Government Funding Cutbacks
Who Will Have The Money?
I paraphrase an article in the Tuesday, July 22nd Wall Street Journal here, on spending and entitlements. The Congressional Budget Office long- term budget outlook released July 15 shows a 40 TRILLION dollar increase in debt over the next 2o years.
The CBO simply stops projecting after 36 years as its models cannot conceive of a functioning economy. What does this have to do with Long Term Care? If you are expecting government Medicaid to pay for your LTC, you had better reconsider.
The CBO’s estimates show a typical middle class family’s income tax burden nearly doubling over the next 25 years. No, this is not a rant on taxes, it is a warning that government spending cannot continue as it is (which is increasing).
Each day, 10,000 baby boomers retire and begin receiving Medicare and often, Social Security benefits as well. While five workers supported the benefits of each retiree in 1960, only two will by 2030. We do not have the resources for 77 million retirees in the Medicare system, and it’s Medicaid, not Medicare that pays for LTC when you become impoverished (it does not take long with an assisted living facility at $4000/month and a nursing home at $8500/month and doubling every 15 years).
Who will pay for your care when you can no longer manage on your own? Can your children afford to retire early and become your caregivers? Your children may be saving less than you, and you probably did not save enough for your retirement.
We are going to be on our own for our LTC. I bought LTC insurance for myself years ago, when the policies were less expensive, and the insurance companies accepted people that today are often declined. They learned that diabetes leads to cognitive impairment, and heart disease can lead to strokes. Both of these afflictions can require years of care.
Some of the LTC insurance companies have had rate increases, due to accepting people they have now learned to avoid. Some still plan to raise rates regularly, and I avoid those companies. As an independent agent, I am able to pick and chose the best deal for each client, and I work long and hard to find the best deals.
Some LTC insurance companies do not offer their products in every state, but residents of those states can come to Wisconsin to purchase them from me and they are good anywhere in the USA. It may well be worth a $250 plane ticket to get a good deal and save $1200 a year on premiums. If your agent has only one choice, ask why. If a car dealer had only one car on his lot, would that be the appropriate one for you?
If you are still healthy enough to qualify for an LTC insurance policy, you best start investigating, now! Get while the getting is still good. They are actually very inexpensive, when one person of a couple can recoup 30 years of premiums paid by two people in less than one year on claim. I will be well taken care of, who will take care of you?
More information is available at www.TheLongTermCareGuy.com
What We Don’t Know About Long Term Care – Is A Lot
Americans over 40 — in other words, us — are dangerously unaware of our likely need for long-term care when we age and woefully ignorant about the costs, according to a new poll of adults in midlife and beyond.
The telephone survey of 1,019 boomers over age 40 was conducted by the Associated Press-NORC Center for Public Affairs Research and financed by the non-profit SCAN Foundation, which supports research and other initiatives on aging and health care. It found that many older Americans had barely begun to think about their long-term care needs, nevermind put aside money to cover them. For example, nearly 31 percent of respondents said getting older was something they’d rather not think about.
Following are other highlights from the poll, along with advice available on Next Avenue to help you avoid falling short when the time comes.
Only 16 percent of those surveyed said they had done a great deal of planning for their long-term living assistance needs; two-thirds admitted they’d barely started preparing. Looking deeper, only 8 percent of respondents between age 40 and 54 — and just 30 percent of those over 65 — said they’d begun long-term care planning. In addition, just 47 percent said they had created an advance directive (or living will) to designate someone to make decisions for them in the event that they can’t.
The survey found that even many of us who have been caregivers for our own parents have taken no steps to prepare for the day our children may need to look after us. Fifty-three percent of people responding to the survey said they had provided care for a family member or close friend, yet only 24 percent said they thought it was very likely that they’d ever require ongoing living assistance themselves.
And while 77 percent said they were confident their spouse or partner would help them as they aged, if need be, only 46 percent said they were sure they could count on their children. Maybe that hesitancy reflects the fact that nearly 60 percent of respondents had not talked to loved ones about the possibility. That’s surprising, considering 95 percent who had been family caregivers say the role was fulfilling and 72 percent say it was stressful.
