McMahon and Associates, Ltd.

Long-Term Care Insurance: What People Are Buying Long-Term Care Insurance: What People Are Buying

2012-02-24T09:14:00.000-05:00

Like any other profession, long-term care insurance planning involves the practice of both art and science. The art requires understanding our clients hopes and fears and the ability to balance the reality of your client’s current physical and financial health against the reality of life at age 80 or 90.

The science relies on an understanding of policy mechanics, keeping up-to-date on tax incentives, government programs and planning techniques. In many cases, though, what really helps is offering meaningful insights about how other people are preparing for their eventual need for care and what they are actually buying.

Knowing what other people are doing can sometimes motivate us to take action, either by validating our own choices, or illustrating how our needs differ. To that end, here are some important benchmarks gathered from the latest in-depth industry-wide survey on long-term care insurance polices, published in the July 2011 issue of Broker World magazine.

Elimination Period: The vast majority of people (76.3%) purchased policies with a 90- to 100-day facility elimination period. However, 26.6% of the policies had a zero-day home care elimination period coupled with a longer facility elimination period.
Benefit Period: The most popular benefit period was 3 years; 13% of policies were issued with a lifetime benefit period; 80% of policies were issued with a benefit period of 6 years or less.
Daily Benefit: The average maximum daily benefit is approximately $155, due to some data categories being combined at the lower end of the report.
Premium: The average premium for an individual policy was $2,218 per year. Keep in mind that this number is inflated by the fact that some policies are sold on a 10-pay, or otherwise limited payment structure, making the premium higher than traditional pay-as-you-go policies. Single-premium policies are not included in calculating the average number.
Issue Age: The average purchaser is 58 years old. It's interesting to note that 29% of purchasers were between the ages of 18 and 54. Fewer than 7% of purchasers were older than 70.
Multi-life: Sales accounted for about 25% of new policies purchased. This refers to individual policies sold through employers, associations or other groups, not group policies.

Whether we are discussing financial planning, law, medicine or any other profession, the best practitioners balance the art and science and can offer context and insight to help with our decision making. Knowing what a typical policy looks like, and what other people are buying, may help you and your Long Term Care Specialist to design your optimal coverage.

Dorothy McMahon is a Long-Term Care Insurance Professional who has been helping families in Michigan plan for their long-term care needs for many years. Reach her at (248) 844-9787, or LTCINSUSA@aol.com.

Bridge the Gap Between Ignorance and Enlightened Action

2012-01-30T09:27:00.001-05:00

Shopping for a new sports car or planning the trip of a lifetime is fun and fills us with anticipation. The same cannot be said for long-term care planning. Like jury duty and unplanned visits to the dentist, getting it behind you is a generally best.

It’s understandable. Chronic illness and age-related disability are difficult subjects for many people, which is one reason that financial and legal advisors, the very people we pay to watch out for us, don’t typically broach the subject of long-term care planning. While the best of them will refer their clients to a professional who specializes in the area, most financial and legal advisors are simply not knowledgeable about the potentially astronomical costs of care and the many insurance products available to help cover those costs.

Sometimes it takes a well-intentioned messenger to bridge the gap between ignorance and enlightened action. Like Katie Couric championing routine colonoscopies after her husband died of rectal cancer, the best messengers are those who have seen the downside of inaction. Without pressuring others to act, they instead remind and encourage us to consider the ramifications of ignorance or inaction, and long-term care is a frequently misunderstood topic.

For example, many people mistakenly believe:

Medicare pays for most long-term care
Long-term care insurance is best purchased after age 60
Long-term care insurance is outrageously expensive
A better strategy is to invest the premiums and self-insure

These mistaken beliefs would almost be amusing if the potential consequences weren't so tragic and expensive. Of course, it's not up to you to convince another adult to purchase long-term care insurance. However, whether you have a professional obligation or fiduciary responsibility, or are just a practitioner of the Golden Rule, please considered this:

You can help many individuals and families simply by encouraging them to get the facts on long-term care insurance while they are healthy and young enough to more easily afford the purchase.

Taking appropriate action, motivated by awareness and a frank look at funding choices is the goal of long-term care insurance, and it doesn't have to be a complicated or unpleasant subject. Taking responsibility for your own health and welfare can help you avoid years of poverty or substandard care.

Dorothy McMahon is a Long-Term Care Specialist who has been helping Michigan families for many years. She can be reached at (248) 844-9787 or LTCInsUSA@aol.com.

Three Critical Components of Long-Term Care Planning

2011-12-22T17:41:00.000-05:00

It's that time when many of us make lists of the important things we plan to accomplish in the New Year. Although it seems that every cause has a day, week or month to raise awareness, awareness of a problem isn't enough, and all too frequently devising a solution doesn’t translate into action.

That's one reason that few of us add: "make decisions regarding long-term care insurance" to our resolutions list. But there's little doubt that most of us would benefit from taking the necessary steps to safeguard our physical, mental and economic health against the rising costs of long-term care. Here’s a look.

Awareness
Recently a 51-year-old friend of mine visited an 86-year-old family friend, a retired nurse who had just moved into an assisted living facility. She had been blessed with robust health until age 84 and had been living alone in a single-family house. She had finally given up driving a couple of years earlier and had been walking with a cane.

Then she fell. A hip replacement proved to be the tipping point for her. As she went through her initial rehab in a skilled nursing facility, her adult son did some research and eventually relocated her to the assisted living facility near his home and put her house up for sale.

After the visit, my friend remarked "Everyone should attend an event at a nursing home and spend an hour with an elderly person who lives there. Seeing this frail, lovely, intelligent and well-dressed woman, I thought ‘this could be me in 30 or 40 years.’ And I'd better have a ton of money if I'm ever in that situation."

