UEPC

Financial and Insurance Ideas and Help in Utah

Protecting Assets from Nursing Home Costs

Nursing homes in Utah are extremely expensive. Depending on the geographic area, costs can range from $4,000 a month to $7,000 a month and in some areas in the Northeast, nursing home costs can be as much as $10,000 to $12,000 a month. Any retirement savings a nursing home resident has accumulated are often quickly depleted.

A vast majority of families in Utah simply don't have the money to pay for any more than a few months of nursing home care and they must eventually rely on Medicaid to make up the difference between their income and the cost of the facility. Medicaid requires an eligible beneficiary to have less than $2,000 in liquid assets.

This means any savings or investments must be spent first before Medicaid takes over. If there is a spouse at home, there are special impoverishment rules that allow that spouse to keep a certain amount of assets and income, but oftentimes these spousal allowances result in a significant reduction in the standard of living for the healthy spouse. In addition, members of the family who provide long term care care services and housing prior to the need for a nursing home are not recognized by Medicaid for their sacrifice and they are not allowed to receive any transfers of money from the Medicaid recipient or the spouse.

There are legal ways to transfer more money or income to a healthy spouse or to transfer assets to family members. Medicaid does not share these strategies with the public. But there are attorneys and specialists who do understand Medicaid transfer rules and can help with providing more for a healthy spouse or transferring assets to other deserving family members.

Local Councils in Utah are familiar with this program and can explain it to interested individuals as well as directing those individuals to the person who can help them.

Government Programs That Allow for Family Members to Provide Care

Both Medicaid and certain veterans benefits allow a long term care recipient to pay members of the family to provide legitimate care. This can be an effective way of recognizing the sacrifice of family members who care for their loved ones by transferring assets to them in the form of payments for care. Otherwise -- primarily with Medicaid -- money cannot be directly gifted to family members without creating an eligibility penalty. In addition, with the Veterans Aid and Attendance Program, money paid to family members can usually be replaced in the form of additional income to the veteran household.

Local Councils in Utah are familiar with this program and can explain it to interested individuals as well as directing those individuals to the person who can help them.

Veterans Administration Long Term Care Reimbursement for 1/3 of all Seniors

At least 33% of all seniors age 65 and older could qualify for a little-known veterans benefit called the "Aid and Attendance Pension Benefit. That's how many war veterans or their single surviving spouses there are in this country. Under the right circumstances, these veteran households could qualify for up to $2,085 a month in additional income to help pay the costs of long term care.

Local Councils in Utah are familiar with this program and can explain it to interested individuals as well as directing those individuals to the person who can help them.

Contingency Funds for Long Term Care Costs

According to some sources, at least 60% of all individuals in this country will experience the need for long term care services. In many cases, this care might only last for a few weeks or months. But for those unfortunate individuals where care lasts for years, the financial cost can be significant. In many cases, retirement savings accounts are completely wiped out.

A good strategy for preparing for this eventuality in old age is to set aside money when one is young and is working. Congress is also toying with the idea of allowing such contingency funds to accumulate and be used for long term care, free from taxes. If this happens, this might provide an additional incentive for people to save for the need for long term care.

Our local councils understand the concepts of periodic purchase savings and the power of compounded interest earnings. They can explain how such a contingency fund code be set up, where it could be invested and how much would be required yearly or monthly to provide adequate funds in old age.

Protecting Assets from Medicaid Recovery

As far as we know, Medicaid is the only government entitlement program that attempts to go after a beneficiary's home after that person dies. Medicare, Social Security, disaster relief, crop subsidies, income assistance and a host of other government support programs do not place liens against someone's property after they die to repay the government for the money it spent on that person's behalf. A great amount of the money for government support programs does not come from beneficiary contributions but directly from the general budget. This includes Medicare and Social Security. Yet, Medicaid appears to be the only program that tries to recover these general budget dollars.

As unfair and inequitable as Medicaid recovery is, it is still a reality that must be dealt with. There are legal ways to keep property out of the hands of Medicaid recovery. Our local councils are familiar with these concepts and can arrange for specialists to help retain property from Medicaid recovery.

Finding Money through Life Settlements

In recent years, a large and growing industry has emerged where major investment groups, mutual funds or hedge funds purchase the life insurance policies owned by older Americans. The purchasers become the new owners and beneficiaries for the death benefits of these purchased policies. They also take over paying the premiums. This is a legitimate investment in the death of another person. The investor will pay the insured 20% to 80% of the face value of the policy depending on the age and health of the seller.

The purchaser must be able to invest in a large number of policies and must be able to reasonably predict when death will occur for those policies. Historic death rates typically enable determination of what costs should be put into purchasing the policy and paying for premiums in order to achieve a reasonable investment return in the payout of the death benefits.

Policies generally have to have a face value of more than $100,000 and in order to receive a reasonable purchase price for the policy, the owner should not be expected to live much longer than three to five years. For those life insurance owners who also need long term care, this is an excellent way to free up money to pay for the immediate costs of that care.

