Texas Estate Planning

What Do People Think About Government-Paid Long-Term Care?

About 50% of adults say that assistance for older adults should be funded by Medicare and Medicaid, according to an Associated Press-NORC Center poll.

MSN’s recent article entitled “Bipartisan support for policies to pay long-term care costs: Poll” says that 75% of adults surveyed say long-term care should be funded through Medicare Advantage or supplemental insurance programs. Close to two-thirds of respondents also said they’d support a government-administered insurance program, government funding for low-income people to receive long-term care at home and Social Security earnings credit or tax breaks for those providing long-term care to a senior.

Overall, 66% of respondents said they think it’s the federal government's responsibility to make sure all people in the U.S. have health insurance coverage, with 73% of people aged 18-49 likely to support vs. 53% of those aged 50 and older.

Republican and Democratic responses were about the same, according to the poll.

About the same number of Republicans and Democrats favor nontaxable funds to pay for long-term care insurance—about 70%. The largest party difference was about the option for low-income people to receive government-funded, long-term care in their homes. Roughly 84% of Democrats supported this, compared to 55% of Republicans.

Overall public satisfaction with the U.S. healthcare system is low. Just 12% think the government is handling healthcare very or extremely well. When asked about healthcare specifics, 74% of adults said the U.S. handles prescription medication costs or mental healthcare "not too/not at all well," and 70% said the same about mental healthcare.

The survey found that whites had a more negative view of the U.S. healthcare system compared to black and Hispanic adult respondents. When looking at healthcare for older adults, 56% of white adults think it is not too/not at all handled well, with 49% of Hispanic adults and 44% of black adults responding the same.

The poll consisted of 1,505 interviews between July 28 and August 1, with a 3.6% margin of error.

Reference: MSN (Sep. 12, 2022) “Bipartisan support for policies to pay long-term care costs: Poll”

How to Manage the Cost of Long Term Care

A single woman has seen her annual premiums for long-term care rise by more than 60% over the last six years. Her cost in 2018 was $2,721, up from $1,626 in 2013. She’s keeping her policy, reports CNBC in the article “Long-term care insurance costs are way up. How advisors can help clients cope”

For her, the price she is paying is worth the cost. However, these types of increases can take older individuals off guard, especially if they are living on a fixed income.

Last year, Genworth Financial received 120 approvals by state regulators to increase premiums on their long-term care insurance business. The weighted average rate increase was 45%. General Electric said earlier this year that it expects to raise premiums on its LTC policies by $1.7 billion in the next ten years. Insurers hold between $160 to $180 billion in LTC reserves, covering 6 to 7 million people, according to estimates from Fitch Ratings.

Elder care has also become increasingly expensive. The annual national median cost of a private room in a nursing home was $100,375 in 2018, according to Genworth Financial. The annual national median cost of a home health care aide was $50,336 in 2018.

Insurers entering the business in the 1990s and early 2000s didn’t anticipate that so many policyholders would continue to pay their premiums and eventually file claims. Fewer than 1% of policyholders have let their policies lapse, and this caught many companies off guard.

Low interest rates have also hurt overall profitability for the insurance companies.

About 40% of the bonds held in insurance companies’ general accounts had a maturity of more than 20 years at purchase, said the American Council of Life Insurers.

There are a few ways to tweak benefits to keep premiums more affordable, while continuing to have this essential coverage.

Daily Benefit. Policies sold in 2015 had an average daily benefit of $259. Paring down the daily benefit could keep premiums down.

Benefit Period. Insurance contracts sold in the 1990s and early 2000 could pay out for the remainder of a client’s life. Reducing that period to five or ten years could make premiums lower.

Inflation Protection. Inflation riders help stay ahead of the rising cost of care. For older policyholders, this might reduce the inflation protection.

Waiting Period. Most policies have a waiting period before benefits will be received. Adjusting this period of time might reduce benefits.

Policyholders are advised to speak with the insurance company directly, instead of relying on the premium increase notices. This may reveal more options that can be used to reduce the premiums, without sacrificing too much in the way of coverage.

