The Long Term Care Review by Duane Lipham, CLTC

There are many reasons why long-term care may become necessary, but one of the most difficult both financially and emotionally is due to Alzheimer’s. Since the body can remain relatively healthy for a period of time while the cognitive abilities deteriorate, no one knows how long this kind of care may last.

During the care process the family of the one of the receiving care will have a unique set of challenges to deal with. Here is an article from the Wall Street Journal that discusses the impact that dealing with Alzheimer’s can have from a financial standpoint:

“When Theresa Kraus’s mother was diagnosed with Alzheimer’s disease in 2005 at age 87, Ms. Kraus figured that she could manage the health-care bills if she combined her mother’s savings and her own. But the size of those bills proved larger than anyone anticipated.

To start, the mother moved in with Ms. Kraus, who had to pay for care almost 24 hours a day, seven days a week. An extra person in the house meant higher costs for food and utilities. Additional expenses — including medicine, co-payments for doctors’ visits and adult diapers — amounted to $200 to $300 a month.

By the time her mother passed away in March, Ms. Kraus had run through her mother’s savings — as well as the money that Ms. Kraus had put aside for her daughter’s college education. Ms. Kraus, a teacher in Rochester, N.Y., is now tens of thousands of dollars in debt. She says she doesn’t regret a penny of the money spent, but adds that the impact on her finances was devastating.

“You never think you are going to outspend the money you [have] saved,” she says.

An Alzheimer’s diagnosis is the start of a long, hard road. Naturally, health-care questions must be resolved, but at the same time, families need to address a host of financial issues. They range from the logistical — tracking down deeds or making sure family members have access to bank and savings accounts — to budgeting and assessing the potential costs of care.

“These are conversations that need to be had early and often,” says Donna Schempp, program director for the California-based Family Caregiver Alliance.

Patients Participate

Tackling tough questions at the outset can give Alzheimer’s patients the chance to express their wishes, which can go a long way toward avoiding family disputes down the road.

“People in the early stage of the disease, no matter how old, can still retain a lot of abilities and be able to participate in their own planning,” says Peter Reed, senior director of programs for the Alzheimer’s Association.

Legal issues, such as determining who will have power of attorney once the person is no longer able to make decisions, should be a top priority. Says Marguerite Angelari, an elder-care law professor at Loyola University Chicago School of Law: “Decision-making capacity is going to start to decline…and, if needed, you want to be able to have someone step in immediately.”

If the person with Alzheimer’s lives on his or her own, household bills should be sent to someone else, and others should have the ability to monitor spending. “Sometimes when people are in the early stages of dementia they spend money inappropriately or build up unpaid bills because they aren’t able to keep track,” Ms. Angelari says.

Outlining a potential budget can help avoid unpleasant surprises later.

If there’s a long-term-care insurance policy, review details of the coverage. And as daunting as it seems, when considering questions about home care and nursing homes, talk to an expert on your state’s Medicaid to understand eligibility rules.

That kind of help can sometimes be found at a state agency on aging, in the office of an elder-law attorney, or with an organization such as the Alzheimer’s Association, which has staff members who also offer help on setting up a budget.

Central to financial planning will be decisions about where the care will take place, such as an assisted-living facility, nursing home or in a family home. Continuing-care retirement communities have grown in popularity, but they generally require a large initial investment. Adult day care is more common, but also comes with a cost.

Paying Family Members

Some family members will want to help provide care. For those thinking about quitting a job or working part time, be sure to weigh the costs beyond losing a salary. Such a move will cut into retirement savings and Social Security, not to mention potentially lead to the loss of medical insurance.

One increasingly popular option is to have a family member act as a paid caregiver. But that approach is more complicated than just writing a check; if you end up applying for Medicaid, such payments could be viewed as transfers of assets, which could delay eligibility. The solution is to have a so-called personal-care contract put in place, which specifies the care being provided and the pay.

“You want to formalize it as much as possible,” says Loyola’s Ms. Angelari. “And you want to work with an attorney that doesn’t just know the state law; you want one that knows what’s going to be acceptable to the Medicaid office.”

Then, as Ms. Kraus found out with her mother, expenses pop up unexpectedly. In addition to adult diapers, many people with advanced Alzheimer’s may need costly liquid nutritional supplements. If there are physical impairments as well, home modifications may be needed.”

