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Retirement Savings Bombshell - Estate Planning & LTC
Where you you want your hard-earned money to go?
I'm sure your estate or financial planner has made sure you are prepared, that your money is protected from the devastating costs of long term are and that you're estate will be preserved and that you're not on the government plan. (ltcfinancialadvisors.com)
90% of estates go in this order:
1. nursing home
Is this the order in which you want your estate to go?
If you don't plan for your long term care now it may be too late when you finally decide to do something. Actually you are deciding right now, if you don't have your own plan in effect today you're on the government plan today. You're on one or the other. The only certainty greater than long term care is death.
What is the risk of long term care and what is the cost for care?
The GAO reports that at least 70% of Americans will need long term care.
The cost of varies by location and time in care. An average of 3 years at $75,000 per year = $225,000. (Metro - NY, NJ, CT, CA, over $100,000 yr). But how are you going to pay?
What is the cost of long term care insurance?
For a 55 year old couple average premiums can run from $150 and up per month. But with just the top 5 companies you have 10,000 possible combinations of benefits. You should have a plan custom designed for your individual needs. (ltcfreequotes.com)
How to design a long term care insurance plan?
First find out what it cost in your area, call nursing homes, assisted living facilities and home care agencies. Then look at your health and your family health history then imagine a future in which you need care -- what do you want the insurance to do for you then? Pick the plan that will accomplish that and see if the premium is affordable, or make adjustments to the plan based on what is affordable.
Since you select benefits based on cost today and the benefits increase with inflation protection ($150 compounds to $244 in 10 years) you can plan for how much of your estate you want protected from Medicaid if you have a Partnership plan - available in select states. (guidetolongtermcare.com/partnership)
What if I never use my insurance?
What if you never use your house, car, or health insurance? Long term care insurance is like term life insurance, it has no cash value, benefits are tax free. You can get a Return of Premium rider at an additional cost but it's usually not worth the expense. (Hancock has a built in RoP till age 65).
For a 55 year old with an average policy their first 5 years of premiums would be recouped in 59 days of care, the first 10 years in 92 days, and 15 years of premiums would pay for itself with 108 days of care.
Men have an average stay just in the nursing home of 2.2 years or 803 days and women an average of 3.7 years or 1,350 days x$200=$270,100 (longtermcare.gov) If you add home care and assisted living the averages can be 1.5 more, or men 3.3 years, women 5.5 years of care.
In addition to standard long term care insurance there are whole-life insurance plans that have cash value with a long term care rider, and there are annuities with underwriting with a long term care rider. There is even an annuity with a long term care rider with no underwriting if you are uninsurable. Standard long term care insurance is the least expensive to insure the most for long term care expenses. Then there are multi-life policies for small businesses or groups of 3 or more, and executive carve-out plans as long as they are available in your state.
Do you need to meet with an agent?
The Internet allows communication with people like yourself who agents would not otherwise meet and it provides you with the option of dealing with an experienced certified insurance agent by email or over the phone at your convenience rather than in person. Internet applications are emailed or postal mailed. It's easy to keep in touch with clients by email and or phone during underwriting or whenever they have a question. With the Internet and access to the large long term care insurance brokers you get the choice of all the major companies whether you live in large city or a small town anywhere in America.
If not now, when?
Every day people like yourself research long term care. Everyone is busy with this and that and don't take the time to plan, preserve, and protect their life savings. Then something happens to them and they're now uninsurable, now they have very few options. Don't let that happen to you, get a quote and start the underwriting approval process by applying this month. In less than 60 days you can be prepared, have your assets protected, and your estate will be preserved.
Your doctor tells you: "you are facing a 50:50 chance of having a $216,000 expense but doesn't don't know when and your current insurances don't cover this. If you don't have the money the state will pay but they will take it out of your estate later.
Your financial planner says that you have a 50:50 chance of losing $216,000 out of your retirement plan but he doesn't know when, and it's not recoverable.
