Financing LONG-TERM CARE Needs?

AGING AND RETIREMENT

Long-term care (LTC) may not be the first thing individuals or couples think about as they approach retirement, but the costs for those who needs it can disrupt and derail retirement security. A good plan for long-term care requires many decisions over an extended period of time, and well before retirement.

In this article, Milliman consultant Robert Eaton discusses the major considerations and options for financing LTC needs in retirement.

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WILL THE CORONA VIRUS PANDEMIC DECIMATE THE L.T.C.I. INDUSTRY?

WILL THE CORONA VIRUS PANDEMIC DECIMATE THE L.T.C.I. INDUSTRY?
Courtesy: https://lnkd.in/eBf-4vY

By Dr. David E. Marcinko MBA

I admit that I held a state insurance license.
LINK: https://lnkd.in/e9AmEhd

A 22 minute computer test was the barrier to entry. There aren’t many with both medical and insurance licenses; and even fewer who actually practiced inside a [skilled] nursing home, long term care facility or geriatric hospital; etc.

ESSAY: https://lnkd.in/ebJPN3V
EESSAY: https://lnkd.in/gMZP-T9

Of course, agents sell policies but doctors treat patients. And, most Long Term Care Insurance policies are sold; not bought. I would not want to live in such a facility.

ESSAY: https://lnkd.in/etQwcP6
ESSAY: https://lnkd.in/eCBuPeq
ESSAY: https://lnkd.in/eKCFAhG

My combined experience led me to advocate for the age-in-place movement; despite the exploding aging population.

ESSAY: https://lnkd.in/eK54jfq
ESSAY: https://lnkd.in/eFzDUju
ESSAY: https://lnkd.in/gMyFFVz

QUERY: Has the recent pandemic exposed the structural weakness endemic to our LTC system and made institutional out breaks more deadly?

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LINK: https://lnkd.in/eqkneqq

Assessment: Any thoughts or comments?

BUSINESS, FINANCE AND INSURANCE TEXTS
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Conclusion

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More on Long Term Care Insurance

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LTCI

By Rick Kahler MSFS CFP®

Rick Kahler MS CFP

Knowing how long you may live is an important variable to consider in putting together a successful retirement plan. Many online sites can give you a scientific estimate of your life expectancy; one that I recommend is livingto100.com. When I retook the evaluation recently, I was surprised that my life expectancy had increased from 93 to 98.

In an instant I related to one of the greatest fears of older Americans: outliving your sources of income.

The greatest financial risk for depleting retirement resources is an unexpected and lengthy stay in a long-term health care facility, like a nursing home or an assisted living center. Not surprisingly then, “What do you think about long term care insurance (LTCI)?” is one of the questions I often hear.

LTCI is a difficult product to analyze and recommend. It has existed in some form for 40 years, but the industry seems to exist in a continual state of disarray. Low interest rates, low lapse rates, and rising longevity have driven premiums high enough that sales of the insurance have declined 70% from their high in 2002.

The “Guarantee”

Exacerbating the problem is that most LTCI companies issued policies with “guaranteed” premiums.

According to a report by Michael Kitces at kitces.com, just a small variation in actuarial assumptions can have a significant impact on premiums. He says “it’s estimated that as little as a 1% change in interest rates correlates to a 15% required change in premiums to keep an LTC insurance policy actuarially sound. Having a 1% lapse rate instead of a 5% lapse rate can increase future claims for an insurer by as much as 50%.”

As a result, Kitces notes, LTCI providers have struggled to be profitable. In some cases, companies were unable to honor their original prices and had to request permission from state insurance departments to increase premiums on existing policies by as much as 85%. Premiums for new policies have gone even higher.

Simply stated, a guaranteed premium LTC policy needs to be priced high enough to provide a cushion against these variables or the company may be unable to regain profitability with rate increases later.