Read more of this article here.

Several states have joined with the federal government in an initiative to get the word out about the need for long-term care planning. Both state and federal government agencies understand that without some advance planning and taking responsibility for their own care now, the prospect of providing quality long-term care for baby boomers is going to be very difficult at best.

Pennsylvania is one of the most recent states to promote a statewide advertising campaign aimed at those who will most likely need to begin planning for long-term care costs soon. Pennsylvania has also chosen to enact the Partnership program that I have discussed at great length in this blog in other posts as well.

Here is an article that discusses the great interest that the “Own Your Future” advertising campaign had among Pennsylvania residents:

“Governor Edward G. Rendell said today that more than 200,000 people have requested Own Your Future planning kits since March, when Pennsylvania launched its outreach effort urging individuals to take a more active role in planning their own long-term care needs.

The federal government says Pennsylvania’s 13 percent response rate is approximately double the rate seen by any of the 16 states that took part in similar outreach efforts. The typical response rate reported by states is between 5 and 7 percent.

“The strong response to our Own Your Future campaign suggests that Pennsylvanians are seriously considering their future long-term living needs,” Governor Rendell said. “Individuals who begin planning today will have a broader range of options available to them in their later years, which can help to ensure greater financial security and peace of mind.”

By 2020, one in four Pennsylvanians will be age 60 or older. Many consumers are not aware that Medicare does not cover the cost of many long-term care services.

More than 1.6 million Pennsylvania households with residents aged 45 to 65 received a letter from Governor Rendell urging them to request the Own Your Future kit, which offers information on financial planning, legal services, housing, transportation, long-term care insurance and more. ”

You can read more of this article here.

The American Association for Long-Term Care Insurance often publishes a yearly Price Index to help track the increasing costs of long-term care from year to year. The 2008 edition of the Price Index has been released and these are the findings:

A 55-year-old individual considering long-term care insurance protection can expect to pay $709-per-year for a base level of protection if they are married or $1,095 if they are single according to the 2008 Long-Term Care Insurance Price Index. Costs for coverage increased about 4% over 2007.

The annual index measures current costs for top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits (base-level coverage), with protection increasing yearly as the individual ages.

2008 National LTCi Price Index

Average price for a comprehensive long-term care insurance policy (100% home care benefit + skilled care coverage) 90-Day Elimination Period with 5% Compound Inflation Protection Option

• Age 55 $100 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $709-per-year Individual Qualifies for Preferred Health and Spousal Discounts
• Age 55 $100 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $1,095-per-year Individual is single (preferred health discount)
• Age 55 $150 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $1,064-per-year Individual Qualifies for Preferred Health and Spousal Discounts
• Age 55 150 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $1,578-per-year Individual is single (preferred health discount)

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• Age 65 $100 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $1,342-per-year Individual Qualifies for Spousal Discounts (standard health)
• Age 65 $100 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $1,999-per-year Individual is single (standard health)
• Age 65 $150 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $2,013-per-year Individual Qualifies for Spousal Discounts (standard health)
• Age 65 $150 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $2,998-per-year Individual is single (standard health)

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• Age 65 $240 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $3,221-per-year Individual Qualifies for Spousal Discounts (standard health)
• Age 65 $240 Maximum Daily Benefit x 3 Year Benefit Period
  Cost: $4,729-per-year Individual is single (standard health

Genworth reports that the number of LTC workers in the U.S. is dwindling while demand is growing and the “Care Gap” threatens to increase the already high cost of home care.

The country is challenged with recruiting 200,000 new home health care workers each year and retaining them to meet the needs of the nation’s burgeoning senior population. Can it be done? Read the executive summary of the Genworth white paper A Workforce to Care for Our Aging to review the startling statistics and the consequences of the possible labor shortage.

You can read the report here.

Kiplingers Personal Finance magazine often publishes articles on long-term care issues to help keep their readers up on the latest trends in the industry and how they would be affected financially.

A recent article focuses on some of the lower cost policies that are now being offered by some of the largest and most established carriers including Genworth, John Hancock and MetLife.

I certainly think that these policies have a place for some folks who simply can’t afford more coverage and for those who can co-insure a significant portion of their own LTC costs.

However, each of these new lower cost policies also have their drawbacks too. It’s a good idea to read about them and I will be happy to discuss the pros and cons with anyone who would like to know more.

