When to Buy LTC
Long Term Care In The News
Yesterday’s Wall Street Journal had some interesting statistics on labor growth predicted for the next decade. The article stated that 95% of new jobs would be in the service sector.
Previous articles have noted that the fastest growing service profession is caregiving. Earlier this year the New York Times estimated that by 2020 (four years from now) there will be more people working in caregiving than work in retail.
Where are all those low wage workers going to come from? And speaking of low wages, the minimum wage is increasing, in many locales doubling to $15 per hour. Since most Long Term Care (LTC) is minimum wage labor, what will this do to the cost of such care?
Currently $3000 a month is the base cost at many assisted living facilities, assuming you really do not need any help. A median cost is $4500 a month and dementia often goes for $6000 a month. Nursing homes often are $10,000 a month. Costs have been increasing at a rate of over 5% per year (the past 8 years of recession excepted). Now with interest rates having risen, inflation will increase, and minimum wage earners will be demanding higher wages.
How many of you can afford to pay for LTC for very long out of your current savings when your health changes? Many people tell me they plan to die in their sleep, a noble hope, but not likely to work out for you. Can your children leave their jobs, children, homes to come care for you? I doubt it.
The baby boomers continue to pass through age 65 at 10,000 a day. Some of them (like myself) have LTC insurance. The facilities want people like me as they lose money on the low Medicaid reimbursement levels. When there are enough people who can pay for their LTC because they purchased LTC insurance (or the few who are rich), the facilities will start declining to accept people on Medicaid.
I don’t want to think about the day when I can no longer properly care for myself either, but I know I will not become a burden on my children and will have ready access to the care I want, in a nice place I can afford. I no longer stay at Motel 6, even if they do leave the light on for me. I have become accustomed to nice surroundings and have little interest in changing. If home care can work, my policy will pay for that too.
You know the day is coming, are you going to investigate what you can do for yourself, or ignore it until it happens? You don’t need a lot of money to get LTC insurance. Since the fall back option is to sell everything, including the house and your life insurance to go on Medicaid, you might use some of that house equity to get coverage so you can stay home if you want, to or stay in a nice place (not your children’s basement).
For more information visit www.TheLongTermCareGuy.com You can email me questions at [email protected]
Being Stuck In Sandwich Generation Is No Baloney
Reblogged from CNBC
One-time real estate agent Evelyn Rehg was showing a house to a prospective buyer four years ago when an alarming phone call came from the retirement facility where her mother lived.
“They told me I either had to get my mother immediately into a mental hospital or she would be evicted,” said Rehg, 48, of Crestwood, Missouri. “I panicked,” she added. “I didn’t know how to handle it insurance-wise, what hospital to take her to or anything like that.”
Rehg’s mother, 80, suffers from mild dementia, severe anxiety and manic behaviors that now are treated properly. But prior to the phone call, her mom’s anxiety had become so debilitating that she began calling Rehg’s cell phone upward of 200 times a day.
In desperation, Rehg, then still working in real estate, changed her number because she needed her phone for work. So instead, her mother started incessantly calling the front desk at the retirement facility. “They put up with it for about a day and a half,” Rehg said. “Then they called me.”
Rehg also has two children, who were then 12 and 9 and needed supervision and care. That meant that her husband, Jon, had to adjust his work schedule to tend to their needs.
Financial advisors say that in addition to the emotional drain, “sandwichers” may also face a financial burden if they haven’t taken an interest in the steps parents have put in place to ensure they receive proper care.
“It’s important to talk about financial things, but allow your parents some space,” said Rita Cheng, a certified financial planner and chief executive of Blue Ocean Global Wealth.
“You don’t need to be completely involved in their business, because they still want to be independent and in charge,” she said. “But ultimately, if they want to be in charge of how they are cared for, they need to be proactive and plan for it.”
After the call that made it clear that her mom’s condition had deteriorated, Rehg checked her into a mental health facility. It was the first of a handful that Rehg had researched before her mother received a diagnosis and effective medication.