Reference: CNBC (September 8, 2019) “Long-term care insurance costs are way up. How advisors can help clients cope”

Long-Term Care Insurance Threatened

Long-term care insurance works in a similar manner to other forms of insurance. Policy issuers are banking on the fact that not everyone who pays premiums will be as expensive to care for as some others.

Consequently, some people who pay will not need long-term care. As a result, their premiums will be used to fund the care of those who do.

After all, that is the way that insurance works.

It is a reliable business model because people do not know whether they will be the ones who need to draw more money out of the insurance pool. This leads them to hedge their bets and purchase insurance.

However, if there was an easy way for people to have a much better idea whether they will actually need long-term care, then the current insurance models could be broken, as The New York Times explains in "New Gene Tests Pose a Threat to Insurers."

Inexpensive genetic tests are now available that will give people a better idea whether they are likely to develop Alzheimer's and Parkinson's diseases. Both diseases are likely to lead to the need for long-term care.

People who know they have a greater risk of contracting the diseases, would be more likely to buy long-term care insurance than others.

Insurers can now ask people about their risks for the diseases, but people are not under any obligations to tell insurers the truth and the results of the tests are not available for insurers.

This is an example of the way that medical advances are quickly changing how the elderly will be cared for in the U.S. Any major damage to the long-term care insurance market, will make it more difficult to care for those in need.

Reference: New York Times (May 12, 2017) "New Gene Tests Pose a Threat to Insurers."

How to Pay for Long-Term Care

Americans in most demographic groups are living longer than ever before. Unfortunately, on average they are not living any healthier than previous generations of elderly people. That means that people will need ever increasing lengths of nursing home stays or long-term home health services.

The big problem with this is that most people do not have a good way to pay for that care. They either have to deplete their own assets and then fall on Medicaid to cover the rest of the costs or they have to have private long-term care insurance, which can be costly and is sometimes difficult to obtain.

This creates a gap in the country's health care coverage that needs to be addressed. In "Should Medicare Add A Long-Term Care Benefit?" Forbes columnist Howard Gleckman discusses a couple of different proposals to help fill this gap.

One proposal would add a long-term home health benefit to Medicare. Patients could receive up to $400 a week of in-home services with a co-payment required the amount of which would be based on their income.

As this plan would require an increase in payroll taxes and many politicians think Medicare is too expensive already, it could be difficult to get political support for this option. The other proposal would create a new public universal long-term care insurance program.

Other proposals exist as well, but as of now no proposal has a broad consensus behind it in Congress.

Reference: Forbes (April 15, 2016) "Should Medicare Add A Long-Term Care Benefit?"       

Long-Term Care Insurance Might Not Be Worth the Headache

Anyone who has ever looked into it knows that the costs of staying in a nursing home are extreme. With people generally living longer more and more people are having to confront how they will pay those costs. 

Because of this concern an industry arose to seemingly help pay for the costs. Insurers began to offer policies that would cover the costs. As simple as it might sound to pay for nursing home costs with a long-term care policy it is anything but a simple process. 

Recently, The New York Times discussed the complexities in an article entitled "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

The key thing to understand is that 90% of the companies that offered long-term care policies in the past no longer do so. These companies discovered it is very difficult for insurers to make money on the policies. 

Those companies still in the market offer a confusing array of policies with benefits and costs that are not always easily understood. It can be migraine-inducing for people to figure out what they are getting if they purchase a policy. 

It can also be a complete waste of time for a couple of reasons. 

First, 40% of people who apply for the policies are turned down for health reasons. Second, the policies do not offer life coverage. They are short term policies and if your need for coverage exceeds the policy term then the money spent on premiums is wasted.

As the New York Times suggests, if you are considering long-term care insurance, it is important that you seek independent advice, such as from an elder law or estate planning attorney. That way you can be sure the policy is actually needed and can be certain of the benefits you will receive under the policy.

Reference: The New York Times (Dec. 18, 2015) "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

 

Preventing Long Term Care Policy Lapses

Planning for end-of-life medical care often goes hand-in-hand with estate planning. An estate plan is useless if nursing home costs eat up all of your savings as there will be no assets left for your heirs to inherit through the estate plan. 