According to the U.S. Government Accounting Office (GAO) and the Centers for Medicare and Medicaid you have a 60% chance of needing long term care in your life. So consider it's not a matter of if, but when.
The average amount of care needed is 3 years at an average cost nationally of $72,000. 3x$72,000=$216,000
If you do not have long term care insurance you are self-insured and your situation could be considered to be similar to this:
You have just withdrawn $216,000 from your bank (or took out a second mortgage) and are standing in a casino at the roulette table, the croupier calls for bets to be made and you place your $216,000 on either Red or Black, it's a 50:50 bet. The croupier takes the ball and starts it spinning round the wheel, you wait... and you wait, sooner or later the ball will drop... will you win (and die without needing any care) or will you lose the $216,000 paying for long term care?
You have insured your other high risks from catastrophic damage to your finances, your health, your home, your car (it's not the car replacement you're insuring it's the $150,000 liability).
Long term care insurance is the ONLY insurance that protects you retirement income and nest egg from the greater than 50:50 chance of needing long term care.
If you wait your health may not qualify you, you don't have to be deathly ill, just diagnosed with an uninsurable condition. Consider Michael J. Fox, who in 1991 at age 30 was diagnosed with Parkinson's disease and became uninsurable. That was 17 years ago. When he will need care he will pay out of his own money.
Insure now or wait for the ball to drop.
Main Aspects of Medicaid
Health is an issue that all individuals have to deal with. It is safe to say that the way we treat our bodies will affect the way it treats us back. We all strive for the self-image of a thriving health system, although, not all of us have the funds or even the means to achieve health care. The issue of healthcare and healthcare aid has been a controversial topic for years before now, and will be for years to come. The problem is not everyone can afford health care due to illness, disability, pregnancy, immigration and a variety of many other reasons. So when these people get hurt or need medical attention, whom can they turn to? Medicaid. Medicaid serves as a helping hand to the low-income individuals that just can't afford to enroll in an insurance program or don't have the money to afford hospital or medicinal costs. There are laws that guarantee you the right to receive and apply for this kind of aid, granted you have the qualifications that are required to be eligible. There are various Benefits of the Medicaid program, the way it is enforced and delivered, as well as the financing standards that help these individuals in medical and financial hardships during their lives.
In 1965, the program called Medicaid was signed into legislation, along with the program called Medicare, under the Social Security Amendments of 1965 1. From this, the federal administration granted states the ability to develop their own state healthcare program plan while being monitored on a federal level under what is known as the Centers for Medicare and Medicaid Services 2. This service is known as CMS is within the U.S. Department of Health and Human Services (HHS) 3. In 1985, the coverage was then extended to women who were pregnant if the choose the option 4. In 1986, illegal alien immigrants also had the ability to be covered in emergency only situations 5. CMS is also the main enforcer to monitor the method of delivery, eligibility qualifications, quality of service and funding for each state 6.
The federal government recognizes more than 50 different types of social groups that can be classified as future or potential Medicaid eligible applicants 7. Some of these distinct groups are listed as mandatory eligibility for all state's to follow, while others are optional and at the decision of the state's programs 8. Today, some of these qualifications are requirements such as disability, age, income, assets, pregnancy and citizenship 9. Although, before the 1980's, Medicaid was only open and available to the low-income elderly and families with children, the special medical attention needed individuals and the disabled, now states are even giving the consideration to provide Medicaid to certain causes such as tuberculosis, cervical or breast cancer and even individuals who are disabled, but still have the ability to work 10. For women who are pregnant and uninsured, they have the ability to provide coverage for themselves as well as the child if the infant is born during the term that the mother was on Medicaid 11. For children to receive Medicaid, the child must have a serious illness whereas nursing care is needed, the total family income is limited, or a child up to the age of twenty-one years of age is living on their own 12. So far, thirty-seven states have helped to provide medical help to low-income children with the help of Medicaid since February 2003 13. Individuals, who are elderly, passed sixty-five years of age, disabled, diagnosed with blindness and have low-income may also apply for medical help 14. To qualify as low-income, the income for the individual applying must be lower than that of the Federal maximum monthly Supplemental Security Income benefit 15. Statistically speaking, about two out of every five elderly adults are surviving off incomes that are 200% or more under the federal poverty level (See Table 2, Low-Income Elderly).