In the meantime, here is the article to review.

On June 23, 2008, Custom Care II will become Custom Care II Enhanced in approved states. There are three main areas of benefit enhancement and they are:

Caregiver Support Services

• Provides policyholders and their families with access to provider discounts, care provider quality
reports and expert advice when they are called on to be caregivers or care planners for aging parents,
a spouse, partners, children, and relatives.

• Coupled with the Double Coverage for Accidents benefit and Return of Premium before 65 benefit,
Caregiver Support Services gives Custom Care II Enhanced the strongest package of built-in “boomeroriented”
benefits on the market today.

Unlimited CPI Compound Inflation

• Provides a more affordable compound inflation option that links annual benefit increases to changes in
the Consumer Price Index (CPI); includes an additional Guaranteed Increase Option (GIO) that
enables clients to also increase coverage by 10% every 3 years with no underwriting.

• CPI Compound Inflation gives greater flexibility to offer Custom Care II Enhanced coverage to a
wider array of clients — at multiple price points.

Consumer Protection Provisions

• Designed to give clients the reassurance they need at time of purchase and at time of claim; includes
provisions such as:

o Alternate Services Benefit for emerging care services

o Independent Third-Party Review option

o Lifestyle Benefit Changes to adjust policy coverage when needs change

Accompanying these enhancements will be a minor premium adjustment of about 4% on average, on new
business rates in approved states.

In previous blog articles I have discussed the long-term care insurance partnership program that almost two thirds of the states have either already put in place or are in the process of approving for their residents.

This program is designed to encourage the purchase of LTCI by consumers so that the state can reduce its liability for paying for long-term care costs in the future. This is vital if current state Medicaid programs are going to remain solvent. The advantage to the consumer is that the state acts as a safety net for them in case their care exceeds the benefits of their LTCI policy, and they are guaranteed that long term care costs will not be allowed to completely wipe out all of their assets.

But what identifies a policy as being partnership-qualified?

There are several qualifications that were outlined in the federal Deficit Reduction Act of 2005, including the need to be federally tax-qualified and to contain the consumer protection provisions of the NAIC LTCI Model Act and Model Regulation. The vast majority of policies sold today already have those provisions anyway.

There is one requirement that contributes more than almost any other to qualifying a LTCI policy for the partnership program though. It must have the age appropriate inflation protection benefit.

These requirements are as follows:

 Those age 60 or younger must have “compound annual inflation protection.”

 Those at least 61 but younger than 76 must have “some level of inflation protection.”

 Those age 76 or older must be offered an inflation protection option, but they are not required to purchase that option.

It is a fair question to ask why inflation protection is given such prominence in partnership-qualified policies? The answer is that if partnership-qualified policies don’t have inflation protection, the purpose of a partnership program may be defeated.

This is because the whole purpose of the partnership program is to help relieve the financial burden of long-term care costs from the state Medicaid systems. If a consumer buys a LTCI policy but does not allow it to keep pace with the rising costs of care, the insufficient benefits will be more likely to force the policyholder to turn to Medicaid anyway. With very little assets left the state will have to pick up the rest of the bill for this individual and the original intent of the program is defeated.

A very important lesson that can be learned is that inflation protection is a vital component of any LTCI policy whether partnership-qualified or not.

Costs for nursing homes and assisted living centers rose again from 2007 to 2008, making this the fifth consecutive year of price increases, according to results from Genworth’s latest Cost of Care Survey.

Costs for nursing homes have jumped 17 percent since 2004 and now average $76,460 annually or $209 per day for a private room. Assisted living charges escalated even more during the same period, rising 25 percent to average $36,090 nationally.

In contrast, in-home care costs for non-Medicare certified workers have remained relatively stable since 2004 and continue to average $18/hour for homemaker services and $19/hour for a home health aide. The cost of a Medicare-certified aide, however, has changed, rising 7 percent over the past four years to reach $38/hour on average in 2008.

For the first time, the survey looked at adult day health care. The annual cost for five-day-a week participation in a community-based care setting is $15,000, with an average daily price of $59.

The study speculates that costs will rise further if the shortage of long-term care workers continues.

Long-term care costs can vary significantly by locale. For cost information by state or metropolitan area, visit www.genworth.com/costofcare. You can also read the full report and a description of the research methodology used.

