Protecting Money from Nursing Homes
Protect Mom’s Money
Here is a not untypical situation where Mom needs care and even though Medicaid will soon be needed, some funds can be moved to family.
In our example, Mom is 83 years old and suffering from dementia. She has 2 daughters, one of which is married, the other divorced. The daughters have finally convinced Mom that she will be happier, safer, and better cared for in an assisted living facility. Mom agrees to move in.
The daughters now need to liquidate Mom’s modest house and her car. An estate sale ensues to dispose of the unneeded contents of the house. When all is liquidated, and Mom’s first month is paid for, she retains about $110,000 in her bank account.
If Mom spends down to Medicaid impoverishment, and is left with just $2000 of assets, the daughters will end up paying for Mom’s funeral at death. This is due to the requirement that any life insurance paying more than $1500 at death be “cashed in” and spent to qualify for Medicaid.
However, Mom can put up to $15,000 (varies by state) into an irrevocable burial trust (IBT). These accounts are allowed by Medicaid, there is no 5 year look-back on transfers to an IBT, and the money earns interest until the date of Mom’s death. At that time, the funds are available, by wire transfer, to pay for funeral costs immediately, even before the death certificate has been printed. By comparison, life insurance proceeds are usually not received until 5 weeks or more after death, commonly causing someone to put up a credit card at the funeral home for at least partial payment.
In addition, in many states, Mom can also fund irrevocable funeral spaces trusts for up to $15,000 for each of her children and spouses thereof. The funds will be immediately available for their funeral costs at death, and in the meantime are protected from any creditors, nursing facilities, lawsuits, etc., as they are outside the estate of the beneficiary of such trust. The money is truly protected.
For those of you who thought that all Mom’s money would be spent on her Long Term Care costs, now you know that some funds can be left to family. Of course, preparing for LTC while healthy with a LTC insurance policy is the least expensive way to deal with the care that the Health and Human Services government agency says will be needed by 70% of us. But for those who did not prepare, options exist. For more information visit www.TheLongTermCareGuy.com
Do You Know Someone Who May Soon Need Help Managing On Their Own?
We all dread the time when we may need some assistance due to not being able to manage on our own anymore. It happens to others, but surely, not us. We are never prepared when a loved one needs help, and then we find out how expensive such care is. There seems to be no one place with all the information we need to formulate a plan.
Many family meetings occur in my office, trying to figure out how the family will care for Mom or Dad. The usual questions include: will the VA provide any assistance? Yes, perhaps, through a program called Aid and Attendance. It is a needs based program (meaning your assets must be somewhat limited) that can be available to veterans and even their spouses to help pay for care.
Medicaid is another possible assistance program. It, however, requires strict impoverishment, spending down to very low asset and income levels and is a last resort. There are things a family can do to protect some assets from this spend-down requirement, and this is often a topic of much interest.
If some funds are available from savings or home equity, there are some little known strategies to produce an income for life that requires far less of these assets than a typical life annuity. When life expectancy is less than “average” for someone’s chronological age, this can seem like a miracle. Being able to pay for the needed care and never running out of money is a very good thing indeed.
If you or someone you care about is going to need some help with day to day activities, and you have no idea where to start looking for help, call us at The Long Term Care Guy. We are Wisconsin specialists based in Green Bay, but can help with questions no matter where you are.
Give us a call at (920) 884-3030 or (800) 219-9203 or send us an email at [email protected]
Number Of Families Providing LTC Increasing Dramatically
More than 8 million people (mostly women over 65) used the services of a LTC provider in 2012, according to the first ever compilation of federal data on the subject by the National Center for Health Statistics. This includes adult day care, home health care providers, assisted living facilities and nursing homes.
However, the lion’s share of people receiving LTC services and support get that support from family caregivers. Numbers are rising fast – 39% of U.S. adults care for someone with significant health issues, says the Pew Research Center, up from 30% in 2010. That is a 30% increase in family caregiving in just 3 years.
Without family caregiving, the LTC provider system would be overwhelmed. But what about those without family support? Who will care for them when their health changes and they can no longer manage on their own anymore? Many will be forced to pay for such care, but how many have prepared for this expense?
