Medicare
5 Retirement Income Risks
Are you aware that 80% of mountain-climbing accidents happen on the way down, not the way up? Reaching the peak is a thrill for climbers, but the second half of that journey, getting down safely, presents the greatest risk and requires the most planning.
If you have saved and invested well and reached the peak, retirement, your descent from the financial mountain is the treacherous part. We are not alone in facing these dangers, 3.5 million of us are turning 65 every year. Here are 5 risks we face:
1. Inflation It is critical to maintain purchasing power. At current levels, prices of many things will double in 20 years. Some things will double in less time, like medical care for instance. LTC costs have been doubling in 15 years, but with legislative hikes in minimum wage, and less workers willing to do this work, we will see costs rise faster in the future.
2. Longevity According to the Census Bureau, the over-80 population is increasing 5 times faster than the overall population. In just 16 years from now the populations of 32 states will resemble what Florida is like now. Many of us will need some help with day to day activities when it becomes difficult to manage on our own.
3. Health/LTC costs As healthcare gets more expensive, and more of it is needed as we age, it will become a huge problem. A shortage of doctors will exacerbate the problem. The US Health and Human Services Department states that 70% of us will need some LTC, and most people are not prepared to pay for it.
4. Market risk If we keep our money in a “safe” place and earn less than 1%, we risk falling behind and losing money to inflation. If we keep invested in the market and a recession occurs just as we need funds we also lose. I leave advice on these problems to the financial planners.
5. Sequence of returns When gains or losses occur can seriously impact your chance to outlive your money. A significant asset loss soon after retirement may never be recovered, and with no more work income to replace lost funds, impact us much more negatively than a loss in later years. Withdrawing money from a (suddenly) depleted account can hurt us much more than future gains can possibly correct.
If we do nothing more than watch our funds and hope for the best, ignoring the first three risks, a health or LTC need can wipe us out quickly. Fortunately we have Medicare to help with the health care costs. However, we have only Medicaid, a welfare program that is available only once we are completely impoverished, to help those without the ability to handle the $50,000 to $100,000 a year cost of LTC. If you are healthy enough to consider LTC insurance, you would be well advised to do so while it is still available to you. For more information visit www.TheLongTermCareGuy.com
HealthCare.Gov (ACA) and Long Term Care
No, long term care is not directly affected by the Affordable Care Act (ACA, AKA Obamacare) but there are some scary correlations between the two. I refer to this morning’s Wall Street Journal article about what is coming – in both healthcare and long term care.
Doctors are retiring in droves. Those near are taking early retirement to avoid the losses of treating people for less than they are reimbursed. Medicare payments are being cut way back just as 10,000 Americans a day are coming on board (and will each day for the next 18-19 years). The ACA takes large sums from Medicare to fund the ACA. Doctors are reimbursed less and less, as more people are starting to use Medicare, hoping to get Dr. appointments scheduled. Doctors often discourage their children from entering the profession. Others won’t accept new patients over the age of 50 (who will get Medicare in 15 years).
Medicaid, the primary payer of long term care in America, is being stretched to millions of uninsured Americans for medical care now. This leaves less for the already under-reimbursed long term care facilities. Nursing facilities tell me they lose between $2000 and $3400 per month on every resident on Medicaid. They cannot make you leave if you run out of funds and turn to Medicaid, but they can – and do – say no to your entrance. If you lose money on every customer, you cannot make it up on volume! They do it gently, asking about what care you will need, and then apologizing that they do not have the staff, currently, to deal with those needs. If the “desirable” LTC facilities turn you away, what choice does this leave you? The less desirable facilities, or one far away that will accept you? I wonder if the people who “wisely” divested their homes and fortunes years ago realized the box they have put themselves in.
More doctors are going into “concierge” medicine, accepting only those patients willing to pay an annual retainer of $500-$3000 a year for ready access and longer consultations. Some LTC facilities also are turning away all Medicaid entrants. The ambience will be nicer, with more staff and better activities and food, and all will pay their fair share with no cost shifting. That is where I want to go when needed, and I have the income from my LTC insurance policy to pay for it. Wouldn’t you like to be in a position to choose such care as well?
With the ACA starting enrollments just as the Medicare Advantage season starts, there is confusion with some going to the wrong site for information and to sign up. Many Americans already believe that LTC is free from the government, and do not realize that Medicaid is not given because you are old, or disabled, it is given because you are impoverished – a fancy word for broke. Why would someone plan to end up that way and dependent on a government that you may have heard rumors of being short on funds itself? LTC insurance is often less expensive than people imagine, and most do not need as much as they initially suspect. Wouldn’t it be prudent to at least investigate? Call Romeo Raabe, TheLongTermCareGuy.com at (902) 884-3030 or (800) 219-9203 to get started.
