Category Archives: Long-term Care

The Cost of Long-term Care is Going to Bankrupt Us

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My Comments: Demographics and interest rates are things over which few people have any control. It used to be DEATH AND TAXES, but not anymore.

Before DEATH these days is an insidious threat called Long Term Care, or LTC. We can agree it’s not OK to just take old people out into the woods and leave them there. That solution is frowned upon, as it should be.

So… what is the best alternative, not only for them but for you and me who haven’t yet reached that stage of life? We had better start paying more attention, ‘cause hoping for hurricanes and wildfires and tornadoes is not the solution.

by Richard Eisenberg on September 8, 2017

This article is reprinted by permission from NextAvenue.org.

When policy makers, health care analysts and financial journalists talk about the staggering costs of long-term care, it’s often wonky, devoid of humanity.
We throw around statistics like this one from the U.S. Department of Health and Human Services: 52% of individuals turning 65 will require long-term care supports and services at some point in their lives.

But at a Bipartisan Policy Center (BPC) webinar recently pegged to its new report on long-term care financing solutions, family caregiver MaryAnne Sterling poignantly revealed the financial, physical and mental tolls that long-term care can take.

When the long-term care crisis hits home

Three of the four parents of Sterling and her husband died from, or now have, dementia. First, she and her mother provided care for her dad in Sterling’s home as long as they could. Then, her parents depleted their savings so Sterling’s father could qualify for long-term care from Medicaid. “As a surviving spouse, my mother was left destitute after the Medicaid spend-down,” said Sterling, co-founder of Connected Health Resources for family caregivers and patients and owner of Sterling Health IT Consulting, in the Washington, D.C. area.

After that, said Sterling, “my husband and I provided $250,000 for basic living expenses for my mom to keep her out of that system [Medicaid].” Sterling’s caregiving responsibilities for her parents, she says, led her to give up getting an advanced degree and not to have children. In 2013, her mother needed to go into assisted living and her father-in-law was diagnosed with dementia. Sterling and her husband turned to Medicaid for her mother. Otherwise, Sterling said, “It would have cost us $8,000 to $10,000 a month, which was completely untenable.”

To those who say people like Sterling’s family “game the system” so Medicaid will pay for their long-term care, Sterling responded: “You’re not gaming the system. You’re desperate. I kept Mom out of the system for 12 years. By the time we needed the support of Medicaid, we did a pretty good job of not utilizing its resources for as long as we possibly could.”

The long-term care financing morass

Families like the Sterlings might avoid some anguish and financial pain if the government, insurance companies and employers adopt or tweak proposals in the BPC report sponsored by The SCAN Foundation, Financing Long-Term Services and Supports: Seeking Bipartisan Solutions in Politically Challenging Times.

The time to fix America’s long-term care financing morass is long overdue. Over 12 million adults rely on long-term care supports and services (LTSS), the BPC report says, “and the need is expected to rise dramatically in the coming decades.” The average expected lifetime long-term care services and supports cost for a 65-year old American today, BPC says, is $138,000 — and $182,000 for women.

Today, few Americans can afford the steep cost of assisted living facilities, nursing homes or home care (median annual nursing home cost: $91,300; median annual cost for a home health aide: $45,800.) As a recent AARP Long-Term Care Scorecard report noted: “The cost of long-term services and supports over time continues to be much higher than what middle-income families can afford.”

Medicare generally doesn’t cover long-term care expenses. As The SCAN Foundation’s President and CEO Dr. Bruce Chernof said at the BPC webinar: “Medicare is not the primary source of long-term care financing, despite the fact that people think it is or should be.” (A recent Associated Press-University of Chicago NORC Center for Public Affairs Research poll found that 57% of Americans say they expect to rely on Medicare for long-term care services and supports.) And Medicaid essentially requires impoverishment.

