The Cruel Truth: Inflation and long-term care
The effect of inflation on the goods that elderly consumers most frequently buy was recently examined in a survey by the Elderly Citizens League. They note that Social Security payouts climbed by 78% from 2000 and 2023, or an average of 3.4% every year. However, over the same time period, the average cost of goods and services purchased by retirees increased by 141.4%, or 6.2% annually.
Gasoline (up 167%), veterinary services (up 190%), homeowner’s insurance (up 193%), and total yearly medical expenses (up 177%), which went from $5,844 in 2020 to $16,192 in 2023, were among the costs that rose the fastest during that 23-year period.
Seniors are really feeling the effects of inflation, especially if they still live at home. is a nursing home or assisted-living facility. The Office of the Actuary at the Centers for Medicare & Medicaid Services updated its estimates of healthcare spending by provider type last month.
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They forecast a 5% increase in nursing facility and continuing care retirement community spending for 2023, which is just under the current inflation rate of 6.04%, and a 5.2% increase in spending for 2024.
Genworth’s yearly cost of care index makes daily predictions for In five years, a private nursing home bed will cost $365 per day for care, or almost $11,000 per month. You’ll pay $182 each day, or $5,500 per month, for five years at an assisted living home. The prices could be at least 50% higher in big cities.
increasing healthcare costs
That is why so many people buy long-term care insurance (LTC) to at least cover a portion of the expense of entering their preferred facility. However, insurers are also concerned about inflation. One of the causes of the traditional policies’ annual premium increases is due to this.
Here’s a fantastic illustration. The annual premium for an LTC policy purchased 20 years ago was $1,890; it was pricey but manageable. Afterward, as interest rates fell. The policy’s premiums were increased by the insurers, virtually tripling the yearly cost to $3,600. The premium increased to almost $8,000 in the most recent few years. And the premium increased to roughly $11,500 this year!
The majority of people would quit. But this senior requested for alternatives after paying all those premiums into the insurance. I recommended that she contact LTC insurance specialists Brian Gordon at Gordon Associates (800-533-6242).
The annual premium decreased back to a far more manageable $2,150 per year in exchange for giving up the future 3% compound inflation protection (which had already nearly doubled the basic daily benefit over the previous 20 years).
That significant cut demonstrates how much insurance providers worry about rising healthcare costs will increase in coming years. also why you should be afraid of it.
The two lessons in this tale
Ask a professional to analyze your alternatives, which may include giving up inflation protection or cutting the length of the coverage period, if the premium on your older LTC insurance policy increases. Avoid, however, simply canceling your insurance and giving the insurance firm a profit on the previously paid premiums.
Look into a new “combo” life/LTC insurance policy, where the coverage is guaranteed and the rates cannot increase or decrease. You can lock in coverage and a death benefit for your heirs if you pass away without using the care coverage with a single large payment or a series of payments spread out over 5–15 years.
Cost of a combo Life/LTC insurance, and financing it
A 63-year-old lady might secure $120,000 in death benefits, $5,000 per month of coverage for six years of care, and a 3% compound inflation adjustment.
The price is a high $99,000 one-time payment. Alternatively, $12,600 yearly if paid over ten years. or, if paid over 15 years, $10,500.
Where would someone get that cash only to pay for the potential need for long-term care that is not provided by Medicare or supplemental insurance? A lot of people, according to Gordon, are trading in cash-value life insurance plans to purchase these combination life/LTC policies. Some people are transferring their IRA funds into annuities that will make these yearly payments.
Using insurance to pay your way into the pricey future A desirable alternative to Medicaid-funded nursing homes may be the best care.
To find out more about how inflation affects long term care insurance,
visit us at 111.Get-Life-Insurance.com
or call us at (313) 561-2486