Medicaid Planning
Private Industry Has Solutions For Funding Care At Home That ADRC’s Do Not
I attended a dementia hearing recently. Eight Wisconsin legislators were listening to ideas and problems in dealing with dementia in Wisconsin. Many of those testifying spoke of how people will not accept home care because they think they cannot afford it.
People rely on family for help and care because they cannot afford home care. The most common advice these people receive from social workers and ADRC’s is to spend down to impoverishment and end up on Medicaid. In many cases, this means selling the home and moving to a facility with absolutely nothing left at death to pass on. No wonder people are terrified of needing Long Term Care someday.
Private industry has solutions as well, and often times they are completely overlooked. I am not speaking of LTC insurance here, once care is needed it is way too late to be trying to buy insurance. Let me give you an example.
Imagine you are an older American, living in your home (the only real asset you have) with very little money in savings and trying to get by on Social Security. You know you cannot afford to pay $1000 to $2500 a month for home care and so you just try to get along by yourself or with the help of family or friends.
Someone in this position often does not realize they can utilize the one remaining account they still have – Bank of House. A reverse mortgage is not something to go into frivolously, but as a last resort, it can keep you in your home.
You could take out the available money from a reverse mortgage and spend it for care until it is gone, but wouldn’t it be much better if the money lasted as long as you did? There is a way to convert the equity in your home into an income for life – a monthly check to use for home care that continues until the day you die, no matter how long that is.
If you used the proceeds from a reverse mortgage to buy a regular life income annuity, that would probably be a very bad idea. A life income annuity is based on how long the annuity company thinks you will live – based on age and gender. Remember, your health is not the best, you need care, and may not have as long a life span as others of your chronological age who are healthy.
There is one company that takes your poor health, and thus your shorter than average life expectancy into account, and will require far less money in return for that income for life -based on your shorter than average life expectancy – than a regular annuity would. Many times I have been able to convert the equity from the reverse mortgage into enough monthly income to pay for home care and keep people in their homes for the rest of their life.
So, often it comes down to this choice: Sell the house, spend down the money until impoverished, apply for Medicaid, and end up in a LTC facility with nothing left over. Or, take the equity in the home out through a reverse mortgage, and convert it into a life income, paid monthly, for as long as you live. By taking into consideration that your life expectancy is less than other healthy people of your chronological age, you get a bigger income and can pay for the home care you thought you never could afford.
For more information visit www.TheLongTermCareGuy.com or call me at (920) 884-3030 or (800) 219-9203
Adult Day Care is Great Respite For Caregivers, But They Are Closing Up
Adult day care is a wonderful break for family caregivers. Family can take their loved one to a day care program where care is provided 5 days a week typically, and get a “day off” from caregiving duties.
Caregiving wears people out physically, emotionally, spiritually. Your batteries get drained and then you cannot provide proper support for your loved one, especially if round the clock care is required. There is a reason the airlines tell you to put on your oxygen mask before helping others, if you are worn out, you are no good to anyone else.
Thus, adult day care can provide a respite day, or possibly as many as 5 per week, giving the caregiver a chance to breathe. It may be difficult to secure 5 days per week care, as there are generally waiting lists to get in. This is very popular, and bear in mind that the great majority of LTC services are still provided by family caregivers.
So, why are these places closing up? In Wisconsin, much LTC is provided by a program called Family Care. It was originally designed to use Medicaid dollars to pay for the lowest cost care available for each recipient, instead of using it for the most expensive setting, a skilled nursing facility (nursing home).
Of course, when the government pays for the more desirable assisted living facilities or care in your home, everyone wants in, upping the usage exponentially and raising rather than lowering costs. Spreading the available dollars among more recipients also lowers the dollars available for each one.
So now the reimbursement for adult day care is so low that the adult day care facilities cannot afford to remain open.
But it only costs $45 to $80 per day to pay for adult day care out of pocket, and on a monthly basis of one day a week that is about $200 to $400 per month, surely affordable for many, you would think.
Apparently, the problem is that the families are wanting to save the available funds to use when an assisted living facility is needed. Often times, if you do not have enough funds to pay for assisted living for at least 2 years, the facility may not accept your loved one. This is because once the money runs out and you turn to Medicaid (of which Family Care is part of) the facilities will be losing money on the care.
A LTC facility cannot require you to leave when your funds run out (unless you agreed and signed off on this at admission). It is also not possible to remain open for business if you lose money on every resident. Thus the facilities often require that you have funding available for a period of time before they will admit you. If you have no money other than Medicaid or Family Care you may end up searching far and wide for a facility that will accept you. Will it be the place you want to spend the rest of your years?
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
Be Careful About Gifting
The concept of “gifting”, or spreading gifts throughout one’s lifetime, has been a recognized as an effective strategy for reducing estate taxes. But, did you know that there is more to think about “gifting” than how it might impact estate taxes—especially for those people for whom estate taxes are not a concern?
So, what is gifting? Most people understand that gifting can be writing a check to the grandchildren for Christmas or birthdays. Gifting can include paying another’s bills and may even include paying someone to provide services.
For federal gift tax purposes, someone can receive $14,000 per year from an individual giver without being subject to gift taxes. On the other hand, very different rules apply to gifts given in the past five years if one ever needs to ask the government for assistance.
Let’s say a couple gives their daughter $10,000 to purchase or remodel her house. The amount is well under the $14,000 gift tax limit, so should not be a problem, right?
Let’s then say that 4 years later, one of them suffer a stroke, and needs to receive care in a long term care (LTC) facility such as a nursing home or assisted living facility. If they can pay the bill ($3500 – $9000 per month) there is no problem at all. But if they can’t afford such a monthly expense, and savings are insufficient, they may need to apply for Medicaid to pay for the care. Medicaid is the long term care program for the poor, so they will find that there are restrictions on the total amount of money and other assets they can keep on hand. In addition, if they have given assets (e.g., money, land, a business) away in the past five years, those will be considered gifts and the amount will prevent them from receiving Medicaid, once they are impoverished. So, that gift to their daughter will be considered to be an asset they gave away and will impact when they become eligible to receive Medicaid.
Even if they pay someone privately to provide the long term care they need at home, it will be considered a gift when they need to apply for Medicaid unless they have proper documentation. They need documentation to prove that the money paid was for services provided, and not a gift. This is the case regardless of whether the caregiver they pay is a family member or not—there needs to be proper documentation that the money paid is in exchange for care given, or they risk having it considered a gift.
Given all of this, it’s not difficult to understand that the monthly check a parent might give an adult child who is struggling financially would also be considered a gift, as would a child assuming operation and ownership of a family business or farm that is held in the parents’ name.
Medicaid requires documentation of finances from the past five years. All gifts made in this time period will be counted. The total of the gifts is divided by the average monthly cost of a nursing home to determine how long a person could have paid for care, had (s)he not given money (or other assets) away. That is how long they will need to wait to receive Medicaid, even after impoverished. Our government feels that it is unfair to give money away, and then want government funding to cover a budget shortfall.
I have a LTC insurance policy that will, along with my available income and assets, pay for my LTC. If I can pay my bills when due, with my funds or insurance I own, I can make gifts to whomever I please in any amounts I want. I will not have to ever ask the government for help through Medicaid when I need LTC. What about 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
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]
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
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.
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!