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One way of addressing this challenge is to eliminate any aspect of a “guaranteed” premium and make long-term care insurance premiums more flexible. One flexible premium policy envisions paying dividends similar to a participating life insurance policy issued by a mutual insurance company. Kitces notes, “To the extent that future claims (or the insurance company’s investment returns) turn out to be better than the original (conservative) projections, the ‘excess’ results will be returned to the policy owner in the form of either an “Insurance Credit” or an “Interest Credit”, to help reduce future premiums.” One such policy is currently priced 20 to 30% under traditionally priced policies with “guaranteed” premiums.

Naturally, there is no guarantee a flexible premium policy will end up costing less than the traditional polity with a guaranteed premium. Probably the biggest concern is the conflict of interest a shareholder-owned company will face in deliberately refunding any savings in the form of dividends to the policy holders. This conflict does not exist with a mutual insurance company, where the owners of the company are the policy holders.

Assessment

Still, the potential benefits look interesting enough that taking a hard look at a flexible premium LTCI policy makes sense. Long-term health care is one of the aspects of aging that most of us don’t want to think about but many of us will need. While LTCI is not for everyone, considering it is a worthwhile part of financial planning for retirement. 

Conclusion

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Newer Thoughts on Long Term Care Insurance

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Most LTCI policies are SOLD… not Bought!

DEM white shirt

By Dr. David Edward Marcinko MBA CMP

To be sure, physicians and Financial Advisors are aware that there is a sometime need to recommend a LTCI policy to clients. Of course, in such cases, it is a good idea to work with a low load provider (or the physician or client’s agent).

The Need?

Yet, most LTCI policies are sold by insurance agents for big commissions; not bought, and that most statistics used to sell LTCI policies are fear-based and half-truths. I know, as I was a licensed insurance agent for more than a decade.

Even the Department of Health and Human Services [DHHS] gets into the fear mongering on their website quoting that “about 70 percent of people over age 65 require some type of long-term care services during their lifetime”

Source: http://www.longtermcare.gov/LTC/Main_Site/Planning/Index.aspx

Department of Health and Human Services

This may be a deceptive statistic as it omits the length of long-term care needed in these 70% of cases. And, it is not 3+ years in all these cases [our estimate is closer to 2.5]. With the stamp of approval by the Supreme Court of the United States SCOTUS on the PP-ACA, we may be looking at social LTCI in the US like other social medicine countries and give up on private LTCI insurance altogether.

Other Countries

Germany introduced mandatory long-term care insurance in 1995. Japan and France also have a LTCI tax funded insurance plan. And, the poor utilization and growing risks associated with long-term care insurance, are leading a growing number of insurance agents, financial advisors and Certified Medical Planners™ to recommend alternatives to their clients.

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Assessment

To be a thought-leader ahead of the curve, the newest aging trend is away from LTCI and toward sheltering at home – living at home and dying at home. Perhaps, this is the way it should be.

Dying should not be a for-profit industry.

http://www.CertifiedMedicalPlanner.org

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[Dr. Cappiello PhD MBA] *** [Foreword Dr. Krieger MD MBA]

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Superannuation Demographics for Financial Advisors

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“Live Long and Prosper”

By Dr. David Edward Marcinko; MBA, CMP™

By Thomas A. Muldowney; MSFS, CLU, CFP®, CMP™

By Hope Rachel Hetico; RN, MHA, CMP™Senior Citizens

The words of Mr. Spock!

Recently, during my promotional speaking tour for the summer of 2009, I had the occasion to visit a few nursing and related homes for the elderly, sick, infirmed and aged. This harkened warm thoughts back to my time at Temple University in Philadelphia, PA as a young medical student. So, as a health economist and former certified financial planner, I recruited some folks and did some research on the domestic aging population to refresh my understanding of the facts and figures; especially in light of the current healthcare reform political debates [DEM].

Just the Facts  

According to the U.S. Bureau of the Census, there were almost 49 million people in the United States who were over age 60 in 2001. There are approximately 4 million people over the age of 85 living in the US and there are over 60,000 people older than age 100 estimated as of July 1st 2004. For every100 middle aged persons in the United States there are at present about 114 persons over the age of 65. This statistic will change as we move forward through time. In the year 2025, there will be about 253 people over age 65 for every 100 middle-aged people.

