Medicaid
“Mind Your Own Business”
“Mind your own business”. How often we have said that to our children or other heirs. That statement does not help those trying to help you when you can no longer handle your affairs on your own.
It is very important that you make the caregivers, or power of attorney aware of what resources you might have.
Case in point: Friends recently lost their elderly mother. She went from sassy, sharp and capable to nursing home and finally to hospice in under 2 months. In this time the eldest son was caring for her and handling her finances, only to find out that mom had a Certificate of Deposit and a small annuity that she had not mentioned. This is now creating problems as he waits for access to these funds to pay the funeral home and other bills related to her care.
If mom had been forthcoming, the son could have been named as a Transfer on Death on the Certificate of Deposit, bypassing probate and making those funds immediately available upon presenting a death certificate. Or mom could have established a Revocable Trust naming the sons as beneficiaries of the estate, thus bypassing the problems and the wait for funds they are facing now.
The annuity has been annuitized, so mom has been getting payments, with a remainder to heirs after her death. It is very possible that mom could have accessed the funds from the annuity in a different manner, and not annuitized it. This may have made it easier for the son to have access to it to now. As it stands, the family will have to wait about a year, receiving small payments, instead of receiving the remainder in a lump sum.
Nobody could have predicted how this would turn out, who needs access to funds, and how. However, by letting the people who will have to take over know where the money is, and how it can be accessed can make things much easier for them. When the probate court does not allow immediate access to funds, family will have to dig into their own pockets, hoping to be reimbursed later.
One more piece that was missing in this non-existent long term care planning: Mom did not put aside any money for a Funeral Trust. This is important as her funeral could have been paid for and the sons would not be in the position of having to jump through hoops and coming up with funds out of their pockets. An irrevocable burial trust pays about the same interest as a CD at your bank, but is immediately accessible to pay the funeral bill completely – even before the death certificate has been produced.
Inflation and Long Term Care
I am continuously appalled to find insurance agents offering Long Term Care (LTC) insurance products that contain no 5% automatic, built in inflation on the amount the policy will pay when care is needed. LTC insurance is purchased while still healthy enough to obtain it, and may not be used for 30 or more years.
If I tell you what LTC may cost 30 years from now, you may not believe me, so let’s go back and let history tell us about inflation. 30 years ago you could buy a new Ford Mustang coupe LX for $7189. A first class US postage stamp was 22 cents, and a nursing home cost about $1600 a month. You probably have some idea of what those cost today.
Most LTC workers are minimum wage employees. The nurses and administrators are doing paperwork. Minimum wage is going up by over 100% in several states to $15.00 per hour. What will this do to the costs of LTC?
The New York Times published an article about a year ago saying that by 2020, more Americans would be employed as caregivers than work in retail. What happens to wages in any industry when not enough workers apply for the jobs? That’s right, wages go up.
I am getting bulk mail postcards in the mail, addressed to resident, from assisted living facilities asking if I will come to work, they are desperate for employees.
Now Medicare is making the problem worse. Medicare has paid for short stays in nursing homes to finish recovering from a 3+ day stay as an inpatient in the hospital. It is less costly to have you finish recovering in a nursing home, than in a hospital bed. But the new system will give a capitated sum to the hospital for knee or hip replacements, and if the hospital can send you straight home, bypassing additional recovery in the nursing home, they get to keep more of the money.
Those short term stays were the only cash cow the nursing homes had. They all employ marketing people to call on the hospitals and ask that recovering patients be sent to their facility.
The nursing homes lose money on the Medicaid reimbursements. They made up for it by the healthy payments from Medicare for recovery care after a hospitalization.
Their cash cow is gone.
Their labor costs are increasing dramatically.
They cannot find enough workers, raising wages even more.
Americans are passing through age 65 at a rate of 10,000 every day.
Medicaid, which pays for LTC when your funds are completely exhausted down to $2000, does not have enough money to pay for all the baby boomers’ care. Most boomers do not have enough savings to pay for their own LTC. How do you plan to pay for the care you need when you are no longer able to take care of yourself anymore?
I bought a LTC insurance policy 15 years ago. Initially, it would pay $4500/month for my care if needed. It has the built in, automatic, compound 5% inflation factor on what it will pay for my care. Today, 15 years later it will pay $9000/month for my care. Along with my Social security and other income I can pay for my care. I can go where I want to be cared for. I can get the services I want and need. Will you?