But then her mom fell and broke her arm and spent several months in a rehab center. She then lived in Rehg’s house for about six months, until the situation became too challenging for the whole family.
Rehg, who by then had given up her real estate license, eventually found a suitable assisted-living facility and moved her mother there.
Gregory W. Edwards, a CFP and partner at Lawless Edwards & Warren Wealth Management, is also in the sandwich generation. His father, who had lived next door to him since 2001, died in 2011 after losing his battle with Alzheimer’s disease.
His dad was financially well-equipped to pay for his care, but Edwards organized it—and it was complicated, because his father’s wishes stated that he never wanted to be put in a nursing home.
During the last two years of his dad’s life, the cost to care for him in his own home was $7,000 to $8,000 monthly.
Additionally, Edwards and a brother each now give their mother, who was divorced from his father years ago, about $1,800 a month toward her various expenses, medical and otherwise. “People have no idea of what’s coming down the pike when it comes to the cost of care in the last months of life,” he said.
For many sandwichers, the pressures from the parent side outweigh those from the child side.
“The hardest part is feeling overwhelmed and overworked. Sometimes you have to make hard choices and you have to be patient with yourself.”
Rehg said that without her husband, she doesn’t know how she could have managed the situation.
“It was the hardest thing I’ve ever been through in my life,” she said. “At the height of it, I was probably spending 40 hours a week on my mom—paying bills, talking to doctors, visiting her, medicines—and trying to work 30 to 40 hours a week and take care of the house and two kids.”
Cheng at Blue Ocean Global Wealth said that it is a difficult balancing act.
“The hardest part is feeling overwhelmed and overworked,” she said. “I have to give myself permission that I’m only one person and this is stressful. Sometimes you have to make hard choices and you have to be patient with yourself,” Cheng added.
There are strategies that can help no matter what your current situation dealing with LTC. In some cases, even if someone is on Medicaid already there may be ways to help improve the financial situation. Of course, owning a good LTC insurance policy is the best way to have the cash flow to pay for the help you need. For more information visit www.TheLongTermCareGuy.com
A Retirement Riddle Answered, Or Not?
Last week a well known mutual fund company attempted to answer the question of why so many retirees die with significant savings left. Is it because they wish to leave large amounts for family? Perhaps they are afraid to spend the last dime just before death? This trend suggests many retirees don’t enjoy their final years as much as they could.
Few older folks seem interested in life income annuities, which could give them a guaranteed income for life with no worries, yet they keep the nest egg close at hand and don’t invade it.
The study seems to indicate that the reason is the fear of potential long term care costs that drives retirees to clip coupons, dine out at 4pm to catch the early bird special and forego expensive trips. If it comes down to it in the last year, and they had to choose between an uncomfortable year versus a comfortable year, they would choose to spend the money on making it more comfortable.
For the upper middle class, 75th percentile of wealth, health care was regarded as a necessity and bequests as a luxury. It was also surprising that people are interested in assistance with daily living expenses, but are not interested in long term care (LTC) insurance.
Perhaps this is due to old beliefs that LTC insurance only covers nursing homes. For many years now, such coverage is good for in-home care, adult day care, assisted living facilities or nursing homes. Nearly all policies also cover “alternative plan of care” for locations or strategies that have not been invented yet, but may be in the future.
The most surprising thing about this study (to me at least) is that traditional LTC insurance can be purchased with just the interest on a portion of the savings people set aside to pay for care. Instead of leaving a significant amount of assets set aside for care, the interest check from just part of that sum could provide the insurance coverage and leave the reminder that is unspent to be passed on to family.
Years ago, I was a representative from a LTC insurance company to a large bank chain in Wisconsin. My job was to show the stockbrokers there how to address LTC funding. I would attend teller meetings and ask if the tellers knew clients who withdrew $5000 or $7000 a month, every month. Every hand went up. My next question was what they spent it on and the answer in every case was a spouse needing LTC. With today’s costs reaching or exceeding $9000 a month, the problem is even worse.
