Category Archives: Long-term Care

My Comments: Those of us who live long enough to enter the final stages of our lives get to confront something that rarely happens to those not retired.

I often refer to this as ‘becoming goofy’, though it’s not always a mental affliction. (My mother had Alzheimer’s and needed constant attention for over nine years.)

As you have long since discovered, being alive can expose you to a double edged sword. Yes, we’re still on this side of the grass but with that comes new challenges.

As a financial planner now focused on retirement planning, not dying quickly comes with a cost. And costs often come with price tags, many of which we’re unprepared to pay.

These words from Maurie Backman are a necessary read. It’s unrealistic to expect bad things won’t happen to us, and to the extent we can be ready if they happen, it will be good for us and our children to take some necessary steps in advance to reduce or eliminate the inevitable financial pain.

Maurie Backman | May 24, 2018

No matter what sort of lifestyle you lead, retirement is an expensive prospect. And while you can cut back on certain expenses like housing and leisure when circumstances require you to do so, there’s one expense you may not have a choice about: long-term care. And unfortunately, new data from the Society of Actuaries shows that Americans still aren’t preparing for it as they should be.

In a recent study of retirees 85 and older, most respondents who have not yet needed long-term care expect that if they do, they’ll get by with the help of paid home aides and family support. Most of those who are currently getting long-term care, however, have had no choice but to pack up and move to nursing homes or assisted living facilities, thus significantly adding to their costs.

The study also underscores the importance of having a financial backup plan for those who don’t have family to rely on to provide elder care. Currently, 32% of seniors 85 and over receive logistical support from family members with regard to physical activities such as transportation, meals, and household chores. To hire a home aide to provide those services, however, is an expense many seniors are in no position to bear.

If your goal is to maintain a level of financial security throughout retirement, then you’ll need to not only assume you’ll require long-term care at some point in time, but also save and plan for it. Otherwise, the latter end of your senior years might end up being more stressful than you ever could’ve bargained for.

There’s a good chance you’ll need long-term care…
It’s easy to think of long-term care as somebody else’s problem, but in reality, 70% of seniors 65 and over end up needing some type of long-term care in their lifetime. Among those, 69% end up requiring that care for a three-year period or longer.

And if you’re counting on Medicare to pick up the tab, you’re out of luck. The average Medicare-covered stay in a nursing home is a mere 22 days. That’s a meaningless tally in the grand scheme of a three-year period or more.

…and it’ll cost you
So how much might an extended stay at an assisted living facility or nursing home cost you? Probably more than you’d think. The average assisted living facility in the country costs $3,750 per month, or $45,000 per year, according to Genworth Financial’s 2017 Cost of Care Survey. The average nursing home, meanwhile, costs $235 per day, or $85,775 per year, for a semi-private room. Want your own room? It’ll set you back $267 per day, or $97,455 per year.

Even if you don’t require a nursing home or assisted living facility in your lifetime, there’s a good chance you’ll reach a point when you just plain need help functioning independently. And if you don’t have family around to assist, you’re going to have to pay for that help. Currently, the average cost of a non-medical home aide is $21 per hour. This means that if you wind up needing assistance for 10 hours a week, you’re looking at close to $11,000 per year.

All of this means one thing: You should be saving for these eventual costs during your working years rather than assuming you’ll cut corners to pay for them later on. And the sooner you do, the more secure you’ll be going into retirement.

The good news? If you still have a number of working years ahead of you, boosting your savings rate modestly could increase your nest egg substantially. For example, socking away an additional $250 a month on top of what you’re already saving for the next 20 years will give you an extra $123,000 in retirement, assuming your investments generate an average annual 7% return during that time. (That’s more than doable with a stock-heavy portfolio, by the way.) That’s enough to cover an assisted living facility for almost three years.

Another option? Look into long-term care insurance. The younger you are, the more likely you are to not only get approved for a policy, but also snag a health-based discount on your premiums. Having that insurance to defray the cost of long-term care could lift a major burden when you’re older and at your most vulnerable.

Finally, if you’re counting on family to provide any type of care or support when you’re older, have that conversation in advance rather than assume that help will be a given. You never know when your adult children might choose to pick up and relocate abroad or when a stay-at-home adult child of yours might opt to go back to work. Knowing what to expect assistance-wise will help you avoid a potential financial shock (not to mention an emotional one) down the line.

How to pay for long-term care? Several funding options exist

My Comments: If you don’t think about it, maybe it’ll go away. But for millions of us, living longer than our parents, LTC is an insidious risk that needs to be dealt with. There is probably no best answer, just a better one.

Short of dying early, most of us will need advanced care of some kind. And like shopping for groceries or going out to eat at a restaurant, it ain’t gonna happen without a money source.

The sooner you come to terms with this, the more likely your future years will be less stressful.

Oct 9, 2017 By Greg Iacurci

Roughly half of Americans turning 65 today will require long-term care. As life expectancy continues to rise and the cost of care creeps up, there’s a growing need for financial advisers to be knowledgeable about long-term-care funding mechanisms to help clients choose the best one — or combination.