Don’t let an insurance agent who is not fully aware of the costs of LTC offer you a policy without the absolutely essential 5% automatic compound inflation benefit included. Without this feature, it may well be a waste of money before many years have passed and costs continue to increase.
For more information, visit www.TheLongTermCareGuy.com or call us to investigate at (920) 884-3030
How Your Home Can Help You Pay For Long-Term Care
Yes, it is possible for your home to help pay for your Long-Term Care (LTC) and possibly help keep you in your home longer. For many seniors, the home equity is their largest asset. Using that asset to help keep you at home versus in a LTC facility can make sense. There are a number of strategies on how this might happen.
First, let’s review the Medicaid rules for paying for LTC. Medicaid is the fall back option for people who cannot pay for LTC themselves. If you are single, you must spend down EVERYTHING you have to $2000, including the sale of the home, auto, IRA’s, cash in life insurance over $1500, pretty much devastating your finances. If married, the spouse at home can retain use of (Medicaid will recover later, so children may not inherit) the house, one vehicle, some savings and income.
Since the house will be subject to estate recovery, where Medicaid takes it after last death preventing your children from inheriting it, why not use it to pay for your care – at home or in a facility. A reverse mortgage can facilitate removing the equity in the house and converting it into a check you can cash. You can then spend the money until it is gone, OR…..
There is a way to convert the cash you removed from the house into an income for life. Typically, this is called a life income annuity, but there is a twist for LTC. When LTC is needed, it is probably true that your life expectancy is less than others of your chronological age. Most annuity companies only take into account your age and gender. There is one that has a different twist that makes it much more beneficial when LTC is needed.
This one takes your [poor] heath and thus shorter than average life expectancy into account. By doing so, it may be possible to get a much larger check each month for life. Since your life expectancy is less than average, you can receive a significantly larger check each month, and use that to either pay for home care and stay in your house, or pay for an assisted living or other LTC facility that might not have been affordable to you otherwise.
This lets you use the home equity, which would otherwise be reclaimed by Medicaid after last death, to pay for the LTC you need, and giving you choices of how and where that care is delivered. Its your home, its your equity, why not use it for your care as you wish?
If you are healthy, planning for LTC needs, and do not have the cash flow to pay the premium for LTC insurance, why not use that home equity to purchase the LTC insurance you do not think you can afford. Once you have the coverage, you can use it to pay for care at home, or in a facility, your choice. Since the alternative is to spend the home equity until you are on Medicaid, and remaining equity going to the state after death, versus your children, it makes sense.
Lastly, if the home is going to go anyway, we here at TheLongTermCareGuy.com have ways to save some of that home equity to pass on to your children (and their spouses) that Medicaid allows. Typically, any gifts given in the past 5 years will disqualify you from receiving Medicaid, but there is a provision that will allow you to protect some for family. We can help you accomplish this.
So, when LTC becomes necessary, and you might think all is lost, there may still be options to be able to pay for care and receive that care where and how you want. It is even possible to protect some assets to pass on the family. Simply call TheLongTermCareGuy.com for help at (920) 884-3030 and schedule a time to learn your options.
Discrimination
Yes, it is legal, despite what an article in the USA Today newspaper stated last week. Long-Term Care (LTC) facilities can and do discriminate on whom they allow in.
The problem is that many people do not plan for LTC costs. The insurance that pays for LTC is not cheap, but is actually quite reasonable compared to what it will pay out for your care when needed. The problem is that many people will put more time and effort into finding a way to get onto Medicaid (welfare) than in finding out how they might be able to pay for their care and have choices.
Medicaid is a fall back for people who run out of money paying for their LTC. Unfortunately, it pays less for your care than a person would pay out of pocket, or with insurance. The facilities can actually lose money on this low reimbursement.
Is it possible to lose money on every customer, and make it up on volume?
Of course not! Nobody, including the government will force facilities to accept a loss on every customer and go out of business. Thus the facilities need to keep a mix of those paying for their care to offset the loss on the Medicaid recipients.
A good friend is currently trying to get her mother into a facility in the Midwest. Most of them are asking about her mother’s finances. If she has enough to pay for a number of years, they will accept her. If soon to be on Medicaid, they will not. Others will accept her only if she signs that when she runs out of money and turns to Medicaid, she must leave. How difficult will it be for her to find a facility to accept her then, when they will be losing money on her from day one? It’s good to be charitable, but if you cannot keep your doors open, you will help nobody.
