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Elder Counselor Newsletter Top Reasons Everyone Needs a Comprehensive Power of Attorney

The benefits of a highly detailed, comprehensive power of attorney are numerous. Unfortunately, many powers of attorney are more general in nature and can actually cause more problems than they solve, especially for our senior population. This issue of the ElderCounselor highlights the benefits of a comprehensive, detailed power of attorney, including some of the provisions that should be included. A proper starting point is to emphasize that the proper use of a power of attorney as an estate planning and elder law document depends on the reliability and honesty of the appointed agent.

The agent under a power of attorney has traditionally been called an “attorney-in-fact” or sometimes just “attorney.” However, confusion over these terms has encouraged the terminology to change so more recent state statutes tend to use the label “agent” for the person receiving power by the document.

The “law of agency” governs the agent under a power of attorney. The law of agency is the body of statutes and common law court decisions built up over centuries that dictate how and to what degree an agent is authorized to act on behalf of the “principal”—in other words, the individual who has appointed the agent to represent him or her. Powers of attorney are a species of agency-creating document. In most states, powers of attorney can be and most often are unilateral contracts – that is, signed only by the principal, but accepted by the agent by the act of performance.

Much has been written about financial exploitation of individuals, particularly seniors and other vulnerable people, by people who take advantage of them through undue influence, hidden transactions, identity theft and the like. Prior issues of the ElderCounselor have addressed guardianships and conservatorships and discussed the benefits of court supervision of care of vulnerable people in such contexts. Even though exploitation risks exist, there are great benefits to one individual (the principal) privately empowering another person (the agent) to act on the principal’s behalf to perform certain financial functions.

A comprehensive power of attorney may include a grant of power for the agent to represent and advocate for the principal in regard to health care decisions. Such health care powers are more commonly addressed in a separate “health care power of attorney,” which may be a distinct document or combined with other health topics in an “advance health care directive.”

Another important preliminary consideration about powers of attorney is “durability.” Powers of attorney are voluntary delegations of authority by the principal to the agent. The principal has not given up his or her own power to do these same functions but has granted legal authority to the agent to perform various tasks on the principal’s behalf. All states have adopted a “durability” statute that allows principals to include in their powers of attorney a simple declaration that no power granted by the principal in this document will become invalid upon the subsequent mental incapacity of the principal. The result is a “durable power of attorney” – a document that continues to be valid until a stated termination date or event occurs, or the principal dies. Absent durability provisions, the power of attorney terminates upon the principal’s death or incapacity.

Having covered the explanation of what a durable power of attorney is, let us look at the top benefits of having a comprehensive durable power of attorney.

1. Provides the ability to choose who will make decisions for you (rather than a court).

If someone has signed a power of attorney and later becomes incapacitated and unable to make decisions, the agent named can step into the shoes of the incapacitated person and make important financial decisions. Without a power of attorney, a guardianship or conservatorship may need to be established, and can be very expensive.

2. Avoids the necessity of a guardianship or conservatorship.

Someone who does not have a comprehensive power of attorney at the time they become incapacitated would have no alternative than to have someone else petition the court to appoint a guardian or conservator. The court will choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court will continue to monitor the situation as long as the incapacitated person is alive. While not only a costly process, another detriment is the fact that the incapacitated person has no input on who will be appointed to serve.

3. Provides family members a good opportunity to discuss wishes and desires.

There is much thought and consideration that goes into the creation of a comprehensive power of attorney. One of the most important decisions is who will serve as the agent. When a parent or loved one makes the decision to sign a power of attorney, it is a good opportunity for the parent to discuss wishes and expectations with the family and, in particular, the person named as agent in the power of attorney.

4. The more comprehensive the power of attorney, the better.

As people age, their needs change and their power of attorney should reflect that. Seniors have concerns about long-term care, applying for government benefits to pay for care, as well as choosing the proper care providers. Without allowing, the agent to perform these tasks and more, precious time and money may be wasted.

5. Prevents questions about principal’s intent.

Many of us have read about court battles over a person’s intent once that person has become incapacitated. A well-drafted power of attorney, along with other health care directives, can eliminate the need for family members to argue or disagree over a loved one’s wishes. Once written down, this document is excellent evidence of their intent and is difficult to dispute.

6. Prevents delays in asset protection planning.

A comprehensive power of attorney should include all of the powers required to do effective asset protection planning. If the power of attorney does not include a specific power, it can greatly dampen the agent’s ability to complete the planning and could result in thousands of dollars lost. While some powers of attorney seem long, it is necessary to include all of the powers necessary to carry out proper planning.

