The Long Term Care Review by Duane Lipham, CLTC

I was asked this question recently on Caring.com. It is a common question on the minds of many that I talk with as they are beginning to familiarize themselves with the actual costs of long-term care.

Here is the answer I gave:

“This is a very good question since the cost of long-term care is constantly rising. This makes planning ahead for long-term care costs essential when you are considering long-term care insurance.

The most common method used to assure adequate funds will be available in the future when the care is actually needed is to select an appropriate daily benefit that is currently in line with the costs of care in the area where you intend to retire. Then if you add a sufficient inflation benefit that will keep pace with inflationary costs as you age, the benefits will automatically increase each year until they are needed when you are older and require care.

When using this method it is good to decide how much of the cost of long-term care that you are personally willing to contribute out of your own funds or income first. If you want your insurance to cover all of the potential cost of care then you should most likely select a daily benefit that is line with the cost of nursing facility care in the area where you intend to retire as that will often be the most expensive care that you may receive.

However, if you plan instead to funnel some of your own unused funds or income to cover a portion of your care, decide how much you feel is practical for you to be able to do so and select a daily benefit that will allow for this coinsurance on your part. If you choose this method, please keep in mind that as the cost of care goes up due to inflation more funds will be needed to close the gap between what your insurance covers and what the cost of care actually is.

When you have the daily benefit set at a level that you feel is right for your circumstances and risk tolerance, then apply an automatic inflation benefit in the policy that is appropriate for your age. By following this plan your long-term care insurance policy should automatically keep your benefits up-to-date as you age and there will sufficient funds available for care whenever the policy is activated in the future.”

You can view more questions that I have been asked on Caring.com by clicking here.

The American Association for Long-Term Care Insurance suggests the following tips that can help you significantly reduce the cost of insurance coverage.

1. Leverage Your Good Health: Insurers will require you meet certain health qualifications to obtain coverage. Discounts are provided to those in good health and 62 percent of applicants between ages 40-49 qualified in 2009. The percentage drops to 46% for ages 50-59 and only 38% for ages 60-69. Once obtained, the preferred health discount is not lost when your health changes.

2. Right-Size Your Coverage: Some long-term care insurance is always better than none. Factor in other sources of income such as Social Security, pension and 401k plans that can pay costs and allow you to add money-saving options such as a 90-day deductible (Elimination Period) or consider a limited-pay plan with a Shared Care option that allows two spouses to share a common benefit pool.

3. Compare Coverage: Each insurer establishes it’s own rates, health standards and available discounts. As a result, virtually equal protection from two highly-rated insurers can vary by between 30 and 80 percent. Ask your insurance professional if they have access to policies from just one or from multiple insurers.

For more information, visit the Association’s Consumer Information Center: http://www.aaltci.org/long-term-care-insurance/

Of course, everyone wants to stay as healthy as possible for as long as they can. But the sad truth is that the longer we live due to good health, the more likely we will spend more on our healthcare overall.

That’s the conclusion of a a report this week from Boston College’s Center of Retirement Research. Here are some of their conclusions:

“First, those in good health can expect to live significantly longer,” the report said. “At age 80, people in healthy households have a remaining life expectancy that is 29% longer than people in unhealthy households, and, therefore, are at risk of incurring health care costs over more years.”

Second, the report said that many of those currently free of any chronic disease will succumb to one or more such diseases. In running a simulation, Boston College found that individuals who are free of any chronic diseases at age 80 can expect to spend one-third of their remaining life suffering from one or more such diseases.

Third, the report said people in healthy households face a higher lifetime risk of requiring nursing-home care than those who are unhealthy. That reflects their greater risk of surviving to advanced old age, when the need for such care is highest.

Also, those who are healthy now but delay buying Medigap or long-term-care insurance could face higher premiums later on, according to Malcom Cheung, a vice president in Prudential’s long-term-care division.