Affordability is a very important ingredient in any successful long-term care plan. As is the case with many kinds of insurance, there is a need to determine an appropriate coverage level that not only provides sufficient financial protection but also allows the policyholder to continue to keep the coverage in place and afford paying the necessary premiums for as long as the insurance is needed.

Of course, we all would like to have the ultimate in financial asset protection that is available. But for the vast majority of people that would be out of reach financially and in fact, would be far too much than is needed in most cases.

CNNMoney.com published an article that makes suggestions on how to trim costs in a long-term care insurance policy to keep the premiums affordable and still provide good coverage at the same time. Here is an excerpt from that article:

“And three years is often enough. “Among people over 65 who are in nursing homes, half will leave within three months,” Miccolis said.

For the other half, the average stay is 21/2 years.

But people with dementia, for instance, tend to stay longer. So you might want to get more coverage if that’s in your family history.

A policy providing benefits for, say, five or 10 years costs more than a three-year policy. But it would still be cheaper than lifetime coverage.

Another way to save costs is to change the formula for inflation adjustments. You can choose simple rather than compound increases.

Say Jones picks a 5% simple inflation adjustment. Her $200 daily benefit would go up $10 a day each year. Jones would have a $340 daily benefit after 14 years.

A 5% simple cost of living allowance (COLA) would cut the premium on the top-of-the-line policy from $7,000 to $4,500 a year.

Miccolis says that a simple COLA might work best for people 70 or older. Odds are that they have fewer years for the gap between a simple and a compound COLA to cost a lot.

In your 50s, a compound COLA might make sense. And you can cut costs by taking a lower daily benefit to start with.

Some LTC policies offer a so-called future purchase option. That gives you a chance to buy extra coverage every two or three years, without taking a physical exam.

Yet another budget move is to take a longer elimination period. You might choose a 90-day rather than a 30-day wait for benefits.

That’s like taking a higher deductible for regular medical. You might pay more for any needed care before the coverage kicks in.

But you’ll pay lower yearly premiums. Taking a 90-day elimination period instead of a 30-day cuts the cost of a $7,000 top-of-the-line policy to around $5,750.

And you don’t have to limit yourself to one cost-cutter. Say Jones uses all the above suggestions. She buys a $200 daily benefit, three years of coverage, a simple COLA and a 90-day elimination period.

Instead of $7,000 a year for a top-of-the-line policy, her annual premium would be less than $2,000.

And Jones may decide that she doesn’t really need to start with a $200 daily benefit. That depends on where she might need care.”

You can read the rest of the article here.

More and more major periodicals and newspapers are starting to get the word out about the benefits of long-term care insurance. This is especially true of most financially-related media.

There are too many journalists who succumb to sensationalistic writing and tend to focus the bulk of their attention on LTCI companies that have a less than stellar record of service in the past. This would still be fine if they would also contrast that situation with the major carriers who have had outstanding financial and customer service ratings for many years. Unfortunately, they often only provide one side of the story in an effort to titillate their readers and stir up controversy.

Next month, Smart Money magazine will publish an excellent article on LTCI that is both balanced and very informative. I agree with the vast majority of information in it and here is a link to an advance copy of that article that I think my readers will find very useful: Smart Money Long-Term Care Insurance Article

Terry Savage is a personal finanace writer for the Chicago Sun-Times and she wrote an article that was published on March 31 that I just had to include in my blog for the benefit of all of my readers.

She rightly draws the attention to the inability of government programs to provide adequate care even now and asks us to consider what that scenario is going to look like in 15 - 30 years down the line. Here is an excerpt from her article:

Don’t say you weren’t warned. The long-term care crisis is upon us. The rumblings have already started in small towns around the country. The government is already having trouble paying the cost of long-term care for the indigent elderly.

Recently, the Wall Street Journal wrote a front-page article, slamming states for joining in a partnership to
encourage the purchase of long-term care insurance to offset the rising strain on their budgets. The article cited concerns about rising policy premiums and difficulty collecting benefits from some insurers.

Well, those are issues that can be addressed with regulation. The very real concern about the cost burden to
government didn’t make the headlines in the Wall Street Journal. But it did make headlines the very same week in the East Troy, Wis., newspaper: “Local Nursing Home Launches ‘Save the Manor’ Campaign.”