7. Protects the agent from claims of financial abuse.

Comprehensive powers of attorney often allow the agent to make substantial gifts to self or others in order to carry out asset protection planning objectives. Without the power of attorney authorizing this, the agent (often a family member) could be at risk for financial abuse allegations.

8. Allows agents to talk to other agencies.

An agent under a power of attorney is often in the position of trying to reconcile bank charges, make arrangements for health care, engage professionals for services to be provided to the principal, and much more. Without a comprehensive power of attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration on the part of the family, as well as lost time and money.

9. Allows an agent to perform planning and transactions to make the principal eligible for public benefits.

One could argue that transferring assets from the principal to others in order to make the principal eligible for public benefits–Medicaid and/or non-service-connected Veterans Administration benefits–is not in the best interests of the principal, but rather in the best interests of the transferees. In fact, one reason that a comprehensive durable power of attorney is essential in elder law is that a Judge may not be willing to authorize a conservator to protect assets for others while enhancing the ward/protected person’s eligibility for public benefits. However, that may have been the wish of the incapacitated person and one that would remain unfulfilled if a power of attorney were not in place.

10. Provides immediate access to critical assets.

A well-crafted power of attorney includes provisions that allow the agent to access critical assets, such as the principal’s digital assets or safety deposit box, to continue to pay bills, access funds, etc. in a timely manner. Absent these provisions, court approval will be required before anyone can access these assets. Digital assets are also important because older powers of attorney did not address digital assets, yet more and more individuals have digital accounts.

11. Provides peace of mind for everyone involved.

Taking the time to sign a power of attorney lessens the burden on family members who would otherwise have to go to court to get authority for performing basic tasks, like writing a check or arranging for home health services. Knowing this has been taken care of in advance is of great comfort to families and loved ones.

Conclusion
This discussion of the Reasons Why Everyone Needs a Comprehensive Power of Attorney could be expanded by many more. Which benefits are most important depends on the situation of the principal and their loved ones. This is why a comprehensive power of attorney is so essential: Nobody can predict exactly which powers will be needed in the future. The planning goal is to have a power of attorney in place that empowers a succession of trustworthy agents to do whatever needs to be done in the future. Please call us if we can be of assistance in any way or if you have any questions about durable powers of attorney.

 

category: Elder Counselor (Newsletter), Power of Attorney

Elder Counselor Newsletter The Future of Long Term Care and How to Finance It

Long-term care is becoming an important issue for our nation to address.  We have 78 million aging baby boomers.  The costs of long-term care to these baby boomers can be catastrophic and few people have sufficient resources to pay for needed long-term care.

In an effort to deal with this growing concern, the Long-Term Care Financing Collaborative (the “Collaborative”) began meeting informally in 2012 for the purpose of finding a solution.  They have since become a formalized group made up of a variety of national experts and stakeholders with varying ideological stances.  Their common goal is to improve the way Americans pay and prepare for non-medical care (Long-term supports and services) needed by the elderly and those living with disabilities.  On February 22, 2016, the Collaborative announced its third and final set of recommendations.[1]

ABOUT THE COLLABORATIVE

The diverse group[2] is made up of policy experts, consumer advocates and representatives from service providers and the insurance industry.  In addition, the group consists of senior executive branch officials in both the Democratic and Republican administrations, former congressional aides, and former top state health officials.

THE COSTS INVOLVED

The statistics surrounding long-term care or long-term supports and services (“LTSS”) are eye opening.  According to the Collaborative, there are between 10 and 12 million adults today who require LTSS and that number is expected to double by the year 2030.  More than two-thirds of older adults will need some assistance before they die and nearly half will have a high enough need that they will be eligible for private long-term care insurance or Medicaid to pay the bill.  More than 6 million older adults need that level of care today and nearly 16 million will need it in 50 years.

The Collaborative defines Long-term supports and services (“LTSS”) as non-medical assistance.  This would include help with such things as food preparation, personal hygiene, assistive devices and transportation, bathing, eating and the like.

Cost to the Elderly or Disabled:

The elderly or disabled persons who find themselves in need of LTSS try to pay for it out of their savings or income from their retirement along with help from family members.  Often, this is insufficient to cover the costs and many people have to turn to Medicaid for help.  The overall spending on LTSS is expected to double by 2050, which will cause even more people to depend on Medicaid to pay for it.

