Nursing Homes
A Billboard in Green Bay, WI
I noticed a billboard in Green Bay, WI last week. Green Bay is a nice midwest town that I call home in middle America which is obsessed with football. What struck me was the item being advertised.
The billboard was advertising a home elevator that travels up and down alongside a stairway. These items have been around for years, and were advertised in the back pages of certain magazines. The fact that they are now appearing on billboards is testament to the aging of America. Perhaps we might start seeing billboards for wheelchairs, walkers, home care agencies, etc.
The point is that America (and the world) is getting older. 10,000 Americans a day turn 65 and start Medicare. This is the baby boomer generation and is expected to continue for the next 18-19 years. Due to the recent financial conditions we have experienced, many do not have the assets or income they hoped to have at this time of their lives. Fewer yet have the finances to handle the costs of Long Term Care either. I do, but that is because I purchased LTC insurance years ago at age 52. I was younger then, thinner, did not yet have arthritis or diabetes, and could get it.
Many waited or are waiting until it is too late to get this coverage. For those folks, a bill of $30,000 to $95,000 a year will devastate them. They will leave spouses with little and children with nothing. Once their money is spent, they will transition to Medicaid, a program for the indigent. In many areas this means a nursing home instead of home care or assisted living facilities. The facilities lose about $2400 a month on the Medicaid reimbursement, but you can go to any one of them that will accept you, and that financial loss. If they lose money on every customer, can they make it up on volume? I think not.
There are concerns about the long term viability of Social Security, and some about Medicare as well. Some people think the government will take over and pay for all Long Term Care. something like this was proposed for the Affordable Care Act just getting ready to start, but was removed as it was financially unsustainable.
Financially unsustainable is an appropriate phrase when used to describe the Long Term Care financing situation in this country. Will we revert to the strategies used in the 1950’s when parents moved in with children? The days of Ozzie and Harriet, a stay at home housewife with time and energy and room to spare are long gone. Perhaps we have unemployed children who will move in with us and provide care. If this is done without a formal employer-employee relationship, and Medicaid is later needed, any payments may be considered gifts, and disqualify us from receiving Medicaid.
If you are still healthy enough to investigate LTC insurance, perhaps that would be wise to do. You must get it before you need it, or you won’t be able to get it. I can help you investigate this and size things appropriately for your situation, then you decide. Call me at 920 884-3030 and lets investigate.
Don’t Bet The Farm
“Betting the farm” is a phrase that describes going all in on a bet, betting the entire amount you have. Most sane, reasonable people would never do that, or would they?
We adapt to risks our entire lives. We may go to a casino, but rarely bet our house, limiting our wagers to a couple of dollars or rolls of quarters so as not to lose more than we can afford. When we bought our first car we realized the risk of an accident wiping out our future income for many years and purchased auto insurance, even though it was expensive. When we bought a house the bank required homeowners insurance in case of a storm or fire so we paid several hundred dollars a year so we would not lose the $150,000 house. Our health is insured and even our income is insured through Social Security. Once we get to 65 Medicare covers most of our health costs.
But as we age, there comes a point when we may no longer be able to manage on our own. Arthritis, brittle bones, stroke, dementia, or a host of other things unfortunately do happen to us, our friends, and our neighbors. Many of us think we will get the help we need from our children. We forget about all the running two parents do with soccer practice, band camp, school functions, etc. , and the fact they may not live nearby.
For most people, that is when we investigate commercially available help, either in our home or in a facility of some sort. The assisted living facilities popular now are wonderful places, many have pools, hot tubs, and even happy hour once a week. But how many of us can afford to withdraw an additional $3000 to $4000 a month from our retirement savings for very long? Nursing homes cost twice as much as assisted living.
Once care is needed it’s too late to get insurance for it. We have, in effect, bet the farm. There may be no other choice than to pay for the care we absolutely must have. Liquidating assets can be terribly expensive. A farm, duplex, business, land that we aquired long ago has appreciated. Selling it may trigger capital gains taxes and realtor’s fees besides the fact that a forced sale rarely gets the best possible price. Any asset we own that has significantly appreciated is subject to severe shrinkage. And then we spend it down. At $2000 of assets we can apply for government Medicaid to pay the bills, but not before. A spouse at home can keep a little, but that is taken later by the government too. We bet the farm – and lost.