Nursing Home Profit Margins Half That of Three Years Ago
Skilled Nursing Facilities are not doing well financially. One third of U.S. nursing homes have no profit or are losing money per the June 7th issue of McNights LTC News. The problem is two fold. Nursing homes lose money on the Medicaid remibursement rate. Many nursing homes have a significant percentage of their residents on Medicaid. It is not possible to cost-shift to the fewer and fewer paying residents when there are less and less of them every year.
The profit center for skilled nursing homes is the Medicare reimbursement they receive for short term recovery stays following 3 days in a hospital. The patient must transfer to the skilled nursing home within 30 days of hospital discharge, and for the same reason they were hospitalized for. While in the skilled nursing facility the patient must be undergoing some type of receovery care and making progress for it to be healthcare and thus paid for by Medicare.
The reimbursement rate for this type of care has dropped by over a third in the past few years. This can no longer make up the shortfall caused by the Medicaid reimbursement rate of those longer term residents.
Why is this of concern to you? If you ever need a skilled nursing home, hopefully there will be several to choose from in the area. More importantly, if you are planning on Medicaid being your Long Term Care provider, and knowing that this often means a nursing home with no other choices, good luck finding one that can afford to accept you.
Nursing homes can and do say no to admissions. They have to in order to keep their doors open. If they have too many Medicaid residents that reimburse them less than the cost of care, and not enough higher paying clients to make up the difference, how can thye stay in business?
If you lose money on every customer, can you make it up in volume?
It has already happened in Green Bay. One skilled nursing home closed up some years back when they had 32 residents, all on Medicaid, and had to close. Think of the difficulty of those residents trying to find another facility to accept them.
If you want access to Long Term Care, in the setting you desire (home, day care, assisted living, or nursing home) then it would be a good idea to be able to pay for it. If you are paying for your care and are unhappy, you can change that care.
How can you be sure you have enough money to pay for your Long Term Care? One way is to be rich, but another way is just like you handle the risk of an auto accident or a tornado damaging your house – insurance. You don’t need enough insurance to cover the entire bill since your lifestyle will change when care is needed. You won’t need as many cars, boats, campers, etc., and won’t be doing the traveling you might do while healthy. Thus some of your income can pay part of the bill. Insurance lets you pay pennnys now for dollars when needed. Perhaps you should investigate it now, while still healthy enough to purchase it?
If you do, consider investigating with an expert in the field, someone who has worked in Long Term Care financing exclusively for over 20 years. Romeo Raabe – click the link –www.TheLongTermCareGuy.com (920) 884-3030 (800) 219-9203
Price of Stroke to Double In Next Two Decades
The rising prevalence of stroke in an aging population is likely to more than double the cost of stroke care over the next two decades, the American Heart Association and American Stroke Association warned.
Annual stroke-related medical costs are projected to jump from $71.6 billion in 2012 to $183.1 billion in 2030, according to a statement from the organizations in the August issue of Stroke.
Total annual costs, including the price of lost productivity, were estimated to rise 129% to $240.67 billion by 2030, Bruce Ovbiagele, MD, MSc, of the Medical University of South Carolina in Charleston, and colleagues reported in the statement.
Now I am NOT advocating having one now, while they are cheaper, but how many are financially prepared for not only the medical costs, but also the long term care costs of a stroke?
Prevention can help, but with more baby boomers passing 65 and 70, plus rising rates of stroke per capita, the problem is expected to increase by 21% by 2030. Stroke related care is already 11% of the Medicare budget and that does not include the years that may be spent in an LTC facility. Annual indirect costs for stroke were estimated to shoot up 68%, from $33.65 billion in 2012 to $56.54 billion in 2030.
While arthritis is the number one cause of home care usage, and Alzheimer’s is the number one cause of facility care, stroke care can often last for many years as well. Medicare rehabilitation care only lasts a short time. Following a three day hospitalization Medicare may pay for continued recovery care in a nursing home for up to 100 days (partial assistance after 20 days). However, care must be for someone making progress as defined by Medicare and often that stops after a week or two at most.
Once you are not making progress your care is no longer health care, covered by Medicare or other health insurance, but long term care. LTC is covered by your savings or LTC insurance. If you wait until retirement age to investigate this insurance, you may find it is too late to qualify for it. Just like health insurance, there is medical underwriting. If your health history indicates the possibility of something that could in the future cause a need for LTC, or a cognitive impairment, you cannot purchase it.
I am often asked what the “proper” age is to buy LTC insurance. It is not a chronological age, but when you have the financial ability and are still healthy enough to be able to purchase it. For many, that is in the 50’s.
Perhaps it might be time for you to investigate LTC insurance for yourself. Please do so with someone qualified to help you choose appropriate benefits. Many financial planners refer their clients to me for that advice. I can be reached at 920 884-3030 or at [email protected] to arrange a meeting.