Few people have saved sufficiently for LTSS.  In fact, the Collaborative reports that a typical American between the ages of 65 and 74 has financial assets of $95,000 and about $81,000 in home equity.  This does not include retirement savings, which vary widely across the country.  To pay for one’s lifetime medical expenses with a 90% certainty requires savings of about $130,000 and an additional $69,500 for LTSS costs.  With this in mind, it is easy to see how people are running out of money.

Over all, individuals pay for about 55% of LTSS expenditures; Medicaid pays about 37%; and Private LTSS insurance pays for less than 5%.

Cost to Family and Friends:

In addition to the financial stress this places on the elderly and disabled, it also significantly affects their families.  The Collaborative estimates that in 2013, family and friends provided 37 billion hours of uncompensated LTSS to adults.  This care calculates to up to $470 billion, which is three times the amount Medicaid spent on LTSS the same year.

When family members provide caregiving to a loved one, it often comes at the cost of their job or a portion of their job.  On average, the Collaborative reports, a woman in her 50s who leaves a job to care for her aging parents does so at a cost of $300,000 of income over her lifetime.  The Collaborative states that “unpaid family caregivers lose an estimated $3 trillion in lost lifetime wages and benefits.”

Cost to Employers of Family and Friends:

The Collaborative reports that employers experience a loss of $17.1 to $33 billion in productivity due to absenteeism alone.  In addition, they state that “costs of turnover and schedule adjustments for caregiving workers add an additional $17.7 billion in costs.”

THE COLLABORATIVE’S RECOMMENDATIONS

The Collaborative was able to agree to five key recommendations in three key areas.  This final set of recommendations focused significantly on:  1) A need for universal catastrophic insurance; 2) Private market initiatives and public policies to revitalize the insurance market to help address non-catastrophic LTSS risk; and 3) Enhanced Medicaid LTSS for those with lower lifetime incomes.

The Collaborative calls for a strong government role in the solution.  The group considered voluntary and universal insurance programs and came to the conclusion that universal was the only viable, long-term solution as it spread the risk across the entire population and avoided challenges of adverse selection.  The Collaborative noted in the report, “As a result, universal insurance appears to offer broad-based insurance at a comparatively low lifetime cost.”

In addition to recommending universal catastrophic insurance, the Collaborative also recommended taking some actions to revitalize the private insurance market.  These included suggestions of employers offering long-term care insurance as part of their benefits packages.  In addition, the group suggests that regulatory changes in the insurance industry, creating more standardization in policies, would save costs to consumers.  The specifics of the regulatory change suggestions include increasing premiums and benefits as the individual ages.  There is also a suggestion that this type of insurance be sold in conjunction with Medicare supplemental programs.  Finally, the group suggests that policymakers continue to encourage and support efforts by the insurance industry to experiment with more hybrid products, combining long-term care insurance with other products.

Another recommendation given by the Collaborative was to encourage increased private savings for retirement.  This encouragement might come in the form of ease of enrollment through employers’ benefits programs, expanded retirement products, tax subsidies and education.

Of note was a recommendation made by the Collaborative was to modernize Medicaid financing and eligibility.  This recommendation is really one to expand Medicaid coverage to include more people, in more settings, for more care.  Eligibility would be based on a functional assessment and a needs assessment rather than requiring an institutional level of care.

CONCLUSION

The Collaborative leaves us with a final recommendation to provide more education about LTSS.  Many people are in denial about the possibility that they may need it some day and do not plan.  While it is encouraging that the nationwide issue is being studied more and taken more seriously now, the problem is far from resolved.  Until there is a firm solution, individuals must take responsibility and plan ahead.

If you or someone you know has questions about how to plan for the costs of long-term care, please feel free to contact our office.

ABOUT THE COLLABORATIVE

The diverse group[3] is made up of policy experts, consumer advocates and representatives from service providers and the insurance industry.  In addition, the group consists of senior executive branch officials in both the Democratic and Republican administrations, former congressional aides, and former top state health officials.

THE COSTS INVOLVED

The statistics surrounding long-term care or long-term supports and services (“LTSS”) are eye opening.  According to the Collaborative, there are between 10 and 12 million adults today who require LTSS and that number is expected to double by the year 2030.  More than two-thirds of older adults will need some assistance before they die and nearly half will have a high enough need that they will be eligible for private long-term care insurance or Medicaid to pay the bill.  More than 6 million older adults need that level of care today and nearly 16 million will need it in 50 years.

The Collaborative defines Long-term supports and services (“LTSS”) as non-medical assistance.  This would include help with such things as food preparation, personal hygiene, assistive devices and transportation, bathing, eating and the like.