There are many strategies to deal with the costs of LTC, but the least expensive is LTC insurance with a built in 5% compound inflation factor on the amount available for care. This will keep up with the costs of care over the years and frees up your life’s savings to experience life with – instead of waiting for that last year or two. This coverage is, in most cases, less than is typically thought it would cost (if chosen appropriately). For more information, visit www.TheLongTermCareGuy.com
Seven Things To Know About LTC Insurance
1. You may not need as much of it as you think
There is usually no need to purchase enough of it to cover the cost of care in the locale where you may use it. Bear in mind that most income such as Social Security continues until death, as do, pensions, interest income, etc. Lifestyle will change too, no Branson, MO trip anymore, cruise, camping, and other fun things may not happen when one cannot participate leaving more of your income to put towards the cost of care.
2. 70% of us will need care (2015 Medicare and You, Centers for Medicare and Medicaid Services)
So don’t think it won’t happen to you. As healthcare in the US improves, things that used to kill us, now only “wing” us, causing more need for care in later life.
3. Women are at significantly increased risk
About 68% of nursing home residents and 72% of assisted living residents are women. (Source: Long-Term Care Services in the United States: 2013 Overview, National Center for Health Statistics) Thus there is even more urgency for women to obtain coverage, and to do so before things like their first bone density test. Many LTC insurance companies charge women significantly more than men, BUT NOT ALL!
4. Don’t believe the average cost surveys.
Some areas of the country cost much less than other areas to receive LTC services. The lowest costs are in West Virginia and Louisiana. New England and Alaska are among the priciest locales. Check out the actual bills where you may need care, not just the median cost.
5. Medicare does not pay for LTC
This gets confusing as Medicare will pay for up to 100 days in a nursing home following 3 days inpatient in a hospital, for the same reason you were hospitalized, and while you are improving (medical care). It save Medicare money to have you recover in a $300/day nursing home bed than a $3000/day hospital bed. Most of us who need care, will need more than 100 days, and if we did not spend 3 days inpatient in a hospital, we may receive no Medicare coverage for the nursing home.
6. I can afford to pay if this happens to me
Really? Not all care is significant enough to allow deducting it as a medical expense. If you need $100,000 that you can spend out of your IRA or 401K account, you will need to withdraw approximately $200,000 so that you have $100,000 after the new “rich person” income tax bracket you will be in. Even if you can afford it, why would you want to when insurance can cost pennies on the dollar to pay the bill versus using up your assets that you may want to leave to family or charity.
7. It won’t be that long, none of my relatives have needed care for long
20% of people needing LTC will need it for more than 5 years. If you follow averages of how long people might spend in the nursing home, remember than only about 20% of LTC is provided there. The majority of care is provided in your own home (no statistics for that) or in assisted living facilities (4 years average stay). Now add that to the “average” nursing home stay of 2.5 to 2.8 years depending on which survey you read and it might be a while.
For more information, visit www.TheLongTermCareGuy.com
Why Do Medicare Reductions ($400 Billion) Matter?
Our president wants nursing homes to deliver care much more efficiently and for significantly less over the next ten years. The proposal indicates that Medicare can save $400 Billion over the next 10 years in reimbursements for nursing home recovery care following a hospital stay.
There are also proposals afoot to raise the minimum wage by nearly a third. Nursing home care is overwhelmingly bricks and mortar and minimum wage help. With labor costs going up, more and more utilization as the baby boomers turn 65 at a rate of 10,000 a day, how will Medicare save $400 Billion dollars?
Medicaid already requires impoverishment before it will pay for your Long Term Care. Perhaps the look-back could be extended to 10 years from the current 5 (that has already been introduced in Congress twice, but died in committee). Perhaps a new requirement will be to force reverse mortgaging of the family home before Medicaid eligibility is granted. Many options are on the table, and the result of each idea is less available government money to cover LTC for you and I.