“Those currently in good health would be unwise to infer that they will continue to enjoy lower than average health-care costs,” according the Boston College report. “The reality is that even the currently healthy can expect to eventually suffer from one or more chronic diseases, which often results in high out-of-pocket and long-term-care costs.”

You can read the rest of the report here.

Alzheimer’s is one of the leading causes of long-term care for seniors today. If no effective treatment is found soon the costs associated with this disease will be staggeringly high.

A recent article in McKnight’s Long-Term Care News on this subject revealed these details:

“Without an effective treatment, the cumulative costs of caring for patients with Alzheimer’s disease in the United States could top $20 trillion over the next 40 years, according to a new report from the Alzheimer’s Association.

By the year 2050, the number of people with Alzheimer’s disease will climb from roughly 5.1 million today to an estimated 13.5 million, the report released this week said. If that happens, annual costs would also rise—from $172 billion to more than $1 trillion. Costs to Medicare will jump by more than 600% to $627 billion per year. That compares to $88 billion today. Meanwhile, Medicaid costs will soar to $178 billion, up from the current $34 billion, according to the report.”

You can read the entire article here.

Just recently John Hancock, one of the leading long-term care insurers, has announced a major premium rate increase to new applicants only. I have been asked by many whether this is a good or a bad thing overall, and here are a few thoughts on the subject:

The cost of insuring long-term care is constantly rising and so it is very common to see insurers raise premium rates for new applicants every 2 - 3 years. This is not a a serious problem as all new applicants then know what the costs will be going in.

What consumers want to avoid is companies that have a history of regular rate increases on current policyholders. This indicates that the insurer has no other way to increase revenue than to lay it on the backs of their current clients. That can be a bad sign for future rate stability with that particular insurer.

The major long-term care insurers have the ability to increase revenue from new sales of their products and that helps keep current policy rates stable.

The fact that insuers often raise new applicant’s premium rates is another reason why procrastination in buying long-term care insurance is an unprofitable decision. So while the lower rates are in effect, I encourage everyone who has not yet gotten a policy to do so if possible, because these lower rates will not be seen again.

Every year Genworth publishes an up-to-date compilation of rates gathered from all fifty states for the cost of home health aides, adult day-care centers, assisted living facilities and nursing facilities.

The new version has just been released and is available for download. Its a good practice to use this guide to help stay up with the rising cost of long-term care in your particular area since these costs can vary considerably depending on where you live in the country.

You can download a copy here: Genworth 2010 Cost of Care Guide

The current economic climate has made saving and preparing for retirement years even more difficult than it was before.

But if you also add the uncertainty of the viability of government programs like Medicare and Medicaid to be there if needed to cover a portion of health costs, the picture gets even worse.

A recent study by the Employee Benefits Research Institute has taken a good look at the subject and here is an excerpt from their report: ““The current set of assumptions - that Mom and Dad were OK because of Medicare - may not be the case” for future retirees. “When you add in the potential for nursing home costs, for just about every demographic group close to retirement, the chances of having adequate retirement savings was hopeless- unless they had long-term care insurance.”

“If nothing else,” says VanDerhei, “I’d love people to realize that even if Medicare continued [to provide the same level of benefits it does today], it’s never going to cover you for nursing home care… I see too many retirees who think they’re all set, and then one goes into a nursing home. And they next thing you know, there goes all the money.””

You can read the entire report here.

No one likes to think of a time in life when they may need constant care, but it happens to millions of us. Unfortunately, most people procrastinate their search for a quality facility until a major illness or disease has occurred that makes a nursing facility necessary.

Under these circumstances, it is very difficult to make an educated decision after considering all of the options available. There simply isn’t enough time for that.

So advance effort is best to identify the facilities in your area that appear to offer quality care at the price that you can afford. But what criteria should you use to compare nursing facilities?

Here is a great article from the New York Times that gives some very specific recommendations for consideration: Stressful But Vital - Picking A Nursing Home.