Just 11% of Americans age 65 and older own long-term care insurance policies and the market is in decline. Many who don’t buy the coverage find the premiums too steep and the benefits too skimpy, while fearing that premiums will rise dramatically. “We need a vibrant private market and we don’t have that today,” said Chernof, who chaired the federal Commission on Long-Term Care in 2013. (Incidentally, that blue ribbon panel produced a bevy of proposals, but punted on long-term care financing ideas.)

Bipartisan proposals for long-term care costs

The Bipartisan Policy Center’s public-private partnership recommendations, some of which build on ones in the think tank’s 2016 report, include:
• Give employers incentives to offer affordable, simplified “retirement long-term care insurance” as an employee benefit and auto-enroll some employees age 45 and older (BPC estimates annual premiums for someone in the 25 percent bracket might be $600 rather than $2,400 today)
• Let employees withdraw from 401(k)s and similar retirement accounts without owing federal tax penalties if they use the money to buy long-term care insurance policies through their employers
• Let Medicare Advantage plans and other Medicare provider organizations offer up to 14 days a year of respite care coverage to high-need, high-cost Medicare beneficiaries who have three or more chronic conditions and functional or cognitive impairment and are part of a person- and family-centered care plan (today, Medicare only offers respite care to beneficiaries in hospice, who are expected to die within six months)
• Let Medigap and Medicare Advantage plans sell limited, affordable long-term care coverage as an optional, voluntary benefit or a separate insurance policy financed through premiums paid by beneficiaries who choose to enroll (maximum daily benefit: $75; cost of premiums: an estimated $35 to $40 a month or $420 to $480 a year)
• Allow state and federal health insurance marketplaces to sell those lower-cost, limited benefit retirement long-term care insurance policies
Dr. William H. Frist, former Republican Senate Majority Leader and now a BPC Senior Fellow and co-chair of its Health Project, said that if the report’s recommendations turned into reality, Americans age 45 to 69 might own 8.5 million long-term care insurance plans, “twice what we would have otherwise.” Added Frist: “That’s not a total answer, but it’s meant to say there are ways to shape and modify the existing system to take the burden off individuals.”

What the report didn’t recommend

One proposal the Bipartisan Policy Center experts couldn’t quite bring themselves to endorse: adding “catastrophic” long-term care coverage to Medicare and paying for it through an additional Medicare payroll tax. That idea was proposed last year by the Long-Term Care Financing Collaborative.

Today, about 15% of people with long-term care needs require care for five years or longer (what’s known as “catastrophic” care) — far longer than the typical two to three years. The Bipartisan Policy Center report said its experts “stopped short” of endorsing catastrophic long-term care coverage through Medicare. Yet about two-thirds of Americans surveyed favor such a catastrophic insurance program.

“While we are not able to reach agreement on a politically viable means of financing a public catastrophic benefit, we agree that a credible overall LTSS framework would include a public catastrophic LTSS program with a waiting period of two-to-three years,” the report said.

It’s easy to see why this otherwise sensible idea was a nonstarter right now. “Policy makers are focused on squeezing Medicaid today,” said Frist. But, he added, “I’m hopeful that once we get through this phase, we will look at a holistic model.”

The Bipartisan Policy Center analysts also rejected the idea of a family caregiver tax credit “given the high budgetary cost of the policy” and because with the direction of Congress and the administration, “the policy does not seem feasible in the current environment.”

Time for action

Tom Daschle, the former Democratic Senate Majority Leader who is co-founder of the BPC and co-chair of its Health Project, noted that long-term care financing is something that deserves more attention from policy makers. “I don’t think our solution is just spending more money. We’ve got to tear down the silos [between health care providers, long-term care supports and services and insurers] that make it so inefficient today. We need to find ways we can commit resources more effectively and we need leadership in the public and private sector to do that.”

As Chernof noted at the webinar: “Most of us will have long term services and supports needs. This is not something like being struck by lightning.”

Richard Eisenberg is the Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and Managing Editor for the site. He is the author of “How to Avoid a Mid-Life Financial Crisis” and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS Moneywatch. Follow him on Twitter: @richeis315.