I am fine. I have my LTC insurance policy. Do you? If not, is it because you heard that they are way too expensive? Or have you heard that you must be in perfect health get the coverage? neither of these excuses are valid – if you plan with someone knowledgeable on how LTC actually works.
Imagine if one of a couple becomes laid up and requires day to day care for bathing, dressing, toileting, etc. Will that couple still own two cars and a Harley or a pickup truck and camper? I think not. Will they go to Branson, MO this year? Probably not. Will there be a cruise in their future, I doubt that as well.
When one of a couple needs LTC, the “fun” budget shrinks drastically, or disappears entirely. If a single person requires LTC, they may find themselves “stuck” in the home versus living there, especially if they cannot drive. In that case, an assisted living facility might be less expensive and provide much more social interaction. With the household and auto expenses eliminated, and both of those items converted to cash that can earn interest, one might find themselves able to pay the majority of the monthly bill. It might only require a small addition from a properly sized LTC insurance policy to make up the difference.
That is the benefit of investigating LTC insurance with a specialist who understands the finances of care. Most people will never require a nursing home, but may be able to use an assisted living facility or stay at home with their family. Thus, a policy sized for that will handle the great majority of care situations. Then with health and ages taken into account, the most appropriate company can be priced and voila, reasonable, affordable LTC insurance can save the day.
If, however you wait, wait until your health changes and nobody will insure you, you have waited too long. You need homeowners insurance before the tornado. You need auto insurance before the accident. You need LTC insurance while you are still healthy enough to get it. When your annual physical comes up and the doctor says “I’m going to write a prescriptions for”…….. you know immediately that you waited too long. How long will you wait? Do you feel lucky this year? Do you?
Considering LTC Insurance? You Might Find Something Entirely Different Is Substituted
So, you’ve decided to investigate LTC insurance. Now, which type do you look at or might be suggested by the agent? You can keep things simple by concentrating on just a few important points:
1. How much money will it give me WHEN I NEED CARE?
2. How long will I be able to collect that money?
3. Will the policy increase each year automatically to keep up with the increasing costs?
4. Will it pay MY claim?
Traditional LTC insurance will guarantee how much you get, how much that dollar amount will increase by automatically each year, how many years of care it will pay for, as well as paying when you need assistance with 2 activities of daily living or a cognitive impairment.
The only traditional LTC insurance policy that cannot do the above is the one sold to teachers by their union that will only pay 3/4 of the claim, no matter how much benefit you may have paid for.
Some of the “new” products using life insurance or annuities as their base will only pay out if the need for care is permanent, meaning there is no chance of your recovery, ever. Others cannot tell you what the benefit will be when claim time comes. It is only determined at that time by some complicated formula.
Some of these offer what seems like a large amount of money each month to pay for care, but fail to mention that the monthly benefit never changes as inflation eats away at that benefit. Recall back to what gasoline cost per gallon when you first learned to drive and you will realize that inflation is real.
There are a few of the life/LTC insurance policies that will give you a guaranteed 5% compound increase in your benefit every year. If this strategy appeals to you, be sure it does include that automatic 5% compound inflation benefit. Costs of care have been going up a bit slower the past 5 years, but the past 5 years have been the worst economy since the great depression. With the 80 and over gang predicted to triple in 20 years, and a shortage of caregivers is already evident, cost will go up by at least 5% compound in our foreseeable future.
As you can see, there are many different types of products, with many options, some important, and others not so much. Rather than purchase something because your neighbor bought it, you might consult with an expert in LTC financing to learn what is best for you. There are even options for people who have been told they cannot get this coverage, or may already be receiving care in their own home or a facility.
More information is available at www.TheLongTermCareGuy.com
Why You Shouldn’t Count On Your Family To Take Care Of You When You’re Old
The Washington Post recently published an article claiming that the great majority of Americans think (incorrectly) that their family will provide their care when they are old.
