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.





Most Americans Incorrectly Believe Health Insurance or Medicare Pays For Long Term Care

More than half of Americans, 55%, incorrectly believe health insurance or Medicare will pay for long term care, the assistance with daily living that some people need because of illness or injury.

People who are sick or injured may need help with activities of daily living such as bathing, dressing, preparing food, and so forth that they would normally do for themselves.

A recent online survey asked adults how they would pay for assistance with activities of daily living if they are unable to take care of themselves for an extended period of time. More than half, 55%, said they would use Medicare or health insurance. But Medicare and health insurance, although they cover some of the medical costs, do not pay for long term assistance with daily living. See “Who Pays for Care”

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Medicare covers these costs for a maximum of 100 days (or until you stop improving). Medicaid will pay for these costs only when the individual’s assets are down to around $2,000 or $3,000 – depending on the state of residence – and Medicaid will recover the costs from the estate after death. This is often done with a lien on the Medicaid recipient’s primary residence.  How long will your savings/investments last if paying $75,000 a year per person for care?

The survey involved 2,065 U.S. adults age 18 and older. People over age 55 were more likely to say they would pay for long term care needs with health insurance and/or Medicare. People ages 18-54 were more likely to say they would borrow money from family and friends or use a credit card or loan. Long term care costs are estimated to be $70,000 a year or more, most of which will not be covered by health insurance or Medicare.

The U.S. Government Accounting Office and The Wall St. Journal report that 72% of Americans will need long term care at some time, either part-time assistance at home or full-time care in a facility. But people need to be educated about the costs of care and how to pay for it. Long term care insurance will relieve some of the burden. Many states now have available a Partnership insurance policy that protects assets by exempting the policyowner from Medicaid spend-down. Read more about The Partnership.

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Dying at Home

Most people (70%) want to die at home, in a familiar place surrounded by loved ones. However, only about 25% do. Nearly 50% of Americans die in a hospital, and another 20% die in a nursing home or long-term care facility.

The trend is for more people to die at home, with a 29.5 percent increase from 2000 to 2014, according to the Centers for Disease Control and Prevention. During the same time period, the percentage of deaths in hospitals, nursing homes and long-term care facilities has dropped.

Seven out of ten Americans die from chronic disease, and more than 90 million Americans are living with at least one chronic disease. The Centers for Disease Control (2007) listed the ten leading causes of death in America (in order):
heart disease
chronic lower respiratory disease
7. diabetes
kidney disease and sepsis.

Almost a third of Americans see ten or more physicians in the last six months of their life. And almost 30% of Medicare’s budget each year is spent on patients who are in the last 12 months of their lives.

According to LongTermCare.gov about 70% of Americans over age 65 will require long-term care. If a person has an extended illness requiring long-term care, long-term care insurance will help cover those expenses whether in a hospital or at home. Studies show that those with long-term care insurance stay at home longer because the insurance provides more money for care. This includes extra money for home modifications like a wheel-chair ramp, a medical alert system and a stair lift.


It is often the lack of money that prevents people from staying at home when they need care. Who pays for long-term care? In some cases they will spend all their savings and now are forced to rely on Medicaid (welfare health care). With a Partnership asset-protection insurance policy you will be exempt from the Medicaid spend-down requirement, the exemption is based on the total benefits your policy has paid out for care.

More than 80% of patients with chronic diseases say they want to avoid being in a hospital or intensive care unit when they are dying. While dying at home is usually preferred by the patient, it can be difficult for the caregiver. Hospice services can help.

Hospice care is for those in the last six months of their lives. More than 88% of hospice patients are Medicare beneficiaries.

Traditionally, for a patient to qualify for Medicare-supported hospice, a doctor must certify that the patient has: a home, a diagnosis of six months or less to live, a full-time caregiver, and a willingness to give up curative care and receive only palliative care.

In 2016 the Medicare Care Choices Model began offering some patients “concurrent care”: the choice of continuing curative care while starting palliative care and hospice care. An evaluation of concurrent hospice in non-elderly patients showed this plan improves quality of life and reduces costs.

The Medicare hospice benefit emphasizes home care, with almost 60% of patients receiving their care at home as of 2014. Medicare coverage is limited, additional care would be paid for out-of-pocket. Do you really want to spend-down your hard-earned savings and investments leaving open the option that Medicaid will require your estate to repay Medicaid for your care costs? There are 30 states with a filial responsibility law that could require your family to reimburse Medicaid.

Home care is much less expensive. Inpatient hospice services are used when the patient’s pain and symptoms must be closely monitored in order to be controlled, when medical intervention is required to control pain or symptoms, or when the family needs a rest from the stress of care giving.

