Is Your Long Term Care Plan Stuck in a Time Warp?
July 18, 2011
The amount of change in the last 15 years is incredible and the pace of change has quickened. Nothing stays the same forever, and forever is not as long as it used to be. We are starting to see this in the senior market, beginning with how the term “old” is viewed by seniors themselves and by the businesses that serve them. The generation turning 65 today is the Woodstock generation. The term senior citizen doesn’t seem to fit and may itself become a relic before long.
If you ask anyone turning 65, they’ll tell you they don’t feel like seniors. They also don’t act like seniors, certainly not like ones of past generations. Growing up with sex, drugs and rock and roll, many of the recently minted seniors, the oldest of the baby boomers, still think of themselves as young and are generally healthier than their parents were at that age.
65 now is not what it was 20 or 40 years ago. People are living longer, more active lives and that will have an impact on what services new seniors will require and demand in the marketplace. For example, traditional senior centers in some areas are closing for lack of funding and lack of participation. Many are too sedentary. You are more likely to find younger seniors at a health club than a senior club. They are more likely to be playing basketball, softball, tennis, golf, even adventure sports, than playing board games, cards and bingo. This change will affect many senior communities, including active adult communities and assisted living facilities.
It usually takes society time to adjust to change. We’ve heard about how the Social Security and Medicare will run out of money within the next 10 to 20 years. The retirement age for Social Security has been raised gradually from the traditional 65 and probably will continue to climb. The notion of retirement in 1935, when the Social Security program was created, did not contemplate 20 or 30 years or more of retirement but that has become the norm. In 1935 people weren’t living with chronic ailments for years like we are now, thanks to advances in modern medical science. In fact, the average life expectancy in 1935 was less than 65 years of age. Social Security was designed with the expectation that a large segment of the population would never collect benefits. That’s generally how insurance works, at least if the insurance company wants to remain in business.
With people living longer, more active lives does that mean long term care services are no longer necessary? Of course not. While we can put off the aging process we can’t avoid it – at least until someone figures out that whole cryogenics thing. It just means we are more likely to face significant declines in our health later, perhaps at 75 or 85. Everything is stretched out over a longer time frame and we’d better be prepared for it. We have to stop thinking about retirement and long term care as it was 75 years ago. Most people have a plan that fits 1935, as if they are caught in a time warp. It’s time to replace it with one that works in 2011.
What’s Your “88 Plan”?
July 11, 2011
It seems more and more to me, that dementia and Alzheimer’s Disease are everywhere, but then, maybe as an elder law attorney I am more tuned to it. In the last month three notable celebrities died or were diagnosed with dementia and/or Alzheimer’s, actor, Peter Falk of Columbo fame, “Rhinestone Cowboy”, singer, Glen Campbell and NFL football Hall of Famer, John Mackey.
Mackey was a tight end for the Baltimore Colts in the 1960’s and early 1970’s after having played his college ball with some great Syracuse teams in the early 1960’s. He later became the first president of the NFL Players’ Association and was instrumental in efforts to secure pensions and other benefits for retired and ailing players. Football is a violent sport and like many players Mackey began to suffer from dementia. In his last years he needed to be cared for in an assisted living facility.
Mackey played in the days before athletes made millions. His wife, Sylvia, therefore, had to go back to work as a flight attendant to pay their bills and because they needed the health insurance. As the disease progressed, however, the Mackeys realized what many of our clients come to learn, that traditional health insurance won’t cover long term care. That’s when Sylvia Mackey and other wives and children of former NFL players pursued the NFL and its Players Association to establish the 88 Plan.
Named in honor of John Mackey, whose uniform number was 88, the plan provides up to $88,000 a year to cover long term care for former NFL players with dementia. Much has been written about the connection between football and brain injuries although the NFL still insists there isn’t any higher incidence of dementia in football players than there is in the general population. Maybe the 88 plan is just the NFL recognizing what I have been saying for a long time, that long term care is a big problem in this country and the owners and players are doing what we all should, implementing a plan to solve the problem.