What is your retirement plan missing?
“The second most important financial priority, especially among older respondents, is saving money to pay health-care costs” from a recent article. This is not surprising, considering that 70% of those surveyed said they expect their medical expenses to increase during retirement. A smaller but not insignificant number of respondents listed a related concern – long term care expenses – as a top-two priority as well.
Fortunately we have Medicare to cover the bulk of our medical costs, and part D to help with drug costs. Even with the Medicare supplements or Medicare Advantage plans most retirees have, the costs are quite well controlled.
The cost that sinks most retirement plans is the extra bill each year for between $42,000 and $96,000 for long term care services. These bills are not covered by Medicare, your supplement, or advantage plan.
Many people simply hope it won’t happen to them. Personally I feel the same way about an auto accident, but I do carry auto insurance. I also carry long term care insurance so that my nest egg does not get used up in a year or two paying for my care when my health changes. In many cases the interest on just a portion of your retirement assets can purchase LTC insurance (if you are still healthy enough to purchase it) and save the rest of the principal for fun things we would like to do in retirement.
So, why don’t most retirees have LTC insurance? Many think the government pays for long term care. They are correct in that Medicaid, a welfare program, will pay for LTC costs once you have spent down to impoverishment – how fun is that? Most people who pay out of pocket use money they had hoped to leave for heirs.
Consider this, take a portion of the retirement savings and have the interest sent to you annually to pay the premium on LTC insurance. How much will it cost? First of all, are you healthy enough to be able to purchase it? A past heart attack may not be a problem, but a sore shoulder or pending knee replacement can disqualify you. Ditto for osteoporosis, diabetes, steroid usage, or memory concerns. You can be totally healthy until your next physical when a diagnosis suddenly becomes part of your medical history and LTC insurance is not available at any cost.
Most people do not need as much insurance for this as they might initially suspect. When one of a couple needs care, there may be less vacation travel, less toys, less vehicles, and some of the dollars spent on fun can be redirected to the cost of care before LTC insurance amounts are decided on. There are also many differnt companies offering such coverage, often with very different prices. A specialist in this area can be very helpful in helping you choose appropriate coverage.
Lastly, do not forget to include an inflation protection option. $100 daily benefit today might be sufficient, but in 25 years it might be as useless as 29 cents at a gasoline pump to fill a gallon can.
Time Your Loved One(s) Need Care?
A weekend Wall Street Journal article suggests paying close attention to your parents during holiday visits this year. Is the normally tidy house now neglected? Is there hoarding? Do you notice memory problems or physical unsteadiness?
It might be time to gather the family and assess what things they might need help with. There are also geriatric care managers who can be hired to do assessments and determine what services might be beneficial. A wonderful website BenefitsCheckUp.org might be helpful as well. It is run by the National Council on Aging and can help determine what benefits your parents might be eligible for.
Many families think that Medicare will pay for the care that a loved one needs. Unfortunately, while Medicare will pay for a short stay in a skilled nursing facility, it is only for a short recovery stay following at least 3 days in the hospital as an inpatient. It does save money for Medicare to pay for recovery care in a less expensive nursing home than in the hospital, but you must be making daily progress, and there are strict limits.
If someone needs to reside in a skilled nursing facility, the costs are approaching $100,000 a year. If you pay for that from IRA, 401K, or other taxable funds, you will need another $40,000 a year to satisfy the IRS. If you withdraw another $40,000 from that taxable account, you will need another $10,000 to cover the taxes on the $40,000, etc., etc.
Perhaps only home care is all that is needed. Before you breathe a sigh of relief, bear in ind that a daily visit from a nurse runs over $100 per visit in most areas. Aides are generally less expensive but there may be a 3 or 4 hour minimum. Assisted living facilities can be wonderful places to live, at a cost of $3000 to $5000 a month. That includes room and board, three meals a day plus snacks, activites for fun in addition to assistance with bathing, dressing and housecleaning. The social interaction is wonderful, however and can add years to a frail lonely person’s life.
You might need to check finances as well if your loved one is having difficulty managing their own accounts. If Medicaid is needed to pay for care, any gifts made in the past 5 years can disqualify them. You might be well advised to check with a specialist in the financing of Long Term Care to learn what strategies might be helpful.
Don’t leave home without it – was a tag line for American Express, and it might be asked of you. Do you have your Long Term Care insurance yet? By 60 years of age a third of us are no longer healthy enough to get it, and must resolve to simply spend the nest egg until gone and then see what government benefits we might be eligible for. You might be surprised to learn that if one year’s cost of a nursing home were set aside to earn interest, that interest check may well pay the annual premium on Long Term Care insurance – and you will never have to touch the principal. But check into it while still healthy enough to get it!