Enter the Baby Boomers

Beginning on January 1, 2006 at midnight and every 12 seconds thereafter for fifteen years, a baby boomer will have a birthday and cross over the age threshold of age 60. In the next 30 years, the 60+ age group will more than double, becoming 25% of the total population, and will have to be supported by a proportionately smaller workforce. Research published in June 2005 by AARP (based on data from 2002) estimates that: ‘‘In 2002, roughly $140 billion was spent on nursing home and home health care, with 24% of these costs being paid out of pocket” (O’Brien and Elias, 2004).

Aging Boomers

As the baby boom generation ages, the care needs will expand precipitously. Add to this, scientific and technological improvements in healthcare. These very same people will need more expensive healthcare and more expensive custodial care, and they will need it for an even longer period of time. Who will pay for this expanded need is not so clear. What is clear is that it will take money and lots of it to make these payments.

Money Preservation Variables

There are only three variables associated with the accumulation or preservation of money: ‘‘time, money and rate of return.’’ Time is reduced to the following two questions ‘‘How long until I will need my money?’’ and ‘‘How long will I live?’’ an uncertainty to be sure. Rate of return is either a function of the financial markets or the successful maintenance of a Long Term Care Insurance [LTCI] plan. Because of the volatility in the financial markets, the ‘‘money’’ question is equally as uncertain. In order to accumulate sufficient assets; an aging physician must ’tradeoff’ many other alternatives such as ’lifestyle.’

Assessment

What is certain is this—financial planning is important. More important is the implementation.

Conclusion

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Long-Term Care Insurance

A Review for Doctors and Advisors

By Gary A. Cook; MSFS, CLU, ChFC, LUTC, RHU, CFP®, CMP™ (Hon)

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Long-term care (LTC) insurance is considered one of the newest forms of personal coverage insurance.  LTC insurance is designed to transfer the financial risk associated with the inability to care for oneself because of a prolonged illness, disability, or the effects of old age.  In particular, it is designed to insure against the financial cost of an extended stay in a nursing home, assisted living facility, Adult Day Care Center, hospice or home health care.  It has been estimated that two out of every five Americans now over the age of 65 will spend time in a nursing home.  As life expectancy increases, so does the potential need for LTC. One unfortunate consequence of being the “new kid on the block” is the lack of actuarial data specifically collected for this style of policy.  This results in policy premiums being underpriced to sustain the claims currently being experienced.  During the first half of 2003, at least three insurance companies stopped writing these policies because of their losses.  Those insurers remaining in this market are expected to increase premiums quickly.  Unless these policies can be profitable for the company, their future will be an uncertain one.

Medicare

Any discussion of LTC must begin with an understanding of what Medicare is designed to cover.  Currently, the only nursing home care that Medicare covers is skilled nursing care and it must be provided in a Medicare-certified skilled nursing facility.  Custodial care is not covered. Most LTC policies have been designed with these types of coverage, or the lack thereof, in mind. To qualify for Medicare Skilled Nursing Care, an individual must meet the following conditions: 

  • Be hospitalized for at least three days within the 30 days preceding the nursing home admission;
  • Be admitted for the same medical condition which required the hospitalization; and
  • The skilled nursing home care must be deemed rehabilitative.

Once these requirements are met, Medicare will pay 100 percent of the costs for the first 20 days.  Medicare covers days 21 to 100 along with a daily co-payment, which is indexed annually.  After the initial 100 days, there is no additional Medicare coverage. Medicare Home Health Services cover part-time or intermittent skilled nursing care, physical therapy, medical supplies and some rehabilitative equipment.  These are generally paid for in full and do not require a hospital stay prior to home health service coverage.

