming to an end in just a few weeks.

So make sure you go out and do that.

You got to do this before November 30th at 11:45pm go to becomingfinanciallyconfident.com connect again.

That's becoming financially confident.com connect because I want you to enter that contest.

And remember, once you do that, you'll get an email.

When you get that email, confirm your email address and then send it to everybody you know.

Now, if something that we haven't talked about on the show is bugging you, if you want to if you want to have your topic talked about on the show, if something that would help you go to becoming financiallyconfident.com connect again, that's becoming financiallyconfident.com connect and tell us what's on your mind because that's what we want to cover on this show.

So thank you so much for joining me today.

I'm going to go out this afternoon and cheer on the Blue Hens, the University of Delaware.

I'm an I'm an alumni of that.

But I will see you on Monday for another week of shows on becoming Financially Confident.

You have a great weekend, and we'll see you again Monday morning.

Sam.