Almost half of respondents – 48 percent – said they thought “just about everyone” will need ongoing living assistance at some point, even if they never become seriously ill. The federal government estimates that 70 percent of American adults will require long-term care at some point after age 65, on average for at least three years.
In the survey, 58 percent of people over 40 guessed that living in a nursing home cost less than $6,000 a month, but nursing homes actually average $6,700 per month nationwide. Respondents’ estimates of assisted-living facility and home health aide costs were more encouraging: Only 31 percent underestimated the average monthly cost of the former ($3,000 to $4,000) and 14 percent underestimated the average monthly cost of the latter ($1,000 to $2,000).
Still, when it comes to long-term care savings, many of us have not faced reality. Only 33 percent of those surveyed said they doubted they’d have the financial resources to cover their care needs as they age, which makes sense when you consider that only about a third of respondents said they’d begun setting money aside. As for the rest of us, it’s time to take financial action.
Our knowledge of what’s covered by Medicare and Medicaid is also fairly remedial. For example, 44 percent thought Medicare, the national health insurance program for seniors, paid for care by home health aides; 37 percent thought the program covered nursing home fees. But Medicare does not cover nursing home costs and it covers home aides only in certain cases. As for Medicaid, the federal program for Americans with low or no income, only 39 percent of respondents thought they might ever need to rely on it to cover long-term living costs. The reality is that Medicaid pays the bulk of the nation’s long-term care costs, usually after people have spent their retirement savings. However, there is zero chance that Medicaid will have the funds to pay for the baby boomer’s LTC needs as they begin requesting assistance. For more information visit www.TheLongTermCareGuy.com
Where Will The Workers Come From (and What Will The Price Be?)
Long Term Care is getting more and more expensive every year. LTC insurance is getting more and more expensive each year as well, it’s a direct correlation.
This morning’s Green Bay Press Gazette had a guest commentary about boomers becoming part of the labor solution. The article stated that in less than 30 years, the number of people ages 65 or older will rise from 14% of Wisconsin’s population to 24%. The working age population may remain flat during this same period.
Earlier this year the NYTimes reported that caregiving will overtake retail as the number one occupation in America. Where will the (minimum wage) workers come from to care for our aging population? Congress is attempting to raise the minimum wage by a third, further raising the cost of care.
While volunteering at a recent Alzheimer’s Association event, I was approached by two home care agencies. Both lamented that they have more clients seeking home care than they have staff to provide for. They requested I ask my clients if any of them would consider some part time employment as a caregiver.
The employment dilemma will be mitigated by retired workers returning to part time employment, or delaying retirement. But even with that, we do not have enough workers to provide the LTC services of the baby boomers as they age. We do not have the facilities or other infrastructure. Those with available cash flow to pay for care will always find providers. However, Medicaid, which many will have to rely on, pays so far below market costs of care that providers will have to shun that payment source.
Where will Medicaid eligible people find care? Many will have no choice but to move in with family. Many families already have joined the “sandwich generation” caring for parents and children at the same time.
Two states (New York and Pennsylvania) have already begun enforcing filial responsibility laws, holding adult children responsible for parents’ LTC costs. Ask your financial planner how that will impact your retirement! Or, perhaps ask your financial planner how he/she would suggest you fund an extra, unanticipated bill of $50,000 to $100,000 a year later in your retirement. These costs are in today’s dollars, and will double in 15 years, and quadruple in 30. See if they suggest investigating LTC insurance, or if they say your life savings will handle that easily.
For more information, visit www.TheLongTermCareGuy.com or try this free online LTC calculator at www.RetirementChoices.net/rraabeLTC1.html
Is It Too Late To Get Long Term Care Insurance?
For many it is too late. By 60 years old, approximately 25% of us are not healthy enough to be accepted for this insurance. It gets more expensive the longer you wait as well. For each year you wait in your fifties, you will pay 3% to 4% more, while in your sixties, waiting a year will add 6% or more to the premium.
I am taking some of these statistics from two excellent articles published recently, one from a USA Today insert on Sunday, April 13, 2014 and the other from the Wall Street Journal on Monday, April 14th, 2014. The first one stated that eight out of every 10 couples will have an individual who requires long term care (LTC).