Bear in mind that with the baby boomers turning 65 at a rate of 10,000 a day, the government does not have the funds to handle all the Medicaid LTC either. Medicaid LTC is passing both Social Security AND Medicare as a government expense that is unaffordable.
So, what is the solution to this problem? Have you even investigated LTC insurance for yourself? Why not? Are you hoping that if you don’t talk about it, then perhaps you will never need care? Really? That superstitious?
Most people are surprised to learn that they need less of the insurance than they initially thought. They do not take into account that when one of a couple needs care, there may be no more cruises, trips to Branson, Washington DC, the Florida Keys, etc. No need for 2 (or 3) vehicles if only one can drive, same for the boat, camper, motorcycle. Thus a good portion of spendable income can be redirected towards the cost of care when care is needed.
If you do not want to decimate your life’s savings, you can still use the interest they generate for care, without touching the principal. Then, only the remainder needs to come from LTC insurance.
Many people do not purchase enough insurance to cover a nursing home, since only about 20% of care is done there. If you can afford to cover home care and the wonderful assisted living facilities with a small policy, you have a very good chance of never seeing the inside of a nursing home. Like your homeowners insurance, some of you do not have flood coverage, thinking the risk is too small to insure.
Lastly, the longer you wait to investigate this, the more it will cost. Not just because you get older, but because this insurance has built in inflation to keep up with increasing care costs. Waiting is like saving up to pay cash for your first house. Get it now and inflation will be working for you, causing your policy to automatically get larger every year.
So, wait no more. Give us a call at (920) 884-3030 and schedule a time to do some investigation. You might be pleasantly surprised. The longer you wait, the more likely something will happen, and then you cannot buy it ever again.
Hiring Help For Mom
Reprinted from the Washington Post Carolyn Hax column
On Abruptly Facing An Elderly Relative’s Need For Care
I sometimes supplement my income by senior-sitting those in need of temporary help. Recently, a family offered me a position to live 24/7 in their mother’s home as her aide, caregiver, housekeeper, cook, laundress, hairdresser, chauffeur, med-tech, and personal care provider. The “terms” (their word) were: free room and board, two full weekends off each month, most holidays off and a “stipend” (their word) of $100 a week.
Essentially, they want the Care Fairy to come see to their mother and the house, and will give the Care Fairy a weekly allowance for the privilege. This family is desperate, of course. They have slipped right on over into the fantasy world between Denial and Magical Thinking, unable to grasp the situation upon them. So, I did not overreact when I said no thank you. I was polite, but they were stupefied that I was not interested.
Adults in the sandwich generation: This is your future. The time to talk about it is now, not the day after “something happens”. You might not have a legal right to see your parent’s financials, but you have the moral right to ask to be part of their advance planning and directives. Do it before feelings are hurt and tempers flare, and before you later offend or insult every friend, neighbor, acquaintance, or extended-family member in your search for help.
TheLongTermCareGuy input:
Long-Term Care is a lot of work. It is expensive to hire it done, but many adult children cannot afford to leave their work and families to provide for loved ones. LTC insurance is the least expensive and best way to address this problem, if you look into obtaining it while healthy and preferably below age 55. You pay dollars and get thousands of dollars later when care is needed. For those who do not plan in advance, there are still ways to help – even if already spending down to Medicaid. You can try to figure this all out yourself, or come see an expert who can help. Your choice.
For more information contact www.TheLongTermCareGuy.com
More Bad News in Long-Term Care
The numbers of seniors who need personal care help is increasing, says the CDC. The data released last Tuesday by the CDC’s National Center For Health Statistics shows that 7.2% of seniors require help with activities of daily living in 2015, compared to 6.6% in 1997. This includes eating, bathing, dressing and getting around as personal care needs.
Seniors over age 85 were twice as likely as adults between 75 and 84 to require personal care help, and were 5 times a s likely as adults age 65 to 74. The report also found 6.4% of white seniors required personal care help, compared to 9.6% of black and 11.3% of Hispanic seniors.
Not only do we have more seniors, especially those over the critical age of 85, but their rate of needing care is increasing as well. A dangerous combination!
“Nursing Home Evictions Strand The Disabled In Costly Hospitals” was a recent article by Ina Jaffe of National Public Radio.