Our council directors understand life settlements and can help the public directly or find specialists in this area of expertise.

Long Term Care Insurance

We discussed above the use of a contingency fund, begun early in life, to pay for long term care in later years. The most efficient and the least expensive way to pay for care, is to purchase long term care insurance. For every $1.00 put into a contingency fund, $.10 could be put into a long term care insurance policy and produce the same dollar benefit at age 75. Or stated another way, a long term care insurance policy could produce 10 times more benefit than the same money put into a contingency fund. Some policies also allow return of premiums at death if the policy benefits are not fully utilized.

Council directors are knowledgeable about long term care insurance and can discuss this as an option for family members of seniors needing care. Family members confronting the need for care for loved ones often see the need for planning for themselves and if they are under the age of 65, long term care insurance should be a major part of that planning.

The Use of Reverse Mortgages

Most elderly homeowners fail to recognize the value of a reverse mortgage. If you ask individuals what their largest investment is, most people will answer, "their home." But the equity in a home is only an investment when you can get to it. Unfortunately, equity is not liquid and the only way in the past for people to cash out equity was to sell their home. However, much of that equity cash had to be used to rent a new home, pay for facility care or purchase a new residence. In other words, the freed equity ended up being locked-up again because of the need of retaining a place to live in.

A reverse mortgage allows a property owner to remain in his or her home but still get to the equity with no risk, no income requirements, no credit check and no monthly payments.
Most people who are doing reverse mortgages are seeking the money in order to pay off an existing mortgage or pay off debt. Many more should be using their equity to pay for long term care and remain in their homes. Money should also be used for the single premium life insurance strategies we discussed above. For healthy seniors, reverse mortgage money could also be used to purchase long term care insurance.

Reverse mortgage money used to purchase a single premium income annuity or left in the mortgage line of credit will not bar that person or his or her spouse from qualifying for Medicaid.

Reverse mortgage specialists in Utah can provide information and possibly quotes for those who are interested in pursuing this as a funding option.

Insurance for Medicare

Gaps in traditional Medicare insurance have led people over the past 40 years to purchase supplemental or Medigap insurance policies to provide less worry-free coverage under Medicare.

Medicare Advantage plans were created along with the Medicare drug benefit as a result of the 2003 Medicare Modernization Act. The plans are funded by Medicare but design and administration are carried out by private-sector insurers. An Advantage plan must offer at least the same benefits of original Medicare but may offer better benefits as well. MA plans are designed around provisions of modern group insurance coverage and these plans do away with the gaps in coverage with original Medicare. Many of these plans are integrated with the new Medicare drug benefit as well.

Because of the modern design, there is no need for a Medicare supplement (Medigap) policy and the additional cost of the supplement is eliminated. The trade-off for this improvement is generally more direct out-of-pocket costs for MA beneficiaries. Eligible Medicare beneficiaries typically enroll with an MA by signing on with a designated agent of the insurer.

Long term Care Insurance-- Why Should You Buy It?

How to Buy Long Term Care insurance

There are hundreds of long term care insurance companies selling hundreds of different types of policies. It can become very confusing. There are various conditions for home care and nursing home care, waiting periods, qualifying periods, inflation clauses and the list goes on. Here is a checklist of some of the things you need to know before you purchase a policy:

LONG TERM CARE INSURANCE BUYING CHECKLIST

the more "yes" answers you get the better off you are

Underwriting Individual Policies

The uniform insurance code adopted by all states requires individual policies to be fully and medically underwritten. This means an insurance company must verify, through means legally available, the applicant's medical history, lifestyle and potential for cognitive impairment prior to issuing the policy. Once this has been done the company cannot refuse to pay claims based on a condition that did not exist at the time of application. On the other hand the underwriting process also allows a company to refuse to cover someone who poses a significant risk for future claims. The underwriting process prevents the future denial of claims based on the fact that the insurance company was unaware of the risk at the time that it issued the policy. The insurance code also allows a company to defer coverage for pre-existing conditions, after issue of the policy, for a certain time period, say six months. The majority of insurance companies do not use pre-existing conditions and for the majority of companies, the policy is in effect at the time it is paid and issued .

Companies are protected from fraud by being able to deny claims if an applicant deliberately withheld information that would have affected whether the policy would have been issued or not. If an applicant in good faith did not reveal information that would not have significantly affected the issuing of a policy, then the insurance company cannot challenge any future claims after the policy has been in force two years or longer. If an applicant did not state his or her age properly, the policy benefits will be altered to reflect the amount of benefit the premium would have bought at the correct age.

