Military Financial Independence

Note:  My Dad passed away on 18 November 2017 from end-stage Alzheimer’s.  This post is about my experiences with his insurance during the years 2011-2014.

There are hundreds of posts on the pros and cons of long-term care insurance, but most of them approach the question from a financial perspective. Today we’re going to look at other aspects of the decision: statistics, lifestyle, the process, and the lessons that I’ve learned.

Another reason I’m writing this 2500-word post is because I’m disgusted by John Hancock Life Insurance Company’s latest attempt to exploit their beneficiaries and caregivers. My father is finally finished with their long-term care policy and I feel free to describe why I’ll never do business with them.

But first let’s look at the statistics. You’ve seen the dire warnings on every insurance and financial website: someday you’ll need skilled care in a nursing facility, and you’ll have to protect your finances with long-term care insurance.

As usual, the facts are more complicated than the sound bites.

Statistics

Last month a new study on long-term care risks was published by the Center for Retirement Research at Boston College. (That link opens a PDF.) The research was funded by a grant from the National Institute on Aging, part of the Department of Health and Human Services, so I’m going to call it “objective”.

The paper’s background is the most illuminating part of the study. The typical statistics and probabilities quoted for long-term care insurance marketing are based on survey data that’s over 25 years old. That data identified the “long-term care insurance puzzle”: only 13% of wealthy people purchase the coverage, even though over 30% of men and 40% of women can afford it. A large crowd of informed consumers should be more rational, so the puzzle was thought to be caused by ignorance of the risk or by poor product design.

The latest survey data shows a different story: a higher risk of using long-term care, but a shorter stay in a facility. Among people over 65 years old, 58% of women and 44% of men are expected to need long-term care at some point. However, the new data shows that each stay in a facility tends to be shorter than previously predicted– and a significant amount is covered by the 100-day limit of Medicare.

The reality matches the new data: fewer than 5% of today’s elders are living in full-care facilities, and only about 20% use paid home-care assistance. Our families are either stepping up to provide care, or care isn’t needed for very long.

Insurance companies have used the older data to set their long-term care policy parameters and premiums. On the premium table of the Federal Long-Term Care Insurance Program, the payments start rising faster for ages above 60. The implication is clear: buy the insurance now while you still qualify for cheap rates. Even if you’re paying for a longer time, you’ll still pay a lower total of premiums. In the last 25 years, millions of clients did the math on this fear marketing.

As people lined up to buy policies (with inflation riders), the insurance industry discovered that they’d made two horrible mistakes:

• they competed for market share by selling policies at ever-cheaper premiums, and
• the actuaries underestimated the lapse rate.

Click the logo for a premium chart.

Those issues have largely been corrected in today’s policy premiums (and many smaller insurers left the sector) so long-term care insurance is more expensive today than ever before. When John Hancock took over as the sole provider of the FLTCIP in 2010, premiums jumped up 25%.

The financial industry has also acknowledged their problem by creating new hybrid policies that combine life insurance or annuities with long-term care riders. If you thought policy-shopping comparisons were tough before, it’s even more complicated today.

So we’re living longer than ever, and long-term care policies cost more than ever, and the policies are more complicated than ever, and those premiums are still rising– yet we’re using less long-term care than we thought.

Lifestyle

No, we’re not going to talk about aging with dementia. We’re going to discuss caregiver lifestyle.

My father first noted his cognitive decline (privately) over seven years ago. Today he’s deep into mid-stage Alzheimer’s in a full-care facility, but back then he made his wishes clear: do not resuscitate. Years ago his cognitive self decided that when his time came, he only wanted palliative care. Today his short-term memory is measured in minutes but all of his needs are met. As far as he can tell, life is awesome. When awesome stops, hospice will step in.

My brother and I have the world’s best possible caregiver situation. I’m financially independent and his small business will soon do the same for him. We’re largely in control of our time, and Dad is in one of Denver’s top-rated care facilities. I’ve read extensively about caregiver stress at Alzheimer’s Reading Room and in books, and our stress is barely a 1 on a scale of 10. Maybe 0.5.

Yet we still drive ourselves nuts.