It doesn’t have to be this way. If we planned ahead like we did with the auto, homeowners, and other insurances and investigated long term care (LTC) insurance while we are still in good health and mobile, we could have traded a couple hundred dollars a month to get thousands a month just when needed to pay for the care we need when we can no longer manage on our own.
Which will you do? Hope for the best, plan on help from the children, bet the farm? Or plan ahead while you still can? Call TheLongTermCareGuy.com at (920) 884-3030 or (800) 219-9203 to start investigating. While you still have that option.
Are You Concerned About How You Will Pay For Long Term Nursing Care?
You’ve read that nursing homes can cost up to $8500 a month, assisted living half of that, and home care anywhere from very little to more than the nursing home. Your first thought might be there is no way I can afford such care. That is often an accurate first impression. However, there are strategies that can help.
First, consider how much of the cost you may be able to bear on your own. When someone needs care, lifestyle changes, often considerably. If one of a couple needs care there may be no need for a second car or pickup truck. That can equate to less mouths to feed. Then there are the toys; boat, motorcycle, snowmobile, camper, etc.
The travel and fun budget will also shrink with no trip to Branson, a cruise, a bed and breakfast weekend, etc. Note: you should be having fun while you are healthy as you only go around once in this life. Thus with basic necessities budgeted for, less gasoline, insurance, tires, trips, toys, etc., you may find that a significant amount of income may be freed up.
Long Term Care insurance is a great way to pay for care, if you purchase it while still healthy enough to get it. The trick is to investigate it when it becomes affordable, and take into account the budget changes mentioned above and not buy too much. Most long term care is NOT done in nursing homes, so an amount that, along with available income, can cover home care or an assisted living facility may be sufficient for many. And don’t forget the IRA or other nest eggs. Even if you want to preserve them for a spouse or heirs, you can still use the income (yield) they produce. I realize interest rates are not the highest right now, but every little bit helps.
Medicare does not pay for long term care. It will pay for a short recovery stay in a skilled nursing facility following 3 days in the hospital (and you know how quickly they get you out), but that is only for your active recovery for a very short time. Medicaid can pay for care, but only after you are impoverished, meaning you have spent all available assets, cash, savings, real estate, etc. It is a last resort to be avoided if possible. If this becomes necessary, do plan to set aside some money in an irrevocable trust to pay for funeral, which most states allow (life insurance must be cashed in to get Medicaid).
There is a strategy that uses as its base an annuity, an insurance product that converts a sum of money into a monthly income for life. Obviously the older you are, the smaller a check you write to receive the needed monthly check for life in return. One company has fine tuned this for long term nursing care, however, and takes health into consideration. If you need care, your health is probably not as good as the average person of your chronological age. Thus your shorter life expectancy, when taken into account, means a smaller sum may buy you the income you require for the rest of your life. The worse your health, the better the deal.
If funds are not available in your regular bank, do not discount the “bank of house” (reverse mortgage). Since you can’t take it with you, why not use its equity to help you stay at home in it? Some people have even used home equity through a reverse mortgage to pay for long term care insurance. This gives them a much better chance to remain in the home and have money left over at the end to pass on.
For more information on what is best for your situation, contact TheLongTermCareGuy.com Romeo Raabe at (920) 884-3030 or (800) 219-9203
Seniors Optimistic About Future
Seniors today are optimistic about the future, yet 41% of them that are not yet retired plan to rely on Social Security as their primary source of income. This is probably due to the decimated nest eggs as a result of the past 5 years financial crisis.
41% WOW, that means a lot of people who are ignoring the government’s position that Social Security is not to replace other means of support, but only to augment them. Many of these people have no alternative. Long term unemployment, very low interest rates, capital that has evaporated, etc. leaves them more dependent on that Social Security check than they or the government wanted.
Many of these people will not be able to afford LTC insurance. They will need to pin their hopes on Medicaid, a program for the impoverished. It may not take long to end up impoverished with nursing homes often costing to $8500 a month, and assisted living facilities $3500 to $5000 a month. Home care is expensive too.
LTC insurance is the least expensive way to plan for the possibility of needing assistance when people are no longer able to get along on their own anymore. IF one purchases it while still healthy enough to get it, and benefits are chosen appropriately, the premiums are affordable for many – but not all.
For others there are ways to make the best of the situation, if you know what must be done. Medicaid requires one to spend down, and also to cash in life insurance over $1500 worth of death benefit. However, money can be set aside for burial expenses, if done properly, so that the family does not end up taking a collection among themselves in the funeral home at death.