LTC insurance will not be an option for many. By 55 years of age, 17% of Americans will be declined for such coverage. By age 65, fully a fourth of us can no longer qualify to purchase this insurance. These people will have no choice but to spend down their life’s savings and hope that there is enough to last – for themselves or family they leave behind.
Many do not appreciate the impact of inflation on the costs of LTC services. Assisted living facilities often cost $50,000 a year today and nursing homes more than twice that amount. If these costs only double every 15 years a person who is 50 today can expect to pay $400,000 per year for a nursing home at age 80 and more than a million dollars a year by 95. And this is only accurate if inflation of LTC costs does not exceed 5%. Minimum wages are going up legislatively, less and less workers are willing to work for these wages, and there are less workers per retired person every year worldwide.
Have you decided which family members you will ask to provide your care? Have you contacted them to be sure they are ready and on the same page as you? Can they afford to leave their employment to do this? Will you be able to pay them to provide this care out of savings, or perhaps your Social Security checks? Maybe it would be a good idea to discuss this with them – now. For more options and ideas visit https://thelongtermcareguy.com
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
Minnesota Makes it Harder to Collect Medicaid For LTC
Many state have been working diligently to provide Medicaid benefits for home care instead of forcing Medicaid recipients into nursing homes. This serves more people in nicer and often more appropriate settings. However, it does not seem to save money as when the medicine tastes good, more people want the medicine.
Starting this month, home care benefits will only be offered by Minnesota if the recipient needs assistance with 4 activities of daily living (ADL’s). “Until now, it has been relatively easy for poor Minnesotans to qualify for the program. It was enough to show that they needed assistance in one basic activity of daily living, such as help with bathing or dressing.”
“Under the new criteria, seniors must show that they need assistance in at least four
activities of daily living; or, alternatively, they need help in a single critical activity such as toileting or transferring, for example, moving from a bed to a wheelchair.”
Unfortunately, Medicaid home care tends to delay institutionalization, but does not prevent it, thus causing higher costs overall. Medicaid expenditures for all LTC – home and community-based care and nursing home care combined – continue to rise rapidly everywhere. Furthermore, the availability of home care makes Medicaid much more attractive than when nursing home care was the only option. Thus, when home care is offered, the public is less likely to plan privately for LTC and more likely to rely on Medicaid. Consequently, LTC expenditures, especially for home-based services, continue to skyrocket.
With Medicaid budgets increasing faster than Social Security and Medicare, the time will come when the federal government cannot print money fast enough to pay for everyone’s care under Medicaid. Many already assume incorrectly that Medicaid is an entitlement. One qualifies for it not by age, or disability, but by being out of money, impoverished, broke. Nobody plans to end up that way, but with Medicaid giving out the home care people want, many incorrectly assume it is free for all.
Once care is needed, and the money is spent, it is too late to qualify to purchase LTC insurance and Medicaid is the only option. Many Minnesotans are now learning this the hard way as their desirable benefits are now being restricted. Compound this problem with the aging of America (10,000 Americans turn 65 every day – 12,000 turn 50 every day) and who will be left to provide the care? America’s population is not growing, but minimum wages are. With fewer people to fill the caregiving jobs, wages will go up until sufficient workers apply for these jobs. Costs will rise even faster than the 5-6% average over the past 20 years in this field. Will you be prepared?
Visit www.TheLongTermCareGuy.com to learn more.
Should I Buy LTC Insurance or Would I Prefer Crisis Management?
1. LTC insurance is not necessary – the government pays for this
Correct! The government will pay for LTC needed, in a nursing home only in many areas, once you are impoverished (broke), unless you have given any money away, for any reason in the past 5 years. You are allowed to retain just under $2000 of assets, socks, underwear, and slippers, $45/month of income, and life insurance – unless it will pay more than $1500 at death in which case it must be cashed in first.
Married people can retain (in the name of the spouse at home) a house, automobile, 1/2 the liquid assets – but that half cannot be larger than $115,920 nor less than $50,000, and income for the spouse at home of up to $2898/month. The state will file a lien against those assets and recover them (before your will take effect) after the death of the at home spouse.
The nursing home will be losing approximately $3000/month on your care. They can say no to you as you wish to move in, but cannot make you move out after you are there. Hopefully there is one nearby, that is nice, willing to take that loss on you.