Quote: “What if you had to go to the hospital, and when it came time to return home, your landlord said you couldn’t move back in? Across the country, thousands of nursing home residents face that situation every year. In most cases, it’s a violation of federal regulations. But those rules are rarely enforced by the states. So, in California, some nursing home residents are suing the state, hoping to force it to take action. … Chicotel [a staff attorney with California Advocates for Nursing Home Reform] says the residents most likely to be refused readmission fit a particular type. First, they’re all on Medicaid, which pays nursing homes less than they get from Medicare or private insurance. Second, he says, these are patients who are behaviorally difficult to manage – for example, ‘residents with mental health issues or significantly advanced dementia, or maybe traumatic brain injury.’ They’re undesirable, says Chicotel, ‘because they might take a disproportionate amount of labor time.’”
State budgets are getting stretched thinner and thinner as seniors continue to accelerate passing through age 65. Most of the newly 65 year olds do not need any Long-Term Care services, but as they continue to age, as you can see from the article above, the incidence of care needs is increasing.
Medicaid picks up much of the cost of Long-Term Care for those who have run through all of their savings, homes, and other assets. Medicaid is half federal money and half state money, so everyone is sharing the pain equally. We are now faced with only 3 workers for every retired person and the ratio continues to get worse. Where will the money come from when you need care?
Just like responsibly planning for the time an automobile accident occurs, I have insurance for Long-Term Care as well as my auto insurance. When I need care someday, I will simply notify my Long-Term Care insurance company. As they receive copies of the bills for my care on a monthly basis they will send me a check each month to reimburse that cost.
I don’t have to worry if the Medicaid reimbursement rate is so low that the facility will be trying to get rid of me. My money will come in each month, in addition to my Social Security check. If I do not like the care I am receiving, I will find a better facility or home care agency and make changes. When you pay for the care you want, you get the care you want.
How will you pay for your care when your health changes? If you want to explore options, contact The Long Term Care Guy at (920) 884-3030 or (800) 219-9203.
LTC Planning, No Matter The Situation
If Long Term Care (LTC) is needed, but not planned for, there are a number of options to make the money last longer or protect some of it. The best and least expensive way to handle this would have been to purchase LTC insurance while still healthy, preferably in your 40’s or 50’s. By the time we’ve hit 60, a fourth of us can no longer qualify to buy this insurance.
I’ll use a recent example where I was called in to a financial planner’s office as his client’s wife was about to exhaust her short duration LTC insurance policy. The client owns a cottage in addition to a house, $200,000 of IRA money in addition to $180,000 of non IRA investments. He owns a life insurance policy with minimal cash value and his wife has one where the cash value is only slightly less than it’s death benefit.
One of the children would like the cottage and may be able to purchase it. Medicaid does not allow two homes, only one, and it must be sold for fair market value so as not to be a gift and disqualify her from receiving Medicaid.
His life insurance policy with a very small cash value but a significantly higher death benefit would be a shame to lose per Medicaid’s requirements. One of their children could purchase it for fair market value (the cash value) and pay premiums to keep it in force until his death. Hers has cash value nearly the same as the death benefit so it could be surrendered and after paying any income taxes on the gain, the remainder could be used to purchase allowed items like plot, marker, vault, casket, etc. This would be in addition to the irrevocable burial trusts they already purchased.
In Wisconsin, the at-home spouse’s IRA accounts are not a countable asset (currently), so we can ignore those for now. This leaves him with some at risk assets, primarily money. If he were to fund irrevocable burial trusts for his children and their spouses now, he would only be allowed to keep half of remaining assets when Medicaid takes their “snapshot” of assets. If he waits until wife is on Medicaid, and the spend down amount is identified, then he can fund those irrevocable trusts for children and spouses of, while keeping his entire half for himself.
A house presents a timing issue as well. If the at home spouse decides to sell the house while spending down to Medicaid (prior to being on Medicaid), the sale price becomes an at risk asset that must be spent down. If the at home spouse waits until the institutionalized spouse is ON Medicaid, and then sells the house, those funds can be retained by the at home spouse.
As you can see, there are things that can be done to protect assets when someone needs LTC. Every situation is different. Knowing what can be done and when to do it can be very helpful. We often have family meetings to simply explain the Medicaid rules. While we can establish the irrevocable burial trusts for you, your children and their spouses, there are no fees for doing so at The Long Term Care Guy.
For more information, visit www.TheLongTermCareGuy.com or give us a call at (920) 884-3030.
Who Are The Caregivers?
Let me start with a study done last year which said: By 2020 (now only 4 years away) there will be more people in the US working as caregivers than working in retail.