Medicaid generally allows (varies by state) up to $15,000 to be set aside in an irrevocable trust for burial. This is money not tied to any funeral establishment, and is under control of the family. The money can be used for any funeral associated bills at time of death and is far better than children financing this final bill. Nobody wants to leave that legacy to their family. What ever is not spent on final expenses is refunded to the estate of the deceased of the insured, spend as much or as little of it as needed.
If money is divested (given away) in the 5 years prior to needing Medicaid, there will be a penalty period during which Medicaid funds are not available. The irrevocable burial trust is exempt from these penalties. They can be funded even if the person doing so is already receiving care, or in a facility. It is even possible to set aside $15,000 for each of your children (and spouses of) in an irrevocable burial trust as well, if done before the money is all spent on care.
If this is of interest to you or your clients, contact TheLongTermCareGuy.com at (920) 884-3030 or (800) 219-9203 to get this set up. If you sell Medicare Supplements, you already have the clients who will be needing to do this. If you are a consumer worried about this, remember that the ambulance does not stop at my office on its way to the hospital.
Estimating The Current Cost of Future LTC
With the costs of LTC services increasing at 5% to 6% annually over the past 20 years, it would be likely to expect that trend to continue. However, with the shortage of workers for LTC facilities, it is also likely that wages, and thus prices will rise even faster. How would I calculate how much to set aside now?
It is often difficult to visualize how something we purchase may cost considerably more in the distant future. Who envisioned $5.00 for a cup of coffee, or $4.00 for a gallon of gasoline? Many baby boomers have purchased cars recently that cost more than their first house.
If we have some idea of the rate of inflation for a particular product or service, and we can assume how many years into the future we might need that product or service, a calculator can be built to compute this for us. www.RetirementChoices.net/rraabeLTC1.html is such a calculator for LTC. It was created by Louis Lavosh of www.financialScenarios.net (866) 808-8342 and is used by financial planners and LTC insurance specialists across the country.
There are five variables, and you can move any or all of them. First, consider the cost of care in today’s dollars. If you want to prepare for the cost of a nursing home, I’d suggest between $250 and $300 a day unless you are in the more expensive New England area. An assisted living facility might cost half of that. Secondly take a guess at how many years it might be before you need care.
Third is how many years of care you might need. The national average of nursing home care is about 2.8 years. However, only a relatively small percentage of LTC is done in nursing homes. The average for CBRFs or other assisted living type facilities is 4 years and there are no good averages of how long one may need home care.
The last two are easy, the cost of LTC services have been increasing at a rate of 5% to 6% a year for the past 20 years. However, a recent Wall Street Journal article addressed the problem facilities are having finding employees. Typically when an industry has a hard time finding employees, wages rise until sufficient applicants appear. Thus costs may increase faster in the future. Lastly, what are you earning on your investable assets?
Using myself at age 63 as an example, I’ll enter $270/day as the cost of care in a nursing home. I may need care at age 85 which is 22 years from now. Hopefully, I will only need three years of care. I’ll estimate that costs will increase at an average of 6% and I’m earning 4% growth on my money. The calculator tells me I should set aside $426,385 today, which will grow to $1,051,981 in 22 years, which will then pay for three years of nursing home care.
I am so happy that I decided to purchase LTC insurance back when I was 52. It has 5% compound inflation on the daily benefit which is now $244 a day. I pay $1800 a year for this policy which has a 90 day deductible and lifetime benefits. Nothing works like traditional LTC insurance with its 5% compound inflation feature. Expensive? I think not, it is actually dirt cheap!
Romeo Raabe LUTCF, LTCP is known as TheLongTermCareGuy.com and is located in Green Bay, WI. He works all over the state primarily by referral from other insurance agents, financial planners, attorneys and accountants who use him as the expert helping their clients deal with LTC issues. He can be reached at (800) 219-9203
Alzheimer’s in Now the 6th Leading Cause of Death in America
Per the Alzheimer’s Association, Alzheimer’s Disease is the 6th leading cause of death in America. The rate of deaths due to Alzheimers rose 68% between 2000 and 2010. This is due in large part to longevity increases and better diagnosis.
One in three seniors now dies while suffering from Alzheimers or another form of dementia. Dementia can last for many years requiring significant time in long term care at home and/or a facility. For many diseases the death rate is going down because the federal government funds and invests in research, but we have not seen that same commitment for Alzheimer’s disease.