Medicaid offers a variety of benefits to those who qualify including helping with some or all nursing home expenses, nurse and physician check ups, x-rays, lab tests, select screenings, and at home health care costs 16. Some Medicaid programs also cover medical necessities like hearing aids for the elderly or disabled, eye examinations, prescription drugs, glasses, dental visits and procedures, even transportation 17. Other services included inpatient hospital attention, outpatient hospital services, pediatric and family nurse practioners visits, diagnosis and treatment, medical supplies, and family planning services and supplies 18. Other types of benefits include case by case management as well as physical therapy for those who are under 21 or older than 65 19. Under the Medicaid program, there are certain concrete services that are required for all states to provide for as well as "secondary" services that the state could choose to implement, leading to the matching of payments from the federal government 20. A program called ESPDT is a type of child care service for individuals who are under 21 and help with physical exams, immunizations, lab tests, health education, and even physical or mental illnesses 21. For patients who are diagnosed with tuberculoses, the states have an opportunity to provide health care for them or not 22. If the state does however decide to provide care, they help with the expenses of prescription drugs, physician's visits, hospital visits, lab and x-ray screenings, as well as prescription drugs 23.
V. Delivery Systems
Under the Medicaid program, there are a couple of delivery systems that are available for the patient, varying from state to state 24. The delivery systems that are used for Medicaid are managed care and fee-for-service systems 25. Manage care has proved itself and has been steadily increasing the number of individuals enrolling under its care plans 26. All states besides Wyoming, Mississippi, and Alaska have the availability to use a managed care plan to deliver the services to the beneficiaries 27. Managed care plans are developed by the state and may cover a variety of services or just one specific service 28. For each plan that is created, the state discovers the monthly, fixed, and future payments depending on the average costs for the certain social group 29. After the state determines this, it moves forward to breaking it down even more by specific differences such as age, diagnosis or location 30. There are three main types of managed health care under the Medicaid program, starting with Managed Care Organization 31. Under this plan, the state agrees to pay for risk-based only individuals 32. Next is the Pre-paid Health Plan, which focuses more entirely on behavioral services 33. The last main plan is called Primary care case management, in which certain services are specified and being covered under certain physicians and requirements 34. The other delivery system that is available is called the fee-for-service system and is the most common service used 35. Medicaid in turn lists asset of physicians and services that are covered to the beneficiaries 36. States increase or limit these services depending on their own approval 37. Through this type of delivery system, states have the ability to determine how to calculate their own payments for these services 38. This type of system is primarily used for those who aren't or can't become covered under the managed care system due to social group or location 39.
The most popular services that are within coverage are the capitation services, inpatient services and prescription medications (see Table 1, Medicaid Payments). Financing for Medicaid services is spectacular in that sense that the federal government matches what the state pays for the services 40. The amount of funds the federal government will dispose to the states depends on the state's ability and compliance to finance medical services covered under the program41. This type of program or issue is called the federal medical assistance percentage and is modified and reevaluated each year 42. Each state on its own reimburses Medicaid providers through developing their own rates, although, they must be generally covered services to the general population 43. Since the Balanced Budget Act of 1997, it was signed into law that the states must release these rates for the uses of nursing facilities, hospitals, and the healthcare facilities for the mentally disabled 44. Not only are they required to disclose their rates, but they are also required to disclose the process by which they determine these rates 45. Also, every healthcare provider must accept a payment from Medicaid in full for the specified covered services 46. It is unlawful to impose cost on women and services dealing with pregnancy, children under the age of 18, emergency services, and in house nurse services who do not have the income to pay for anything else, other than the services 47. Not only is there a reimbursement policy for the services being provided, but also for the prescription of drugs 48. Under the Omnibus Budget Act of 1990, Medicaid is required to pay what is called an "upper payment limit." 49 This is usually when a designer drug has a sister or generic drug as well; Medicaid will pay one hundred and fifty percent of the wholesale price 50. The government will not match funding to any prescription drug manufacture if they do not provide beneficial rebates to the states 51.
