Cost of Long Term Care

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A lot of people incorrectly assume that health insurance and Medicare will cover long term care. They cover medically necessary care for up to 100 days, or until you stop improving or stablize. After that, you’re on your own.

The majority of Americans over 60 do not have long term care insurance yet 70% will need care. So, why do people not buy insurance?

Most will say the cost of the policy. An average policy, depending on age, health and benefits chosen, will cost $1,000-$3,000 per year per person.

But what about the fact that the same people who say they will “self-insure” for long term care will never “self-insure” a parking meter… they always put money in the meter, even though they could easily afford and “self-insure” the parking fine.

We make decisions based mostly on emotion. That’s what causes people to buy stocks when they are high and sell when it crashes, the opposite of what seasoned investors do.

What if you “self-insure” for long term care, how much will it cost you? The national average for nursing home care is $89,000/year with some areas over $140,000/year. Home care and assisted living average $50,000/year. See how much care cost in your state: download the Cost of Care brochure.

For every $1,000 of monthly retirement income you want to generate from your own savings, you will need about $230,000 in assets, according to the Schwab Center for Investment Research. For example, if you want only $3,000 a month, or $36,000 a year, you would need savings of $690,000. That’s a conservative estimate, assuming that you earn 5.2% on your investments and live off the earnings without dipping into the principal.

If you cannot afford a long term care insurance policy, how are you going to afford paying out of pocket? The other option is spending all your cash for your care. This includes anything of cash value: savings, investments like stocks, bonds, life insurance, annuities. Medicaid allows you can keep only $2,000.

There are 30 states with filial laws that allow the state to make your children repay Medicaid for your care expenses, although this is rarely done. Fifteen years ago the #1 reason people bought long term care insurance was they did not want to be a burden on their family. Today, the #1 reason is people do not want to outlive their money (and end up on Medicaid-Welfare Health Care).

Some people will buy long term care insurance for asset protection. Most states have a Partnership program that will protect assets from Medicaid if you own a Partnership long term care insurance policy.

You have five options to pay for long term care:

1. Self-insure.

2. Long term care insurance and Partnership.

3. Life insurance with long term care rider.

4. Annuity with long term care rider.

5. Medicaid.

The life insurance and annuity do not qualify for the Partnership (neither do group LTC policies). The life/LTC or annuity/LTC are often bought because: the person’s health will not qualify for traditional LTC insurance, or the person has too many cash assets and they’d never spend down to qualify for Medicaid. An old life policy or old annuity can be converted to one with long term care benefits without paying capital gains.

You can continue down the same road, uninsured, until either a diagnosis or a serious change of health, like a stroke, will disqualify you from insuring. Then you will only qualify for state assistance. At that point you would have to have used, sold or given away your assets 5 years before applying for Medicaid. Who has the ability to see 5 years into the future?

*  The best age to insure: the age your health will still insure you.
*  The best benefits to get: enough to cover what you cannot afford to pay out of pocket.


For updated quotes and more information visit: https://guidetolongtermcare.com


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Why You Should Consider Long Term Care Insurance in Your Retirement Planning

If you haven’t already done so, now is an excellent time to consider adding long term care insurance to your retirement portfolio. Because uninsured long term care expenses can pose a significant risk to the assets you’ve worked a lifetime to accumulate, long term care insurance should be considered as part of a complete financial plan.
 
As former Senator told the United States Senate Special Committee on Aging, “Although the need for health insurance to cover a patient’s medical expenses in case of catastrophic illness is widely recognized, few people are insured against the costs of providing long term support services for that same person. This lack of insurance coverage jeopardizes the financial security of families and diminishes the economic security of the country.”
 
The likelihood that you may need long term care is significant.  Some 70% of Americans who reach the age of 70 can expect to utilize some type of long-term care during the remainder of their lives.  And while long term care includes a broad range of services, from in-home care to nursing home care, each comes at a cost.  Those costs could be substantial, and could have a significant adverse effect on your retirement portfolio.
 
Why? Most forms of health insurance focus on medical expenses, not the custodial care and nonmedical expenses associated with long term care. Medicare only covers nursing home care after a related three-day inpatient hospital stay and even then for only 20 days before a daily co-payment is assessed and Medicare only covers a total of 100 days.