The WSJ listed mistakes people make when buying LTC insurance. The first is waiting too long. The second is buying on price alone. There are a number of moving parts in LTC insurance, how much, for how long, deductible, inflation, etc. It is easy for an agent who is not intimately familiar with all the things one needs to consider to offer an inexpensive policy that does not address inflation. Purchasing a daily or monthly benefit today that does not grow, and may not be needed for 30 or 40 years, will give a low price, but may be completely useless when needed. If you had set aside $0.29 for a gallon of gasoline while in high school back in 1965, and tried to buy that gallon of gasoline with it now, you would be very disappointed.
This is not a product to be purchased without some expert guidance. There are features that may be very important to you and others that may not matter much at all. Each person’s situation may be different making what is unimportant to one, very important to another.
The new hybrid policies were also addressed in the article. These are typically life insurance or annuities with a LTC feature. While it is great to have life insurance to claim if LTC is never needed, some have no inflation on the amount paid for LTC services. Thirty or forty years from now when this problem becomes apparent it will be too late to go back and make corrections. If the cash flow at time of claim is not enough, along with your other available cash flow, then spending down to Medicaid impoverishment may be inevitable. If this happens, one must generally cash in any life insurance to obtain Medicaid, and all is lost.
If you have saved well and are ready for retirement, wonderful. Have you also planned for unforeseen expenses? If 80% of couples will have one person needing LTC, and the number of Wisconsin seniors is expected to double by 2035, there will be a lot of unprepared people hoping the government will still be able to pay for their LTC. Good luck with that! I got my LTC insurance at age 52. When will you consider investigating it for yourself? More information is available at www.TheLongTermCareGuy.com
Caregivers Trials and Tribulations
The New York Times recently reported that caregiving is set to become the number one profession in the USA by the year 2020, overtaking retail.
This tells us there are a tremendous number of people caring for an individual needing long-term-care (LTC) services. Whether they are working as a professional caregiver, or are caring for a family member, the stress is similar. Today I am referring to an April 1 article in the USA Today newspaper concerning the depression that comes from doing this work.
The article mentions that 64% of those caring for disabled veterans have jobs. On average, they miss about a day of work each week. Twenty-eight percent quit work due to their caregiving duties. Sixty percent say they are under constant financial strain. Many of these caregivers are aging themselves and worry what will happen to the loved ones they care for when they can no longer provide that care.
It has also been documented that the morbidity (health) of caregivers is significantly worse for their entire life, even after their caregiving duties are over. This is not something you want to burden your family with if it is avoidable. However, with many states requiring more significant disability to qualify for Medicaid payments for care, many families will be required to step into a caregiving role, whether they have the time, energy, or space to do so or not.
Those who take responsibility for their own care will be able to choose the providers they want, and pay for it. When I first purchased my LTC insurance policy 13 years ago, I thought it was expensive. However, over the years that premium has become a smaller and smaller percentage of my income, just like a mortgage payment does. The benefits though, at a built in 5% compound inflation factor, have kept up with the costs of services I may someday need. Fortunately, I purchased my insurance at age 52, before several medical conditions became evident that would have made such insurance impossible to get, at any cost.
I know that I can obtain and pay for any LTC that I might need. Do you have a plan? Social Security will not be sufficient to pay for care, and with facility care costing between $40,000 and $100,000 a year, most life savings accounts will be emptied very quickly. This is something that needs to be considered while you are still healthy. More information is available at www.TheLongTermCareGuy.com
Is Something Really Better Than Nothing?
Recently, I have had a few conversations with agents about clients who have purchased the life/long term care products. Now, it’s no secret that I am skeptical about the benefit of these products for clients (which I’ll explain later). When I share my concerns with the agents, I invariably get the response, “Well, something is better than nothing.” Is it?
Long term care insurance (LTCI) is a complicated product because many factors need to be taken into account when selecting the appropriate product for the client. The major questions include how much benefit is appropriate, for how long, the nature of the deductible – commonly called the elimination period, and inflation.
The first factor–how much benefit is appropriate–can be determined by considering how much of the cost of care clients can cover with their own resources—how much they can pay “out of pocket”. When care is needed, the lifestyle changes that occur at the same time often mean that other areas of spending go down. For example, they may be able to sell a car that is no longer being driven, will probably travel less, go out for dinner less frequently, and generally be out and about less. Those dollars that were formerly used for these things can now be reallocated to paying part of the cost of care. The interest generated on a life savings can also help pay for care, even while preserving the principal.