Cost to the Elderly or Disabled:

The elderly or disabled persons who find themselves in need of LTSS try to pay for it out of their savings or income from their retirement along with help from family members.  Often, this is insufficient to cover the costs and many people have to turn to Medicaid for help.  The overall spending on LTSS is expected to double by 2050, which will cause even more people to depend on Medicaid to pay for it.

Few people have saved sufficiently for LTSS.  In fact, the Collaborative reports that a typical American between the ages of 65 and 74 has financial assets of $95,000 and about $81,000 in home equity.  This does not include retirement savings, which vary widely across the country.  To pay for one’s lifetime medical expenses with a 90% certainty requires savings of about $130,000 and an additional $69,500 for LTSS costs.  With this in mind, it is easy to see how people are running out of money.

Over all, individuals pay for about 55% of LTSS expenditures; Medicaid pays about 37%; and Private LTSS insurance pays for less than 5%.

Cost to Family and Friends:

In addition to the financial stress this places on the elderly and disabled, it also significantly affects their families.  The Collaborative estimates that in 2013, family and friends provided 37 billion hours of uncompensated LTSS to adults.  This care calculates to up to $470 billion, which is three times the amount Medicaid spent on LTSS the same year.

When family members provide caregiving to a loved one, it often comes at the cost of their job or a portion of their job.  On average, the Collaborative reports, a woman in her 50s who leaves a job to care for her aging parents does so at a cost of $300,000 of income over her lifetime.  The Collaborative states that “unpaid family caregivers lose an estimated $3 trillion in lost lifetime wages and benefits.”

Cost to Employers of Family and Friends:

The Collaborative reports that employers experience a loss of $17.1 to $33 billion in productivity due to absenteeism alone.  In addition, they state that “costs of turnover and schedule adjustments for caregiving workers add an additional $17.7 billion in costs.”

THE COLLABORATIVE’S RECOMMENDATIONS

The Collaborative was able to agree to five key recommendations in three key areas.  This final set of recommendations focused significantly on:  1) A need for universal catastrophic insurance; 2) Private market initiatives and public policies to revitalize the insurance market to help address non-catastrophic LTSS risk; and 3) Enhanced Medicaid LTSS for those with lower lifetime incomes.

The Collaborative calls for a strong government role in the solution.  The group considered voluntary and universal insurance programs and came to the conclusion that universal was the only viable, long-term solution as it spread the risk across the entire population and avoided challenges of adverse selection.  The Collaborative noted in the report, “As a result, universal insurance appears to offer broad-based insurance at a comparatively low lifetime cost.”

In addition to recommending universal catastrophic insurance, the Collaborative also recommended taking some actions to revitalize the private insurance market.  These included suggestions of employers offering long-term care insurance as part of their benefits packages.  In addition, the group suggests that regulatory changes in the insurance industry, creating more standardization in policies, would save costs to consumers.  The specifics of the regulatory change suggestions include increasing premiums and benefits as the individual ages.  There is also a suggestion that this type of insurance be sold in conjunction with Medicare supplemental programs.  Finally, the group suggests that policymakers continue to encourage and support efforts by the insurance industry to experiment with more hybrid products, combining long-term care insurance with other products.

Another recommendation given by the Collaborative was to encourage increased private savings for retirement.  This encouragement might come in the form of ease of enrollment through employers’ benefits programs, expanded retirement products, tax subsidies and education.

Of note was a recommendation made by the Collaborative was to modernize Medicaid financing and eligibility.  This recommendation is really one to expand Medicaid coverage to include more people, in more settings, for more care.  Eligibility would be based on a functional assessment and a needs assessment rather than requiring an institutional level of care.

CONCLUSION

The Collaborative leaves us with a final recommendation to provide more education about LTSS.  Many people are in denial about the possibility that they may need it some day and do not plan.  While it is encouraging that the nationwide issue is being studied more and taken more seriously now, the problem is far from resolved.  Until there is a firm solution, individuals must take responsibility and plan ahead.

If you or someone you know has questions about how to plan for the costs of long-term care, please feel free to contact our office.


[1] Full report:  http://www.convergencepolicy.org/wp-content/uploads/2016/02/LTCFC-FINAL-REPORT-Feb-2016.pdf

[2] For a list of members of the collaborative:  http://www.convergencepolicy.org/ltcfc-participants/

[3] For a list of members of the collaborative:  http://www.convergencepolicy.org/ltcfc-participants/

 

 

category: Elder Counselor (Newsletter)

Elder Counselor Newsletter Underestimating the Risk of Disability – The Importance of Being Prepared

No one likes to think about the possibility of their own disability or the disability of a loved one. However, as the statistics below demonstrate, we should all plan for at least a temporary disability. This issue of The ElderCounselorTM examines the eye-opening statistics surrounding disability and some of the common disability planning options. Disability planning is one area where we can give each and every person and family we work with great comfort in knowing that, if they or a loved one becomes disabled, they will be prepared.