The Mackeys’ story is instrumental. It’s a story of a wife who suffered along with her husband, supporting him physically, financially, emotionally and psychologically the best she could. It’s also a lesson about being unprepared. The Mackeys didn’t have a plan, but they were lucky. They convinced John Mackey’s former employer to come through with the “88 Plan”. The question then is, “who’s going to provide your 88 Plan?” Chances are you’ll have to do it yourself so the sooner you get started the better off you’ll be, unless you’re thinking the NFL is going to help us all out – just as soon as they figure out how to solve their lockout and save the coming season. Yeah, right.
Underground Storage Tanks and Long Term Care?
May 16, 2011
It just keeps getting worse doesn’t it? I’m talking about the economy and our federal, state and local governments’ inability to balance their budgets and provide the services and assistance they have provided in the past and promise to provide in the future. And is why you can’t expect the government to bail you out.
The latest example is not about long term care but the parallels are there. The State of New Jersey established a fund to help homeowners remove rusted and leaking underground storage tanks that contaminate the soil. 5 years ago the fund had $90 million. Now there is nothing. But it’s the reason why there is nothing left that gets me. The fund ran out of money in part because it was spent on other things that had nothing to do with removing underground storage tanks and in part because too many people were made eligible. As a result, 1300 people seeking grants or loans to help pay for cleanup will have to wait at least a year and no new requests will considered until 2014. Of course, there is nothing preventing the State from extending either of those timelines, making residents wait even longer.
Meanwhile, leaky tanks will continue to leak and the State environmental agency can, by law, hold the residents responsible for the spill. It’s commissioner has said that in some cases, where the homeowner doesn’t have the money to pay for the removal and it can’t wait, then the State will go in and clean it up and then put a lien on the property for the cost of that cleanup. What does that tell you about whether any funds will be available next year, 2014 or any time? All the chairman of the Senate environmental committee could say is that they will conduct an investigation as to what happened to all the money and why no one told them sooner. Great.
What has this got to do with long term care? Nothing and everything. Certainly environmental and long term care issues couldn’t be more different. What is important, however, is to pay attention to what the government is, or in this case, is not, doing for its citizens, especially where it made certain promises. The State isn’t beyond changing the rules in the middle of the game and breaking its promises.
And that’s the lesson to be learned here. Long term care is a huge problem. The government is a part of the solution. But, it has in the past, and will most certainly again in the future, change the rules. If you aren’t prepared for the possibility of needing long term care and expect the government to be the answer, you’d better rethink it. Look what happened with a small program to remove underground tanks. Don’t think it won’t happen with a program like Medicaid. It will. That’s why it’s so important to get your ducks lined up now, have a plan and a backup plan in place. Because what the government provides you today may be very different than what is willing to provide you tomorrow. You’d better know how you will respond.
Of Alzheimer’s Disease and Government Shutdowns
April 11, 2011
A new survey by the MetLife Foundation indicates that Alzheimer’s Disease is more feared by adult Americans than any other disease except cancer – and in a few years that just might change. Approximately 1000 Americans were interviewed last fall. 31% indicated they most feared Alzheimer’s Disease, ahead of heart disease, stroke and diabetes. 41% said they most feared cancer. Interestingly, 4 years earlier 38% said they feared cancer most vs. 20% for Alzheimer’s. With babyboomers entering retirement, presumably the gap will continue to close. The survey also confirmed some other suspicions.
Nearly 1 in 4 interviewed said they were concerned about needing to provide long term care for a loved one with Alzheimer’s. Less than 1 in 5 said they had made any plans for the possibility of getting Alzheimer’s. Only 2 in 5 people said they have had discussions with their families about Alzheimer’s. 4 in 5 adults admitted that they have made no financial arrangements for the cost of care should they develop the disease. And here’s one final stat. 63% of those surveyed acknowledged they know little or nothing about Alzheimer’s Disease.
