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


30 States Have Laws Requiring Children to Repay Medicaid for Parents Care

 

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Filial responsibility laws date back to 17th century English law requiring children to financially support their parents when they couldn’t support themselves.

Because of age, or maybe an illness like Alzheimer’s, millions of Americans are no longer able to take care of themselves.

Spending one’s own money for care can wipe out a life’s savings in a short time. It could be someone in your family.

What happens when the money runs out? Out of love, you may feel a moral obligation to help. In some states, however, you may be legally responsible for paying your parents’ long-term care.

In these days of economic uncertainty it is essential that people have a sense of security in terms of their future. Long term care insurance is a way to preserve that.

Like car insurance, the prices for long term care insurance will vary by company. The premium will depend on your age, health and the benefits you want.
The LTC Partnership Program provides asset protection in most states.

Since care cost differs by type and location it is important to get the right information to make an informed decision.

Other than transferring your assets to an irrevocable trust five years before you apply for Medicaid, the only way to protect your estate from Medicaid is with a Partnership long term care policy.

 

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Caregiving and finances

As we begin the caregiving journey, we are mainly concerned about our aging parents’ well-being and safety. This can be a difficult time psychologically for adult children as they watch their parents, once vital and in charge, become frail and in need of help. In the rush to deal with day-to-day problems and scramble to figure out what to do if Mom or Dad is having difficulty at home or has a serious health crisis, the financial ramifications are often an afterthought.

However, sooner or later, finances will become a key part of the mix, whether we end up paying for incidentals, managing or coordinating parents’ finances, or paying outright for their care. It is not unusual for family caregivers to take on all three financial roles. A recent study finds that 92% of caregivers are “financial caregivers” along with more traditional caregiving responsibilities. Often people aren’t aware of what they are spending or how much time they devote to helping out with paperwork until they are deep into their caregiving responsibilities.

Paying out-of-pocket expenses
Whether aging parents or other loved ones are well off financially or not, family caregivers usually don’t think twice about picking up groceries, items from the drug store or medical supplies. And if they live in a different location from their parent, they are quick to get in their car or fly to a destination if a crisis occurs or simply to make sure things are okay.

Expenses for gas, airfare and all the incidentals can really add up. Caregivers spend an average of $6,954 yearly for out of pocket expenses, and for long-distance caregivers, the cost is nearly doubled. On average, those who care for someone who lives far away spends $11,923 per year. These expenses are generally unbudgeted and can take an unbudgeted bite into a family’s savings.

Coordinating and managing finances
It’s not unusual for someone who needs care or has a serious visual impairment to be overwhelmed by the paperwork generated from Medicare, insurance, utilities, and savings and checking accounts. Even if a parent has a financial professional, the day to day work involved of making sure bills are paid, taxes filed, accounts monitored, and insurance premiums and claims under control is part of this responsibility. Keeping track of legal documents such as powers of attorney, living wills and other safeguards also needs to be managed by someone. And that someone is usually a family caregiver.

Taking on this role has some pitfalls as parents are often reluctant to turn over anything related to money to their children. But it is an important role, because it enables the caregiver to make sure that the bills don’t stack up and that there are no suspicious expenditures. The annual loss to victims of financial elder fraud and abuse is estimated to be $3 billion a year; some estimate it could be as high as $36 Billion as four out of five incidents go unreported.

Whether fraud is an issue or not, financial caregivers find themselves spending many hours coordinating finances and making sure that their parent’s money is safe and secure.

Paying for care
As financial caregiving escalates and care needs increase, caregivers may need to confront a harsh reality. They may find that their parents don’t have enough money saved to afford paid care, whether at home, in an assisted living facility or nursing home, and do not have long-term care insurance protection. It’s also possible that assets have dwindled after one of their parents had to spend down savings to pay for the other spouses’ care.

The cost of care increases each year. The average rate for paid home care is now at $22 per hour and assisted living at $3.750 (base rate) per month. Studies indicate that about half of adult children feel an obligation to pay for their parents’ care should they need it. But families are often struggling with their own finances, worried about college tuition payments, mortgages, possible job loss and their need to save for their own retirement.

Transferring parents’ assets to a daughter or son, once considered a viable option, is risky and not always foolproof. Most states have look back periods, and thirty of them now have Filial Responsibility laws on the books requiring adult children to repay for the cost of care incurred by the government. While rarely enforced, a few lawsuits are currently pending. With state budgetary shortfalls in the news, it’s likely that these laws will have more teeth in the future.

Lost lifetime wealth
An alternative to paying for care directly is to ask a parent to move in, or as another option, to assume the caregiver role. For those who do the math, it may seem logical at first to leave the workforce altogether or step back to part time and become the primary caregiver. Paying for round-the-clock care is costly. Even if parents have money, the stress and emotions of providing care may drive a caregiver to stop working. Women, in particular, who take on intense caregiving roles, are more inclined to see this as an option and decide to cut ties with employment.

However, more sophisticated calculations show that a workforce departure or step-back can result in a significant blow to long-term retirement finances. For men, the loss of wages and benefits over a lifetime amounts to $284,000. It’s even worse for women at $324,000. People who do drop out often don’t think of the subtle ramifications in addition to the missed years of earnings and income growth. They forget about the 401 (k) match, the value of employee benefits, the career trajectory, and the roadblocks they might find when they try to get back into the workforce at the same salary level. Actually, continued employment might be the best thing to do, not only to maintain financial health but also for physical and mental health as well. Caregivers often say that work helps them take a break from the intensity and emotions of caregiving.