Medicaid doesn’t kick in until one has spent down a significant portion of their assets (spend-down to $2,000*).  Therefore, if either you or your spouse needs long term care, you may have to pay for that care out of your accumulated assets … unless you have long term care insurance.

genworth-nursing-cost-2016The average cost of a private room in a nursing home met or exceeded $80,000 annually.  If one partner needs such care, the cost could quickly and substantially erode the assets acquired over a lifetime.
 
Let’s use a hypothetical couple living off the interest of $500,000 of invested assets to illustrate how serious an impact long term care expenses could have.

For the sake of this discussion, assume the couples’ investments are earning approximately eight percent annually, generating about $40,000 per year in income.  Let’s also presume this couple needs all of this income to support them while they’re living together in their home.
 
Based on an $80,000 annual cost for nursing home care, it may appear that this couple has enough for a little more than six years of care. However, that basic calculation does not consider the living expenses of the spouse who remains in the community.  

If this couple is using all of their investment income to provide for their living expenses, they will soon need to start withdrawing from the principle for a portion of those living expenses as well as for the long term care expenses of the partner who needs care.
 
In circumstances like these, it’s easy to see how the assets accumulated over a lifetime could soon be completely exhausted.
 
Long term care insurance can help provide the funds to pay for the care you may need, while simultaneously protecting the assets you’ve worked a lifetime to accumulate. Long term care insurance may also help preserve financial independence, choice, and dignity, and those can be priceless.
 
It’s never too early to consider insurance because your health can change at any time, meaning you may be uninsurable and end up paying out-of-pocket.

The Partnership Asset Protection program is available in most states. This will protect your home and assets to the limit as was paid by a qualified policy.

Some people have too many assets to benefit from the Partnership. They may prefer an annuity or life insurance with a long term care rider. You can use an existing whole/universal life policy or existing annuity to fund a new policy with long term care coverage. The Pension Protection Act allows this transfer without having to pay capital gains.

Feel free to contact us for more information or for an updated quote.

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.* States can differ on spend-down.

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Assisted suicide in nursing homes creates moral and ethical dilemmas

A court in Switzerland has ordered a nursing home to perform assisted suicide for those patients who want it. Switzerland legalized assisted suicide and has become a destination for suicide tourists – 611 from 2008 to 2012 – since passing the law, including 21 patients from the United States.

The nursing home, run by Christian charity The Salvation Army, claims its religious beliefs forbid helping patients commit suicide. But the court denied The Salvation Army’s appeal.

There is one way the nursing home can avoid helping patients kill themselves: giving up its charitable status and state subsidies.

One concern about assisted suicide is that some people who do not have a terminal illness are choosing to end their lives. Also, there is a risk that elderly people may be pressured into “voluntary” suicide by family members, or their own concerns about the cost of their care.

Find out about long term care insurance in America at Guide To Long Term Care.


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The Cost of Long Term Care Insurance versus The Cost of Not Insuring

The cost of long term care insurance policies may seem high to some people, but it may actually be a less expensive in the long run than not insuring.

Not insuring and depending on family caregiving has hidden costs:

Lost income. Family members sometimes must leave their jobs to care for aging parents. The consequences are lost salary, lost Social Security benefits, and difficulty getting back into the job market after the absence. Also, leaving a job can mean loss of health insurance.

Increased Health Risks. Caregiving is stressful physically and psychologically and may result in injury or illness to the caregiver. Because of the demands of caregiving, including financial demands, family caregivers may be less able to take care of themselves and their own health.
genworth nursing cost 2016
Lost Retirement Assets and Less Investment in the Family. In a study by the National Alliance for Caregiving and Evercare, 47% of working caregivers reported using up all or most of their savings while giving care. These costs can mean less money available for such expenses as retirement and the education of children.

The U.S. Department of Health and Human Services says nearly 70 percent of those 65 or older will need long term care at some point. Since nursing home costs can be $80,000 a year or more, having long term care insurance is an essential part of financial planning. Long Term Care Insurance can pay the expenses of both family care in the home, and institutional care.


