The Long Term Care Review by Duane Lipham, CLTC

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.

In my discussions with consumers who may be considering the purchase of long-term care insurance, they often try to determine whether they will need long-term care services in the future.

This is impossible to know for a certainty since none of us possesses a crystal ball that allows us to see ahead in the future. That means that we have to rely on available information to make a reasonable decision. For most people this means looking into the past to find trends that can shed light on what will probably happen in the future.

Many people will look back on past health history as if it is a good predictor of future care needs. This kind of rationalization is often overly optimistic. There are many people receiving long-term care services today that resulted from a sudden change in health. This can be caused by strokes, aneurysms, accidents and many other causes.

There are also many other illnesses that can appear without warning and slowly erode good health. Alzheimer’s, Parkinson’s, multiple sclerosis and many others fall into this category.

Another line of reasoning that is often used to help predict future long-term care needs is family history, particularly that of parents. Many people assume that whatever happened to their parents is a good indicator of future long-term care needs.

This may or may not be true. An important factor that is often not considered is the advancements that have been made in the treatment of disease within the last twenty years.

It has been well established that many of the diseases that were causing death in short order decades ago are no longer doing so. Medical science has learned how to prolong our life in the face of such illnesses, but this means that we can also need more care toward the end of life than was necessary in the past.

Since the need for future care services is hard to predict on an individual basis, it is usually best to ask two basic questions instead. Do I (we) have assets that need to be protected from being used for possible long-term care services? Can I (we) reasonably afford the premiums for long-term care insurance?

If the answer to those questions is in the affirmative, long-term care insurance may be a viable option for you to consider.

Although American life expectancy is still lower than 14 other countries including Japan and Italy, it has reached a new high of almost 78 according to a recent government report.

Both men and women are living longer, although the average for women is 80.4 years and the average for men is 75.3 years. This five year gap is actually an improvement from about a decade ago when it was closer to 10 years between sexes.

The leading causes of death are still heart disease and cancer, but interestingly, Alzheimer’s has moved up to sixth place from seventh. This is a disturbing trend for potential long-term care needs in the future.

Although increasing our overall life expectancy is a good thing it also means that more care is usually needed before the end of life and this is a further reason why long-term care insurance makes more sense today than ever before.

Ever since the Office of Personnel Management (OPM) announced a major increase in long-term care insurance premiums for currents policyholders in the federal program, I have had quite a few of these folks requesting quotes from other major carriers.

The federal program is available to all federal employees and the military.

What many did not realize is that the bid for that contract comes up every seven years and when it does all current policyholders are subject to facing a rate increase. The current increase will be as much as 25% for some.

Here is an excerpt from an article about how some feel cheated by this unexpected premium increase:

“Like many others, when the Joys signed up for the Federal Long Term Care Insurance Program in 2003, they had the clear impression their premiums would not rise. But recently, the Office of Personnel Management announced fees for about 150,000 members of the plan will jump between 5 and 25 percent.

The Joys, who are being hit with the full bump, are livid.

“That just wasn’t the deal we signed,” Chester said by phone as they drove across Tampa Bay to visit Donna’s parents. “I think we’re being grossly cheated.”

You can read the rest of the article here.

I am getting more and more questions about so-called “hybrid” investment products like annuities or life insurance that also include a long-term care rider to provide some benefits for long-term care down the road if needed.

I am not a fan of these products in most cases. Among other reasons, it is because it requires an investment of a significant amount of hard assets to be able to produce any really meaningful benefit that can be used for long-term care. It also makes it difficult to keep up with rising costs of care later on. This means that even though you may have adequate funds for providing care now after putting $100,000 or so in your annuity that has a long-term care rider, it does not mean that those funds will be adequate 20 - 30 years from now when you actually need them.

Here is an excerpt from an article that discusses these kind of “hybrid” offerings and who may be best served by them. By the way, I agree with this assessment:

“Hybrids are not right for everyone, but they could be right for some, experts said. For instance, they could be a good fit for someone who planned to self-insure and set money aside in a rainy-day fund for long-term-care costs, or someone who doesn’t qualify to purchase a stand-alone LTC insurance policy, or someone who wants to do a 1035 exchange to switch from a paid-up policy into the hybrid.”

You can read the rest of the article here.

The long-term care partnership program is an initiative that was outlined in the Deficit Reduction Act of 2005. Each state can decide whether or not to choose to enact the program for their residents. It is not mandatory.