Selecting the proper product becomes essential in accomplishing what is intended here. If the combination of the clients’ income sources, along with the proposed LTC insurance benefit is not enough to pay the monthly bills for care when that care is needed, the clients’ assets will be depleted. Eventually, they will become impoverished and need to turn to Medicaid.
Choosing the length of the benefit and the deductible is often a matter of what companies offer and what the clients prefer. Many companies have been shortening the length of time they will provide a benefit. Here too, clients may need to decide how much they can pay for on their own before they would need to turn to the insurance when considering these benefit levels.
One of the most vital items that must be considered when selecting an appropriate LTCI product is the impact of inflation on the benefits, especially when the needed care might not start for 20, 30, or 40 years from the time of purchase . The costs of long term care services (such as assisted living, nursing care, home care, and so on) have been increasing by an average of 5- 6% per year for the past 20 years. Since about 2008, the impact of the recession has resulted in a slightly lower rate of inflation, but costs will likely accelerate in the future. The New York Times recently reported that “Caregiving” will become the largest profession in the United States by 2020, overtaking retail. This is because of some basic demographic changes that are occurring.
My other blog posts have discussed the impact of the aging of the baby boomer population on the demand for long term care services. Suffice it to say that the unprecedented number of people on the cusp of turning 65—or older—will have an impact on long term care service needs, just as it has impacted every other institution over the past 60 years. Especially significant is the fact that the U.S. Department of Health and Human Services says that at some point, 70% of Americans will need some long term care services. There are fewer working-age caregivers, compared to the growing number of seniors who will need care. The market always responds to an imbalance of demand and supply– wages will rise to attract more workers to meet the need. All this is a recipe for rapidly increasing costs of long term care services. A benefit that will pay for long term care today will be as useless as having $1 to fill a gallon gasoline can 20, 30, or 40 years from now. Thus, purchasing long term care insurance without an automatic 5% inflation factor benefit increase is not in the consumer’s best interest.
So…is something better than nothing? Is a flat spare tire better than nothing? You think you are covered in the event of a flat tire, but you have actually lost fuel mileage hauling around that empty flat spare while thinking you had “insurance” against a flat.
Similarly, if you paid LTCI premiums for many years, and then find that the cash flow it provides, along with your other available income sources is not enough to pay for care, you have no choice but to spend assets down to impoverishment and end up on Medicaid. What good did that policy and all those years of premiums do for you? They helped you go broke faster, and you still end up on the welfare program called Medicaid.
Long term care insurance is a complicated product. Decisions made when purchasing it today will affect you many years down the road. If it does not do what it was expected to do, it was a waste of time and money for clients and provides them a false sense of security.
My aforementioned skepticism about the life/long term care products is that when they were introduced, they didn’t include the inflation feature… and you can see that I think this is essential to protect clients. The good news is that many products have now begun to include this. Agents who have clients who can benefit from a life/long term care product have an obligation to seek out the ones that include inflation protection, for the protection of their client.
From time to time, I have even heard some agents say that clients won’t buy the life/long term care policy with inflation because it’s too expensive, so that’s why they sell the ones without inflation. That makes me wonder—is this about making a sale or doing what’s best for clients?
So..is something better than nothing? I think that when it comes to long term care insurance, in some cases, nothing is, in fact, better.
Seeking expert advice from someone knowledgeable is vital. For more information visit: www.TheLongTermCareGuy.com
Medicaid LTC Is Very Costly For States
Among people eligible for Medicaid but not Medicare, long-term care residents are most likely to be among the costliest beneficiaries for a state, according to a new report from the Government Accountability Office.
Senator Charles Grassley (R-IA) requested the report, noting that much research has focused on those eligible for both Medicaid and Medicare, but has largely overlooked the Medicaid-only group. The GAO findings are meant to guide policymakers’ efforts to manage spending, the report states.
People on Medicaid for payment of LTC services compose only 4.3% of Medicaid beneficiaries nationally, but account for 31.6% of state Medicaid spending in 2009, according to the report. Dual eligible (those eligible for Medicaid and Medicare) were an even costlier group, accounting for 35.2% of spending.