First of all, 60 percent of adults between 40 and 65 don’t think they will ever need any long term care (LTC). The Health and Human Services office in Washington DC tells us that 70% of us will need such care. 20% for between two and five years and 20% for more than 5 years.
Fortunately, only about 15% is done in nursing homes (at a typical cost of just over $100,000 a year). The great majority of LTC is provided in your own home or in the assisted living type facilities, at about half the cost of nursing homes.
“A major reason people are too optimistic is that they think their families will take care of them. Almost 75 percent expect their families will provide long-term care, which was about seven times more than those expecting to need a home health agency, nursing facility or assisted living facility, according to the Health Affairs study, which analyzed responses from the 2012 National Health Interview Survey. People in the survey were asked to say who they expect would provide long-term care, even if they didn’t think they needed it.”
(Health Affairs)
The Health Affairs study also warned that the 29 percent of people ages 40-65 who live alone could have the greatest needs for long-term care. They had the worst health of any group in the survey, were much less likely to rely on family to provide care and had the greatest expectation of any group that they’d need to pay for long-term care services, according to the University of Minnesota researchers who authored the study.
Ozzie and Harriet lived in the 1950’s and into the 1960’s. Harriet stayed home, wearing a dress, heels, and a pearl necklace. She had the time, space, and energy to have parents or in-laws move in and provide their care. How many of you have children who stay home wearing dress, heels, and pearl necklace with the time, energy and finances to provide all of your care? I didn’t think so!
LTC insurance does not need to be expensive – if chosen appropriately. There are many options, and knowledgeable guidance can help greatly. Just as you might not invest based on your barbers advice while getting a haircut, seeking out a specialist in the financing of LTC can result in custom tailoring coverage to the risks you wish to cover, and no more.
One universal piece of advice to consider is the impact of inflation. Numerous recent articles have stated that the costs of LTC have only increased an average of 3%/year during the past 5 years. This is correct, and the past 5 years have been the worst recession since the great depression of the 1920’s. Minimum wage is set to increase legislatively, employment is picking up and who will fill the workers slots at minimum wage going forward? A recent New York Times article stated that professional caregiving will overtake retail as the number one profession in America in just 5 years. We did not have enough children to provide our care! Costs will increase more than 3%, and 5% is the best inflation hedge we have. it is absolutely essential!
More information can be found at www.TheLongTermCareGuy.com
Giving An Engagement Ring for Christmas? Be Aware Of This!
Christmas is a common time to get engaged. A ring doubles as both a wedding proposal and solves the what to give her for Christmas question. Then you can dream in front of the fire this winter, planning a spring wedding.
Financial planners will offer many pieces of advice to new engaged couples, but typically not this piece of advice:
Once you are married, you are one – financially. If you have more assets and your spouse suffers a stroke dancing at the reception (yes it happens, not all newly engaged couples are in their 20’s) you will spend your nest egg paying for the other’s long term care (LTC).
Even many attorneys are not aware of the fact that a prenuptial agreement is not honored by Medicaid, the welfare program that will pay for LTC once you are impoverished. I was called in on a case where an older gentleman, who owned a very valuable farm that his son was farming, married a sweet gal his age. The attorney told him the prenuptial agreement would protect him. When his wife needed LTC, he found out that was not true, and now must sell the farm out from under his son to pay for her care.
While I do have several options to help pay for care once the care has already started, the least expensive strategy is to own LTC insurance. Most people cannot handle a bill of over $100,000 that comes every year. If your funds to pay this come from an IRA, the IRS will be involved as well.
LTC insurance is available up through age 84. I have had many a mature couple in my office to purchase a LTC insurance policy on the one who does not have it yet. When the cost ends up being substantial, the one with the wealth typically says that this must be obtained before the marriage license or all the life’s savings could be spent paying for care and the risk is too great to ignore.