One thing is clear. While the average American is concerned, he/she is not doing anything about it. The problem isn’t going away and will only continue to intensify. The government isn’t going to help either if this week’s developments are any indication. Congress and the President only avoided a government shut down at the 11th hour when they reached tentative agreement on federal budget cuts. The message is clear. You’ve got to look out for yourself and your family. Others won’t do it for you. To start taking action, visit our website www.livingstonmemorylawyer.com/
But Mom Won’t Live to 100 – or Will She? (Part 2)
March 28, 2011
Last week we were discussing Mary and her mom. Mary opted not to do long term care planning for her mom at age 95. At age 100 she called me again. We met and Mary asked me, again about long term care planning. I told her that Mom would need to live 5 years, now to 105, and spend about another $600,000 (costs had gone up) before we could apply for Medicaid. Mom was now down to $800,000.
Mary’s response was, “I guessed wrong the first time, so, although I don’t think she will live to 105, I will plan against that risk.” Mary was especially concerned because she was an only child, had divorced her husband a number of years ago, and did not have much in the way of assets herself. “Mom had always planned to leave me enough for me to survive on when she’s gone”, Mary related.
Well, the rest of the story is that Mom made it to age 103. We never did apply for Medicaid. But, looking at it in hindsight, had Mary made the decision the first time we met, Mom would have been on Medicaid at age 100, saving approximately $360,000.
You might ask “why should Mary get this windfall? She is cheating the government.” But, is that really the case? Mary now has about $250,000, not a whole lot for someone who is on a fixed income and could live another 20 to 30 years. Mary may well find herself living in poverty, needing government handouts years before she ever might need long term care.
The lesson to be learned is that planning isn’t about predicting what is going to happen. It’s like buying insurance. I buy life insurance to protect my family should I die. I am buying peace of mind, protection against a scenario that could occur. I am not “betting” on my mortality. If I don’t die while the policy is in force I won’t be upset that my family didn’t “collect”.
It’s the same thing with long term care planning. If thoughts of nursing home care are keeping you up at night or occupying your thoughts during the day, you ought to manage that risk. Most 95 year olds don’t make it to 100, especially when they are at a nursing home care level. Mary thought her mom wouldn’t make it either. But, in the end, her mom wasn’t like most 95 year olds.
“But Mom Won’t Live to 100 – Or Will She?”
March 21, 2011
Quite often when explaining long term care planning to the family member of an aging senior, specifically when I mention the 5 year Medicaid look back, the person will tell me that “Mom won’t live that long”. Of course, no one can predict the future with any certainty so, logically, that statement is opinion and not fact. But, it reminds me of a client I first saw a few years ago. I now retell her story frequently.
Mary’s mom was already in a nursing facility when she came to see me. Mom was in spend down mode, paying privately for nursing home care, at the rate of about $100,000 per year. She had $1.2 million in assets and minimal Social Security of $500 per month. Oh, and she was 95 years old.
Her situation was pretty simple and straight forward. She didn’t have long term care insurance. Her deceased husband wasn’t a veteran. She didn’t have any disabled children or own a home. I explained to Mary that Mom had two options, private pay and Medicaid, but all assets would need to be spent first before Medicaid eligibility could be an option, unless we did some very basic long term care planning.
I told Mary that we could move some assets to a trust. “But what about the Medicaid penalty and look back period”, she asked. I explained that Mom would need to private pay for her care for 5 years, approximately $500,000, before we could apply for Medicaid. We discussed the likelihood of Mom living to 100. I told Mary that while I agreed the odds were not good she would have to evaluate that risk herself and decide if it was worthwhile to plan for that possibility. She opted not to do the planning and thanked me.
Well, you know what happened, right? (Otherwise, I wouldn’t be telling you this story.) Mom did live another 5 years and Mary came back to see me when she reached 100. I’ll tell you all about that meeting in next week’s post.
The Long Term Care Perfect Storm
February 21, 2011
Two articles in the local paper last week reminded me again of how a number of forces are combining in the coming months and years to really make the long term care issue an acute problem for many Americans, creating a “perfect storm” to use a popular phrase of recent years.