This will be true not only because everyone shops on Amazon now, but because we did not have enough children to take care of us in older age and must hire this done, at home or in a facility. Where will all these workers come from?
Most caregiving jobs do not require a college degree. I am getting bulk mail from facilities begging me to come work for them, all training provided, no experience needed. Of course they are minimum wage mostly, and few offer much for health benefits, but the jobs are plentiful. That is because we continue to pass through age 65 at the rate of 10,000 per day. You read in many places, but we are also turning 85 in record numbers as well.
Who are the caregivers that we will hope to find available for our care when needed? There are currently 43.5 million caregivers in the US according to the USA Today newspaper. Their average age is 49, but 24% are between 18 and 34. 19% are over age 65, and 60% are female. Some of them are taking time away from high paying jobs, or turning down transfer or promotions to continue the work they do for loved ones.
Caregivers help with day to day tasks that we healthy people do for ourselves. 78% of caregivers provide transportation. 76% shop for groceries. 72% do housework and cleaning. Meal preparation is done by 61%, while 54% manage finances for another, and 31% arrange other outside services.
They help with daily activities like getting in and out of bed and chairs (43%), getting dressed (32%), getting to and from the toilet (27%), bathing and showering (26%), eating (23%), and dealing with incontinence and diapers (16%). A whopping 57% deal with tube feedings or injections.
How well will your family or children be prepared to take over such duties? Stress is a huge challenge for 26%, not enough time for self affects 16% and 11% find themselves financially burdened by providing care to a loved one, probably because 49% go to work late, leave early, or take time off.
It’s going to get worse. There are currently about 6.7 caregivers available for every boomer who turns 65 in 2016. by 2031 there will be 4 and by 2045, when today’s 51 year old turns 85, there will be just 3 caregivers available for each of them.
It appears that depending on family might not work out so well. I doubt the people who tell me they plan to die peacefully in their sleep might find that plan stymied by their health as well. Those who say the government will provide forget the government is us, and there are too many who will need care for the healthy ones trying to hold down a job and care for us at the same time.
My Long-Term Care insurance policy is getting larger each year by 5% compounded (a built in benefit). I will have the cash available each month to pay for whatever care I might need. Those with the money to pay for such care will always get the best care in the nicest settings. Have you actually thought about what your plan is? By age 60, a fourth of us can no longer buy this insurance. How long will you wait before investigating it? Do you feel lucky this year?
More information is available at www.TheLongTermCareGuy.com
Do Wealthy People Need LTC Insurance?
Some financial planners might say that if you have enough savings, why insure? While that might seem like a fair question, let’s put something in perspective: There is a 1 in 1800 chance of a claim on your homeowners insurance in any given year. HHS says once you’ve reached 65 there is a 70% chance you will need LTC. So which one do they say you don’t need (which can cost many hundreds of thousands) and which one do they make sure you have (which might cost $100,000 to $300,000 – and rarely happens)?
There are several other reasons for wealthy people to insure for LTC. When care is needed, which accounts will be tapped first? Which stock will be sold (or maybe we should wait until next year)? Is it the right time to liquidate bonds? Which real estate should we sell, and what will the capital gains taxes be?
A stream of tax free money (another good reason to insure) that comes every month can leave investments in place to mature. No family fighting over which assets to liquidate. Remember, your children who are arranging all this for you, will be liquidating their inheritance.
Today’s Wall Street Journal had an article on curbing elder abuse. It happens. Someone “borrows” from mom or dad’s estate while they are getting care. If Medicaid is needed when assets run out, these “borrowed” amounts may be counted as gifts making Medicaid unavailable.
” Elder financial abuse is expected to grow dramatically” says the WSJ. The articles suggests financial advisors might soon be expected to report suspected financial abuse. Such abuse is up over 12% in just the past two years. Having a regular stream of insurance payments to cover the costs of LTC means less likelihood of anyone needing to invade savings and investment accounts.
Lastly, the return on LTC insurance, if it is needed, is huge. If you never need to use it, wouldn’t that be wonderful. However, if it is needed, $60,000 of tax deductible premiums over a lifetime can yield nearly a million dollars. And that is not dependent on stock or bond market returns.
So, do you plan to simply spend all those assets down when care is needed? Or will you at lest investigate the insurance that can pay for LTC and leave your assets to go to those you want them to go to? Do so while you are still healthy enough to have this option available.
For more information visit www.TheLongTermCareGuy.com
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]