With the recent spike in economic downturn and the soon eligibility for the baby boomer generation to qualify for medical help, it is important to know and understand the different aspects of Medicaid itself. The history of Medicaid originated under the Social Security Amendments of 1965 51 . The Centers of Medicare and Medicaid Services monitors this program on a federal level and is processed under the United States Department of Health and Human Services 52. Its process starts with eligibility that spans over 50 different social backgrounds. There are certain qualifications and requirements such as income, assets, age, disability, pregnancy, and even citizenship 53. Each applicant is reviewed if his or her income is under the federal maximum supplemental security income 54. The benefits that come with Medicaid are extensive and vary on the state's willingness to implement certain services 55. Services such as inpatient services, outpatient services, prescriptions, dental and vision may be covered depending on the individual states Medicaid plan 56. The two main systems of enforcing and delivering these services are through fee-for-service, managed care service, or a combination of both 57. Fee-for-service deals with each individual service that is carried and paid for separately while under the managed care service certain physicians and services are covered stated by the plan 58. Each state determines which services are to be covered whether it is childbirth or a mental disability59. The federal government will match what the states pay for under a system called the Federal Medical Assistance Percentage, which is readjusted each year 60. The result of a program like Medicaid is very beneficial to those who are in economic hardships and need the help with medical services. Medicaid may not be for you, but it definitely helps those who need it, especially the ones who are struggling, although, Medicaid may not be around for much longer. Like stated before, the baby boomer generation is slowly, but steadily reaching that qualifying age, which my lead to an uproar and dry up of finances the government will be able to issue to later generations like mine for aid. So what are we supposed to do? They say in 5 years, medical aid and help from the government may be non-existent. That means that even individuals who do make enough money that do not have to consider Medicaid may need to soon. Why? Because nation wide Medicare is going to be wiped clean and you may end up paying more for health insurance then you would on your own house. Now that is something to consider.
Protect Your Assets with Long Term Care Insurance
When you're discussing your financial future you should considering purchasing a long term care insurance (LTCI) policy. LTCI covers care that is not covered by health insurance, Medicare, or Medicaid. It provides coverage for those who may not necessarily be sick, but unable to perform basic daily activities, such as bathing, clothing, eating, etc. It is estimated that 50% of Americans will require some type of long term care in their lifetime. If you're one of those statistics, can you afford to stay in a nursing home which is approximately $75,000 a year? Most people cannot, so you would benefit from LTCI.
When you're shopping for LTCI there are certain aspects you should pay attention to. Health care costs and nursing home costs will be dramatically different in 20 years so make sure the policy has inflation protection to raise your benefit amount automatically. Also, be sure that your policy has at least a 70% daily benefit, so don't just purchase the least expensive policy. Research how much it costs to stay at a nursing home in the area and request 70% of that, if not higher. You may not always need care from a nursing home, so make sure the policy has variable coverage. This will allow you to receive care from adult day health care providers, health aids, and assisted living. Finally, be sure that you have independent care management. Whenever you file a claim, the insurance company sends out a representative to evaluate your needs. With independent care, you have the freedom of choosing a separate licensed health care provider who can manage your care instead of the insurance company.
LTCI can be purchased from different sources. It may be offered through your employer at a group rate. It is most often purchased from independent insurance agents and companies. It may also be offered through membership groups and associations you belong to. Be sure to research the company you want to purchase from and learn about their financial strength. You want to be sure that company can financially handle your claim in the future.