Here in New Jersey the budget deficit worsens. Governor Christie will be announcing his state budget for the upcoming year and many are bracing for cuts in Medicaid programs, a trend that is occurring across the country. The economic recession has reduced tax revenues in many states and caused a reduction in federal funding as well. Remember that the federal and state governments contribute, on approximately a 50/50 basis, towards the cost of Medicaid programs. What this means is that many states are cutting optional Medicaid programs and reducing the rate at which they reimburse providers.
The second article talks about the first wave of Baby Boomers who are starting to turn 65 in 2011, and the fact that many are postponing their retirement plans for at least 4 years because of the recession. In other words, they can’t afford to retire yet. The article also notes that even before the latest economic downturn, Baby Boomers were unprepared for retirement which now typically lasts decades. So, what do you think will happen as 77 million people retire over the next 20 years? Many will enter an overburdened and underfunded long term care system. More people and less money, a perfect storm.
Knowing this storm is brewing, what can and should you do? I am reminded of Aesop’s Fables, those stories we all learned as a child. The particular one that is relevant here is “The Squirrel and the Grasshopper”. The squirrel was busy in the summer gathering food and preparing for the coming winter. Meanwhile the grasshopper was having a good time, not a care in the world. When winter arrived he was unprepared and died of starvation.
The same holds true for long term care planning. Failing to plan while you are healthy may leave you unprepared when a crisis hits. Ask yourself if you could afford a $125,000 per year additional expense (the average cost of nursing home care in New Jersey), or $250,000 for a married couple, without depleting your assets. If the answer is “no” then it may be time to talk to your advisors, including a qualified elder law attorney, about putting a plan in place. Better to be the squirrel rather than the grasshopper.
When is it Too Late to Plan?
December 6, 2010
Last month we lost one of our clients to an unfortunate accident. John was suffering from the early stages of Alzheimer’s Disease and living at home with his wife, Mary (not their real names). Mary was 20 years younger than John and still working to support the couple. We had begun to long term care plan and recommended a part time home health aide for John while Mary worked.
Early one morning, while Mary was still asleep, John awoke to use the bathroom. The progression of the disease had recently caused John to become increasingly unsteady on his feet and he had experienced a few minor falls but he was resistant to using his cane. When Mary awoke, she noticed the bathroom light on. When she went to investigate, she discovered John in the bathtub. He probably lost his balance, fell in the bathtub and died from the blow to his head. The news was devastating.
Could this tragedy have been prevented? Did we, as counselors to John and Mary, do everything we could? Certainly, a situation like this one calls out for the use of a Personal Emergency Response System (PERS) or Medical Emergency Response System (MERS). (Life Alert is the one most people know.) These systems enable seniors, in the event of emergency, to contact a call center which in turns notifies the police, ambulance or fire services. The senior wears the device as a wrist bracelet or necklace pendant. It is impossible to say whether John would have had time to use it in this instance.
There is, however, a broader lesson here. When we talk with clients about planning for long term care, especially with families that are already in crisis mode, their focus is usually on the here and now, which is certainly understandable. What services or assistance does Mom or Dad need right now? What most fail to realize, however, is that the level of need is anything but stable. What Mom or Dad needs now isn’t likely to be what they need 6 months or a year from now. But there isn’t a set schedule as to when those care needs will increase. It won’t be the same for everyone. And there won’t be anyone tapping you on the shoulder to say “now is the time to move to a safer environment”.
We so often talk with families about getting the appropriate level of care. It might mean in home care. It could be selling the home and moving to a facility. It’s never easy to hear, usually frightening to consider, and often the issue of cost is a primary obstacle. The failure to adapt, however, can have serious consequences, as we saw in John and Mary’s case. It is best to be “ahead of the curve”, not waiting for something to happen and then reacting to it. Tragedies can be avoided and financially, a better result is the outcome as well.
MetLife Dropping Long Term Care Insurance – What Does it Mean for You and Me?