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Critical LTC Policy Features

According to the U.S. Department of Health and Human Services and the Health Insurance Association of America, there are seven features that should always be included in a good long LTC policy: 

  • Guaranteed renewable (as long as premiums are paid, the policy cannot be canceled).
  • Covers all levels of nursing care (skilled, intermediate and custodial care).
  • Premiums remain level (individual premiums cannot be raised due to health or age, but can be raised only if all other LTC policies as a group are increased).
  • Benefits never reduced.
  • Offers inflation protection.
  • Full coverage for Alzheimer’s Disease (earlier contracts tried to eliminate this coverage).
  • Waiver of premium (during a claim period, further premium payments will not be required).

In addition, there are another seven features considered to be worthwhile and are included in the better LTC policies: 

  • Home health care benefits
  • Adult day care and hospice care
  • Assisted living facility care
  • No prior hospital stay required
  • Optional elimination periods
  • Premium discounts when both spouses are covered
  • Medicare approval not a prerequisite for coverage.

ADLs

Most LTC policies provide benefits for covered insured’s with a cognitive impairment or the inability to perform a specified number of Activities of Daily Living (ADLs). These ADLs generally include those listed below and the inability to perform two of six is generally sufficient to file a claim:

1. Bathing:  Washing oneself in either a tub or shower, or by sponge bath, and includes the task the getting into and out of the tub or shower without hands-on assistance of another person.

2. Dressing:  Putting on or taking off all necessary and appropriate items of clothing and/or any necessary braces or artificial limbs without hands-on assistance of another person.

3. Toileting:  Getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene without hands-on assistance of another person.

4. Transferring:  Moving in and out of a bed, chair or wheelchair without hands-on assistance of another person.

5. Eating:  The ability to get nourishment into the body without hands-on assistance of another person once it has been prepared and made available.       

6. Continence:  The ability to voluntarily maintain control of bowel and/or bladder function, or in the event of incontinence, the ability to maintain a reasonable level of personal hygiene without hands-on assistance of another person.

Other Issues

Another issue concerning ADLs is whether the covered insured requires “hands-on” assistance or merely needs someone to “stand-by” in the event of difficulty.  Obviously, LTC policies that read the latter are considered more liberal.

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Long-Term Care Taxation

Some LTC policies have been designed to meet the required provisions of the Kassenbaum-Kennedy health reform bill, passed in 1996, and subsequently are “Tax Qualified Policies”.  Insured’s who own policies meeting the requirements are permitted to tax deduct some of the policy’s premium, based on age, income and the amount of total itemized medical expenses.  The major benefit of the tax-qualified LTC policy is that the benefit, when received, is not considered taxable income.  There are several initiatives in Congress, however, which would expand and simplify these deductibility rules. 

Assessment

Regardless, the medical professional or financial advisor [FA] should investigate the opportunity afforded them through their current form of business, or client use, for any purchase of a LTC policy. And, small businesses may be permitted to deduct LTC premiums on a discriminatory basis.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. What have we missed, and who might wish to update this post?

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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Selecting an Assisted-Living Facility

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Checklist for Financial Planners

[By Staff Reporters]

Thousands of boarding homes cater to the elderly. Their operators promise to provide at least a place to sleep and food to eat. Beyond that, the services and assistance offered will vary from facility to facility. This checklist will help the financial planner or his or her client find a facility that is appropriate in all respects to the client’s resources and needs. Unlike nursing homes, assisted-living facilities often operate without any scrutiny from public agencies. Furthermore, Medicaid often will not be a source of funds.

The Checklist

The items the financial planner and client should consider when selecting a facility are listed below.

      1.   Determine the client’s willingness to live in a group environment.

      2.   Avoid unlicensed facilities, particularly if Medicaid-provided services may be needed in the future.

      3.   Review the facility’s inspection report.

      4.   Review the facility’s service contract and house rules. Look for answers to the following questions:

            a.         Where will the resident live?

                        Are there any types of ownership rights?

                        What flexibility is there with respect to furnishings?

                        Will the same unit be available after a hospital stay?

            b.         What meals are included?

                        Will the facility provide appropriate meals and a special diet?

            c.         What form of transportation does the resident currently use?

