Long-Term Care You Can Afford - Kiplinger

Long-Term Care You Can Afford - Kiplinger

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Boomers Reluctant over Long-Term Care Insurance

by PATTI NEIGHMOND

Over the past 20 years, long-term care insurance has expanded from simple nursing home coverage to covering care in assisted living facilities and in an individual's own home. Today, insurance companies are busy marketing their product to boomers. But, according to a number of surveys, boomers are not listening.

Bill Vaughn is a policy analyst with Consumers Union, the group that publishes Consumer Reports magazine. Vaughn is considered an expert when it comes to health care issues. But when he looks at long-term care insurance, like most Americans of about the same vintage, he resists.

"It's the last thing you want to buy," Vaughn says. "You want to spend your money on vacations. It's a chore to buy this. It brings up negatives images, images of the end of the road, of death. It's certainly not a product you go joyfully off buying. So, people keep putting it off."

Financial Priorities

Greg Seal is a financial planner who runs his own company in Denver. He says boomers are skeptical about long-term care insurance not only for emotional reasons like this, but also for practical ones.

"Baby boomers are carrying a lot more debt than their parents were at this age," Seal says. "So they have more debt responsibility and they're more concerned about paying off that debt than they are about funding this 'risk.'"

The risk of needing some kind of long-term care is high. Two-thirds of seniors will need it at some point in their lives. But they will mostly need it only for short periods. Just one-fourth of individuals over 65 will end up needing long-term care for one or more years.

Who Should Buy?

So, for a healthy person in their mid-50s, is long-term care insurance worth it? That's a question Joel Gold wanted to answer. Gold is a professor of finance at the University of Southern Maine, as well as a financial planner.

He looked at the cost of care: about $100,000 a year in a nursing home, or $25 an hour for care in an individual's home. He also factored in the probability of needing long-term care.

"Long-term care insurance is a viable tool for women at any age and it is advisable for younger and middle-aged males," Gold says. "Unfortunately, because men tend to die sooner than women, buying this coverage did not prove worthwhile for older men."

Seal says baby boomers also are often mistaken about how long-term care may be paid for. Many think Medicare will cover long-term care costs. The fact is, it won't. Medicare pays for short-term medical care at home or for a limited stay in a nursing home, but only after a hospitalization and only after a number of criteria are met. Medicaid pays for long-term care, but not until people have already used up the majority of their financial assets.

Rapidly Changing Industry

In addition, actually buying long-term care insurance is not simple in the fast-changing health care industry. Vaughn, of Consumers Union, says ads are often misleading and use scare tactics. He adds that because the industry is relatively young, many companies that did offer policies have simply closed down.

Other companies that are still in the business raise their prices, in some cases, significantly. One company raised the cost of coverage 800 percent in just one year.

On top of that, here's the biggest unknown: Will the insurance you buy today pay for types of care that may be available in the future?

"No one really knows what we'll have 30 to 40 years from now," says Mila Kofman, a policy analyst with Georgetown University. For instance, in the '70s when most long-term care insurance was first sold, most of the care at the time was provided in nursing homes. Back then no one could envision assisted living or care in the home."

So, Kofman says, a 50-year-old might buy long-term care insurance today that pays for assisted living. But 30 years down the road, something better might come along, like some sort of video or robotic monitoring. That's something your policy wouldn't even envision today and may not pay for in the future.

Voters were asked to support the transition of the provision for long term care in the National Health System Reform

Voters were asked to support the transition of the provision for long term care in the National Health System Reform

Putting Home Care in Perspective

Putting Home Care in Perspective

The Evolution of Home Care

In the first century of our country's history there was no such thing as nursing homes or assisted living. Society was mostly rural and people lived in their own homes. Families cared for their loved ones at home till death took them. In the latter part of the 1800's because of an increasingly urban society, many urban families were often unable to care for loved ones because of lack of space or because all family members including children were employed six days a week for 12 hours a day. During this period many unfortunate people needing care were housed in County poor houses or in facilities for the mentally ill. Conditions were deplorable. In the early 1900's home visiting nurses started reversing this trend of institutionalizing and allowed many care recipients to remain in their homes. Nursing homes or so-called rest homes were also being built with public donations or government funds. With the advent of Social Security in 1936, a nursing home per diem stipend was included in the Social Security retirement income and this government subsidy spurred the construction of nursing homes all across the country.