The 30-year-old Kiwanis Manor nursing home there is “looking for the community’s help to financially keep it afloat” says the article. The well-regarded, AAA-rated facility has “at least $400,000 in bills greater than its
accounts receivable.”

Bad planning? Maybe. But it appears the big issue is a cutback in government reimbursements. In 2006, Medicaid payments for these residents was about $25 a day less than the cost of providing services, the article said, adding that in 2007, the reimbursement was cut by $3 a day.

Even more burdensome, explains the article, the state demanded the nursing home add one certified nursing assistant to every shift — an additional payroll cost of more than $100,000 a year — while at the same time cutting its reimbursements to the nursing home by $40,000 a year! And the baby boomers haven’t even started retiring yet!

Another headline from a small-town Wisconsin paper, The Week, said: “Resolution asks county to stop reducing the number of beds for Medicaid patients.” “To save taxpayer dollars, the county has gradually
increased the number of beds available for patients who can pay privately,” the paper reported, ” . . . and that
means fewer beds are available for indigent patients covered by government-subsidized Medicaid.”

Now, are you still counting on the government to pay for your long-term care? Think again.

You can download a reprint of the entire article here.

There are many mistakes that can be made when considering long-term care insurance, and some of them can be very costly.

Some of the most common mistakes include only getting quotes from one company, assuming knowledge of long-term care costs when no real research has been done, relying on someone else’s opinion of what policy design is best for your circumstances, and so on.

All of these mistakes can prove to be expensive. For instance, I often see consumers who just don’t want to put in the time and effort necessary to learn about long-term care insurance choices. As a result, they will often take the first policy offered to them without really shopping around. They may put in an application with the first insurance agent who contacts them even if that agent only represents one company.

This is rarely a good decision as premiums can vary considerably from one company to another depending on the consumer’s age, health, and coverage needs. Without making a comparison between the top carriers in the long-term care insurance field, there is no way of knowing whether you have gotten the best deal possible.

However, the single most common and expensive mistake that many consumers make with long-term care insurance is to simply procrastinate making any decision at all.

They may have heard that long-term care insurance is a good thing, and so they investigate the cost for themselves. But once they have all the facts and figures necessary to make an informed decision, they just decide to put it off for a while.

Unfortunately, deferring the decision for a year or so often turns into several years. In the meantime, the insurance premiums they were originally quoted no longer apply as this insurance gets much more expensive the longer you wait to get it.

In addition, they often develop illnesses that at the very least will lower their rate classification and make their premiums increase. In some cases, their health may even deteriorate so rapidly and unexpectedly that they are not insurable at all with any reputable carrier at any cost. They may complain about the insurance companies but the fault is not with the carriers. What they have done is similar in nature to waiting to purchase homeowners insurance until their house is on fire. It’s just not a wise thing to do.

I often see folks who have procrastinated for quite some time about purchasing long-term care insurance who can now no longer afford the premiums because they waited too long or who may never be able to get the insurance again because of serious health issues that have suddenly arisen.

So, of all the mistakes that can be made when considering long-term care insurance, there is one that is by far the most common and expensive in my opinion: procrastination.

One of the furure possibilities that worries many people I talk to each day is the prospect of developing Alzheimer’s and requiring expensive long-term care as a result.

Unfortunately, the latest news on the trends for this disease are pointing to a substantial increase in the numbers of people who will have Alzheimer’s in their lifetime. Here is an article from the Washington Post that releases the latest data from the Alzheimer’s Association:

“An estimated 10 million American baby boomers will develop Alzheimer’s disease in their lifetime, placing enormous strains on the U.S. health-care system and the already overburdened network of caregivers, a new report predicts.

Currently, at least 5.2 million Americans suffer from Alzheimer’s, including 200,000 to 250,000 people under age 65. By 2010, projections say there will be 500,000 new cases of the mind-wasting disease each year, and nearly one million new cases annually by 2050, the report estimates.

In addition, the report, released Tuesday by the Alzheimer’s Association, showed that the disease is now the seventh deadliest in the nation and that women are at greater risk than men.

The overall prediction for 10 million, which translates to 1 out of every 8 boomers, is a number that is “particularly significant because it’s people who are now just approaching what we refer to as the age of highest risk,” said Stephen McConnell, the association’s vice president for advocacy and public policy.

