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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)

Elder Counselor Newsletter Proposed Changes to the VA Pension Eligibility Rules

Introduction
On January 23, 2015, the Department of Veteran Affairs (hereinafter “VA”) issued proposed changes tothe regulations affecting VA Pension eligibility, a needs-based program.   In support of the proposed changes to the regulations, the VA points to the results of a 2012 Government Accountability Offices (GAO) report.   That report recommended changes in order to “maintain the integrity of VA’s needs-based benefit programs.”

The proposed changes come on the heels of two bills:  H.R. 2189 proposed by the House of Representatives; and S.944 proposed by the Senate.  Both bills were proposed in 2013 and no action has occurred with regard to them since late that same year.  The VA’s proposed changes are strikingly similar to the two proposed bills, which Congress failed to pass.

In this issue of the ElderCounselor™ we will review the proposed regulatory changes and discuss how they might affect wartime Veterans over the age of 65 and surviving spouses of wartime Veterans.

How the Law Currently Reads
VA Pension benefits are a major focus of the proposed changes.  These benefits are available to wartime Veterans (and their surviving spouses) who meet certain criteria.  Prior to September 1980, the Veteran must have served at least ninety (90) days of active duty with at least one day being during a wartime period (as set by Congress).  After 1980, the Veteran must have generally served at least twenty-four (24) months of active duty with at least one day being during a wartime period.   The Veteran must not have been dishonorably discharged.

There is a disability requirement for the VA Pension benefit, which is satisfied if the Veteran is sixty-five (65) years of age or older, or permanently and totally disabled.  If the Veteran or surviving spouse has additional medical needs then additional allowances may be awarded, like an aid and attendance allowance.

An applicant for VA Pension must also meet certain financial requirements. The current law reads that an applicant’s net worth must not be excessive, taking into consideration the applicant’s age, income and expenses, life expectancy, and rate of depletion of the applicant’s net worth .  The financial rules also require that household income must be less than the benefit the applicant is seeking; however, income may be reduced by out-of-pocket medical expenses.

Proposed Changes

Net Worth
The proposed changes include a bright-line limit on “net worth” that an applicant is allowed to have when qualifying for VA Pension.  The limit is the same as the maximum community spouse resource allowance (CSRA) for Medicaid purposes (currently $119,220).  This amount would increase annually at the same rate as the cost-of-living increase for Social Security benefits.  Income is also counted toward the net worth limit under the proposed rules.

Treatment of Income
The proposed rules would include income in the applicant’s net worth calculation.  In other words, if a Veteran has assets worth $117,000 and receives an income of $2,000 per month, the Veteran’s “net worth” is calculated at $117,000 + $24,000, which is well over the “net worth” limit allowed.

Determining Asset Amount
The proposed regulations define assets as, “fair market value of all property that an individual owns, including all real and personal property, unless excluded under paragraph (b) of this section, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.  VA will consider the terms of the recorded deed or other evidence of title to be proof of ownership of a particular asset.”

Asset Exclusions
A primary residence, whether or not the claimant resides there, is an excluded asset for calculating “net worth” and will continue to be so under the proposed regulations.  However, the proposed rules cap the “reasonable lot area” that the home sits on at 2 acres, a limit that does not exist under current law.

Transfer of Assets and Penalty Periods
The proposed regulations include the addition of penalty periods for assets that an individual transfers prior to applying for VA Pension.  Any “covered assets” (one that is used in calculating “net worth”) that are transferred will be subject to a penalty period. The penalty provisions are not limited to actual gifts, but also apply to the purchase of an annuity or a transfer to a trust (revocable or irrevocable).

The actual penalty period (the time period that the claimant will remain ineligible for the Pension benefit due to the transfer) may not be longer than ten (10) years.  The penalty period will be calculated by using the amount of the transfer over and above the “net worth” limit and dividing it by the maximum annual Pension rate.  This penalty period begins to run the month after the last transfer was made.