This article is reprinted by permission from NextAvenue.org, © 2017 Twin Cities Public Television, Inc. All rights reserved.

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New Options in Long-Term Care Insurance

My Comments: Aging gracefully is not easy. When getting up in the morning is a struggle and you can’t remember if you’ve brushed your teeth, there may be a looming bump in the road. Dr. Gloom here again. I suppose there is value in denial. At least I hope so.

Couple that with both the staggering cost of professional care if you become goofy, and the mindset in Congress these days that it’s your fault if you haven’t already died, the looming bump in the road is increasingly difficult to manage. Here are some thoughts to help you overcome your fears.

In addition to what you read below, there are ways to use qualified money to leverage your dollars when it comes to paying for long term care needs.

July 05, 2016

According to the U.S. Department of Health and Human Services, almost 70% of Americans turning 65 today will need some type of long-term care (LTC) as they age. And 20% will likely need care for five or more years. Given that the annual cost of that care can extend into six figures, that’s a daunting prospect for many retirees.

“There’s no way to know for sure whether you’ll need long-term care,” says Carrie Schwab-Pomerantz, CFP®, president of Charles Schwab Foundation. “But if you do, it could jeopardize your retirement savings if you’re not prepared.”

For decades, purchasing a long-term care insurance policy has been a common solution. But many insurers—facing lower interest rates and higher claims payouts—have raised their premiums or stopped offering the policies.

Fortunately, the long-term care industry has developed a variety of new options that may provide more appealing coverage, given your needs and overall financial plan.

A new era of long-term care insurance

Traditional LTC policies (in addition to their increasing expense) are typically “use it or lose it” products, similar to homeowner’s insurance. You might pay premiums for years without ever needing coverage—and never get your cash back.

There are newer LTC policies, however, that are different. They’re often combination products that provide either a life insurance or annuity component and may allow premium returns. Here are three common types of newer long-term care policies, with some advantages and drawbacks.

1) Hybrid long-term care policies merge traditional long-term care insurance with life insurance, while offering a return of the premium.
The advantage of a hybrid policy is that it offers a benefit whether you need long-term care, pass away, or discontinue the policy and want your premiums back. That said, this type of policy also comes with drawbacks, including how the premiums are paid, as well as a higher bar to qualify for the coverage.

Hybrid plan premiums are typically paid in a lump sum, or spread out over a short period of time (10 years, for example). And because you’re paying for life insurance as well as LTC coverage, plus the return-of-premium feature, the cost can be prohibitive. Also, because this option bundles two products in one, you’ll need to qualify for both coverage types in order to get a policy.

2) Permanent life insurance policies with long-term care riders enable a percentage of the death benefit to be used for long-term care costs.
These policies can offer some payment flexibility—allowing lump sum premiums or annual payments over a lifetime. And their costs tend to be lower than other types of combined coverage.

The drawbacks? The policies don’t offer the return-of-premium option and the terms of reimbursement can be stringent. For example, with these policies a doctor must attest that your inability to perform basic activities is permanent—which could seriously limit the benefits you receive. For a traditional or hybrid LTC claim to be paid, on the other hand, you typically only need a doctor’s validation that you cannot perform certain activities of daily living (or that you’re cognitively impaired).

Similar to the hybrid policies above, applicants must also qualify for both life insurance and the LTC rider.

3) Annuities with long-term care riders have terms that are similar to those of fixed annuities. You typically purchase the annuity with a lump sum and receive a monthly benefit. In some cases, no extra cost is incurred for the long-term care component because it’s funded by the annuity premium.

For example, you can buy a deferred long-term care annuity with a lump sum premium. The annuity creates two funds: one for long-term care expenses, the other for whatever you choose. That said, the terms of the annuity dictate how much you can withdraw from each fund, and the tax implications can be complicated.

Given the complex terms of some annuity products, you may want the advice of a tax professional when exploring this option.