Long-term-care coverage is delivered primarily through “private” means. Roughly 55% of expenditures from age 65 through death are via these private forms of payment, with 2.7% of that from insurance and the remainder from out-of-pocket expenses, according to the U.S. Department of Health and Human Services.

About 45% of long-term-care funding is from the “public” sector, mainly from Medicaid.

Public and private options have respective benefits and drawbacks concerning expense, level of long-term-care benefits and quality of care.

INSURANCE

Traditional LTC
There are a few insurance options to hedge long-term-care risk: traditional long-term-care insurance, and life insurance policies and annuities with long-term-care features.

In 2017, the national median cost for a private room in a nursing home is roughly $8,100 per month, according to an annual report published by the insurer Genworth. An assisted living facility costs $3,750 a month.

Traditional LTC insurance is a stand-alone policy devoted specifically to providing benefits for long-term care if a need arises. This insurance delivers LTC benefits at the lowest cost and offer inflation protection, observers said.

Sales of these policies have dwindled over the past several years. While insurers sold 700,000 of these policies in 2000, the American Association for Long-Term Care Insurance estimates the industry will close out this year with 75,000 policy sales.

There’s been negative consumer sentiment in the marketplace as insurers have had to raise premiums in recent years on in-force policies due to initial policy mispricing, following a misjudgment in lapse rates and interest rates, said Jesse Slome, executive director of AALTCI. A number of insurers also have abandoned the marketplace.

Advisers typically use traditional LTC insurance if clients have a tolerance for a potential premium increase in the future and if they don’t have a life-insurance need, said Phil Jackson, insurance planner at ValMark Financial Group.

Life insurance – LTC combination
Sales have shifted more to combined life insurance-LTC products. These products drew $3.6 billion in new premiums in 2016, a 500% increase over the $600 million in 2007, according to Limra, an insurance industry group.

Broadly, advisers like the flexibility of these policies. Mr. Jackson explains it in terms of “live, quit or die”: Clients get a long-term-care benefit while living, but can also surrender the policy for a portion of their premium or provide heirs with a death benefit. The latter options aren’t available for traditional policies.

Further, premiums and benefits are guaranteed, he said.

Combo policies come in two flavors: hybrid LTC, and life insurance with LTC riders. Hybrids provide more of a long-term-care benefit and have a “very small, very modest” death benefit, whereas policies with LTC riders are more life-insurance focused, Mr. Jackson said.

One key difference is hybrids typically have an inflation-protection feature allowing a client’s future LTC benefit to grow annually, whereas the benefits are fixed in policies with riders, Mr. Jackson said.

Among LTC-related sales year-to-date at ValMark, 45.9% have been hybrid, 49.5% LTC riders and 4.6% traditional LTC.

Annuities
Annuity products are the least-used among insurance products for providing LTC benefits. Combination annuity-LTC sales were $480 million last year, up from $285 million in 2011 but little-changed since 2014, according to Limra.

The products deliver a lifetime income stream, and increase that income in the event of a long-term-care need.

“Annuities are pretty much a last resort for long-term care,” said Jess Rorar, a planner at ValMark. Life insurance products provide more of a benefit and give more value for the money, she said.

However, in the event insurers decline a client from buying traditional LTC or combined life insurance-LTC, annuities can serve as a backup because the underwriting requirements are easier, said Jamie Hopkins, the Larry R. Pike Chair in Insurance and Investments at the American College of Financial Services.

MEDICAID

“Almost every adviser you talk to has clients that end up on Medicaid. It’s just the reality of aging and living a long time,” Mr. Hopkins said.

The government assesses income and asset levels when determining individual qualifications for Medicaid. Generally, individuals have to essentially run out of money before Medicaid kicks in, Mr. Hopkins said.

Clients often need the help of an elder-care attorney to structure their assets appropriately — for example, there are several exceptions for assets, such as a home, that get protected from a Medicaid spend-down calculation, and an attorney can help protect those to the largest extent possible, Mr. Hopkins said.

Medicaid facilities, though, often aren’t as nice as those provided by private care; so private insurance would likely better protect one’s quality of life, he said.

SELF-INSURANCE

Clients concerned about asset flexibility and freedom, as well as those with an aversion to medical underwriting, are often candidates for self-insuring if they have the appropriate wealth, Mr. Jackson said.

“Generally, even if you have the assets to self-fund, you’ll get a better return on your dollars if you use an insurance solution,” he said.

Clients also “tend to have to hold a lot of assets hostage to that self-insurance,” Mr. Hopkins said. “You’re not really allowed to touch them,” which sometimes leads to a reduction of lifestyle when young people set assets aside in a separate account for LTC purposes.

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

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.

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.”

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.

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.

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

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

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.

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.

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

Tony Kendzior, CLU, ChFC

RETIREMENT PLANNING AND CREATOR OF SUCCESSFUL RETIREMENT SECRETS

Category Archives: Long-term Care

If you’re in your 50s, you need to plan for long-term care right now

Paying for Long Term Care with a Hybrid Life Insurance Policy

The 1 Retirement Expense We’re Still Not Preparing For

How to pay for long-term care? Several funding options exist

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

New Options in Long-Term Care Insurance

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