The age of highest risk for Alzheimer’s starts at 65, McConnell said. “Some of these people are already developing the disease, and those numbers are just going to increase dramatically over the next several decades,” he added.

This is going to have a huge impact on baby boomers’ lives, their families, and the nation’s health-care system, McConnell said.

Right now, there are 10 million caregivers providing care, many of them family members, at enormous personal cost, McConnell noted. “These caregivers tend to be spouses, but there’s evidence that 250,000 of these caregivers are children 8 to 18,” he said. “So you get the sense of an expanded circle of people who are affected by this disease. It’s not just the person with the disease. It’s not just their immediate caregiver — it’s the children and grandchildren.”

Most people with Alzheimer’s are eligible for Medicare, so a burgeoning number of Alzheimer’s patients will put a major strain on the federal health insurance program, McConnell pointed out.

Medicare currently spends more than three times as much money on people with Alzheimer’s and other dementias than it does for the average Medicare recipient. In 2005, Medicare spent $91 billion on people with Alzheimer’s and other dementias. By 2010, that number is expected to climb to $160 billion, and by 2015, to $189 billion annually, according to the report.

These high Medicare costs occur because Alzheimer’s tends to complicate the treatment of other medical conditions such as diabetes and heart disease, McConnell said. Also, while people with Alzheimer’s live an average of eight years, they can live more than 20 years, placing an additional strain on the health-care system.”……you can read more of this article here.

A clear trend toward younger buyers has been emerging in the long-term care insurance field. What used to be considered mainly a product for seniors has become recognized as a smart asset protection vehicle for consumers who are much younger due to the significant savings in premium cost over a lifetime.

Here is a report from the American Association for Long-Term Care Insurance (AALTCI), that you may find very interesting:

“Long-term care insurance has evolved from a post-retirement purchase to a staple of financial planning for those in their 40s and 50s. According to new research just published by the American Association for Long-Term Care Insurance (AALTCI), one third (33%) of buyers of individual long-term care insurance protection in 2007 were under age 55. Younger individuals are not merely buying protection in anticipation of claims in their later years. The Association’s new study revealed claims involving policyholders in their 20s and 30s.

“Long-term care planning is now an integral part of mainstream financial planning, especially for baby boomers,” states Jesse Slome, AALTCI executive director. According to data published in the Association’s 2008 Long-Term Care Insurance Sourcebook, some 400,000 Americans purchased insurance protection last year either on an individual basis or through their employer. The total number of Americans with protection has now reached eight million.

“Individuals who purchase protection at younger ages are far more likely to qualify for significant savings offered to those who meet health qualifications,” Slome explains, “and now the data confirms that some of these younger policyholders will actually receive benefits from their protection as a result of an accident or illness.”

Six of the nation’s leading insurers shared data for their youngest policyholders receiving claim benefits in 2007. One such claimant was a 32-year-old who fell and injured a knee requiring several surgeries and months of rehabilitation. After six months on claim (receiving care in their home) they recovered fully. Another individual (currently 39) has been on claim for over four years due to Parkinson’s disease. The youngest individual on claim (individual LTCi policy) was age-25 upon submission of the initial claim payment. The youngest group (employer-sponsored) plan participant on claim is 23.”

Each year, approximately three months prior to a person’s birthday, the Social Security Administration sends
a statement showing the earnings on which they have paid Social Security taxes and a summary of the
estimated benefits they can expect to receive during retirement. This year, all Social Security statements
include an important message, “Medicare does not pay for long- term care, so you may want to consider
options for private insurance.” This message is appearing more and more in state and federal government
agencies and was recently seen in the results of the NAIC (National Association of Insurance Commissioners)survey.

The NAIC’s survey shows baby boomers are unfamiliar with Medicare’s coverage options and states that,
“…nearly half (of respondents) — 48 percent — said they expected to use Medicare to cover their healthcare
needs during retirement. This number increased to 57 percent among older baby boomers, those 55–62 years
of age.”

Their release provides ten tips regarding health insurance and retirement, including “Consider purchasing
long-term care coverage. This type of insurance covers the cost of services for nursing homes, assisted-living
facilities and in-home caregivers when individuals are unable to perform activities of daily living - such as
eating, dressing and bathing….”