What to know, what to ask about LTC coverage
Buying LTC insurance can be an exacting process, but one that’s well worth it.

“Long-term care insurance can be staggeringly expensive, but so is the cost of care itself,” Carrie notes. In addition to examining the payment and coverage features, be sure to evaluate the insurer’s reputation and financial strength.

And when comparing options, make sure to ask the following questions:
• What sort of inflation protection does the policy offer?
• Are there limitations on preexisting conditions?
• Is Alzheimer’s disease covered?
• What is the lag time until the benefits kick in, and how long will they last?
• How often has the insurer raised rates?

What you can do next
With the cost of long-term care rising, now is a good time to explore how you can integrate LTC insurance into your financial plan

Long-Term Care Options

My Comments: Dr. Gloom here again. I suppose there is value in denial. At least I hope so.

However, aging gracefully is not easy. When getting up in the morning is a struggle and you can’t remember if you’ve brushed your teeth, there may be a looming bump in the road.

Couple that with both the staggering cost of professional care if you become goofy, and the mindset in Congress these days that it’s your fault if you haven’t already died, that bump in the road is increasingly difficult to manage. Here are some thoughts to help you overcome your fears.

July 05, 2016

According to the U.S. Department of Health and Human Services, almost 70% of Americans turning 65 today will need some type of long-term care (LTC) as they age. And 20% will likely need care for five or more years. Given that the annual cost of that care can extend into six figures, that’s a daunting prospect for many retirees.

“There’s no way to know for sure whether you’ll need long-term care,” says Carrie Schwab-Pomerantz, CFP®, president of Charles Schwab Foundation. “But if you do, it could jeopardize your retirement savings if you’re not prepared.”

For decades, purchasing a long-term care insurance policy has been a common solution. But many insurers—facing lower interest rates and higher claims payouts—have raised their premiums or stopped offering the policies. Fortunately, the long-term care industry has developed a variety of new options that may provide more appealing coverage, given your needs and overall financial plan.

A new era of long-term care insurance

Traditional LTC policies (in addition to their increasing expense) are typically “use it or lose it” products, similar to homeowner’s insurance. You might pay premiums for years without ever needing coverage—and never get your cash back.

There are newer LTC policies, however, that are different. They’re often combination products that provide either a life insurance or annuity component and may allow premium returns. Here are three common types of newer long-term care policies, with some advantages and drawbacks.

1) Hybrid long-term care policies merge traditional long-term care insurance with life insurance, while offering a return of the premium.
The advantage of a hybrid policy is that it offers a benefit whether you need long-term care, pass away, or discontinue the policy and want your premiums back. That said, this type of policy also comes with drawbacks, including how the premiums are paid, as well as a higher bar to qualify for the coverage.
Hybrid plan premiums are typically paid in a lump sum, or spread out over a short period of time (10 years, for example). And because you’re paying for life insurance as well as LTC coverage, plus the return-of-premium feature, the cost can be prohibitive. Also, because this option bundles two products in one, you’ll need to qualify for both coverage types in order to get a policy.

2) Permanent life insurance policies with long-term care riders enable a percentage of the death benefit to be used for long-term care costs.
These policies can offer some payment flexibility—allowing lump sum premiums or annual payments over a lifetime. And their costs tend to be lower than other types of combined coverage.

The drawbacks? The policies don’t offer the return-of-premium option and the terms of reimbursement can be stringent. For example, with these policies a doctor must attest that your inability to perform basic activities is permanent—which could seriously limit the benefits you receive. For a traditional or hybrid LTC claim to be paid, on the other hand, you typically only need a doctor’s validation that you cannot perform certain activities of daily living (or that you’re cognitively impaired).

Similar to the hybrid policies above, applicants must also qualify for both life insurance and the LTC rider.

3) Annuities with long-term care riders have terms that are similar to those of fixed annuities.
You typically purchase the annuity with a lump sum and receive a monthly benefit. In some cases, no extra cost is incurred for the long-term care component because it’s funded by the annuity premium.