To illustrate:  A married Veteran applies for VA Pension with an aid and attendance allowance.  The monthly benefit she is trying to qualify for is $2,120.  During the past 3 years, the Veteran contributed $10,000 to The Wounded Warriors Project, a nonprofit organization.  She also gave her only child $1,000 on each birthday the past 3 years.

As a result of the charitable contribution and the cash gifts to her child ($13,000 total in 3 years), this Veteran will be penalized for 6.13 months when she applies for VA Pension.  If this same Veteran was not married, the penalty would be 11.3 months.

Lookback Period
The lookback period for all transfers, is thirty-six (36) months immediately preceding the date of application for the VA Pension benefit?  There is a presumption that any transfer made during this thirty-six (36) month period of time was made for the purpose of qualifying for the VA Pension benefit.  As an exception to this presumption, the claimant must prove by clear and convincing evidence that the transfer was the result of fraud, misrepresentation or other bad act in the marketing or sale of a financial product.  Otherwise, the presumption is non-rebuttable.

In the example above, the Veteran, whose transfers had nothing to do with VA Pension eligibility, would not be able to rebut this presumption and would have to take the penalty imposed.

Medical Expense Deductions from Income
Medical expenses are those that are either medically necessary or improve a disabled individual’s functioning.  These medical expenses are deducted from income.  This becomes more complicated when the claimant is receiving home care or is in an independent or assisted living facility, as the proposed rules seek to limit the circumstances under which room and board expenses may be counted, as well as the amount paid.  There are very specific rules as to which services qualify as medical expenses and the claimant will have to be able to identify those in his/her application.

The proposed rules also limit the hourly amount that can be paid to a home health care provider.  The amount is based on a national average, rather than local costs for care.

Burden on Surviving Spouses
The surviving spouse of a wartime Veteran can make a claim for the Pension benefit if the Veteran meets the service criteria and the spouse meets the financial requirements.  However, the proposed rules put the surviving spouses at a disadvantage.  The proposed regulations allow surviving spouses little flexibility in planning due to the calculation method of the penalty period.  Where a married Veteran applying for VA Pension with an aid and attendance allowance could transfer $10,000 and incur a penalty period of 4.7 months, a surviving spouse transferring the same amount would incur a penalty period of 8.7 months.  As illustrated earlier, the gifting that many people do to benefit their children on birthdays, holidays or other reasons, charitable contributions or donations to places of worship will create a penalty period under these rules.

Negative Effects of the Proposed Regulations

Below are just a few of the potential negative effects of the proposed regulations if they pass as currently written.  We would be happy to speak to you further about additional harmful effects of the rules as written.

1. As mentioned above, surviving spouses will be penalized more harshly than Veterans for making transfers prior to applying for VA Pension – even if those transfers had nothing to do with qualifying for VA Pension.

2. Applicants in rural areas will be treated unfairly by the 2-acre limit on the reasonable lot area.  Currently, an applicant’s home and reasonable lot area that is immediately adjacent to the home is not counted for net worth purposes.

3. Transfers made prior to an application for VA Pension will be penalized regardless of the reason for the transfer.  Therefore, a cash birthday gift to a child, a contribution to a charity, or a donation to a place of worship will all be penalized if the Veteran or surviving spouse later applies for VA Pension.

4. Basic estate planning, like establishing and funding a revocable living trust, will be subject to a penalty if that same individual applies for VA Pension within 3 years.

Status of the Proposed Rule Changes and a Call to Action

The regulations proposed by the VA are currently up for public comment until March 24, 2015.  Until that deadline, the public is free to comment and the VA is required to respond to those comments before passing the regulations.  If you would like to comment on the proposed rules, please include this information in your response:  Subject: RIN 2900-AO73, Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits.  You can read the full text of the bill, a summary of the bill and you can post your comments online (see the blue “Comment Now” text in the top right corner) using this link: http://www.regulations.gov/#!documentDetail;D=VA-2015-VBA-0003-0001.

You may also consider reaching out to your local representatives in Congress to let them know about some of the negative effects of the proposed changes.

If you would like more information or would like to discuss the impact of these changes on wartime Veterans and surviving spouses in more detail, please feel free to contact our office.

category: Elder Counselor (Newsletter)