                        What transportation is provided by the facility?

                        Can residents shop, dine, attend services or visit doctors?

            d.         What help does the facility provide during a medical emergency?

                        What type of staff training is provided or required? Is there 24-                        hour-a-day staffing?

            e.         What provisions are there for privacy? When are rooms cleaned and when can staff access the rooms?

            f.          What is the basic cost and what are the costs for extras?

                        What is included in each?

                        What provisions for fee increases are there?

            g.         Can a resident see his or her own doctor?

                        Does the facility offer transportation for appointments?

            h.         Who’s in charge of administering and scheduling medication?

                        Can medication and other supplies be purchased at the facility?

            i.          What happens if the resident’s health begins to fail?

                        Does the facility provide additional services to help with ADLs?

            j.          What is the procedure for transfers from one unit to another?

                        Does the resident have any opportunity to express an opinion?

            k.         What’s required if a contract is terminated by facility or resident?

                        What is the provision with respect to refunded fees?

                        Is there a required minimum stay?

Assessment

What have we missed?

Conclusion

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Re-Examining Medical “Do Not Resuscitate” Orders

Information for Financial Planners and Advisors

By Dr. David Edward Marcinko; MBA, CPHQ, CMP™

By Hope Rachel Hetico; RN, MHA, CPQH, CMP™

[Publisher-in-Chief and Managing Editor]

dave-and-hope11

According to the Rev. Chuck Meyer, former Vice President of Operations and Chaplain at St. David’s Medical Center in Austin, Texas, a new designation for Allowing a Natural Death (“A.N.D.”) would eliminate confusion and suffering when patients are resuscitated against their wishes.

Defining Do Not Resuscitate [DNR] Orders

As medical professionals, we know that a Do Not Resuscitate [DNR] order does not mean that medical care has stopped. It simply means that the goal of treatment has been changed. But, to FAs, patients and family members who are emotionally involved in the situation, this truth may not be apparent www.HealthDictionarySeries.com

Terminal versus Healthy Patients

While a completed DNR tells physicians not to start Cardio Pulmonary Resuscitation [CPR] if the patient suddenly goes into cardiac arrest, the order does not differentiate between a terminally elderly ill patient; and a potentially healthy younger person who may die due to current circumstances. A non-terminal patient may be in a DNR category and continue to receive aggressive or supportive treatment aimed at a cure; or at supporting him through this medical crisis. If symptoms start to respond, then the DNR category might even be changed to a full code.

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Assessment

Should financial advisors become involved in this issue? If not, why not; and if so; to what extent? MD-CFP® subscribers please chime-in with your unique experiences.

Conclusion

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Nursing Home Beds Add Medicare Certification [Part IV]

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Cost and Duration of Long-Term Care at Home

[By Dr. David Edward Marcinko; FACFAS, M.B.A., CPHQ™, CMP™]

[By Thomas A. Muldowney; M.S.F.S., CLU, ChFC, CFP® CMP™]

[By Hope Rachel Hetico; R.N., M.H.A., CPHQ™, CMP]hetico1

This is the fourth and final post, in an exclusive four part series for the ME-P titled: At-Home or Nursing Home Care for Long-Term.”

Low Medicaid Reimbursement Rates

Mainly because of low Medicaid reimbursement rates, nursing homes have recently dually certified large numbers of beds in order to add payment from Medicare (or private insurers). In the four-year period from 2001 to 2006, the number of licensed nursing home beds that were Medicare-certified (eligible for Medicare payment under Title XVIII of the Social Security Act) increased by more than 70%, to 1.4 million from 816,786.

Rising Share

In accordance, the share of all licensed nursing home beds with Medicare-certification also rose considerably, to 82% in 2006 from 48% in 2001. Similarly, the number of licensed beds per nursing home eligible to receive only Medicare reimbursement jumped 46%, to 4.1 in 2006 from 2.8 in 2001. Meanwhile, the number of licensed beds per nursing home that qualified for payment from either Medicare or Medicaid rose by nearly three-fourths, to 88.1 in 2006 from 50.8 in 2001.