The remaining third of Medicaid dollars were spent on the 81% of Medicaid recipients who were not receiving LTC services. As you can see, LTC is the majority of Medicaid spending, both on those who are Medicare eligible and those not yet of that age. Fully 40% of all LTC services delivered in the USA are used by people between the ages of 18 and 64.
Some articles suggest that one should not even consider LTC insurance until you are 65 years old. By 65, fully one-fourth of us cannot qualify to purchase LTC insurance due to our medical record. That leaves us with little choice but to spend down our life’s savings when the need for care arises. While many do not believe they need to leave an inheritance for family, few people want to leave a spouse or dependents with little to live on.
I occasionally encounter financial pundits who tell clients that their $200,000 or $500,000 IRA or 401K balance will take care of any LTC needs out-of-pocket, no need to buy expensive insurance that may never be needed. I feel the same way about my car insurance (not needed in the past 25 years) or homeowners insurance (have you seen a single house burn down in your entire neighborhood in the past 30 years?).
Nest eggs are often used in retirement, that is why people saved. How many will not touch the money, saving it in case LTC is needed? If the money does not grow significantly, but the costs of LTC do, will there be enough? Thirty years ago a new car averaged $12,300, gasoline was $1.11 a gallon, gold was $384 an ounce and the DOW was at 3800.
If costs of LTC services only increase at the current rate of 5%, a nursing home will cost $17,000 a month in 15 years and $34,000 a month in 30 years. Are you prepared to handle those costs out-of-pocket when you can no longer manage on your own any more? If the assisted living facilities or home care are only half or a third of that, how long will your funds last?
Perhaps investigating LTC insurance might be prudent. More information is available at https://thelongtermcareguy.com
“Senior Tsunami” To Come
A recent California study projects “an unprecedented senior tsunami” led by 65 – 84 year old baby boomers. This group will swell nursing home residency to more than double current levels in just over 15 years.
The findings by the UC-Berkley study paint a dire picture for California by 2030, when the state’s Medi-Cal Long Term Care (LTC) costs are expected to soar to $12.4 billion annually. This is an 88% increase from current government spending for institutional LTC.
It does not help that rising levels of obesity are expected to exacerbate seniors’ health problems. Obesity often leads to diabetes, and people with diabetes have a significantly higher incidence of Alzheimer’s disease.
Couple this with a recent Pew Research study that states people in the United States are much more likely to say that seniors should be responsible for their own care than people in other countries. I find that surprising when one considers the number of people who attempt to hide assets to collect Medicaid.
Others say they plan to move in with their children, but most have not conveyed that plan to those children. Ozzie and Harriet were a typical 50’s couple where the wife stayed home while dad went to work. In her dress, heels and pearl necklace she had the time, space, and energy to have parents move in when they needed care. Today most wives are working just as many hours as the husbands and have little resources to provide 24 hour care to elders.
The government itself is short on funds, you may have heard rumors of budget deficits in the news. 29 states and Puerto Rico have filial responsibility laws on the books. These laws can force children who are above the median income of their state to be held legally responsible for parents’ bills. They have not been enforced, until recent court case decisions in two states.
No one knows whether these recent court cases will encourage other states to enforce their filial support laws with greater vigor, but this is a development worth watching. However, as more of the Baby Boomer generation reaches their golden years, and as many nursing homes and local governments are faced with providing care to a growing number of indigent elderly patients, there’s a possibility that other states will look more closely at their filial support statutes in an attempt to find another way to fund mom’s or dad’s nursing home bill.
There are basically three ways to pay for care if you cannot move in with your children: pay for care until you are impoverished, apply for Medicaid when you are impoverished, or plan ahead and purchase LTC insurance while you are healthy enough to purchase it. Insurance is the least expensive option, but if you wait until your health changes or your doctor has handed you a diagnosis of a medical condition that precludes your qualifying to purchase it, you are left with no choice but to spend down a life’s savings. Have you even investigated this insurance? Perhaps it’s time.
What Americans Aging Means For Long Term Care
The population of America is growing at its slowest rate ever. Population increased last year at only 0.72%. Yet 10,000 Americans turn 65 every day. We are becoming an older population.