There is some important information you should know regarding long term care insurance. When you're young, you should still consider purchasing a long term care policy. As long as you purchase it, it will be available for you when you need it, not just when you're elderly. If you're interested purchasing the policy through your employer and you're young, consider getting an independent policy instead. Group rates are great for some things, but long term care may not be one of them. Since the risk is assessed amongst the employees, everyone at the company is sharing the cost. So, premiums are set according to the group. Therefore, those who are older are benefiting from a better rate, while the young are essentially paying a higher rate. Long term care also doesn't pay out right away. There is an elimination period in every policy, which is the length of time you will have to pay before your insurance company will pay. Although a longer elimination period will make your premium less expensive, it could lead to paying a lot of pocket down the road, so be sure you're financially ready to handle that. People should also know that LTCI does not replace other forms of insurance like life, disability or health.
How to Decide Whether to Buy Long Term Care Insurance
A lot of people incorrectly assume that health insurance and Medicare will cover long term care. They cover medically necessary care for up to 100 days, or until you stop improving. Information can be found at the medicare.gov website.
If you need care for longer than health insurance and Medicare will cover, you must either pay yourself out of income, savings, retirement funds, or you can apply for Medicaid, the state welfare health care program. Medicaid consists of three parts: 1. Eligibility, 2. Share of cost, 3. Recovery.
Medicaid looks at your income and your assets. To qualify for Medicaid benefits to pay for long term care the applicant must meet certain criteria like have property that does not exceed the Medicaid property limits.
The first decision to make is whether or not you are going to continue to self-insure or transfer the risk to an insurance company.
People will ask "can I get nursing care at home?" ... of course... people like Bill Gates aren't going to go to a nursing home, he'll build his own hospital. The common reason people leave home and go to an assisted living facility or a nursing home is that they cannot afford that level of care at home. You can get any kind of care anywhere you need it as long as you can pay for it.
Let's look at the actual cost since according to the Government Accounting Office there is a 60% chance you will need long term care in your life with an average of 3 years of care at $72,000 per year.
Being self-insured today here is what your out-of-pocket long term care cost (premium) is per person at todays cost. (national average)
(average care of 3 years = $216,000)
By self-insuring you will pay above. Compared to a LTC insurance premium below.
Daily: $10 (your age and benefits may show different premium)
(if you pay-in 20 years before using benefits = $72,000 (unless it's used before))
At todays cost you will spend over $200,000 for long term care, but factoring in that the cost of care will double in 14.5 years it will be somewhere between the cost today and if you need care in 14.5 years it will be $144,000 x 3 = $432,000.
So if you are willing to self-insure be ready for as much as $500,000 per person.
As shown above, for an average of $3,600 a year you can insure for the $432,000 because the policy has built-in inflation protection. Where will the money come from to pay the long term care bill? There no other insurance that will cover this cost.
There is nothing wrong with self-insuring if you are willing to assume the risk. But why would you insure your home, car, and health which have a less likelyhood of being a catastrophic event than long term care?
Other than self-insuring and welfare lets look other ways to pay for your long term care:
1) Traditional long term care insurance - the least amount out of pocket for the largest return, but has no cash value. You'll need to find if you can qualify to buy long term care insurance, because not everyone qualifies. Don't assume you will be insured and don't assume you won't. Companies are always changing their underwriting guidelines (for new applicants-once insured they have to renew your policy regardless of changes in your health).
2) Universal life insurance with a long term care rider, which does require underwriting like traditional LTC insurance but it has cash value, a good option for those who already have this kind of insurance they can exchange their for one with a LTC rider.
3) Annuity with a LTC rider which is great for those who cannot health-qualify for 1 or 2 because no health underwriting is required.
Your choice today is the choice you and your family may have to live with. The reason is that health changes suddenly, as do accidents happen, and if you needed care tomorrow you would be stuck with paying yourself or welfare.
Whether you insure or not is a matter of whether you are OK with the consequences if you needed care and didn't have insurance. That's how you decide.
* The best age to insure: the age your health will still insure you.
* The best benefits to get: enough to cover what you cannot afford to pay.
* The best company to insure with: John Hancock, MetLife, Genworth, Prudential