The purpose of the long-term care partnership program is to encourage consumers to buy long-term care insurance to help relieve the financial pressure on the Medicaid program. Lawmakers realize that Medicaid will be unable to sustain the current financial obligations in the future as more baby boomers retire and this program is intended to help reduce the burden.

If a state does not have a long-term care partnership agreement in effect, a policyholder who exhausts all of their benefits under a long-term care insurance policy will then have to pay for care out of their own funds. Medicaid will not offer any assistance until almost all of available funds and assets are depleted.

If a state has enacted a long-term care partnership agreement, the same policyholder that has exhausted all policy benefits will be allowed to keep an amount of funds that equals the total sum of all policy benefits paid out by their long-term care insurance. This means that Medicaid can begin paying for their care much sooner. This also means that they would not be completely wiped out by long-term care costs.

The long-term care partnership program has been steadily adopted by an increasing number of states and an overwhelming majority either has already put the program into effect or has passed the legislation necessary to do so.

Although the program outline was provided by the federal government each state may make certain amendments and changes as it sees fit. For that reason, the partnership programs may vary from state to state.

Some issues that may change depending on the state are the following:

 Will the state grandfather older long-term care insurance policies into the program that were purchased before the partnership legislation was enacted?
 What specific inflation protection benefits will the state allow for qualified long-term care insurance policies?
 Will the state allow reciprocity for partnership policies that were sold in other states?

It is difficult to keep up with all of the individual state’s requirements. Here is a link to a useful website that tracks these changes and is an excellent source of information on state long-term care partnership programs: State Long-Term Care Partnerships

With all of the talk about health-care reform, not much attention has been focused on the escalating costs of Medicaid. But Medicaid will certainly require some examination soon because it is the largest payor of long-term care in the US at this point.

Since there will soon be a substantial increase in long-term care patients due to the aging baby boomer population, this means that Medicaid, as stretched thin as it is, will be unable to keep up with the financial demand in just a few years.

I have often written about this issue myself, but here is an excellent article that suggests some possible changes that could be made to Medicaid to keep it solvent:

“Although Medicaid is a means-tested program that was established to provide health care for the poor, it has become the program upon which middleclass and even wealthy people rely to pay for their long-term care.
People think, “When I retire, Medicare pays my medical bills; Social Security provides a monthly check; and, if
I need to go to a nursing home, that’s what Medicaid is for.”

There’s only one big problem with this from a reality-check point-of-view: Taxpayers pre-paid their Medicare and Social Security benefits for years through payroll taxes, but did not pre-pay for Medicaid. It’d supported by the general revenues of the federal government and each state (approximately 50/50).

That’s why we’re going to see reform. With tax revenues down, and a growing elderly population, states can’t afford to cover their share of the Medicaid bill.

But you asked whether the Medicaid benefits for LTC will change. I believe the benefits will probably stay about the same, but what will change are the qualifications and what are called the recovery provisions. In other words, some of the generous loopholes that allowed people who held certain types of assets to qualify for Medicaid will be closed, and states will look to recoup benefits they paid from the estate once the person dies.
What kind of loopholes exist? And what kind of assets will be sought out to repay the government?

Right now, if someone transfers assets of any amount and waits a little more than five years to apply for Medicaid, they can be eligible. It wasn’t too long ago that the government only looked back three years instead of five. If you agree that people shouldn’t be able to transfer money, then qualify for a government program, perhaps the better number is 10, or even 20 years.

Right now, if someone’s home equity is less than $500,000 ($750,000 in Massachusetts and some other states), he or she can qualify for Medicaid without having to sell the home or otherwise tap into their equity. Perhaps that number should be less than $100,000, as it is in other countries. “

Here is an article that discusses the latest Price Index figures just released by the American Association for Long-Term Care Insurance :

“The announcement of the 2009 long term care insurance (LTCI) price index shows that the rates have increased by two percent compared to the previous year. However, some ages actually pay slightly less for the long term care insurance.

A 55-year-old individual considering long-term care insurance protection can expect to pay $723-per-year for a base level of protection if they are married or $1,060 if they are single according to the 2009 Long-Term Care Insurance Price Index published by the American Association for Long-Term Care Insurance (www.AALTCI.org). Across various age groups, costs for coverage increased about two percent from the prior year.