A hospice team arranges for doctors, nursing care, medical equipment like wheelchairs and walkers, medical supplies, prescription drugs, hospice aide and homemaker services, physical and occupational therapy, speech-language pathology services, social workers, dietary counseling, grief and loss counseling for the patient and family, short-term inpatient care, and short-term respite care.

After evaluation by a doctor, a patient can enroll in hospice care for two 90-day benefit periods, followed by an unlimited number of 60-day benefit extensions. A patient can decide to stop hospice care at any time.

A recently proposed bill, The Patient Choice and Quality Care Act of 2017 (H.R. 2797), aims to give patients and families living with advanced and life-limiting illnesses the information and services they need.

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California Partnership Plan: Changes Needed

After age 65, 70% of people will need long term care at some point. The costs are potentially staggering. Financial advisors recommend long term care insurance to protect oneself against the excessive costs of nursing home care or home services.

Medicare pays for doctors, hospital costs, drugs, and some other health care needs, but not for long term care – longtermcare.gov

Long term care is the care needed by someone who has difficulty with two or more activities of daily living (ADLs) over a period of 90 days or more. Over 12 million people in the United States need long term care now, with almost half of them under 65 years old.

One of the incentives for people to get long term care insurance is state Partnership plans, which allow insureds to protect their assets if they use up their insurance and need to apply for Medicaid (called Medi-Cal in California).

In the 1990s, California, New York, Indiana, and Connecticut were pioneer states in creating Partnership programs, where insurance payouts for long term care can be deducted from the insured’s assets if the plan runs out and Medicaid is needed. Partnership programs save states money by encouraging people to buy long term care insurance.

To encourage more Americans to plan for the risk of needing long term care Congress passed the Deficit Reduction Act of 2005 (DRA). The new law permits the creation of beneficial public/private partnerships; a joint-effort between states and insurance companies who offer Qualified Long Term Care Insurance Partnership Policies. States would then amended their Mediciad law(s) to allow for the Partnership.

Insurance companies have agreed to offer high-quality, affordable long term care insurance protection that meets the stringent requirements set by the federal legislation and states.

Not all policies sold in your state are Partnership qualified. The most common non-Partnership policies are sold through employers, unions, associations – these are group policies and only individual policies are Partnership. Not all insurance companies policies qualify for Partnership in every state, check with us about your state or a specific company.

Partnership policies not only offer benefits to pay for long-term care costs. They offer the special additional benefit of Asset Protection should you ever need to apply for Medicaid assistance.

Now most states have Partnership programs, but California’s program needs to be updated.

To qualify for the state Partnership, California requires a long term care insurance policy to have a minimum of  $190* a day in coverage and a 5% compound interest inflation protection for someone under age 70. But these requirements may make the premiums out of reach for average Californians.

In  Partnership states created after 2005,  inflation protection is the only requirement for a plan to qualify for Partnership and 3% compound is about half the cost of 5% compound, making a comparable California Partnership policy about twice the cost.

The requirements can change from year to year. But another problem is that California long term care insurance Partnership policies do not have reciprocity; that is, if the insured moves to another state, although the insurance policy moves with the insured, the Partnership asset protection no longer applies. You would have to move back to California to use the Partnership asset protection part of the policy.

All the other Partnership states have reciprocity – even the other Partnership pioneer states New York, Indiana, and Connecticut.

California spends over $14 billion annually on long term care through its Medicaid program (called Medi-Cal). The only state that spends more is New York at over $15 billion. Total long term care Medicaid spending for the United States is over $118 billion.

In 2005, about 1.5 million Californians used long term care services. That number is expected to skyrocket: 6.5 million Californians will be 65 and older by 2025. Nearly a million will be 85 and older, and many of them will need long term care.

It is obviously in the interest of states to encourage people to get long term care insurance. However, the policies have to be affordable or people will not insure. Also, since people move around, reciprocity between states is essential. California needs to make these changes to its Partnership program so it can include more people.

To find out more about Partnership plans nationwide, click here.

*2016 minimum daily requirement

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New rule protects nursing home residents’ right to sue

For the first time in 25 years the federal government has completed a comprehensive revision of the way it regulates nursing homes, where 1 million older adults and younger people with disabilities reside.

The Centers for Medicare and Medicaid Services, a federal agency within the Health and Human Services Department, recently released a new rule for nursing homes, banning contracts that require arbitration. The rule applies to nursing homes and assisted living facilities that receive federal funding.

Many nursing homes have required new residents to sign mandatory arbitration agreements, giving up their right to sue for wrongdoing.

Though mandatory arbitration can reduce costs, it also hinders the ability of patients and families to be compensated in cases of elder abuse, patient neglect, sexual harrassment, and even wrongful death. Arbitration also enables the facility to hide these cases from the public.