It’s not very common to see the issue of long-term care planning raised on network television. But CBS news aired an interview with SmartMoney.com’s Contributing Editor Stephanie AuWerter, who had some very positive things to say about the need for looking ahead and being prepared before these issues arise.

Here is some of what she said: “You should also come up with a plan for long-term care, should you need it. This is particularly important for folks in their 50s and 60s. Long-term care is breathtakingly expensive and Medicare does not cover this. So consider long-term care insurance. This is something you need to buy when you’re in good health. Now, the insurance isn’t cheap, but having to pay out of pocket for these costs can bankrupt a family. So you need to know how bills could be covered one way or another.”

You can view the rest of the interview by clicking here.

Finding quality care in a nursing facility can be a real challenge for families who have someone who needs long-term care services and support on a continual basis.

The last thing that anyone would want is for their loved ones to languish in a nursing facility where substandard care is being administered.

But which nursing facilities are best? And how do you get an objective opinion on local nursing facilities?

One way is to consult the 2010 America’s Best Nursing Homes ranking recently released by the U. S. News Media Group. You can access that report here.

Many people still have the idea that long-term care is mainly administered in nursing facilities. But a recent study helps explode that myth as it reveals that almost three times as many people receive long-term care services at home as compared to those in facilities.

The other important finding in this study is that long-term care insurance helps more patients stay at home to receive their care for longer periods of time. Here is an interesting excerpt from an article about this new study:

“One aspect of the study sought to compare individuals with long-term care insurance policies with those without insurance coverage. According to the American Association for Long-Term Care Insurance, 8.25 million individuals presently have coverage and more than 180,000 policyholders are currently receiving benefits. The study clearly indicated that individuals with long-term care insurance receive significantly more home care, and thus can stay in their homes longer. The difference between the insured and uninsured is significant: 70.6% of those covered received an average of between five and seven days of care each week, while only 35.1% of those without insurance received similar care as often.

Possessing insurance to pay part or all of the cost of home care services enabled individuals to receive care at home for longer periods of time. The study found that 41.2% of those with insurance received care for longer than one year; compared to 29.7% of those without coverage.

“The study confirms what we’ve long suspected, that a basic long-term care insurance plan costing less than $1,000 a year may provide sufficient coverage for those who want care at home and still have the ability to transition to more costly skilled facilities should the need arise,” adds Slome.”

Click here to read the entire article

A common question that I am asked about long-term care insurance is what tax advantages are available for owners of a LTCI policy?

Unfortunately, the answer to that question is a little involved and it depends on what kind of employment you have and how old you are as a policyholder.

Here is an excellent quide provided by the AALTCI (American Association for Long-Term Care Insurance) that spells out all the details on tax deductibility for LTCI for this year.

One of the leading causes of the need for long-term care services among seniors is cancer. Well over a million people are diagnosed with cancer every year.

Some recent finding indicate that diet can have a significant impact on the prevalence of cancer in seniors. Here is what a recent article had to say: “According to findings reported by researchers from the University of Alabama at Birmingham, reducing calorie-intake can benefit longevity and help prevent diseases like cancer that have been linked to aging.

The researchers conducted tests by growing both healthy human-lung cells and precancerous human-lung cells in laboratory flasks. The flasks were provided either normal levels of glucose or significantly reduced amounts of the sugar compound, and the cells then were allowed to grow for a period of weeks. Restricted glucose levels led the healthy cells to grow longer than is typical and caused the precancerous cells to die off in large numbers.”

You can read more of this article by clicking here.

One of the major advantages of long-term care insurance has always been the flexibility that it affords the policyholder to choose the setting and quality of care on their own terms. It makes sure that you are not left to the whims of a governmental agency to decide what care you receive and when and where it will be administered.

As a result, many who have long-term care insurance are choosing to remain independent for as long as possible by receiving home care instead of facility care. This is actually what most people want anyway, and long-term care insurance helps make sure that they enjoy this kind of freedom in their decision making.