You can read a sample Social Security statement here.

This is further evidence that state and federal governments are beginning to appreciate the crisis that is looming if consumers do not begin to take responsibility for their own long-term care needs. Let’s hope that even more stringent efforts to shed light on this issue will be forthcoming in the months and years ahead.

I am a big fan of the long-term care Partnership programs that are being adopted by most states across the country. No doubt you have noticed that I post several articles on this blog about how the Partnership initiative works and how it benefits consumers.

The hard part is trying to keep up with each state’s adoption of this program designed by the federal government in the 2005 DRA and left open for each state to decide whether to accept or reject.

The good news is that an increasing number of states are in the process of introducing legislation to implement the program for their residents. Here is the latest update on the progress being made:

States that already have approved Partnership programs: PA, VA, FL, OH, MN, KS, NE, ND, SD, CO, ID, RO, CA, NY, CT, IN.

States that have introduced legislation to start the Partnership approval process: ME, NH, RI, GA, MI, WI, IL, IA. MO, AR, OK, TX, AZ, NV, MT, HI

Hopefully, the remaining states will also see the benfits to both consumers and state governments that the long-term care Partnership initiative brings.

As several states are now implementing the Long-Term Care Partnership Program outlined by the federal government in the the 2005 DRA, there are several questions that consumers have about how a LTCI policy qualifies for Partnership status.

In general, there are a handful of qualifications that must be met in order to be considered Partnership-friendly. Most of these requirements are pretty standard stuff, such as the need for it to be a tax-qualified policy and follow the guidelines for LTCI produced by the National Association of Insurance Commissioners in 2000.

But one especially important qualification that is affected by consumer choice has to do with the inflation protection of the policy. The Partnership initiative requires that consumers up to age 60 must have compound inflation protection, whereas from age 61 - 75 the choice is reduced to “some form of inflation protection” instead. After age 75 no inflation protection is required to be a qualified Partnership policy.

I was recently asked why the need for rules regarding inflation protection. Here are a few thoughts on the subject:

State governments want to try to insure that consumers get the inflation protection that is not only cost effective but also matches their expected life span.

The state’s view is that a person in their 50’s has a longer time horizon than someone in their 60’s. Therefore they have enough time to actually see the compounding effect kick in and return significant benefits to offset rising costs.

Since simple and compound interest perform fairly similarly to one another for the first 15 years or so, the thinking is that simple will work just fine for someone in their sixties and early seventies. After age 75, no inflation protection is required by the Partnership in order to qualify. This is because in most cases they will be either using the policy or expire within a short number of years before inflation has had a chance to make a major impact on reducing their benefits.

So if you live in a state that either already has joined the Partnership Program or plans on doing so be sure that you pay particular attention to the inflation benefits that you choose.

It’s actually shocking how little many consumers know about the costs of long-term care. I see it every day as I talk about this subject with people from all over the country.

In most cases, consumers have no real idea how much facility care in their area costs, or how much inflation has increased those figures over the past 10 -20 years. That also means that they also have no idea how much it can cost them in the next 15 years or so.

As a result, it comes as no surprise that the majority of families have done very little to make plans for the possible need of long-term care services. Admittedly, it’s a difficult subject to bring up and discuss. But with such high financial costs at stake, it is a subject that will be discussed sooner or later for most people. Unfortunately, if the discussion takes place after the need for such care arises, it will most likely be too late to avert a major financial and family disaster.

AARP conducted a study among boomer women regarding long-term care planning in their family.

The study found that:

• About two-thirds of respondents (69%) have had conversations with their parents about their ability to live independently as they get older. However, only 40% have begun to plan with their parents for assistance they may need in the years to come.
• Two-thirds (68%) feel that their parents would be able to pay for assistance.
• In considering where their parents might go if they were unable to live by themselves, respondents most often mentioned having their parents move in with them (43%) or remain at home with paid help (33%). Only 17% had considered the possibility of their parents moving into a nursing home.
• The majority are familiar with community resources their parents might draw on, such as assisted transportation, meal services, adult day care, assistance with everyday activities, and assisted living facilities.
• More than half of respondents have begun to think about their own ability to live independently when they get older and how they would pay for any assistance they may need.

The two most troubling statistics are:

1. That almost 70% have had conversations about their parents future care but only 40% have actually started to do anything about it.