Most Individuals Will Face At Least a Temporary Disability
Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. More specifically, one in three Americans will face at least a 90-day disability before reaching age 65 and, according to the definitive study in this area, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than die in any given year.

In raw numbers, over 37 million Americans, or roughly 12% of the total population, are classified as disabled according to the 2010 census. Perhaps surprisingly, more than 50% of those disabled Americans are in their working years, from 18-64. For example, in December 2012, according to the Social Security Administration more than 2.5 million disabled workers in their 20s, 30s, and 40s received SSDI (i.e., disability) benefits.

Many Persons Will Face a Long Term Disability
Unfortunately, for many Americans the disability will not be short-lived. According to the 2007 National Home and Hospice Care Survey, conducted by the Centers for Disease Control’s National Center for Health Statistics, over 1.46 million Americans received long term home health care services at any given time in 2007 (the most recent year this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one “activity of daily living” (such as eating, bathing, getting dressed, or the kind of care needed for a severe cognitive impairment like Alzheimer’s disease). The average length of service was more than 300 days, and 69% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past age 65. The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over 65 are increasing at an impressive rate:

The Department of Health and Human Services also estimates that 9 million Americans over age 65 will need long term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons age 65 or older will need some type of long term care services during their lifetime.

The Council for Disability Awareness provides startling examples of how disability is likely to impact “typical” Americans.

“A typical female, age 35, 5’4″, 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:

  • A 24% chance of becoming disabled for 3 months or longer during her working career; with a 38% chance that the disability would last 5 years or longer, and with the average disability for someone like her lasting 82 months.
  • If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.

“A typical male, age 35, 5’10″, 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:

  • A 21% chance of becoming disabled for 3 months or longer during his working career; with a 38% chance that the disability would last 5 years or longer, and with the average disability for someone like him lasting 82 months.
  • If this same person used tobacco and weighed 210 pounds, the risk would increase to a 45% chance of becoming disabled for 3 months or longer.

Visit the Council for Disability Awareness website at http://www.whatsmypdq.org/ to calculate your own Personal Disability Quotient (PDQ), or risk for disability.

The Alzheimer’s Factor
Alzheimer’s is growing at an alarming rate. Alzheimer’s increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period.

The 2015 Alzheimer’s Association annual report titled, “Alzheimer’s Disease Facts and Figures” explores different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. This report contains some eye-opening statistics:

  • An estimated 5.3 million Americans of all ages have Alzheimer’s disease. This figure includes 5.1 million people aged 65 and older and 200,000 individuals under age 65 who have younger-onset Alzheimer’s.
  • One in nine people age 65 and older (11 percent) has Alzheimer’s disease.
  • About one-third of people age 85 and older (32 percent) have Alzheimer’s disease.
  • Eighty-one percent of people who have Alzheimer’s disease are age 75 or older. The number of people aged 65 and older with Alzheimer’s disease is estimated to reach 7.7 million in 2030 – more than a 50% increase from the 5.1 million aged 65 and older currently affected.
  • Every 67 seconds, someone in the United States develops Alzheimer’s. Thus, approximately 473,000 people age 65 or older developed Alzheimer’s disease in the United States in 2015.
  • By 2050, the number of individuals aged 65 and older with Alzheimer’s is projected to number between 11 million and 16 million – unless medical breakthroughs identify ways to prevent or more effectively treat the disease.

Caregivers are at risk of developing health problems. There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons with Alzheimer’s or dementia in 2009. According to the Alzheimer’s Association, those persons are at high risk of developing health problems, or worsening existing health issues. For example, family and other unpaid caregivers of people with Alzheimer’s or another dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease.

Spouses who are caregivers for the other spouse with Alzheimer’s or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer’s Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.

Receiving care. According to the National Nursing Home Survey 2004 Study, the most recent of its kind, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than three months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission also had a shorter average stay than those who lived alone prior to admission.

While a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increased dramatically with age, ranging from 1.1% for persons 65-74 years to 4.7% for persons 75-84 years and 18.2% for persons 85+. According to the U.S. Census Bureau, 68% of nursing home residents were women, and only 16% of all residents were under the age of 65. The median age of residents was 83 years.