So what is a potential strategy?
Both the family and the financial professional can take the initiative and make a difference by confronting the issue of financing care early, before it is too late. A conversation with family members and with an advisor about care planning—who will provide care, where will care be delivered and how will it be paid for—is a very important step. It’s often forgotten or put off. Another topic of discussion with an advisor is what long term care protection options are available, not only to find out whether parents might be eligible but also as a planning tool for the adult children themselves. Financing the quality care that we all want and helping our families cope when they assume caregiving roles should be top of mind and incorporated into any discussion of long-term care.

Be Prepared: Get Long Term Care Insurance Quotes


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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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Caregivers At Risk.

It is not easy to talk about our parents or even ourselves getting older and some day needing help with very basic things. Here is information designed to educate the public about these issues.

Finding the words to begin a long term care conversation. (Genworth)

Beyond Dollars Infographic exposing the true costs of a long term care event. (pdf)

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LongTermCare.gov – Basic information about what is covered by Medicare and Medicaid.

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There are different ways to fund long term care: self-insure, long term care insurance*, life insurance or annuity with a long term care rider*, life insurance with a chronic illness rider*, Medicaid.
* Insurance is medical underwritten. Insuring locks in age and health.
27% of applicants ages 60-69 are declined because of health.

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A Solution for Caregiver Shortage: Robots

The government of Japan expects a shortage of 370,000 caregivers for the elderly by 2025, and is will look to robots to help provide care in institutions and at home.

Robots can transfer patients who are unable to move themselves from bed to a wheelchair, or to a bath, for example.

A new robot named Named RIBA (Robot for Interactive Body Assistance) has been developed by RIKEN and Tokai Rubber Industries (TRI). Using the latest sensor, control, information processing, mechanical and materials technology, it is the first of its kind in the world. So far, RIBA can safely lift and move a human patient of up to 61 kg (around 135 lb.).

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RIBA’s arms have high-precision tactile sensors and its human-like body has a soft exterior of urethane foam, for patient safety and comfort. Having robots do the lifting will ease the burden on staff, reduce injuries to health care workers, and help patients who want to live at home.

Another use of robot tech is a walking aid that can give a boost when the person is walking uphill and a braking action going down hills. The robot prevents falls and helps the user carry loads safely.

There are monitor systems that collect information aimed at improving nursing care services, and robots that can detect when a patient falls down or needs help. For example, robots are being developed that can predict when a person needs to go to the toilet and guide them there at the right time, helping them with removing clothing and other necessary motions.

In addition to their uses in nursing homes, robots can contribute to self-reliance for people who have some disabilities but want to remain at home.

The Japanese government wants patients to get used to robot helpers, hoping that by 2020, 80% of patients will accept having some of their care provided by robots. Several Japanese government agencies want to encourage businesses to develop care robots, and popularize them.

The RIKEN-TRI Collaborative Center for Human-Interactive Robot Research (RTC), where RIBA was developed, expects to bring care robots to market in the near future.

Priority Areas to Which Robot Technology is to be Introduced in Nursing Care – get information at METI.

For more information on long term care issues, see the Guide To Long Term Care,

 

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Insomnia increases Alzheimer’s risk

Just one night without enough sleep can cause harmful proteins to build up in the brain, increasing the risk of Alzheimer’s disease, according to a new study.

Past studies already linked insufficient sleep to increased risk of Alzheimer’s and other chronic diseases — but this recent study from Washington University,published in the Annals of Neurology, discovered what insomnia actually does to the brain.

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One of the functions of sleep is to clear the brain of waste, including amyloid beta proteins which can bond with each other and form plaques on nerve cells. These plaques build up in the brains of people with Alzheimer’s disease.

People with a genetic tendency for Alzheimer’s disease have higher than normal levels of beta amyloid proteins, even before they develop symptoms. After a night without sleep, these higher levels appeared in the healthy study participants.

Inadequate sleep has been linked to a 1.5 fold increase in the odds of developing Alzheimer’s. It’s not surprising, therefore, that research shows that sleep disorders such as sleep apnea increase the risk.

In the study, eight participants with no previous sleep or memory problems were instructed to either stay awake all night, get a normal night’s rest, or use the drug sodium oxybate to help them sleep. The sleep aid is supposed to increase the period of deep, dreamless sleep when the brain is thought to restore itself.

The scientists tested the cerebrospinal fluid surrounding each participant’s brain for amyloid proteins. Measurements were taken before the night of the test, and then every 2 hours the next day, to show how the night of sleep or no sleep affected the accumulation of these proteins in the brain.

Study participants who went without sleep for just one night had a 25-30% increase in the beta-amyloid proteins in their cerebrospinal fluid, bringing the levels to what researchers would expect to see in people who have genes for Alzheimer’s disease. Before the test, the participants all had normal levels. The pills designed to promote the deep sleep did not affect the levels of amyloid protein.

In a healthy person, normal sleep eliminates waste and restores the brain each night. But repeated nights of insufficient rest may overwhelm the brain’s recovery system, allowing amyloid proteins to build up and form plaques which interfere with the brain’s functioning.

For information on Alzheimer’s and also long term care insurance, see Alzheimer’s Section on the Guide To Long Term Care.

 

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