Medicaid Reimbursement Plummets

By comparison, the total number of licensed nursing home beds that were eligible to receive only Medicaid reimbursement plummeted in that four-year period, to 228,910 from 796,091 in 2001.

As nursing homes continue to confront cost containment and reimbursement issues, they are likely to continue to increase their numbers of Medicare-certified beds. Although nursing home average occupancy underwent a modest decline, to 84.6% in 2006 from 86.1% in 2001, in the future homes still seem likely to continue to add Medicare certification to beds even as they limit the number of Medicaid beds in an effort to avoid reimbursement problems.

Assessment

Most elders, especially married senior citizens, prefer LTC at home. However, this option is often not possible for two reasons; first, the healthy spouse is usually unable to provide the care, second, the high costs for 24-hour care and/or privately engaged specialized care. The person requiring care may have no feasible choice other than a nursing home. Finding an appropriate and affordable nursing home can be a challenge to the family and/or friends of the elderly. Lower-cost facilities often provide an environment that is considered undesirable by the elder and his or her family.

NOTE: Last essay in a series of four parts on: At Home or Nursing Home Care for Long Term Care.

Conclusion

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At-Home or Nursing-Home for Long Term Care [Part III]

Cost and Duration of Long-Term Care at Home

By Dr. David Edward Marcinko; FACFAS, M.B.A., CPHQ™, CMP™

By Thomas A. Muldowney; M.S.F.S., CLU, ChFC, CFP® CMP™

By Hope Rachel Hetico; R.N., M.H.A., CPHQ™, CMPdr-david-marcinko1

This is the third post, in an exclusive four part series for the ME-P titled: At-Home or Nursing Home Care for Long-Term.”

Average Nursing Home Stays

It is generally agreed that if short, recuperative stays are excluded, the average stay in a nursing home is about 21/2 years. Nursing home studies show that residents experience four types of stay before death: 12 percent remain for less than 90 days; 21 percent stay between 91 and 365 days; 43 percent stay for up to five years; and 24 percent stay longer than five years. It is not possible to know in advance which type of stay you or your family may experience. But, put in another way, two-thirds stay more than one year and one-quarter stay more than five years. Most seniors also have home care services before entering a nursing home.

Custodial Services 

Custodial nursing home services are paid from the elder’s savings or by Medicaid. The current estimated annual cost for a nursing home resident is about $35-40,000. However, the annual cost for a nursing home in metropolitan areas may be at least twice as much.

Assessment

In the past decade, nursing home charges increased 8 percent a year. At a minimum, these costs may be expected to climb at a 5 percent annual rate in the future.

Conclusion

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Nursing Home Perceptions & Realities [Part II]

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Cost and Duration of Long-Term Care at Home

By Dr. David Edward Marcinko; FACFAS, M.B.A., CPHQ™, CMP™

By Thomas A. Muldowney; M.S.F.S., CLU, ChFC, CFP® CMP™

By Hope Rachel Hetico; R.N., M.H.A., CPHQ™, CMPhetico

This is the second post, in an exclusive four part series for the ME-P titled: At-Home or Nursing Home Care for Long-Term.”

Nursing Homes Less Desirable

Most agree that nursing homes are regarded as the least desirable LTC choice. Some people enter a nursing home after a hospital stay with a need for skilled care or for short-term respite care. Many people who are admitted to a nursing home remain there for the rest of their lives.

The Only Answer for Some

Nursing home care may be the only answer for single people requiring LTC or people with Alzheimer’s disease. However, nursing home care is not always available when needed. Many of the better nursing homes have substantial financial requirements, and have long waiting lists, some lasting months or years.

Assessment

Unfortunately, some people will have difficulty being admitted to these nursing homes without a reservation. Many nursing homes will not accept Medicaid at the outset from a prospective resident; therefore, having funds available (which may be spent down) or LTCI may make a difference in getting into a nursing home.