By the end of the 1950s it was apparent that Social Security beneficiaries were living longer and that the nursing home subsidy could eventually bankrupt Social Security. But in order to protect the thousands and thousands of existing nursing homes Congress had to find a way to provide a subsidy but remove it as an entitlement under Social Security. In 1965 Medicare and Medicaid were created through an amendment to the Social Security Act. Under Medicare, nursing homes were only reimbursed on behalf of Social Security beneficiaries for short-term rehabilitation. Under Medicaid, nursing homes were reimbursed for impoverished disabled Americans and impoverished aged Americans over the age of 65. It has never been the intent of Congress to pay for nursing home care for all Americans. The nursing home entitlement for all aged Americans was now gone.

Over the last 40 years, there has been a gradual change away from the use of nursing homes for long-term care towards the use of home care and community living arrangements that also provide in-house care.

With Proper Planning People Could Remain in Their Homes for the Rest of Their Lives 

We are seeing a trend towards working conditions like those in urban America in the early 1900's where both husband and wife are working and putting in longer hours. We are also seeing a return of the trend in the early part of the 20th century where outside visitor caregivers are becoming available to replace working caregiver's and allow the elderly to receive long-term care in their homes. In addition there is a significant trend in the past few years for Medicaid and Medicare to pay for long-term care in the home instead of in nursing homes.
Given enough money for paid providers or government funding for the same, a person would never have to leave his home to receive long-term care. All services could be received in the home. Adequate long-term care planning or having substantial income can allow this to happen.

We only need to look at wealthy celebrities to recognize this fact. Christopher Reeve, the movie star, was totally disabled but he had enough money to buy care services and remain in his home. President Ronald Reagan suffered from Alzheimer's for many years but received care at his California ranch. He was also wealthy enough to pay for care when needed. Or what about Annette Funicello or Richard Pryor? Income from their movie careers allowed them to receive care with their multiple sclerosis at home. We will be willing to bet that Mohammed Ali, who is severely disabled with Parkinson's disease, will probably never see the inside of a care facility, unless he chooses to go there to die. With the proper planning and the money it provides, most of us could remain in our homes to receive long-term care and we would never have to go to an institution or a hospital.

The Popularity of Home Care 

Most of those receiving long-term care and most caregivers prefer a home environment. Out of an estimated 8 million older Americans receiving care, about 5.4 million or 67% are in their own home or the home of a family member or friend. Most older people prefer their home over the unfamiliar proposition of living in a care facility. Family or friends attempt to accommodate the wishes of loved ones even though caregiving needs might warrant a different environment. Those needing care feel comfortable and secure in familiar surroundings and a home is usually the best setting for that support.

Often the decision to stay in the home is dictated by funds available. It is much cheaper for a wife to care for her husband at home than to pay out $2,000 to $4,000 a month for care in a facility. Likewise, it's much less costly and more loving for a daughter to have her widowed mother move in to the daughter's home than to liquidate mom's assets and put her in a nursing home. Besides, taking care of our parents or spouses is an obligation most of us feel very strongly about.

For many long-term care recipients the home is an ideal environment. These people may be confined to the home but continue to lead active lives engaging in church service, entertaining grandchildren, writing histories, corresponding, pursuing hobbies or doing handwork activities. Their care needs might not be that demanding and might include occasional help with house cleaning and shopping as well as help with getting out of bed, dressing and bathing. Most of the time these people don't need the supervision of a 24/7 caregiver. There are, however, some care situations that make it difficult to provide long-term care in the home.

Please note from the first graph below that a great amount of home care revolves around providing help with activities of daily living. Note from the second graph below that the average care recipient has need for help with multiple activities of daily living. Finally, it should be noted from the second graph that well over half of home care recipients are cognitively impaired. This typically means they need supervision to make sure they are not a danger to themselves or to others. In many cases, this supervision may be required on a 24-hour basis. (Graphs were derived from the 1999 national caregivers survey, courtesy www.longtermcarelink.net.)