See Vol. 4 Issue 5 of the Elder Counselor, The Affordable Care Act:  How It Impacts Our Senior Population, for a discussion of the Affordable Care Act’s Impact on information regarding nursing homes.

Long Term Care Costs Can Be Staggering
Not only will many individuals and families face prolonged long term care, in-home care and nursing home costs continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows:

  • Monthly base rate (room and board, two meals per day, housekeeping and personal care assistance) for assisted living care is $43,200 annually, expected to increase .2% annually.
  • Daily rate for a private room in a nursing home is $250, or $91,250 annually, expected to increase 4% annually.
  • Daily rate for a semi-private room in a nursing home is $220, or $80,300 annually, expected to increase 4% annually.
  • Hourly rate for home health aides is $21.50, expected to increase 4% annually.

These costs vary significantly by region, and thus it is critical to know the costs where the individual will receive care. For example, the median annual cost for a private room in the state of California during 2015 was $104,025, whereas the median cost for a year in a semi private room was nearly $90,000.

Most Americans Underestimate the Risk
Perhaps most importantly, despite overwhelming and compelling statistics; most Americans grossly underestimate the risk of disability to themselves and to their loved ones. According to the Council on Disability Awareness 2010 survey:

 

  • 64% of wage earners believe they have a 2% or less chance of being disabled for 3 months or more during their working career; the actual odds for a worker entering the workforce today are closer to 25%.
  • Most working Americans estimate that their own chances of experiencing a long term disability are substantially lower than the average worker’s.

 

Given the high costs of care, this underestimation often leaves Americans ill prepared to pay for the costs of long term care.
Long Term Care Insurance May Cover These Costs
If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family’s hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance.

Most long term care insurance plans let the individual choose the amount of the coverage she wants, as well as how and where she can use her benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person’s home, assisted living facilities, adult day care centers or hospice facilities.

Planning in the Event Long Term Care Insurance is Unavailable or Insufficient
Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or couple that would otherwise be at risk of being depleted.

All Planning Should Thoroughly Address Disability
When a person becomes disabled; he or she is often unable to make personal and/or financial decisions. If the disabled person cannot make these decisions, someone must have the legal authority to do so. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx recognize the need to avoid a guardianship proceeding if at all possible.

At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a decision-maker for health care decisions (the name of the legal document varies by state, but all accomplish the same thing). Alternatively, a fully funded revocable trust can ensure that the senior’s person and property will be cared for as desired, pursuant to the highest duty under the law – that of a trustee.

Conclusion

The above discussion outlines the minimum planning everyone, including seniors and their loved ones, should consider in preparation for a possible disability. It is imperative that families work with a team of professional advisors (legal, medical and financial) to ensure that, in light of their unique goals and objectives, their planning addresses all aspects of a potential disability. Our firm is dedicated to helping seniors and their loved ones work through these issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office.

 

category: Elder Counselor (Newsletter)

Elder Counselor Newsletter Alzheimer’s Awareness Month: The Costs of Dementia

November is Alzheimer’s disease and Awareness month.  It’s the perfect time to educate people about the disease of Alzheimer’s (and other dementias) and the effects of the disease on its victims and their loved ones.  In this edition of the ElderCounselor™, we are going to focus on the high costs associated with dementia during the final years.

Alzheimer’s disease is a type of dementia.  In fact, it is the most common form of dementia.  Other types of dementia include:  Parkinson’s disease, Lewy body dementia, vascular dementia and Huntington’s disease.  According to the Alzheimer’s Association, 1 in 3 seniors living in the United States die with Alzheimer’s disease.  It is the 6th leading cause of death in the country.  The Parkinson’s Disease Foundation estimates that 600,000 people have been diagnosed with Parkinson’s disease in the United States.  And, around 1 million adults suffer from Lewy body dementia according to the National Institute on Aging.

Compared to other diseases that are common in older adults, dementia has been discovered to be much more costly.  On October 27, 2015, the Annals of Internal Medicine published results of a study of which the objective was, “To examine social costs and financial risks faced by Medicare beneficiaries 5 years before death.”[1] The study compared 1,702 deceased Medicare beneficiaries, classified into 4 groups as follows:  persons with high probability of dementia; those who died due to heart disease; those who died of cancer; and those who died for other causes.

The results of the study showed a significantly higher cost of those who died of dementia than those who died of other causes.  Over a five-year period, the average cost of care for the dementia patient was $287,038.  In contrast, the heart disease patient’s average cost for the same period of time was $175,136 and the cancer patient’s cost was $173,383.