For example, you can buy a deferred long-term care annuity with a lump sum premium. The annuity creates two funds: one for long-term care expenses, the other for whatever you choose. That said, the terms of the annuity dictate how much you can withdraw from each fund, and the tax implications can be complicated.

Given the complex terms of some annuity products, you may want the advice of a tax professional when exploring this option.
What to know, what to ask about LTC coverage

Buying LTC insurance can be an exacting process, but one that’s well worth it.

“Long-term care insurance can be staggeringly expensive, but so is the cost of care itself,” Carrie notes. In addition to examining the payment and coverage features, be sure to evaluate the insurer’s reputation and financial strength. And when comparing options, make sure to ask the following questions:
• What sort of inflation protection does the policy offer?
• Are there limitations on preexisting conditions?
• Is Alzheimer’s disease covered?
• What is the lag time until the benefits kick in, and how long will they last?
• How often has the insurer raised rates?

What you can do next

With the cost of long-term care rising, now is a good time to explore how you can integrate LTC insurance into your financial plan

What’s Killing The Long-Term Care Insurance Industry?

My Comments: This was written almost five years ago. During these years, every reader today is almost five years older and while the world has changed dramatically, the demographics are still with us.

Among the existential risks we all face is what is known as a Long-Term Care, or LTC event. Before we all die, about 70% of us are going to be directly affected. At some point, family and friends can no longer adequately care for someone, and an outside caregiver enters the picture.

It’s not a cheap solution. But I’ve yet to find anyone who says just drop me in the woods somewhere and leave me to the critters. It doesn’t happen that way. My solution of choice is one that requires assets be re-positioned to gain leverage, and provide an escape clause if an LTC event never happens. This article will help you better understand the context in which the solution of choice becomes the answer.

by Howard Gleckman | August 29, 2012

The long-term care insurance industry is in big trouble. Consumers aren’t buying. Carriers are dropping out of the market. And those that are staying are raising premiums, cutting discounts, and eliminating products–all of which are discouraging even more consumers from buying.

What’s gone wrong? The industry has two fundamental problems. A long-standing one–buyers are dropping coverage less often than the industry predicted. And a more serious new one–historically low interest rates are sucking the profit out of the business.

As a result, just about every LTC insurance company has raised premiums in recent years for both old policies and new ones. And now many have begun trimming their product lines and eliminating or reducing discounts.

For instance, Genworth, which dominates the LTC market, announced on Aug. 1 that it plans to raise premiums on pre-2003 policies by 50 percent over the next five years, and on newer policies by 25 percent over the period. It will tighten underwriting for new products, requiring, for the first time, blood tests for applicants. It will also stop selling lifetime benefit policies, reduce spousal discounts from 40 percent to 20 percent, end preferred health discounts, and stop selling products that allow consumers to pay premiums up-front rather than over their lifetimes.

Another big player, Transamerica, has announced similar cut-backs.

Finally, some household names are simply dropping LTC insurance entirely. In February, Unum stopped selling group policies (a product once thought to be the industry savior). In March, Prudential stopped selling individual coverage and on Aug. 1, it abandoned the group market as well.

For years, carriers underestimated how many consumers would let their insurance drop before they went to claim. The companies assumed that as premiums increased and buyers’ disposable income shrank, a certain percentage would drop coverage. The phenomenon, known as the lapse rate, increased returns to insurers and allowed them to keep premiums under control.

But as it turned out, lapse rates have consistently been much lower than the companies figured (typically about 1 percent, compared to 5 percent for other insurance products). That squeezed their profits and forced them to raise rates which, in turn, made insurance less attractive to new potential buyers.

In recent years, the industry has adjusted its estimate for those drop-outs, and newer policies–with higher premiums– are more profitable than older ones. But carriers have had much more trouble adjusting to the newer problem: How to survive in a nearly zero interest rate environment.