It is precisely the ongoing and escalating need for help with activities of daily living or the need for extended supervision that often makes it impossible for a caregiver to provide help in the home. Either the physical demands for help with activities of daily living or the time demand for supervision can overwhelm an informal caregiver. This untenable situation usually leads to finding another care setting for the loved one. On the other hand if there are funds to hire paid providers to come into the home, there would be no need for finding another care setting.

Problems That May Prevent Home Care from Being an Option 

Caregivers face many challenges providing care at home. A wife caring for her husband may risk injury trying to move him or help him bathe or use the toilet. Another situation may be the challenge of keeping constant surveillance on a spouse with advanced dementia. Or a son may live 500 miles from his disabled parents and find himself constantly traveling to and from his home, trying to manage a job and his own family as well taking care of the parents. Some caregivers simply don't have the time to watch over loved ones and those needing care are sometimes neglected.

The problems with maintaining home care are mainly due to the inadequacies or lack of resources with informal caregivers, but they may also be caused by incompetent formal caregivers. These problems center on five issues:

1. Inadequate care provided to a loved one
2. Lack of training for caregivers
3. Lack of social stimulation for care recipients
4. Informal caregivers unable to handle the challenge
5. Depression and physical ailments from caregiver burnout

In order to make sure home care is a feasible option and can be sustained for a period of time, caregivers must recognize these problems, deal with them and correct them. The responsibility for recognizing these problems and solving them is another function of the long-term care planning process and the team of specialists and advisers involved.

Adequate Funding Solves Most Problems Associated with Providing Home Care 

None of the problems discussed in this article would be an obstacle if there were enough money to pay for professional services in the home. These services would be used to overcome the problems discussed in the previous section. If someone desires to remain in the home the rest of his or her life, adequate preplanning could provide the solution.

This planning must occur prior to retirement. The most obvious way to provide sufficient funds for home care is to buy a long-term care insurance policy when someone is younger, healthy and able to afford the lower premiums. If insurance is not an option, then money must be put aside early in life to pay for care in the future. The only other option is to be rich.

Unfortunately, very few people address the issue of needing long-term care when they are older. This leads to a lack of planning and in turn leads to few options for elder care when the time comes. Lack of planning means most people do not have the luxury of remaining in their homes and must rely on Medicaid support in a nursing home to finish out the rest of their lives.

Get The Best Quote For Long Term Care Insurance: Part 1

Once you have made a decision to look into a long-term care insurance plan, the next step is to identify the various insurance players in the market and compare their rates.

If you are offered long term health care coverage at your place of work, it could be wise to compare costs and coverage with plans available on the individual market. You could find better coverage for less cost. Or, you might find the employer plan is the smarter way to go.  It's always a smart move to compare.

To compare costs and coverage you must request quotes from an insurance agent or broker. Insurance companies do not sell long-term care insurance directly. If your employer offers coverage, there generally will be an agent involved to explain the plan or you might be offered information via an online website.

Long-term care insurance does not have to be complicated. But there are many moving parts and options available. If you are not familiar with them, you may find yourself overwhelmed with trivial and unimportant features. Or, you may end up with a number of different cost quotes for long-term care insurance that you really don't understand.  I can help. 

Each year, the American Association for Long-Term Care Insurance  conducts a national Price Index. I am a member of this industry organization and they report that prices from one insurer can be as much as 60 percent higher than another - for virtually identical coverage.

The least expensive might be excellent protection. Or, it might be missing a most important element that you won't realize until you eventually need care. Or, the insurance company may simply fail to offer a discount that could reduce your cost significantly.

Here are some three tips that could help save you time and energy, avoid frustration and ultimately help you get coverage you can afford and benefits that suit your need.

1. Compare Costs: There can be significant differences between what one insurance company charges as compared to another. For someone age 55, the cost differences could range from a few hundred dollars a year to almost one thousand dollars annually. Here's where it is important to determine if the insurance agent you are working with is shopping the marketplace to get you the best coverage for the lowest cost.

2. Shop Your Health: When it comes to long-term care insurance, your health is as important as your money. If you are in perfect health (the right weight, non-smoker, no medications) every insurance company will welcome you with open arms. If your health isn't perfect, some companies will offer you better rates than others. Again, that's where a knowledgeable LTC specialist comes in.