Dementia, including Alzheimers, takes a toll on families. In 2012, more than 15 million people were caregivers for someone with Alzheimers. The problem starts often decades before the disease is apparent. Once a memory concern is on your medical record it is too late to get long term care insurance. Even a question posed at a regular physical about memory, and discounted by the doctor will be recorded in the medical record and eliminate any hope of purchasing long term care insurance.
Ten thousand baby boomers are turning 65 every day in America, and will for the next 18 years. By age 65, over 10% of us have Alzheimers. By 85, 3/4 of us do. Couple that with our longevity increases due to better medical care and you can see that dementia is becoming an epidemic.
Who will provide care for you when you can no longer live on your own? How many children did you have and where do they live? The Ozzie and Harriet of the 1950’s where the wife stayed home and could easily have parents move in when they needed help is long gone. Assisted living facilities average $3500 a month if not much care is needed, and the cost is much higher for dementia care. Nursing homes cost more than double that and in-home care, if needed on an ongoing daily basis is also expensive.
If you have a $400,000 nest egg for retirement, and plan to live on that, will an extra annual bill of $50,000 to $100,000 be a problem for your strategy? Many people do not even consider the cost of long term care in their retirement plans. The insurance for long term care does not need to be expensive. Most of us have some discretionary spending that would cease if one of a couple needs care. Those dollars can pay part of the bill and perhaps interest on the nest egg can be used as well without tapping and decimating that nest egg. Consider the rest to be provided by a long term care insurance policy – while you are still healthy enough to get one. You may be healthy right now, but you are only one doctor visit away from suddenly being uninsurable at any price.
Investigate long term care insurance with an expert who specializes in this and has access to many policies, not a generalist who says they can do this as well as your car, home, life insurance and also manage your investments. www.TheLongTermCareGuy.com, Romeo Raabe, would be a good place to start if you live in Wisconsin. He can be reached at 800-219-9203 or 920 884-3030.
Irrevocable Burial Trusts for Family Members Not a Divestment Court Rules
In a Fond Du Lac courtroom on January 18th, 2013 the court ruled that a person funding irrevocable burial trusts for children and spouses of children is not a divestment for Medicaid purposes.
For years insurance agents have used irrevocable burial trusts instead of final expense life insurance policies as the trusts are outside the estate and not available assets to pay for long term care. Life insurance over $1500 face amount generally must be cashed in to qualify for Medicaid. Medicaid has always allowed these as well as establishing them for children and spouses of, neither of which were considered divestments. A divestment, or gift, would preclude the grantor from receiving Medicaid for long term care.
The recent ruling where Medicaid challenged the practice of establishing trusts for family members clears away any concern that this is a legal and proper estate planning option for people needing or who may need Medicaid.
Here is an example of their use: Mom has Alzheimer’s and needs care in a nursing home. She has $1200 a month income from Social Security and $30,000 in savings plus a home worth $90,000. Her $120,000 of assets will be gone in just over a year and she would rather leave a legacy to her 3 children and their spouses than spend it all at the nursing home. She purchases a $15,000 irrevocable burial trust for herself so that her children will not have to dig into their pockets to pay for her funeral. She then further establishes an irrevocable burial trust for each one of her 3 children and their spouses for $15,000 each. Those for children can only be used for burial spaces and the merchandise of the funeral, not for services. She must obtain a statement of goods and services for each one of them verifying the cost of such merchandise. She has successfully “protected” $105,000 from being spent on her care and when she spends the remaining $13,000 on care, leaving herself with $2000 of assets, she qualifies for Medicaid.
While life insurance payout can take up to 5 weeks afer death, the irreovocable burial trusts can pay out within 48 hours of death, even before the death certificate is issued. This can eliminate the family having to come up with a deposit before the funeral home starts their work.
If you sell final expense life insurance products, you will immediately recognize the benefit to using irrevocable burial trusts instead. If you know of someone spending down to Medicaid impoverishment who would rather leave a legacy for family members, refer them to Kathy Lichter at 920 366-2928 for information on how to offer these products or to obtain them for yourself.
Anti-Nursing Home Insurance?
Why is it called “Anti-Nursing Home Insurance?” Because having it gives you a really good chance of never seeing the inside of a nursing home. If you can pay for home care and/or assisted living type facilities, you may be among the 85% of those needing Long Term Care who never enter a nursing home. If, however, you are not able to pay for home or assisted living care, and must turn to Medicaid, you may well have to go to a nursing home.