You may have read about legislation in many states to raise the minimum wage. The great majority of Long Term Care (LTC) is done by minimum wage workers. Every year there are less and less of them while the elder population continues to expand. The costs of LTC services have been increasing by an average of 5% to 6% each year over the last 20 years. The past couple of years have been a bit less than that due to the economy, but that is changing.
What happens in any industry when there are not enough workers applying for the jobs available? Wages go up until workers apply for those jobs. Compound that with the legislation to raise minimum wages, less and less young people willing to work for minimum wages, and the explosion of elders in America and what do you see for the future of LTC service costs?
Yesterday the PEW Research Center released a survey about aging and retirement in 21 countries. Many countries expect to face an increase in public pension and medical expenditures costs as people age. Public pension shortfalls are already bankrupting many U.S. cities. Their research showed that many countries will have more people over 65 than under 15. In 13 of the 21 countries surveyed, respondents said the government had a key responsibility in caring for the elderly. Does the U.S. have the money for all our elders?
The burden here is increasingly falling on family members. Americans are quite unprepared for their later years and particularly for the potential need for LTC services and support. When you are 85 will you depend on your 60 year old children to bathe and dress you? Can they handle the burden of Alzheimer’s care when you must be watched every minute? With less workers and higher minimum wages costs will soar. Can you handle an extra bill of $40,000 to $90,000 each year in your retirement? If costs only increase by 5%, that number will double in 15 years, and quadruple in 30.
I have a way to predict the future costs, a free online calculator that you can move the numbers around any way you want to. It will tell you how much money you need to set aside today, so that it will grow to enough to fund your LTC in the future. You can access it here at www.RetirementChoices.net/rraabeLTC1.html
Check it out. Play with the numbers. If you decide it might be worthwhile investigating LTC insurance, and you did not wait too long so that health makes it unavailable, call me. Or call a local LTC insurance expert. Check to be sure this is not a sideline, an also has product for them, but rather someone who is knowledgeable in this field. Or check out my website at www.TheLongTermCareGuy.com
Medicaid Is Just Fine, Isn’t It?
If I had a nickel for every time I heard people say that Medicaid gives you the same care as paying for care does………
True, there is no sign above the door in your facility stating if you are paying the full bill for care or if Medicaid is paying the bulk of it. However, getting in to the facility you would like to be in can be very difficult.
Medicaid does not pay the same amount to a LTC facility as you or I would if we needed to be there. If one spends down to Medicaid impoverishment and applies for Medicaid benefits, the facility cannot ask us to leave due to the change in payment source.
They can, however, refuse to admit someone for financial reasons. It is usually done very tactfully, the admissions person you meet with might inquire about the cares your loved one needs. After listing those cares you might be advised that they do not currently have the staffing, equipment, etc. to provide the needed care. Unfortunately you may need to look elsewhere.
The problem is, it is not possible to lose money on every customer, and make it up with volume. The problem simply continues to get worse until they close their doors. That has happened to a number of facilities, and the others have learned from this.
The Medicaid reimbursement can be from one to several thousand dollars a month less than the cost of care. The assisted living type facilities suffer the most as the loss tends to be a larger percentage of the rates they need to charge to remain in business. If someone has done Medicaid planning, their family now holds their assets and they are qualified for Medicaid, will they have easy entrance into the most desirable facility? The one most people want in to, the one that might even have a waiting list?
Now consider LTC insurance as an alternative to this. If purchased in the 40’s, 50’s, or even 60’s if still healthy enough, the premium can be easily financed with just the interest on a small portion of life savings. Most people have some income and interest that can be contributed to the cost of care – once care is needed. Less income may be needed for travel, boating, camping, and other fun pursuits that are no longer manageable. Only the difference needs to come from LTC insurance meaning less insurance may be needed than most people think.
When you pay for the care you need, you have your choice of care providers. If you are unhappy, you can easily move to a more desirable facility or provider. You are in control and your life savings can be left to family, charity, or anyone you desire because it is not being used up. That is how I will pay for my care, if needed. If care is not needed, I will be in the same position I am with my auto insurance, glad that I have not had an accident (knock on wood). For more information visit https://thelongtermcareguy.com