Unlike life insurance companies which often rely heavily on medical exams and current health to issue a policy, long-term care companies rely heavily on medical records and the history of past medical conditions. For older ages, companies also use a phone interview or schedule a personal interview with a nurse. In the interview the company is looking for lifestyles, activities and hobbies or pursuits to indicate whether a person is already partially disabled or not. The phone interview also helps keep agents honest who for the sake of trying to get a policy issued may have deliberately downplayed or excluded information on the application that could affect whether a policy is issued or not. Finally, the insurance company is extremely interested in whether a person is struggling with short term memory problems. The phone interview is designed to uncover this and if it is suspected a person has cognitive impairment of any kind, the interviewer will conduct a cognitive impairment survey.

In the past, companies have been more liberal in issuing policies than they are today. This change of attitude has probably come from the companies misjudging the amount of current claims resulting from more liberal, past underwriting assumptions. Because of this change, if you are thinking about buying long-term care insurance and are in good health, but you are delaying buying it for whatever reason, you should not wait until your health changes because it may be too late at that point to buy it. You should buy it now.

Rate Creep

In recent years long-term care insurance companies have been following a pattern of designing new policy forms about every two years. Part of the reason for new policies superseding old ones is that companies want to offer newer and better benefits. But I also believe that the issuing of new policies is a way to cover the increasing costs of claims. Almost without exception the new policies are more expensive at the same age than the old ones were. Many companies are reluctant to raise rates on existing policyholders and a few of them are even advertising it as part of their sales process. These companies are claiming they have never raised rates on any policies some dating back as far as twenty years.

The new code-mandated application process also requires companies to disclose in writing to the applicant, whether there have been any rate increases on existing policyholders and the details of these rate increases. Because of these pressures to not raise existing rates, I believe companies can only cover increased costs by having new policyholders subsidize the policies of previous insureds. This is certainly an advantage to existing policyholders who are concerned about future rate increases, but new policyholders are paying higher rates at the same age than existing policyholders would have paid on the old policy at that same age. This is all the more reason to buy insurance now instead of delaying the purchase. The combination of higher rates at an older age as well as higher premiums due to rate creep, could make the delayed purchase of insurance a very expensive decision.

Underwriting and Pricing Group Policies

So-called large group policies, policies offered through very large employers, are not medically underwritten when people sign on during the initial enrollment period. The question is how do companies control their risk of not getting too many people who have health problems and who may cause a large number of future claims? This is done in two ways. First, there is a concerted effort to get as many employees to sign on as possible. This helps dilute the number of people who have health problems, who would naturally be attracted to the coverage, with people who are healthy. Unfortunately, large group plans are only signing up about 6% of eligible employees nationwide. This low participation rate does not significantly weed out the ratio of unhealthy to healthy applicants and so the insurance companies offering group plans must charge higher rates for benefits than they would for underwritten individual plans.

On the other hand, the participation of younger employees is encouraged by keeping their rates very low. Since younger employees are less likely to have health problems, this helps reduce the risk of future claims for the insurance company. Also the enrollment of healthy younger employees has another benefit. These people are more likely to leave their jobs for another company and will probably not take their insurance with them. This means the insurance company will never have to make a payment for claim with younger employees who leave and the insurance company has made some additional profit that it normally would not have made with older policyholders who tend to keep their coverage for life.

The second way that an insurance company controls its future costs with group policies is to limit the benefits that are available to employees. This is done by providing only three or four choices for employees and limiting the amount of home care and downplaying the availability of inflation protection. By skimping on benefits the company will have a better handle on future claims. Limited benefits also make the policies less expensive and this helps encourage more people to sign on thus increasing the participation rate.

But limited benefits pose a huge future risk for existing group policies. By not offering automatic inflation protection and limiting home care benefits, group policies will be woefully lacking 30 years from now when claims are made. Since it is not in the best interest of the insurance company to explain this problem with group policies, employees who buy group policies think that they have adequate coverage when in reality they don't.

Utah Senior Services

Senior Services for familiesOur council is dedicated to helping families in Utah deal with the issues and challenges aging seniors face. We do this by offering a trusted listing source of eldercare and senior services in your area.

Some of these senior services include Care Management, Elder Law, Estate Planning, Funeral Planning, Home Care, Medicaid Planning, Placement, Reverse Mortgage, and help with Veterans Benefits.

Books on Medicaid, Eldercare, Veterans Benefits, and Long Term Care

Eldercare BooksThe Utah Eldercare Planning Council offer books written by the National Care Planning Council, a leader in providing materials on timely subjects relating to aging seniors.

Below are five of their popular books:

"How to Apply for Department of Veterans Affairs Benefits for Senior Veterans and Their Survivors" (2016)

"How to Deal with 21 Critical Issues Facing Aging Seniors"

"The 4 Steps of Long Term Care Planning"

"Protect Assets from Nursing Home Costs: Medicaid Secrets" (2016)

Join the Utah Eldercare Planning Council

Join the UEPCThe elderly and their caregivers search online everyday for senior services and frequently find our web site, careutah.com. We, along with the National Care Planning Council, have become an important resource for families looking for help.

We invite you to become a member of the UEPC starting at only $15.00 a month. Your membership will include an advertising listing(s) on two sites, your own personal sales (web) page, and access to the member section.