2. I don’t like that scenario, what is the alternative?
You might have the income to cover an extra $3000 to $4500/month at an assisted living facility, or up to $8500/month in a nursing home, in which case you are fine, nothing to worry about.
Alternatively, you might consider LTC insurance. You probably will not need as much of it as you might anticipate as your lifestyle will change considerably when one of a couple needs care. The boat may no longer be used, likewise the snowmobiles, motorcycle(s), camper, second or third car, etc. There may be no more trips to Branson, cruises, weekends in Door County or the Catskills, etc.
Once you determine how much or little of your income is needed to maintain the home and spouse there, you have an idea of how much income can go towards the cost of care. If you have savings, even if you do not want to use them up, you might use the interest generated (yield). Only the remainder needs to come from LTC insurance.
Some people will go a bit farther, and choose to cover only the cost of care at home or assisted living facilities. If this is your plan, you need only be able to generate about $4500/month to pay for that level of care. Thus the LTC insurance would be keeping you OUT of a nursing home in most cases, and a smaller policy is all that is needed.
Lets look at an example of a 60 year old couple who decides that a benefit of $3300/month ($110/day) is appropriate for them. They choose a 10 year benefit, meaning the policy will pay for 10 years of care, each, once care is needed. The first 90 days of care is the deductible, their responsibility, and they include the absolutely necessary 5% compound automatic inflation feature.
The 5% compound inflation feature raises the price of the policy a bit, but the benefit starts at $3300/month, and increases at a rate of 5% compound each year, gradually doubling in 15 years, or quadrupling in 30 years, while the premium is designed to stay level. Since these two are in good health, only blood pressure and cholesterol medication is used, the annual premium for this couple is $3912/year. That is the interest generated annually by $130,000 of savings earning only 3%. Interest earned is generally taxable, but the premium for LTC insurance is tax deductible.
Now which is better in your opinion, buying LTC insurance, or crisis management? Get more information at www.TheLongTermCareGuy.com
Some Helpful Hints For Financial Planners Concerning Long Term Care
I realize LTC is not a topic you relish discussing. Hopefully your clients won’t need such care, and if they do perhaps they can pay for it out of cash flow (at possibly $100,000 a year). However, if the topic comes up, here are some ideas and strategies that might help.
Let’s say you have a client whose loved one suddenly needs LTC. This relative or loved one does not have much money and they wonder what, if anything you can do to help. Knowing that Medicaid requires spending down to impoverishment and cashing in life insurance, you might suggest they move some money into an irrevocable burial trust so that nobody needs to pay this bill for them. They can even set these trusts up and fund them for children, and if done correctly, is not a divestment. It will not disqualify them for Medicaid and they get to leave funds for family. I can help you with this.
If they have significant funds, but worry they won’t last, there is an immediate annuity that takes (poor) health into account. Someone needing LTC will probably not have the same life expectancy as a healthy person of the same age. By underwriting that poor health, a far better payout can sometimes be produced, allowing them to pay the bills for life and still leave funds for family.
If your client inquires about LTC insurance for themselves, and it’s not your main area of expertise, consider working with someone who does nothing but this. There still are some lifetime benefit policies available, with 5% compound inflation. There are even options with a single premium available. Prices vary drastically from one company to another and knowing which ones like which ages and don’t mind which health concerns can make a huge price difference. If someone is declined, it does not mean they can’t get coverage. Perhaps they did not apply with the most appropriate company for their age and health – there are still quite a number of insurers out there. Knowing which ones accept which health concerns lets you help most any client.
There is even a partial return of premium, single funded, so that if your client never needs care, a good part of that single premium is refunded at death. The best news is that numerous options exist. No matter the situation, there may be something that can be done to help. It’s never too late to inquire.
Keep up by reading this blog or go to www.TheLongTermCareGuy.com for more info.
It’s The Holidays, Let’s Talk
How long has it been since you saw all of the family? How are they doing? Perhaps not as well as last year? Perhaps it’s time to talk.
This is the time of year when many families realize someone is not doing as well as they have been in the past, and may need some help. Perhaps it is just with raking leaves or snow removal (I live in Wisconsin). It might be the house is not as neat as it always was, or perhaps bills and paperwork are being neglected. Maybe it’s time to talk.