3. Start Low & Grow: Your cost for long-term care insurance will be based on various factors, your age, health and how much protection you buy. Start by pricing a plan that protects a set amount of assets; say $150,000 in today's dollars.  Adding inflation protection option will enable your coverage to keep pace with growing costs. It will grow to $300,000 or more when you are likely to need it.

If you would like a no-obligation cost quote for long-term care insurance, please contact me by calling 303-671-9777 or E-mail me at gregs@c-hall.com.

Consumers Over-Estimate Cost of Long-Tem Care Planning

November is Long-Term Care Awareness Month and the Congressional Resolution says it best. "Congress . . . urges the people of the United States to learn more about the potential risks and costs associated with long-term care and the options available"

Over 10 million Americans, or almost five percent of the total adult population, need long-term services and supports to assist them in life's daily activities.  The annual cost is is nearly $200 billion.  Long-term care services are generally not paid by health insurance policies and Medicare typically provides only limited coverage.  As a result, individuals and their families pay an increasing amount of the cost.

Care in one's home or that of a family member is increasingly popular. A report by the American Association for Long-Term Care Insurance (AALTCI), the industry trade group, reveals that 86 percent of people with long-term needs live at home.  Only 14 percent live in nursing facilities.

Last year, some $8.5 billion of costs were paid  by long-term care insurance and some 8.25 million individuals currently own protection according to AALTCI.  The trade group's study reveals that less than one-in-ten adults are aware of what long-term care insurance protection costs, their  planning options or ways to reduce the cost.

There are numerous ways to save when pricing long-term care insurance. By taking advantage of discounts on can reduce the cost sometimes substantially. Good health can save 10 to 20% and married couples and even unmarried adults can sometimes save an additional 15 to 40% annually.  The percentage and rules determining discounts vary from one insurer to another.


Other ways to reduce the cost of long-term care insurance is selecting a longer elimination period or select a 3 or 5 year plan as opposed to longer terms of coverage.  


For more information on planning for your or your loved ones long-term care needs call Kristine at 303-671-9777 or send her an email at kristine@c-hall.com to request your complimentary planning guide.

MetLife 7th annual MetLife study of Employee Benefit Trends

With the significant challenges facing the U.S. economy many companies are facing their own difficult challenges in providing their employees with the best benefit options available.

The 7^th annual MetLife study of Employee Benefits Trends provides some significant insights that can help benefit professionals make positive choices in the face of economic change.

The study indicates that employees faced with new economic realities place a greater value on their benefits. In fact, 40% of employees say that benefits play an important part of their decision to remain with their employer. As they assume more responsibility for their well being and are attempting to take control of their finances, employees are looking to the workplace for support.

While employers realize that benefits are important, they underestimate how much their employees value their benefits. Few employers are addressing one of their employees greatest concerns – retirement.  51% of employees surveyed have expressed interest in access to financial planners for retirement advice and 44% have expressed an interest in retirement seminars. 


Employees place retirement planning at the top of their list of concerns, while employers place it considerably lower on their list of benefit strategies. Gaps such as financial planning and voluntary benefits offer opportunities for you to improve benefit effectiveness by responding to employee priorities and get the most of your benefit dollars.

 41% of those surveyed indicated that they view their benefits as the foundation of their financial safety net. Many feel ill prepared to deal with unexpected life events such as income loss due to disability, eldercare or premature death. 

No matter the age of your employees, preparing for long-term care needs is at the forefront of their concerns. It is no wonder that 43% said they are concerned about caring for aging parents and the need to provide for their own long-term care needs when 45% of American households are caring for an adult family member or loved one.

Employees lack confidence and seek planning resources. Employers can be instrumental in helping their employees strive for and meet their personal and financial goals by providing access to a financial and retirement planning firm for guidance and advice.

Consider offering voluntary benefits to close this gap. 40% of employees are highly in favor of more voluntary benefit options but only 17% of employers are offering more voluntary benefits.

You as an employer have the opportunity to help alleviate their long-term care concerns with a cost-effective long-term care program with a wide variety of voluntary benefit options to fit the needs of your workforce.