A new study produced these findings: “Individuals with long term care insurance receive significantly more home care, the study found. Almost 71% of those covered by LTC insurance received an average of between 5 and 7 days of care each week, while only 35.1% of those without insurance received similar care as often, the study found.”

You can read more about this study by clicking here.

For those of us that have worked with the buying public on the subject of long-term care insurance for some time, it is no surprise that studies reveal very little understanding on the part of the general public about the costs associated with long-term care and the options that they have to pay for those costs.

This lack of education can be attributed to a wholesale failure on the part of state and federal governments and the insurance companies to get the word out about the looming long-term care crisis in a timely and informative manner.

The truth is that modern long-term care policies are very flexible, reliable, and affordable if bought at the correct age and using a reasonable benefit design. The state partnership programs are excellent collaborations between government and private agencies to lower costs and bring this insurance into an affordable realm for most consumers. Unfortunately, not much effort has gone into advertising these programs.

As a result, consumers are mostly unprepared for the financial crisis that will many will be facing soon.

Here is an article that discusses the extent of the lack of correct information that many have on this subject.

Some news outlets are emphasizing the critical need for LTC planning by singles.

Without a spouse or child to help care for them, many must rely completely on facility-based care or paid professional caregivers when faced by a LTC event. There are 96 million singles in the U.S. today, which represents 43% of the adult population, up from 28% forty years ago. More than half are over age 40.

The IRS has just announced the new tax deductibility limits for 2010 for long-term care insurance and the benefits have increased over 2009.

Here are the 2010 limits:

Attained Age Before Close of Taxable Year
Age 40 or less: $ 330
More than 40 but not more than 50: $ 620
More than 50 but not more than 60: $1,230
More than 60 but not more than 70: $3,290
More than 70: $4,110

Many people looking at long-term care insurance seem to focus mainly on current costs of care. But the cost of long-term care services are constantly going up whether its home or facility care.

That is why a very important ingredient of any serious long-term care plan is to make sure that the funds allocated for care constantly rise to offset inflation in the industry.

Most long-term care insurance policies allow for an inflation benefit that provides additional coverage as the policyholder ages. It costs more to have this built into the policy at inception but without this provision it is very easy to fall steadily behind the actual costs of care with each year that goes by. Eventually, if the policy is held long enough before a claim is made the benefits can almost become meaningless or at least contribute very little toward the actual financial need.

Here is an article that discusses the rising cost of care and makes some interesting projections for the future:

You can read the article here.

More and more people are beginning to recognize that long-term care insurance in states that have a long-term care partnership program is really a good deal. It also allows the greatest freedom of choice for the quality of care received and the setting that is most desirable.

Here is an article from the Jackson Sun about long-term care partnership plans in Tennessee:

“”If they can afford it and are insurable, I try to steer my clients toward long-term care insurance,” said attorney Nancy Choate. Estate planning is among her specialties.

“The new long-term care insurance partnership act in Tennessee is a wonderful thing,” she said. “The client can buy insurance in the amount of the assets they have, and they don’t have to give those assets away.”

When determining eligibility for Medicaid, if benefits under a Partnership Program policy do not sufficiently cover the cost of care, the state will disregard the policy holder’s assets up to the amount of payments made by the long-term care insurance policy.

So if the insurance policy pays $200,000 for care, that’s $200,000 in assets the state will not count when determining a person’s Medicaid eligibility.

“To me that’s the best way to do it,” Choate said. “It gives the client a lot more options as to the type of care they can receive.”"

Click here for the rest of this article.

It’s always helpful when the media comments in a positive way about the challenges facing seniors regarding long-term care and discusses long-term care insurance as a solution.

Two major articles during the last couple of months have focused on this subject and each is from a well-respected source. One is from US News and World Report and the other is from SmartMoney. They both make a great read.

Click here for the article from SmartMoney.

Click here for the article from US News and World Report.