For this reason it is important to decide how you will pay for nursing home care should you ever need it. 

Long term care insurance policies are a popular and effective solution. However, more than a third of the people who purchase long term care policies let them lapse before they need them to pay for nursing home expenses. 

Most of the time people do not intentionally let the policies lapse. Instead, they simply forget to pay the premiums. 

This may not happen out of ordinary forgetfulness but may happen because as we age we often start to suffer from cognitive impairments. 

Unfortunately, the people who suffer from the cognitive impairments that would make them forget to pay the insurance premiums are the very same people who are most likely to need long term care in a nursing home. 

Next Avenue reported on this problem in "How Long-Term Care Insurance Policies Backfire."

The article does point out a potential solution to this problem. It is possible to have the insurance policy statements sent to a trusted third party who can make sure that the premiums are paid. 

However, if this is going to work as an anti-lapse strategy, it needs to be done when the policy is first purchased rather than risking forgetfulness later in life. 

Reference: Next Avenue (Nov. 6, 2015) "How Long-Term Care Insurance Policies Backfire."

 

Answers to Questions about Medicare and Medicaid

The recent Hometown Life article, titled "Plan ahead to assure secure future for aging parents," stressed the importance of planning ahead for elderly parents are or may become physically or mentally unable to care for themselves. This process should include two important documents: a power of attorney—which can give an adult child legal authority to act on behalf of elderly parents with financial matters—and a patient advocate designation—to help them in medical matters. By starting early, children and their parents can work together to create these documents.

 

The article also answers questions on a few other topics:

 

What about putting your name on your parents' bank accounts?

Children should not be joint owners, because you’ll be subjecting your parents' assets to all of your liabilities, causing issues for future benefits. The government is more likely to scrutinize a joint account if the parent applies for Medicaid when transitioning to a skilled nursing facility. Instead, a signed financial power of attorney allows an adult child to pay bills, sign checks, and help the parent with other financial matters—without the need for joint bank accounts.

 

Who pays when an elderly parent, on Medicare, needs rehab in a skilled nursing center?

Medicare may pay 100 percent of the first 20 days. After that, Medicare may pay 80 percent, and supplemental insurance may pay the other 20 percent of the bill. There is a 100-day Medicare benefit, but not everyone qualifies. You also need to have a 30-day wellness period outside the hospital or a skilled nursing center for that benefit to reset. For example, if the parent leaves the facility on Day 20—but returns the next week—they start where they left off at Day 21 because they didn't have a 30-day wellness period.

 

Should I give any money away if considering entering a skilled nursing home (with Medicaid)?

No, Medicaid will examine the past five years of your finances when you apply for coverage. If you have given money away, you could be severely penalized with long periods of ineligibility and you may not get Medicaid even if you have zero dollars.

Veterans Center Employees Fired for Accepting Bequests

When a man who lived in a Norman, Oklahoma veterans center left six center employees gifts in his will, he was likely attempting to thank the employees for their kindness and companionship. The employees were fired for accepting the gifts, despite the fact that the director of the veterans facility said that they could do so without repercussion. However, when a new director came in and found out about the gifts, the employees were fired.

 

The employees are suing for their jobs back.

 

The veterans center has a policy that employees cannot accept gifts from patients. The employees argue that since the gifts were by will, the man was no longer a resident at the time that the gifts were made. Recently, the general counsel for Oklahoma's Veterans Department testified that he could find no provision in the rules that would prevent the employees from accepting the gifts.

 

The Norman Transcripthas the full story in "Attorney testifies handbook doesn't prevent veterans center workers from accepting bequests."

 

This is not an unusual problem at long term care facilities.

 

Residents often do grow close to employees and want to leave them something. The lesson to be learned is that before rewriting your will, you should consult with the facility and an experienced estate planning attorney to see if policy allows you to leave anything to facility employees.

 

Reference: Norman Transcript (January 10, 2015) "Attorney testifies handbook doesn't prevent veterans center workers from accepting bequests"