November 29, 2010
I have been saying it for years now. Long term care is a growing problem in this country, one that won’t go away. Not with the population continuing to age as 77 million baby boomers start to turn 65 in a little more than a month. The sheer number of people entering the long term care system is something no one knows whether we are prepared to handle. Perhaps the recent announcement by MetLife that it is pulling out of the long term care insurance market is an indication that we need to pay closer attention to this growing problem.
The reasons for MetLife’s decision are twofold, rising number of claims and decreasing interest rates on reinvestment income. This comes on the heels of recent announcements by John Hancock and Genworth that they are raising premiums, in John Hancock’s case by as much as 40% for individual policies. On the other hand, companies like Northwestern and New York Life have not raised rates. Rather, in some cases new products have been introduced.
So, what conclusion can we draw from all this news? For one thing, long term care is something that everyone ought to examine very closely, and for many who are approaching senior status, they should put it on the front burner of issues to tackle. And while I do believe that long term care insurance is an important part of the solution, a well crafted long term care plan shouldn’t rely too heavily on any one thing. Just as diversity in investment is wise, so is diversity in planning. One can’t “set it and forget it” because, as we are witnessing, the insurance industry is still wrestling with decisions on how to make long term care insurance “work”.
MetLife is saying they can’t make it work. Too many claims and not enough money to cover those claims. Did MetLife mismanage their business or is this an industry wide problem? I am certainly not knowledgeable enough about MetLife in particular or the insurance industry in general to be able to answer that question. I certainly hope it isn’t an indication of more companies pulling out of the market. More choices are better for the consumer. But what I do know is that the warning signs are there for anyone paying attention. Long term care is the greatest threat to financial security in this country. Ignore that fact and you do so at your own peril.
Can I Make Gifts this Holiday Season? (Part 2)
November 22, 2010
Last week we were talking about gift giving. Most people assume an elderly family member can make gifts without any tax consequences as long as it doesn’t exceed $13,000 per person per year. That’s true. However, it may very well cause a problem if you run out of money and are expecting to then qualify for Medicaid.
That’s because gifts are subject to Medicaid’s transfer for less than fair value penalty. And as the rules are written, even as little as a $250 gift carries a 1 day penalty. So does that mean you can’t make gifts? Not necessarily. It depends on the amount, frequency, timing, source and recipient of the gifts. Allow me to explain.
If Mom is in failing health and currently paying for long term care, gifting is going to be an issue for Medicaid, which will review 5 years of financial statements going back in time from the date of application. For example, if Mom made gifts 6 months before applying for Medicaid, the State will probably take issue with that since those gifts could have been used to pay for Mom’s care.
Small gifts of $100 or so, far enough in advance of the Medicaid application may be OK. However, if Mom has 20 children, grandchildren and great grandchildren then the total amount is now $2000, carrying a penalty of approximately 1/3 of a month. Keep in mind that the State adds all transfers over the 5 year lookback period together before calculating the penalty. That’s why the frequency of transfers is an issue.
The recipient of the gifts is important as well. Transfers to certain disabled children may be exempt from the Medicaid penalty rules. Of course, gifting to a disabled child may not be a wise idea, depending on the nature of the disability, but the gift can be made to a special needs trust. (See my 11/9/09 blog post)
Finally, the source of the gifts is also key. If the gift comes from the Medicaid applicant’s account then it will be subject to the transfer penalty. However, if it comes from another source, for example, from a trust then it could be permissible. Why? Because the assets in certain types of trusts are not counted as owned by the applicant for eligibility purposes. So when gifts are made from the trust it doesn’t count as a transfer. It does, however, count as a transfer when the applicant puts the money into the trust. That’s why long term care planning using trusts must be done well in advance of the possibility of needing Medicaid, not when you are on the doorstep of the nursing home.
By doing the planning, ideally while you are still healthy, you can “have your cake and eat it too”. Assets in the trust are there for your benefit, to pay for your long term care needs first, but you also can have the ability to make gifts to your loved ones without worrying that you’ll jeopardize your own care if you run out of money.