To oversimplify a bit, insurance companies earn revenue by collecting premiums and then investing that income. Because long-term care insurance companies typically do not pay claims for many years, they hold premium income for a long time and, thus, investment income is a very important part of their business model.

Those investments are limited by state insurance regulators to ultra-safe bonds. But ten-year Treasury bonds are returning just 1.6 percent. Five-year notes are paying a paltry 0.7 percent. That is far lower than overall inflation and significantly lower than the annual increase in long-term care costs, which is roughly 5 percent.

The math is brutal: No insurance company can pay claims and make a profit when its costs are rising by 5 percent but its investment returns are in the neighborhood of 1 percent.

Keep in mind that long-term care insurers are almost all subsidiaries of much larger life insurance companies. And their parent firms, anxious to manage risk in what was already a very risky business, are not at all troubled by the decline in LTC sales. In fact, slashing sales may be exactly what they have in mind.

Until a few years ago, carriers that stopped selling LTC insurance would sell their existing policies to other firms. But, today, in a reflection of the state of the industry, there are no buyers. In most cases, the large carriers will continue to cover their current customers, though policy-holders should not be surprised to see ongoing rate increases.

Overall, though, the decline of the private LTC market is a huge problem, especially since it is coming just as Washington is seeking ways to reduce Medicaid, the most important payer of long-term care costs. It is yet one more reason why it will be critical to find a workable solution to the problem of long-term care financing.

Options for Funding Long-Term Care Expenses

retired personMy Comments: When you reach retirement age, the elephant in the room becomes Long Term Care. This is when someone in the household becomes unable to perform two of what are called Actitivies of Daily Living, or ADLs.

A healthy spouse will simply take on more and more to help the affected person manage and get by from day to day. But it takes a huge toll, and if there are enough resources or insurance in place, there may be money to find someone to help.

Only two of the four ways to finance a solution are referenced in this blog post. If you want more information on the other two, call or email me.

This begins to explore ways to pay for those LTC expenses.

January 12, 2016 by Wade Pfau

Four general ways to finance long-term care expenses include:
1. Self funding with personal assets
2. Medicaid
3. Traditional long-term care insurance
4. Long-term care insurance combined with life insurance or annuity

I will discuss the first two of these today and go into the others in subsequent posts.

The overall cost of long-term care can be defined as:

LTC Cost = LTC Expenses + LTC Insurance Premiums – LTC Insurance Benefits

This equation highlights that the overall cost of funding long-term care is comprised of the actual expenses for care plus any premiums paid for long-term care insurance, less any benefits received (including death benefits or other auxiliary benefits, when applicable) from the insurance policies. For this formula, one may consider Medicaid benefits as a type of insurance benefit.

Before we go any further, notice that Medicare and health insurance are not on the above list. The misperception that Medicare provides long-term care support is common. Medicare provides support only in limited situations when an individual is confined to home, requires intermittent or part-time support from a Medicare-certified home health agency as prescribed by a doctor, and is expecting a full recovery. Full benefits last 20 days and partial support ends after 100 days.

Selecting between the four options listed above includes a number of considerations: age, health, ability to receive help from family or friends without overburdening them, wealth levels and how they may relate to Medicaid qualifications, legacy objectives, risk tolerance with regard to the financial impact of unknown long-term care events, and costs and benefits of different types of insurance.

As far as funding is concerned, developing a written plan and sharing it with family members can help avoid misunderstanding when the time comes. You should also ensure family members know about any funds set aside or any insurance policies designed to support care when the time comes. A qualified elder care law attorney can help with issues surrounding the transition to using Medicaid for long-term care expenses.

Self Funding
Self funding means any long-term care expenses will be funded through distributions from financial assets. This strategy keeps the full risk for the amount of long-term care spending on the household and results in the widest range of potential spending outcomes. Of course, if no long-term care event occurs, the cost of self funding is zero dollars. But without any risk-sharing, the threat of potential costs that could exceed one million dollars hangs overhead.