Conclusion

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At-Home or Nursing-Home for Long Term Care [Part I]

Cost and Duration of Long-Term Care at Home

By Dr. David Edward Marcinko; FACFAS, M.B.A., CPHQ™, CMP™

By Thomas A. Muldowney; M.S.F.S., CLU, ChFC, CFP® CMP™

By Hope Rachel Hetico; R.N., M.H.A., CPHQ™, CMPdr-david-marcinko

This is the first post in an exclusive four part series for the ME-P titled: At-Home or Nursing Home Care for Long-Term Care.”

Remaining at Home

It is not surprisingly, eighty-five percent of married elders prefer to remain at home instead of moving to a nursing home or some other senior care facility. Staying at home is easier, more comfortable, and less traumatic. Home care statistics are limited, but three years is the estimated average number of years that elders will require custodial care services. This estimate also may combine home care followed by nursing home care. And, the anecdotal healthcare experience of two authors [DEM and HRH] confirms this period length.

Incremental LT Cost Approach

Quantifying the annual incremental costs of LTC home custodial services is difficult. Today, a high percentage of home care services are provided by unpaid family members, friends, or volunteer organizations. In the future, however, there will be fewer available unpaid caregivers, and more elders will have to pay for home custodial care.

Because of this potential shortage of caregivers, new business opportunities are springing up and, as usual, let the buyer beware. Many of these new businesses, for a fee, contract with a family that needs home LTC for a family member.  Upon contract, the new LTC business owner begins a search for a candidate caregiver who will live in your house and care for your parent or spouse. Often the in-home caregivers have difficulty speaking the language or may not be familiar with local customs.

Furthermore, many of them wish to be paid in cash rather than by check. As you might imagine, background checks, tax compliance and other legal considerations are of utmost importance.  Career education and career experience are also very important. Be sure that if you look for such a caregiver, you must exercise thorough due diligence so that your loved one will be cared for properly.

LTC Costs Vary Widely

LTC home care cost estimates vary widely by location and type of service. At present, the average annual cost for a live-in, full-time aide in the United States (especially if part-time help to relieve a full-time aide is added) is estimated at $40,000, the same as the estimated cost of staying at a nursing home for a year. If living expenses are added to costs for custodial aides, LTC home care costs can be more expensive than nursing home costs.

For three shifts of paid LTC custodial services, home care costs may exceed $100,000 annually; more than triple the current estimated cost for nursing home care. These numbers should not be surprising.  In a nursing home environment, one caregiver may be able to provide care for multiple patient/residents. This reduces the cost per patient. In your private home, your personal caregiver can give only care to a single patient.

Custodial Aide Costs

Costs for custodial aides in the fragmented, rapidly expanding, competitive home care industry may increase at a faster rate than the Consumer Price Index [CPI]. Employed aides will replace family caregivers. The Bureau of Labor Statistics [BLS] indicates that jobs for home health aides, human service workers, and personal and home care aides are expected to grow faster than any other industry in terms of total jobs.

In the next decade, there will be more than 2 million home care jobs, and they will become a larger component of total gross domestic product expenditures. Using an estimated three-year home care requirement and current estimated costs, and allowing for 15 years of inflation at 5 percent, $225,000 per person is a reasonable estimate to use for financial planning purposes.

Assessment

However, in some metropolitan or suburban areas, such as New York City, the cost should be increased by at least 100 percent. Of course, three years of required care is an estimate. About one-third of the people who require nursing home care will need it for more than three years. Presumably, nursing home care will be preceded by home care. Moreover, only one full-time aide was assumed. Some elders also will require additional part-time help.

And so, your thoughts and comments on this Medical Executive-Post, which represents the first in a series of four parts on: At Home or Nursing Home Care for Long Term Care, are appreciated. Comments from physicians and LTC insurance agents are especially valued.