My brother and I both beat ourselves up for not spending more quality family time with Dad over the years (even though Dad chose his hermit lifestyle). My brother visits several hours each week with Dad and shops for his personal needs like clothing and toiletries or new jigsaw puzzles.

We both frequently talk or e-mail with the care staff. I rarely visit but I spend at least an hour a week taking care of his finances and the probate court’s conservator reports. When Dad has a medical issue, we both swing into full-time crisis-response mode to handle the logistics and the billing. I may be retired from the military, but I’m still on duty: we have to be ready to drop everything and race to Dad’s side to make sure he’s taken care of and that his DNR wishes are respected.

And yet our caregiver responsibilities are laughably light compared to the national norm.

Home care for elders is extremely stressful on the families. Constant vigilance and caregiver burnout lead to lack of sleep, poor diet, high blood pressure, cardiac stress, and a rapid decline in health. Delegating the labor to paid home care staff trades the physical effort for the challenges of supervising the logistics, fretting over the quality of care, and perhaps even feeling guilty at not being able to do it all for our loved one. “Respite” care periods are spent catching up on other essentials in order to be more ready to devote more caregiving time. In a few cases the caregiver ends up nearly as disabled as their charge, and they have a higher mortality risk.

I’m not going to link a bunch of caregiver statistics in this section. Numbers can’t adequately describe the physical burdens and mental stress of caregiving. Instead I recommend that you talk to just about any of your family who are in their 50s or 60s. We all know someone who’s caring for an elder, but we just don’t feel comfortable talking about it.

I’m a fairly capable person with the time (and the ethics) to responsibly handle someone else’s finances, yet it’s still a significant effort. In the middle of caregiver chaos, I don’t know how anyone manages to track the expenses and project the finances. When it’s routine, it’s still a perpetual chore. Caregiver financial ignorance is all too common, bureaucracy runs rampant (with more ignorance), and fraud is a constant risk. When there’s a crisis, paying the bills is probably the lowest item on the priority list.

In some ways the person with dementia has it easier than anyone around them. Today my father is the happiest he’s ever been, because Team Nordman is taking care of him.

Which brings me to John Hancock’s latest outrage.

Tracking the process

Three years ago by the time I filed Dad’s long-term care insurance claim, everyone around him knew that he had dementia. He had a doctor’s diagnosis and the care facility’s assessment of his abilities.

John Hancock denied the claim because Dad scored too well on the Mini Mental State Exam, a rapid assessment of dementia severity. They also claimed that he didn’t need enough help with the activities of daily living. They said that they’d need a more thorough assessment for a claim appeal, so I hired a neuropsychologist. After a two-hour interview with Dad (and nearly $4000), the doctor’s assessment finally “proved” the status quo to John Hancock’s insurance claims department.

For the last three years, the insurance company has paid the claim through a laughably archaic and labor-intensive procedure.

All business with them was initially handled via phone, fax, and postal mail. Again, I have the time to jump through these hoops and I’m fairly persistent. However, the monthly paperwork shuffle was a hassle, as was the tracking. For the first 18 months Hancock even insisted on sending a paper check through the postal mail, even though several pieces of mail had been lost and I was concerned about mailbox theft. They finally began electronically depositing the payments to Dad’s checking account, but they still mailed out paper confirmations instead of using e-mail or a website.

There was so much paperwork (just like the 1980s) that I finally took the time to put together a spreadsheet to track the payments: when invoices were received, when they were faxed, when the check arrived, and the total paid on the claim. (The insurer’s monthly confirmations did not include this information.) I projected when the policy would reach its payout limit, and I knew how much the last payment should be.

As the policy approached its limit last month, John Hancock never sent any alerts or other notices. Instead, one day a small payment was deposited in Dad’s account. Five days later the letter arrived in the mail:

“We have determined that all benefits eligible under your Long-Term Care Policy have been exhausted. This is based on benefit payments issued from 6/17/2011 to 10/5/2014. An exhaustion of benefits means that the policy limit […] has been paid out in full with no benefits remaining. All benefits eligible under your policy have been paid as of the service date of 10/5/2014. […] Since your long-term care policy limit has been exhausted, no further benefits are due under this policy.”