2. 68% believe that their parents have adequate funds to meet the potential costs of long-term care.

Obviously, more long-term care education is needed to help consumers prepare for the associated costs both financially and emotionally. Currently we have lots of talk and not much informed action.

You can read the AARP article here.

This election is sparking national interest in a very big way. There are plenty of important issues that will be affected by the person we choose as our next president.

For those who are concerned about the looming long-term care crisis as baby boomers start to retire en masse may find it helpful to know what position the presidential candidates of both parties have taken on the subject so far.

The CLTC Newsletter this month included an article by Diane Hoyle that gives us an idea of where each canadidate stands on the issue. Here is an excerpt from that article:

“Most Americans mistakenly believe that health insurance and Medicare cover the cost of long term care services. And, nearly two-thirds of the residents in America’s nursing homes rely on Medicaid. Clearly, there is a lack of understanding about the risk, cost and financers of long-term care.

Encouraging personal responsibility with the purchase of long-term care insurance to take the pressure off the Medicaid program seems like an obvious policy solution. However, the presidential candidates who lightly weigh in on the subject have not put planning for long-term care financing at the top of their lists.

Senator Clinton is the only Presidential candidate to go on record with a comprehensive long-term care plan. However, the other candidates have shared personal experiences that help to anticipate their policy preferences.

Senator Clinton’s mother moved in with her at age 88. The Senator’s $5 billion per year long-term care plan provides a $3,000 tax credit to caregivers; expands Medicaid-financed home and community-based care; gives a tax credit (covering 75% of premiums up to $1500 per year for couples earning less than $150,000); provides consumer protections; and tougher nursing home regulations.

Senator John McCain’s 95 year old mother lives alone in Washington. McCain believes helping caregivers (through tax credits or other financial incentives) should be considered, but needs to be part of overall health policy reform.

Senator Obama suggests “strengthening” Medicaid and protection from abuse and fraud, particularly regarding long-term care insurance. He also supports changes to the tax code to benefit family caregivers.

Former Arkansas Governor Mike Huckabee’s parents sold their home to move into an assisted living facility. His mother later moved to a nursing home and died approximately 10 months prior to running out of her savings to pay for long-term care. Huckabee praises Arkansas ‘ current “Project Independent Choices” which allows state payments to family caregivers.

The candidates’ efforts focus on providing needed relief to the family caregiver after care is needed. However, they fail to support the family caregiver by encouraging planning prior to the need for care.

Senator Clinton’s tax credit for the purchase of long-term care insurance is a step in the right direction however, she limits the credit to couples earning less than $150,000 a year. The capped credit along the numerous expansions of government services will further delay planning. Consumers will simply continue to rely on government because that’s the message that is being delivered.

Regardless of who is installed as the new President of the United States on January 20, 2009, one thing is certain – that individual will need a better understanding and appreciation of planning for long-term care financing.”

As a very large segment of Americans age and the senior population expands dramatically, long-term care issues cannot help but come to the fore. The signs of strain are already beginning to show as many family members are becoming caregivers for aged parents while still trying to hold down a job and in some cases also raise children.

This is an issue that I have written about often in this blog but the media is starting to get the picture as well. Here is an excerpt from an excellent article about the financial and emotional strains that millions of caregivers are already going through in our country:

“Today, about 36 million people in the United States are 65 or older. That number is projected to grow to roughly 54 million over the next 12 years, with the oldest and frailest growing faster than any other age group.

Where will they live? How will they pay for it? Who will take care of them?

The answers to those questions remain unclear.

The United States lacks an overall policy for long-term care. In New York State, meanwhile, it’s unknown if a handful of promising initiatives will meet future demands and whether the state can adequately fund them. “Right now, I’d say we’re not prepared,” said Senft, who sees the problem from another angle as outreach supervisor at the senior center in Cheektowaga.

She works with older people who didn’t save enough for long-term care at a time when medical advances enable the elderly to live longer but with multiple disabilities and chronic illnesses that require a huge amount of support and care.

“No one thinks they’re going to live to 100, but that’s what’s happening,” she said.

She sees how elderly residents get dropped off at hospitals. They’re often too frail to be safely returned to their homes, but not sick enough to be admitted. If they have children, they often can’t or won’t get involved in their care…….read the rest of the article here.