 

Long Term Care Insurance Newsletter


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Good News for Long Term Care Insurance Companies and Policy Holders

Long term care insurers are paying more in claims in 2016, and expect the increase in claim benefits to continue in future years. Around $8.15 billion in claim benefits were paid to 260,000 insured individuals in 2015; In 2014 there were benefits amounting to $7.85 billion paid to roughly 250,000 individuals.

Why the increase? First, more people are living to be older. Also, many policies have a 5% compound inflation, which increases benefits. And of course, some of the increase in claims payments is caused by increases in the cost of care.

The difference between low-cost and high-cost policies remains between 20% and 90%, but monthly premiums are not rising, because the number of policy holders claiming benefits is already factored in to the monthly premium.

The average cost for a long term care policy has gone down in 2016. The lowest price for one of the better policies is $873 a year or $72 a month for a 55-year-old single man. In 2015 it was $1060 or $88 a month. For a 55-year-old single woman, the lowest price in 2016 is $1100 a year or $91 per month. In 2015 it was $1,390 a year or $115 per month.

Linked benefit plans, including life insurance with a long term care rider and annuities with a long term care rider, have been popular since 2014. Sometimes linked benefit plans will be the best option for people who have pre-existing conditions that disqualify them from getting traditional long term care insurance.

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Long term care insurance policies have a relationship with interest rates. The extended period of low interest rates for the last decade forced some long term care insurers out of business. The Federal Reserve raised its key interest rate in December, from a range of zero to 0.25 percent to a range of 0.25 percent to 0.5 percent. Insurers mainly invest in bonds or fixed income securities and not equities; therefore higher interest rates are good news for them.

The reason monthly premiums increased over the past few years was that interest rates were declining. Now, rising interest rates will bring additional revenue to long term care insurers, making it possible for them to lower their premiums. According to the American Association for Long Term Care Insurance (AALTCI), a 1% increase in long term interest rates can mean a 10% to 15% decline in policy premiums.

 


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Tips for Buyers: LTC Insurance Health Assessment

Insurance companies will request a health assessment (interview) to be done either by phone or in-person. Insurance companies outsource the testing to paramedical companies.

When you are called to set your appointment they will identify themselves and the insurance company and they will let you know if it is a phone interview or a face-to-face interview.

Schedule the meeting for a time that is convenient and when you will not be too tired or too distracted.

The interview is an important part of the health underwriting/approval process. It is important to remember to be calm and focused. Also turn off your phone so not to be interrupted and only answer the questions asked.

More LTC insurers are requiring in-person or telephone interviews as well as physical exams, according to Joe Sperling, J.D. He said he reminds clients that the interviewers work for the insurer, which means applicants should be honest but stick to the point when answering interview questions. It’s the same advice an attorney would give a client who is about to testify in court: answer the question, don’t go beyond it, don’t volunteer, he said.

“The examiner is not their high school buddy,” Sperling said. “The examiner is there to ask questions about your medical history. You want to answer the questions, be succinct and not elaborate. A natural tendency is to get a little bit too verbose. Rein that in. The danger is getting into the embellishment because there’s nothing good to happen there.” 

Do not intentionally exclude information that is related to your health. The underwriter will be reviewing your medical record and will compare that to the application and health assessment. If you do remember something later that you had not disclosed during the exam contact your insurance agent.

Dementia: It’s more than Alzheimer’s

Alzheimer’s disease is starting to get more attention.

People affected by other causes of dementia, and the researchers studying those conditions, are just starting to catch the public eye.

Matthew Sharp, a program coordinator at the Association for Frontotemporal Degeneration, tried to remind policymakers of the importance of the “related causes of dementia” recently during the public comment period at a meeting of the Advisory Council on Alzheimer’s Research, Care and Services.

The law that created the council calls for it to help people with conditions such as frontotemporal degeneration, Lewy body dementia, mixed dementia and vascular dementia, Sharp told council members.

Sharp asked council members to make sure they think carefully about the terms they use when they are creating and updating documents, to make sure the other conditions, and the people suffering from those conditions, also get help.

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