There was no other documentation or statement summary– just that one-page letter and a toll-free phone number for questions.

Seems pretty straightforward, right? If you were an exhausted overwhelmed, stressed, sleep-deprived caregiver then you’d probably shrug your shoulders, file the letter, and move on to the next crisis.

Except that I knew John Hancock’s numbers were $6,175 short. That’s only about a month of care over more than three years, but their letter didn’t refer to the policy’s original amounts (and inflation adjustments) to justify their statement. I couldn’t even reverse-engineer their math to arrive at a sensible answer, and as far as I can tell they were just makin’ stuff up. I still don’t know how they determined that they’d reached the cap, but I had Dad’s copy of the policy and I can punch calculator buttons.

So I spent an hour writing a letter, collecting and attaching the documentation, and stuffing it all in a $5 priority-mail envelope. I asked them to please justify their numbers or to send $6,175. I tracked the envelope’s progress on the U.S. Postal Service website until it was logged at John Hancock’s claims department.

19 days later, $6,175 was deposited to Dad’s account. Five days after that I got a one-page letter from John Hancock– no phone calls, no e-mails, nothing else. The letter said

“Based on a review of the file, we are honoring your request for payment of $6,175.”

No other explanation. Not even a “thanks for insuring with John Hancock”, let alone an apology. I had to “request” that they pay the money that their policy owed to Dad?!?

How many caregivers have the time, energy, organization, or persistence to question the big insurance company? If John Hancock cuts off just 100 beneficiaries a month by $6,175 then they “save” nearly $7.5M annually. If the state insurance commissioner asks them about a client complaint, they can simply say “Ooops” “Based on a review, we’re honoring the request for payment”. It’s not a conspiracy when you’re incompetent– you just have to convince the clients (and the authorities) that you merely made a dumb mistake. And apparently you don’t even have to express regret at the way you’re running your business.

Lessons learned

So what have I learned from this experience?

I’ve learned not to trust long-term care insurance policies. They’re based on flawed math and they’re still catching up to reality.

I’ve learned not to trust long-term care insurance companies. At best they’re inadequately informed and inappropriately motivated by market share and commissions. (Imagine if their salaries were based on customer satisfaction surveys.) At worst they’ve learned to sell through fear marketing. They’re still losing money on long-term care insurance policies (as far as they can tell).

It’s not “insurance” when a beneficiary’s claim is denied and caregivers have to fight for every dollar. It’s not “insurance” when you have to understand and track the benefits better than they do, and when you have to communicate the policy status more than they do.

I’ve learned that we need a better approach to long-term care. I’ve read many bold polemics over the years about “accidental overdoses” and “health insurance by Glock”, and I still have my Hemlock Society membership card.

However, I’m still skeptical. I’d rather die in my sleep, and my spouse assures me that could happen. My thoughts will keep evolving, but I favor slow medicine. I think my DNR and hospice are as far as I’m interested in prolonging my life.

I’ve learned that lifestyle is at least half of the cause of dementia, and I can tilt the odds in my favor. (I can’t change my genetics.) I can improve my cardiac fitness, my blood pressure, my weight, and (*sigh*) my sugar consumption. I live in the healthiest state in the nation. Living a healthier lifestyle will improve my life and my finances. I’m a nuke– I can take logs and track data. The good news is that all of those things will improve my surfing, too.

I’ve learned that health tech is a better use of my money than LTC insurance. I don’t insist on “aging in place” or “living independently”. However, I think that safety sensors, health monitors, assistive equipment, and perhaps even robots will reduce caregiver stress. Insurance companies are not reducing caregiver stress.

I’ve learned that I don’t want my spouse or our daughter to grapple with insurance companies on my behalf. If I need long-term care, their lives will be stressful enough. Dealing with long-term care insurance has failed to make life better for its beneficiaries and their caregivers.

I’m spending my money on the things that bring real value to my life. So far that is not long-term care insurance.

Related articles:
Book review: “When The Time Comes”
Interview: What’s Wrong With Long-Term Care Insurance?
Geriatric Financial Management Update (John Hancock business practices)
More Lessons Learned On Insurance (the last few paragraphs)