The rule will affect 15,000 nursing homes, which house 1.5 million residents.

Unless challenged in court, the new rule goes into effect on November 28. It will only apply to residents admitted in the future. Nursing homes will still be able to offer arbitration as a voluntary option to solve disputes.
Genworth 2015 Cost of Long-Term Care Survey Chart
Long term care insurance gives families the ability to choose an excellent nursing home or to provide home care.

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Why are some long term care insurance rates going up so much?

Group rates for long term care insurance will rise steeply in November.

  • Federal LTCI premiums will rise an average of 83%
  • CNA recently raised premiums nearly 100% for some group policies for employers, unions, and associations.
  • John Hancock Financial raised premiums as much as 126% on group policies for federal employees and retirees.

Policy holders, many of them angry, are wanting to know the reason for the sudden rise in rates.

Some blame the Office of Personnel Management. OPM oversees government insurance programs and must approve any rise in premiums.

Some say that the government keeping oil prices down produced the shortfall.

Others blame John Hancock, the only insurance company to bid on the federal program this year. John Hancock pays about $13 million a month in federal long term care insurance claims. Since 2002 the federal program has paid out more than $700 million for long term care.

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Part of the reason for the rise in premiums is that insurers originally set prices too low, underestimating how long people would live and need care. Insurance companies must balance the need for affordable rates with the responsibility to pay claims when they come in. Fourteen years ago, 102 companies offered long term care insurance. In 2016, only 12 to 14 companies are still in the business.

Insurance companies earn some of their money in interest on premiums; they make investments that help pay for claims. The recession unexpectedly brought interest rates down below 8%. Around the world, interest rates are near zero, and in some places have even become negative. The low interest rates are one of the main reasons insurance companies must raise premiums.

Because of the low earnings, some insurers have struggled to pay dividends to their shareholders. The Federal Reserve Board held down interest rates on Treasury bonds to prevent another recession.

A law passed in 2012 was supposed to protect consumers from steep increases in insurance rates. Insurers need permission from regulators in most states before premiums can be increased. However, since state insurance regulators still have not issued the final rules, insurance companies can raise rates on some policies without regulatory approval. Group coverage, while it offers discount rates, does not have the same regulatory protections as individual coverage. New regulations are being discussed.

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The National Active and Retired Federal Employees Association and some members of Congress are calling for hearings on the premium increases. But Congress will have little time for action before September 30 when enrollees must decide whether to keep their policies; so hearings will probably take place after the premiums have already gone up.

For those who enrolled in a policy before August 2015, premium increases will begin on November 1.

Policy holders must choose to either keep their policy and pay higher premiums, scale back coverage, or discontinue the policy and consider getting a different policy. Some enrollees can switch to an option in which they pay no more premiums but have a much lower benefit.

For some people, it may be possible to find a better policy in the private market. If the policy holder is in good health and bought the policy within the last few years, it may be possible to get a new policy with better rates. However, if the original policy was bought many years ago, a new policy will probably not cost less – and may have no guarantee that its premium will not rise.

Premiums are based on the insured’s age at the time of purchase. Each year the purchaser waits to buy a policy, premiums can rise 5% to 12%. The risk of being denied coverage for medical reasons also increases with age. And newer policies are regulated more strictly, which makes them more expensive than those issued years ago. Genworth 2015 Cost of Long-Term Care Survey ChartWays to lower the cost of a policy include reducing the benefit period, reducing the daily or monthly benefit, extending the waiting period before benefits apply, or changing the inflation protection. People who have policies with lifetime coverage could save a lot by reducing the benefit period to three or five years. Most long term care claims are for three years or less.

Policy holders should not wait until the last minute to look at the alternatives. If you decide to switch to another company, make sure your application has been approved before ending your existing coverage.

Many policy owners bought their policy before their state had approved the Partnership asset protection program. Some policyholders may choose to buy a smaller second policy just to get the Partnership.

Despite the proposed rate hike, long term care insurance is still the most cost effective way to protect yourself from the high risk that you will need expensive long term care.

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5 things state lawmakers want to do about long-term care insurance

Legislators are wrestling with purchasing incentives, benefits options and rate stability

State lawmakers have a huge stake in improving private long-term care planning.

genworth nursing cost 2016States now spend about $100 billion per year, or about 6 percent of their $1.7 trillion in annual revenue, on Medicaid nursing home benefits and other Medicaid long-term care benefits for the poor, and for residents who have used “Medicaid planning” to protect their assets.

The share of state revenue going to fund Medicaid long-term care benefits could rise sharply starting around 2031, when the baby boomers begin to flow into the 85-and-older age category.

Read Rest of Story Here

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