If you are more risk-averse, you may prefer to pay a premium to better protect your wealth in the event of an expensive long-term care event, even if it carries a relatively small loss should no long-term care event arise. Risks of self funding include potential high costs, investment risks for the underlying portfolio, and difficulties with managing investment assets after a long-term care need begins.

For self funding, ask yourself if you have sufficient financial resources to cover an expensive long-term care shock and still meet the remaining financial goals for retirement. Which specific resources could be used for long-term care expenses? How will they be invested? What impact would these expenditures have on the standard of living for remaining household members and potential beneficiaries? Is this a risk that can be accepted, or could insurance provide a positive impact by helping pool this risk?

Clearly, the self funding option is only possible for those with sufficient discretionary assets to meet potential expenses. With sufficient assets, those with high risk tolerance may prefer the increasing variability in net care expenses by self funding to insurance. Others with a lower risk tolerance might choose to pool some of the risks through an insurance company.

Another risk tolerance consideration: What kind of investment returns could the assets earn if no protection is purchased? The more conservatively these assets earmarked for long-term care are invested, the less potential upside growth they would lose. Those with greater risk tolerance who invest more aggressively may find self funding fits their circumstances, while those who would otherwise invest the assets more conservatively – in cash or CDs, perhaps – may benefit more from an insurance solution.

The self-funding route may also be more attractive to individuals with a family history free of health problems that result in the need for long-term care such as dementia. Also, those with the potential to receive care from family or friends may feel self funding is a safe bet as it could greatly reduce the cost of care.

Self funding could force an individual to rely more greatly on family care, which introduces a number of potential opportunity costs not included in formal cost calculations. Caregivers often experience increased stress and health problems, and they could be forced to make sacrifices in their careers that could result in substantially reduced lifetime earnings. The health problems created by providing long-term care could potentially result in the caregiver needing long-term care for themselves as well.

Medicaid
Medicaid is the most commonly used funding option for long-term care in the United States. It generally serves as a last-resort option once assets and income have fallen to sufficiently low levels. The qualifications for Medicaid – assets, income, and medical need – vary widely by state, which makes it hard to generalize about the process. Some states require relative impoverishment to qualify for Medicaid, while others allow money set aside for a surviving spouse to be exempted from consideration to pay for long-term care.

Medicaid is the main option for those entering retirement with little savings. It is also the go-to for continuing care after available resources have been depleted.

Still others reposition their assets with the aid of an attorney to work around Medicaid limitations and gain access – a somewhat controversial strategic process known as “Medicaid planning.” Some view it as unethical, while others say they are entitled to the welfare benefits through their lifetime tax payments.

Either way, Medicaid is making such planning increasingly difficult by limiting the transfer of assets to avoid using them to pay for long-term care. Also, efforts to recover Medicaid benefits from the estates of beneficiaries have grown more and more complex as states work harder to reduce overall Medicaid expenditures.

Nevertheless, Medicaid planning may be helpful for those with limited resources and health problems preventing them from qualifying for long-term care insurance. Available resources may still need to be spent on long-term care needs in the end, and qualification for Medicaid could occur if long-term care needs persist.

Because Medicaid reimbursement to long-term care facilities is generally lower than the true cost, self-funding patients may receive priority admission – and potentially better quality care – over Medicaid patients. Yet, as an increasing number of people require long-term care, making it difficult for everyone to receive high quality long-term care, those who would otherwise have the ability to self-fund may come to regret using Medicaid planning techniques if they could have funded better quality care themselves.

Wade Pfau: Professor at The American College and Principal at McLean Asset Management. His website: http://www.RetirementResearcher.com

The Importance of Long Term Care

My Comments: As always, this is a difficult conversation for many of us. But that won’t make the issue go away. That only happens when you ultimately leave the building.

I encourage everyone to take a few minutes to watch two short videos. The first one is accessed by clicking on the image above. It lasts about two minutes.