This is not something we look forward to, and it seems the job more often than not falls to the women in the family. Women are overwhelmingly tasked with caregiving. Employers know that the holidays are when female employees often request leave to deal with family issues making caregiving a workplace issue as well. Wages are sacrificed, productivity falls, and seasonal demands may exacerbate the problem. An article in the AARP publication estimates there are 66 million unpaid caregivers in the US as of 2009 and the number is growing. Unpaid caregivers average 20 hours of caregiving a week.
This is not without cost. Caregiving takes a toll on the health of caregivers which lingers long after the death of the family member cared for. It also costs real money, many caregivers contribute significant dollars in their work assisting loved ones in addition to the career and income sacrifices.
By having a Long Term Care (LTC) discussion, plans can be made to share the responsibilities. Other family members may discover they can contribute time and resources to help. Perhaps professional caregiving either at home or in a facility is required and planning – even at the last minute – can provide solutions versus simply spending available money and hoping to qualify for government assistance. Once financing strategies are discovered, more planning options may become available.
So, perhaps it is time to talk. Families get together for the holidays and this can be an appropriate time to discuss these issues. Any time of year can be a good time to consider how the care you may someday need will impact your family as well. Are you prepared to handle your long term care needs? If you might pay for care, where will the money come from? What will be left for family after your care needs are over? Perhaps you might investigate LTC insurance while you are still healthy so that funding is not an issue when you need care. LTC insurance pays for care in your home, day care facilities, assisted living facilities commonly called CBRF’s or RCAC’s, and traditional nursing homes. Pennies on the dollar now can save hundreds of thousands of dollars later.
Try the LTC cost estimator at http://RetirementChoices.net/rraabeLTC1.html to learn what one might need to set aside today to fund LTC needs later. Also read and learn more options at https://thelongtermcareguy.com
Medicaid Enrollments Surge
With the Affordable Care Act now signing up health insurance customers online (in theory), statistics are emerging. For every one person getting healthcare from an insurance company, four more people are enrolling in Medicaid.
The government has only so much money to go around. With 10,000 Americans a day turning 65 and signing up for Medicare, and a majority of them unprepared to pay for their own Long Term Care, a large percentage of them will be hoping for Medicaid when they need care LTC later.
If you are healthy at 50-60 years old, it is easy to do what Congress does and kick the can down the road. The problem is that the older you are and the less healthy you are when care is needed, your options are extremely limited. Many will have to pay for care out of pocket, impoverishing themselves and their families before hoping Medicaid will be able to help with their LTC. In many places Medicaid LTC means nursing home only, with no option for care at home or in an assisted living facility.
Not only are Americans getting older, but the LTC insurance companies are getting more wary of us. Qualifying for coverage is getting more difficult, benefit periods offered are getting shorter, women pay 50% more than men with many insurers, etc. With interest rates so low, and LTC insurance benefits contractually set to increase at 5% compound every year we have the coverage (to keep up with rising LTC costs) several insurers have left the market.
If you have assets you would like to leave for family, or income you would like to leave for a spouse, and you do not have millions you can afford to spend for something that you could insure against, it would be prudent to investigate LTC insurance while it may still be available to you. The good news is that you do not need as much of it as you might think. Once you realize that a portion of the cost of LTC can come from available income, then only the remainder may need to come from insurance.
Lifetime benefits are no longer available. Policies that are paid up in just 10 years, or at age 65 (like I own) are a thing of the past. Life insurance policies that will pay part of the death payment in advance for LTC are available but generally do not contain the 5% compound inflation clause that traditional LTC insurance offers.
My benefit with 5% compound inflation means that what I will receive from my policy will be twice today’s benefit in 15 years, and four times today’s benefit in 30 years. If you are 55 years old today, a nursing home that costs $8500 a month now will be $34,000 a month at age 85. Even this does not take into account what happens in every industry when it is difficult to get enough workers to apply for the open positions – wages rise.
If you want to stop kicking the can down the road and investigate a solution that works, visit www.TheLongTermCareGuy.com and learn what can be done. To calculate future costs visit http://www.RetirementChoices.net/rraabeLTC1.html You can move all the numbers around to see how much you would need to set aside today, to pay for future LTC costs out of pocket without insurance. The cost of self-insuring is huge!