Conclusion

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Superannuation Demographics and LTCI

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“PAYING TO AGE”

  • By Dr. David Edward Marcinko; MBA, MEd CMP™
  • By Thomas A. Muldowney; MSFS, CLU, ChFC, CFP®, AIF®, CMP™
  • By Hope Rachel Hetico; RN, MHA, CPHQ™, CMP™ 

According to the US Bureau of the Census, there were almost 49 million people in the United States who were over age 60 in 2001. There are approximately 4,000,000 people over the age of 85 living in the US and there are over 60,000 people older than age 100 estimated as of July 1st 2004. For every 100 middle aged people in the US there at present about 114 persons over the age of 65. This statistic will change as we move forward through time. In the year 2025, there will be about 253 people over age 65 for every 100 middle aged people. Today, there are more than 55 million over age 60.

The Ticking Clock

Beginning on January 1st, 2006 at midnight and every 12 seconds thereafter for fifteen years, a baby boomer will have a birthday and cross over the age threshold of age 60. In the next 30 years, the 60+ age group will more than double, becoming 25 percent of the total population, and will have to be supported by a proportionately smaller workforce.  Research published in June 2005 by AARP (based on data from 2002) estimates that: “In 2002, roughly $140 Billion was spent on nursing home and home health care, with 24% of these costs being paid out of pocket (O’Brien and Elias, 2004)

Baby Boomers

As the baby boom generation ages, their care needs will expand precipitously. Add to this, scientific and technological improvements in healthcare. These very same people will need more expensive healthcare, more expensive custodial care and they will need it for an even longer period of time. Who will pay for this expanded need is not so clear. What is clear is that it will take money and lots of it to make these payments.

Financial Variables

There are only three variables associated with the accumulation or preservation of money:  “Time, Money and Rate of Return.”  Time is reduced to the following two questions “How long until I will need my money?” and “How long will I live?” an uncertainty to be sure.  Rate of return is either a function of the financial markets or the successful maintenance of an LTC plan. Because of the volatility in the financial markets, the “money” question is equally as uncertain.  In order to accumulate sufficient assets a client must ‘tradeoff’ many other alternatives such as ‘lifestyle.”

Assessment

What is certain is this…financial planning is important.  More important is the implementation or funding of an accumulation strategy or a Long-Term-Care [LTC] investment strategy to overcome these hurdles.

Conclusion

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Long-Term Versus Custodial Healthcare

Understanding the Domestic Model of Medical Care

By Dr. David Edward Marcinko; MBA, CMP™

By Thomas A. Muldowney; MSFS, CLU, ChFC, CFP®, AIF®, CMP™

By Hope Rachel Hetico; RN, MHA, CPHQ™, CMP™

cloudy-mtn-auto-bahn

Doctors, nurses, economists, insurance consultants and financial advisors [FAs] increasingly make a distinction between “healthcare” and “custodial care.” Too often for patients however, health and custodial services are combined and confusingly referred to as health services. The problem with this is that people often focus only on health problems and not on the serious long-term physical and financial consequences associated with these different conditions.

US Model of Care

The US medical model tries to have patients “get well” soon. Typical medical services are often “medically necessary”; short term; acute; and may include hospital stays, major operations, some skilled care to recuperate and other ongoing skilled treatment, and medications.

Dementia and Impaired Cognition

In contrast, many elder health problems are incurable and chronic. These conditions require custodial care. Seniors who have chronic or disabling conditions need full-time live-in assistance, instead of the standard short visits by care providers.

For example, today in the United States, there are about 4 million people with Alzheimer’s or other dementia who are suffering from what is referred to as cognitive impairment. Cognitive impairment is one of the major risks of aging and a source of concern for many seniors. Other conditions that limit a senior’s ability to perform activities of daily living (ADLs) include accidents, blindness, cancer, diabetes, dialysis, emphysema, heart disease, osteoporosis, Parkinson’s disease, rheumatism, strokes, or a combination of these conditions.

Assessment

The gerontologists and hospitalists were perhaps the first medical professionals to appreciate this distinction; years ago.  Nevertheless,people with these conditions may need many years of LTC services.

Conclusion

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