Here’s the gist of the problem: Americans today are facing one of the most critical and overlooked health and retirement securities – long term care. Each day, 10,000 baby boomers are turning 65 and 70% of those who live past 65 will need a form of long term care. Rob Lowe and Maria Shriver have partnered with Genworth, an industry leader in long term care insurance, to raise awareness around the need for long term care planning.

The partnership generated an educational video series, “Conversations That Matter: Maria Shriver and Rob Lowe” about the impact of aging in America and importance of long term care planning. (That started with the video you saw above.) Both Rob and Maria have personal experiences in caregiving that articulate why they feel compelled to encourage viewers to have “the talk” with their family and friends even if it’s not now in your comfort zone.

The second video is behind this image. ltc-costs

It’s designed to give you an idea of what it costs to have insurance, mindful that it comes in many flavors, some of which you don’t need. It lasts a little over nine minutes and comes to you from the American Association of Long Term Care Insurance. I hope you find all this helpful if you’ve not already attempted to solve the problem or died without needing long term care.

There are dozens of similar messages out there but these are from credible sources . If you are interested, I can recommend people from whom you can get more information.

THOUGHT FOR WEEK – April 15, 2015

rolling-diceMy Comments: As usual, talking about long-term care with clients, friends and family members is often a difficult conversation. As a financial planner for whom the need for personal long-term care is an increasing possibility, I’m sensitive to articles I run across that offer choices. Here is one of them.

I know this looks and smells like a sales pitch. But if this issue is on your mind, take 3 minutes to watch the video that comes up when you click on the dice image above. Call me or send an email if you want to know more.

Another way to manage the financial risk of long-term care. By Gene Pastula

There is a lot of risk inherent in the long-term care issue. As an advisor, the most imbarasing risk is that long-term care will require the draw down of a client’s portfolio at a time when the market is not performing well. That could happen you know. Putting linked-benefit life into the portfolio not only takes that risk off the table, but the fixed/guaranteed nature of the cash value also helps reduce the volatility risk that clients fear more as they continue to age.

Top 10 reasons your clients would like to have a linked-benefit strategy in their portfolio…if you would just suggest it.

1. They want to keep their money in their estate so they can pass it on to their children

2. Their ability to stay at home when they need care, surrounded by familiar surroundings and loved ones is greatly increased.

3. If a nursing home is the best solution, “cost” will not be the determining factor in choosing the appropriate one. Keeps peace in the family.

4. They like the fact that companies offer geriatric care management rather than paying fees to attorneys and other specialists

5. By recommending these products for their portfolio you have additionally become a source of expert advice for recommending care providers and other local assistance via the carrier.

6. They won’t have to depend on their children to make the right choices as they will have professional assistance.

7. They will never put their children in a position of having to choose between the high cost of long term care for one parent and protecting the assets of the healthy parent.

8. They will know that no harm or ruin will come to a spouse or family member’s health or lifestyle by making them a primary caregiver.

9. Frees up time for family members to serve as advocates for their parent’s medical and care giving needs, versus being the caregiver. Changes dramatically the quality of time a chronically ill person spends with family members.

10. Kids are more likely to use care that is pre-funded allows the children to get the best possible care for mom or dad without risking it dwindling their inheritance.

The author continues: “Last week I presented LTCi and Linked Benefit life to a full house luncheon seminar. In a little back-and-forth with the audience, we discussed a comparison to purchasing a lottery ticket. But every one of my tickets will win an average of 150% of the cost of the ticket and some will win up to 450% or more. TAX FREE! They agreed that comparing Linked-benefit to winning lottery tickets is pretty close and should make it sell like hotcakes. (Do hotcakes really sell that well??) The point being, that’s when clients understand the value in committing some of the money in their portfolio to products like TLC, or MoneyGuard or Asset Care instead of Banks, Bonds and Money Market accounts…or in many cases, even stocks, they readily embrace the idea. There was no consensus on whether or not we would still have to buy them lunch to get them to come and hear about it.”