The problem is that Long Term Care is expensive. Not all of us are wealthy, and when our money runs out we might qualify for Medicaid. Medicaid is a needs based program, you don’t get it because you are old, or disabled, or need care; you get it because you are broke.
A single person must spend down to $2000 of assets which uses up the savings, IRA’s, 401K’s, house, car, etc. Life insurance must be cashed in if its over $1500 (not enough to get you down below the frost line in Wisconsin), and you are allowed to put some burial money into an irrevocable trust so your children do not end having to pay for your funeral, a more common thing than you think. If you haven’t done that yet – call me and I’ll set that up with no fees.
If one of a married couple needs Medicaid, the spouse at home is allowed to retain use of the house, a car, and some income and assets (which will go back to Medicaid after that person’s death). It’s not a pretty picture, in addition to the bias toward nursing homes for those on Medicaid. Even some nursing homes will not accept you if you are qualified for Medicaid or will be soon because they stand to lose $2400 a month for your care.
If, however, you had purchased enough Long Term Care insurance so that it, along with your other available income were enough to pay for home care and/or an assisted living facility, you might be far better off. Over 85% of all Long Term Care can be done at home or in assisted living facilities, the places that often look like nice hotels. You may be able to pay for home care or assisted living for between $3000 to $5000 a month – far less than most nursing homes cost, but probably more than your Social Security check gives you. Thus the Anti-Nursing Home Insurance policy is very important!
So why don’t you have yours yet? Hopefully you are still healthy enough to purchase it, if you wait too long, you may no longer qualify. Often I find that an appropriately sized policy can cover both a husband and wife for less than $200 a month. That’s the interest on $80,000 earning just 3% interest, and far better than spending the $80,000 for one of you quickly, and then needing to ask for Medicaid. Perhaps it might be a good idea to contact TheLongTermCareGuy.com at 920 884-3030 and investigate, while you are still healthy enough!
Time Your Loved One(s) Need Care?
A weekend Wall Street Journal article suggests paying close attention to your parents during holiday visits this year. Is the normally tidy house now neglected? Is there hoarding? Do you notice memory problems or physical unsteadiness?
It might be time to gather the family and assess what things they might need help with. There are also geriatric care managers who can be hired to do assessments and determine what services might be beneficial. A wonderful website BenefitsCheckUp.org might be helpful as well. It is run by the National Council on Aging and can help determine what benefits your parents might be eligible for.
Many families think that Medicare will pay for the care that a loved one needs. Unfortunately, while Medicare will pay for a short stay in a skilled nursing facility, it is only for a short recovery stay following at least 3 days in the hospital as an inpatient. It does save money for Medicare to pay for recovery care in a less expensive nursing home than in the hospital, but you must be making daily progress, and there are strict limits.
If someone needs to reside in a skilled nursing facility, the costs are approaching $100,000 a year. If you pay for that from IRA, 401K, or other taxable funds, you will need another $40,000 a year to satisfy the IRS. If you withdraw another $40,000 from that taxable account, you will need another $10,000 to cover the taxes on the $40,000, etc., etc.
Perhaps only home care is all that is needed. Before you breathe a sigh of relief, bear in ind that a daily visit from a nurse runs over $100 per visit in most areas. Aides are generally less expensive but there may be a 3 or 4 hour minimum. Assisted living facilities can be wonderful places to live, at a cost of $3000 to $5000 a month. That includes room and board, three meals a day plus snacks, activites for fun in addition to assistance with bathing, dressing and housecleaning. The social interaction is wonderful, however and can add years to a frail lonely person’s life.
You might need to check finances as well if your loved one is having difficulty managing their own accounts. If Medicaid is needed to pay for care, any gifts made in the past 5 years can disqualify them. You might be well advised to check with a specialist in the financing of Long Term Care to learn what strategies might be helpful.
Don’t leave home without it – was a tag line for American Express, and it might be asked of you. Do you have your Long Term Care insurance yet? By 60 years of age a third of us are no longer healthy enough to get it, and must resolve to simply spend the nest egg until gone and then see what government benefits we might be eligible for. You might be surprised to learn that if one year’s cost of a nursing home were set aside to earn interest, that interest check may well pay the annual premium on Long Term Care insurance – and you will never have to touch the principal. But check into it while still healthy enough to get it!