Medicare paid out about $100,000 per patient, regardless of whether the patient suffered from dementia, heart disease, cancer or other disease, over the five-year period.  However, for the same 5-year period, the out-of-pocket costs (costs not covered by Medicare) were 80% higher, or about $61,522 more, for the dementia patients than the heart disease or cancer patients.

Why the discrepancy in the cost for dementia patients over other terrible illnesses?  The reason is that dementia patients require more “caregiving” in terms of help with basic daily functions.  Things that many of us take for granted to be able to do for ourselves, even when we are sick, such as bathing, dressing, toileting, and eating, are all activities many dementia patients require assistance with as the disease progresses.  In addition, dementia patients often need someone with them just to protect them from themselves.  Many dementia patients wander or harm themselves.  Therefore, constant oversight of them is necessary.

Caregiving for the dementia patient is often taken on by a family member to avoid additional costs to the patient.  This results in a financial cost to the family member who quits his or her job to take on this new caretaking role.  It often results in a health cost to the family member as well since family caretakers are frequently overworked and have less time to care for their own health.  This leads to increased medical bills, loss of days at work, more visits to the doctor and other expenses associated with deteriorating health of the family caretaker.

Sometimes family recognizes the benefit of hiring outside caregivers and, in order to keep their loved one in his/her home, hire an in-home caregiver.  These in home care providers cost, on national average, about $20 per hour.[2] A full-time caregiver at $20 per hour could cost a family up to $174,720 per year.  There are also other options, such as adult day care, an assisted living facility with a dementia unit (where doors are kept locked to avoid wandering), and nursing home facilities.  These options can cost, on national average, anywhere from $17,904 for day care to $91,250 for a nursing home.  As is no surprise, the long-term caregiving costs can add up quickly and be devastating to most middle class families.

Currently, there is no cure for Alzheimer’s, or any other type of dementia.  There are treatments that may help slow the progression of the disease.  There are also theories related to diet that may help prevention or stave off the development of dementia.[3] However, there are no surefire ways to beat this disease as of the date of this writing.  Advocating for the recognition of the costs associated with the disease as well as the heartbreaking effect on friends and family of the patient, is the best way to raise funds to support the finding of a cure and prevention of dementia.  We can all look forward to a day that this disease is a thing of the past because a cure, and/or prevention, has been found.

Until that day, there are support groups for family/friend caregivers.  The Alzheimer’s Association puts these groups together as do local hospitals and senior communities.  It is imperative that caregivers seek out emotional, spiritual and physical support as they care for their loved ones.  It cannot be stressed enough that without proper support, the caregiver’s own health will suffer and the caregiver will become a patient as well.

If you, or someone you know, suffers from dementia or loves someone who does, please contact us to discuss your options for planning for the costs associated with caregiving.  Please think of us as a resource for your loved one with dementia.  We can help.  And, if we can’t, we probably know someone who can.

Take some time this month to spread the news about the costs associated with dementia (including Alzheimer’s).  Bring this disease to the forefront of everyone’s mind so we can find a way to beat this disease once and for all.

Have a happy Holiday Season!


[1] http://annals.org/article.aspx?articleid=2466364

[2] https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html $20 is based on the 2015 Long Term Care Costs Survey by Genworth, which states that Homemaker Services national average expenses is $45,760 (for 44 hours/week x 52 weeks).

[3] http://www.webmd.com/alzheimers/features/mind-diet-alzheimers-disease The MIND diet is said to help prevent Alzheimer’s.

 

category: Elder Counselor (Newsletter)

Elder Counselor Newsletter Why We All Fail To Plan For Long-Term Care

Most Americans do not know, or refuse to accept, the facts surrounding their potential need for long-term care and the costs associated with it.  This was reconfirmed recently in a telephone survey of 1,735 Americans over the age of 40, funded by the SCAN Foundation and conducted by the Associated Press (AP) – NORC Center for Public Affairs Research (“survey”).[1] This survey highlights many of the misconceptions Americans have about long-term care, including: the potential that a loved one may need some sort of long-term care within the next five (5) years; lack of knowledge of the positive impact of “person-centered care” practices; lack of understanding of coverage of long-term care services by Medicare, Medicaid and private insurance; and an increase in lack of concern over failure to plan for the costs associated with long-term care.

