The Last Word On LTCI...
Remedial Math
Ronald R. Hagelman Jr.
December 2017

I strongly suspect that it’s not just death and taxes that Americans accept as inevitable. I believe there is a general cultural consensus that as we near the end of the journey there will be an inordinate level of expense and that it will have something to do with our declining health. Unfortunately, it does appear that the fear itself is nebulous, generalized and grossly underestimated. I am also certain that those perceived future expenses have been jumbled all together and that medical expenses for acute /subacute out-of-pocket versus custodial care finances have all been tossed into the same vague mental tumbler. Clearing up this confusion is often where a sales process begins. It’s not one pot of money, there are two distinct financial potholes lying in wait over the horizon. Although we all too often begin the process with an insurance conversation about how much insurance we need for both  problems (sold separately), we usually end up with “How little can still do the job?” 

Recent retirement surveys have estimated that for those 65 and older the aggregate cost of out of pocket medical expenses for a couple is somewhere between $250,000 and $400,000 over a 20 year period. When you throw in medical inflation costs I’m also sure few would argue that your possible long term care expense puts up similar numbers. Each year, late in the fall, I am amazed at the frenzied mad scramble to re-valuate Medicare supplement options and the depths of the conversations about benefits and cost in this regard. Frankly I’m a little envious. If only we could focus our aging population attention in the same way as it regards the reality of custodial care  expense. At any rate we need to do our best to help our clients understand that two plus two really is four. 

However you have accomplished moving the sales conversation in the right direction, the next critical math evaluation is “How much is enough?” That needs to begin, of course, with what you are trying to accomplish with the insurance in the first place. Our sales over the last twenty years have been focused primarily on a “primary” insurance transaction: Evaluate the size of the potential “total” risk and replace that personal liability with a comprehensive insurance plan to cover the problem. This is of course the best plan and for many years it held promise as the panacea. Slowly, but inexorably, we began to separate from what we knew was the most direct choice because, as we grew to understand the real size of the risk, we began to price ourselves out of our market. We became a choice only for some, and each year that choice seems to be available to fewer and fewer. That market continues to shrink. Reductions in available companies and benefits continues, coupled with a seemingly permanent low interest environment which was never part of initial pricing. We have learned the hard way that although almost all insurance products are built on a measurable lapse philosophy, there is one product—long term care insurance—that has defied our logic. Care providers have followed the money, and my mind has trouble imagining the number of new ALFs under construction or the Home Health Advisory/Providers opening as new business start-ups.

Although the potential exists for a $250,000 or much larger LTCI claim, what we do know at this point is that eight out of 10 claims to date would fall within $100,000 of insurance dollars. We must embrace a much humbler mission. What dollars are needed to supplement existing assets and income to maintain personal private control of your claim? Perhaps we should also begin to do a better job of determining what that coverage should most look like: Health or life or some combination. Less is so much more!

Other than that I have no opinion on the subject.

Author's Bio
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: Website:

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