The ideal time to address this is when you are still healthy enough to get LTC insurance. Every year it gets tougher as medical issues that were acceptable years ago, are not anymore. Diabetes leads to an increased risk of Alzheimer’s. Bone density loss leads to loss of mobility when the doctors cannot repair the broken hip. Any use of steroid drugs can cause a decline. This is not like the affordable care act where anyone can get the insurance. By 60, a fourth of us can no longer purchase it. On the other hand, cholesterol medication or blood pressure that is controlled is not a concern.
So, if you are in your 40’s or 50’s and healthy, this is the time to investigate. Do it now as a Christmas present for your children. They won’t have to make room for you to move in with them when your health changes. They won’t have to retire early or go part time to care for you. With care provided, they can come visit, versus bathe and dress you. For more information visit www.TheLongTermCareGuy.com
Thanksgiving is Coming, How is Your Family Doing?
Thanksgiving comes around every year about this time. Families get together, hopefully getting along. Sometimes it is the one time a year everyone sees how the older members of the family are doing since last year.
For some families, it will be a difficult time when they realize that grandma or grandpa are not as sharp as they used to be. Perhaps it is difficulty in getting around, or driving, or perhaps it is in confusion that seems to be getting worse and frustrating the person no end.
Well, the family is all together, so let’s discuss what to do. Perhaps nobody is willing to start the discussion, ignoring the elephant in the room. Or perhaps someone attempts to make suggestions and is quickly shot down.
Talking about losing independence is never easy. Help may be offered and declined since “I can do it myself”! In any case, some family members can see that a problem is evident and wonder what to do about it.
A big part of searching for solutions is learning what options are available. All sorts of support services exist, to help people in their homes, day care several times a week, or even an assisted living facility. Many of these have pools or hot tubs, and most now offer happy hour one afternoon a week to help with socialization. However, who will bring up the topic and risk the wrath of the loved one you all care about?
All of the options can be expensive. The good news is that only about 15% to 20% of LTC is done in nursing homes now. Home care and assisted living facilities cost half or less than a traditional nursing home. However, $1500 to $4500 per month will strain most budgets or put a large dent in the family funds rather quickly. Perhaps it might be prudent to learn what financing arrangements for LTC services are available.
Medicare does not pay for LTC. Medicaid will, but only once the person has spent-down to impoverishment and cashed in any life insurance. There are other, better options available. LTC insurance, if purchased while still healthy is the least expensive way to address this, but even after the need arises, there are other strategies. In a worst case, there is still the option to move some money to family without Medicaid penalties. You simply need to consult an expert in this area and learn what options can work for you.
More information is available at www.TheLongTermCareGuy.com
More Bad News For The Sandwich Generation – Filial Responsibility Laws
The sandwich generation are the folks who are currently raising teens, paying for school, and taking care of their parents as well. This causes much missed work, missed work opportunities, missed events with children, and general exhaustion. How could you possibly accept a promotion requiring a move when you are taking care of an aged loved one here?
Now there is another worry to consider, Filial Responsibility Laws. 30 states have them and they state that adult children have a duty to provide necessities for parents who cannot do so for themselves. This includes long term care (LTC)!
Here is a list of the states that have such laws: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, and West Virginia. If your state is not listed here you are NOT out of the woods. If you have parents living in one of those states, you could become responsible for their bills including the cost of home care, assisted living or a nursing home.
Judges use a number of factors when determining the adult child’s responsibility to cover the indigent parent’s bills. I personally thought I would never see these laws enforced, but California, New York, and Pennsylvania have each had a number of cases.
You may have heard the various rumors of shortfalls in government budgets. You may also be aware that the baby boomers are turning 65 at a rate of 10,000 a day and will for the next 18 years. Where do you think the money will come from to pay for the LTC these people will need, if they do not have the funds, or insurance to pay their own bills?
You might view this as a way to get even with your kids, like the bumper sticker that says we are spending our children’s inheritance. But do you really want to bankrupt them from their financial security? Perhaps you should investigate LTC insurance for yourselves, if you are still able to qualify for it. for more information, visit www.TheLongTermCareGuy.com