The index published annually measures costs for top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits, with protection increasing yearly as the individual ages. “A solid base plan of protection will grow in value to over $305,000 of protection 20 years from now,” explains Jesse Slome, Executive Director of the national trade organization that conducted the research. The study compares costs for different levels of plans that provide long-term care benefits for 3-years or longer with a compound inflation option that increases the available insurance benefits by five percent compounded each year.

“For some age bands the cost of long-term care insurance actually declined,” Slome notes. “What we did see is a far wider range of prices between insurers offering basically the same coverage.” According to the Association study, costs can vary by as much as 100 percent. “This could reflect different benefits or simply the individual insurer’s pricing assumptions,” Slome explains. “Consumers should compare policies or work with a knowledgeable insurance professional who can analyze for them.”"

You can read the rest of the article here.

More and more financial professionals are recommending the purchase of long-term care insurance. In fact, I regularly speak with prospective clients who are looking into the possibility of buying long-term care insurance coverage mainly because their financial planner or elder law attorney specifically advised them to do so.

The real question is “Do these same professionals follow their own advice?”

Here is an article that indicates that they do:

“When advising clients about how to plan for the possibility of needing long-term care, elder law attorneys generally put long-term care insurance (LTCI) at or near the top of the list of planning strategies, provided the clients can afford the coverage and are insurable. But are elder law attorneys walking the walk for themselves and their families as well as talking the talk to their clients?

For the most part, yes, according to a recent ElderLawAnswers survey. In the survey, 58 percent of responding elder law attorneys said they have LTCI. Another 10 percent said they are planning on buying it but haven’t gotten around to it yet and about 8 percent lack coverage because they are uninsurable.”

You can read the rest of the article here.

Home care services have always been popular with many mainly because of the extra measure of independence and freedom that it affords those receiving care. But there may be an additional reason to choose home care or assisted living facilities instead if that is possible.

Here is an article that sounds an important warning on what is often happening in nursing facilities:

“Over the past several years, nursing homes have become dumping grounds for young and middle-age people with mental illness, according to Associated Press interviews and an analysis of data from all 50 states. And that has proved a prescription for violence, as Jackson’s case and others across the country illustrate.

Younger, stronger residents with schizophrenia, depression or bipolar disorder are living beside frail senior citizens, and sometimes taking their rage out on them.

“Sadly, we’re seeing the tragic results of the failure of federal and state governments to provide appropriate treatment and housing for those with mental illnesses and to provide a safe environment for the frail elderly,” said Janet Wells, director of public policy for the National Citizens’ Coalition for Nursing Home Reform.”

One of the great advantages of long-term care insurance is that it allows the policyholder to choose what setting in which they wish to receive care. The Medicaid program on the other hand usually only pays for care received in a nursing facility.

You can read the rest of the article here.

I am often asked about the optimal age to purchase long-term care insurance. My answer is that it depends on what you want long-term care insurance to accomplish.

If you want to truly be covered against the high costs of long-term care at all times you should purchase this insurance as soon as (1) you have assets that need to be protected and (2) you can afford the premiums.

It would be wise for even young people to consider long-term care insurance if they meet this criteria because disability is not limited to any age boundaries. It can strike at any age as a result of sports accidents, auto accidents, strokes, brain injuries, etc.

In fact, almost 40% of patients receiving long-term care are under the age of 65. This is a sober warning that we are all at risk for some kind of disabling incident or illness at any point in our life. It can strike suddenly and without advance notice.

Many financial planners are more concerned with having their clients protect themselves in retirement instead. And it is true that your chances of requiring long-term care services due to aging increase dramatically in retirement years.

So if you are mainly concerned with protecting assets for retirement, what age makes the most economical sense to begin seriously considering the purchase of long-term care insurance?

I usually recommend somewhere between the age of forty-five and fifty-five. There are two main reasons for this:

 The premiums for long-term care insurance are about as low as they ever will be during this period between forty-five and fifty-five and rate increases from one year to the next are relatively small.

 Most people usually still enjoy a measure of good health at this stage in life and therefore they can get additional premium discounts for having a good health history. They can lock in these lower premium rates for the remainder of their life.

After the age of fifty-five premiums start to accelerate more rapidly and change dramatically from year to year in a person’s mid-sixties.

In all cases the course of financial wisdom is to buy earlier rather than later.