 

Who Will Need Long-Term Care

According to the Genworth Cost of Care Survey of 2015 (“Genworth Survey”)[2], seventy percent (70%) of Americans over the age of sixty-five (65) will eventually need some type of long-term care.  In addition, by the year 2040, twenty-two percent (22%) of the population will be over the age of sixty-five (65), which is a ten percent (10%) increase from the year 2000.  Yet, this survey showed an increasing number of people over the age of forty (40) refusing to believe they will ever need long-term care.

 

Quality of Long-Term Care

The survey defined person-centered care as “an approach to health care and supportive services that allows individuals to take control of their own care by specifying preferences and outlining goals that will improve their quality of life.” This approach points to the consideration of coordinated care.  Coordinated care involves communication among various medical providers to reduce overlap, misdiagnosis or other medical oversights.  Because many people are avoiding thinking about their golden years, they are missing out on the benefits provided by this approach and the survey shows a lack of appreciation for the improved quality of life it can provide.

According to the survey, over sixty-five percent (65%) of adults over the age of forty (40) have two or more doctors that they see on a regular basis.  Twenty-nine percent (29%) of those report that their providers do not communicate well or at all.  Further, the lack of understanding of the person-centered care approach is evident in that twenty-three percent (23%) of those individuals who don’t participate in it reported that it would not improve their quality of care.

 

Cost of Long-Term Care

The study showed a lack of understanding by many of coverage for long-term care by Medicare, Medicaid and private health insurance.  The truth is that Medicare does not pay for ongoing long-term care (although it will pay for intermittent stays at nursing facilities).  Yet, thirty-four percent (34%) surveyed thought Medicare would pay for long-term care while twenty-seven percent (27%) were unsure.  Furthermore, Medicare doesn’t typically pay for care in the home.  However, thirty-six percent (36%) of those surveyed thought it would and twenty-seven percent (27%) reported that they were unsure.

As for private insurance, most health insurance plans will not cover long-term services like a nursing home or ongoing care provided at home by a licensed home health care aide.  Yet, eighteen percent (18%) of Americans age 40 and older believe that their insurance will cover the costs of ongoing nursing home care.  While, twenty-five percent (25%) believe their plan will pay for ongoing care at home. About 1 in 5 people surveyed were unsure of the coverage provided for these types of long-term care services.

Medicaid is the largest payer of long-term care services.[3] Medicaid is a federally and state funded needs-based benefit that will provide for various types of long-term care depending on the state’s regulations.  In 2013, Medicaid paid for fifty-one percent (51%) of the national long-term care bill totaling $310 billion.  However, fifty-one percent (51%) of Americans age 40 and older reported that they don’t expect to have to rely on Medicaid to help pay for their ongoing living assistance expenses as they age.

The actual costs for long-term care are staggering.  The Genworth Survey reported that, nationwide, the average bill for a nursing home is approximately $80,300 and for home health care, approximately $44,616 with a variety of options among and in between these levels of care.

 

Planning for Long-Term Care

Despite the availability of this information, most Americans are unprepared for the costs associated with long-term care.  For example, the results of the survey showed that only one-third of adults were “very or extremely confident” in their ability to pay for long-term care.  Fascinatingly, while many individuals reported being concerned over leaving family with debt or becoming a burden on loved ones, many do little to alleviate their concern in the way of planning. In fact, just over thirty percent (30%) of those over the age of sixty-five (65) reported being concerned with this.  And, finally, two-thirds of Americans over the age of forty (40) reported doing no planning for long-term care.

The survey results lead to the conclusion that many Americans are reluctant to face the possible loss of independence related to aging.  Apparently, this plays a role in the unwillingness to plan for the possibility of needing assistance later in life. As an example, there was an interesting difference in the number of people surveyed who had planned, or talked to loved ones about, their funeral arrangements (nearly sixty-five percent (65%)), in those who had discussed care preferences with family (about forty-two percent (42%)) and in those who had saved money for long-term care (approximately thirty-three percent (33%)).  Some things, including how we want to be memorialized are just easier to think about than how we may end up dependent on others.

Conclusion

Although not a popular topic among Americans over the age of forty, long-term care is an increasingly important one.  We are in the business of providing options for people in planning for their potential long-term care needs.  If you, a loved one or a client needs help figuring out their options, please think of us.  We can help and we are always happy to hear from you.


[1] http://www.longtermcarepoll.org/PDFs/LTC%202015/AP-NORC-Long-Term%20Care%20in%20America%202015_FINAL.pdf

[2] https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html)

[3] http://kff.org/medicaid/report/medicaid-and-long-term-services-and-supports-a-primer/

 

category: Elder Counselor (Newsletter)