Some people mistakenly believe that their existing insurance policies, Medicare or other government programs, will cover their long-term care costs. In most cases, it won’t, and anyone watching the news knows better than to rely on the government for their physical and economic health.

Knowledge
Once you are aware of the need for long-term care planning, the next step is asking questions and acquiring information.

A good place to start may be someone who is currently caring for a family member. Ask them what kind of care they have found. Is it home- or facility-based care? What surprised them when they began looking for care? What lessons have they learned? Do the long-term care options require private payment or are they publicly financed?

Keep in mind that qualification requirements for government programs may change in the future, as can the availability of a type of care.

Then consider the sorts of care you or your loved one may need, and where you could receive that care. Call around and find out what that care costs, and what the plans look like. Gathering these pieces of information can prove to be the motivating factor that nudges a person to create a personal long-term care plan.

Funding
This brings us to the topic of funding. Long-term care insurance is not a plan or a caregiver. Long-term care insurance provides the money to fund a long-term care plan once the insured is eligible.

And care for yourself or a loved one is not inexpensive, nor is it a place to cut corners. Take a hard look at the cost of care and consider what the costs are likely to be in the future, when you would potentially need the care.

Are you comfortable with the numbers? If not, long-term care insurance is the only insurance designed to address this risk.

Even if you believe in your ability to pay for this expense, you should ask yourself if your funding plan would allow your other plans – such as providing for the income needs of a spouse, children and other loved ones, or legacy and inheritance planning – to remain intact.

Taking appropriate action, motivated by awareness, education, and a frank look at funding choices is the goal of long-term care insurance, and it doesn't have to be a complicated or unpleasant subject. Taking responsibility for your own health and welfare can help you avoid years of poverty or substandard care.

Dorothy McMahon is a Long-Term Care Insurance Specialist who has been helping baby boomers, seniors and their families plan for long-term care for many years. Reach her at (248) 844-9787 or LTCInsUSA@aol.com.

Plan for Longevity

2011-11-28T20:44:00.000-05:00

The one thing that everyone on earth has in common is that we are all aging. And we're awfully good at it, as shown by our ever-increasing life expectancies. A baby born today in the United States has a life expectancy of 78 years. In 1900, that figure was just 54.9 years.

But while accurate and striking, these statistics are also misleading. In 1900 life expectancy statistics were heavily skewed by high rates of infant mortality. To illustrate this, if two babies lived to age 83 and another lived less than one year, the average life expectancy for that group would be only 55 years. At the turn of the century, 10% of infants died before their first birthday. So it's not that most people dropped dead on or about age 55. Many lived much longer. In fact, on average, we can calculate that those people who survived infancy lived approximately 10 years longer than the 55-year life expectancy.

Today, we are not only living longer, many of us are living with conditions that would have killed us years ago. Our ability to manage chronic diseases, such as kidney and chronic obstructive pulmonary disease, has improved dramatically and future medical advances are likely to increase this phenomenon.

Financial planning and retirement scenarios typically project life spans of 85, 90 or even 100 years because increasing numbers of people are likely to live that long. But when was the last time that you saw a 90 or 100-year-old person in the grocery store, or at the movies, or driving down the road? It’s unusual, and the reason is obvious: their mobility, and ability to do what they once took for granted, is limited.

Most everyone agrees that it's smart to have a will, and perhaps even a trust and a prepaid burial plot. But with more of us living longer, and with more of us doing it with chronic disease, I would argue that it’s even more important to plan on living and to plan ahead for extended long-term care. Long-term care doesn't have to be a complicated or unpleasant subject. Taking responsibility for your own health and welfare can help you avoid years of poverty or substandard care.

Dorothy McMahon is a Long-Term Care Insurance Specialist who has been helping Michigan families for many years. Contact her with questions and concerns at (248) 844-9787 or LTCINSUSA@aol.com.

CLASS: Dismissed!

2011-10-31T10:25:00.000-04:00

November is Long-Term Care Awareness Month! And you need to be aware that you are on your own if you become chronically ill and need long-term health care.

Health and Human Services Secretary Kathleen Sebelius dropped a bombshell on Oct. 14, 2011 when she announced that the Obama administration would not implement the Community Living Assistance Services and Supports (CLASS Act) program, the federal long-term care insurance-like program that was part of President Obama’s Affordable Care Act.

Traditionally, the government's role in financing long-term care consisted of Medicaid, the means-tested program that pays the nursing home bills of the impoverished. All that changed when the 2010 Affordable Care Act (healthcare reform) passed with the CLASS provision included. CLASS was the voluntary employment-based program that would have allowed employees and students, regardless of age or health, to pay a monthly premium for necessary future long-term care services. Class was a long-standing priority of the late Massachusetts Senator Edward Kennedy and was to be implemented in late 2012.

Premiums had yet to be determined, but they would have been anywhere from $231 to $390 per month. The law demanded that CLASS not only be fiscally self-sustaining, but that it be actuarially sound for the next 75 years. Since no medical questions would be asked as a condition of enrolling, estimates of the actuarially-sound necessary premium were as high as $3,000 per month! After five years of paying premiums, beneficiaries could use the money for services to help them stay at home or to help with nursing home expenses.

For the first five years of premium paying, no claims would be paid; a person would self insure the first five years of care and the government would then begin paying a daily benefit of $50.00 per day in year six, subject to income requirements. The benefit would be payable with no limit on duration.

Eligibility for benefits under CLASS would have been partly determined by a minimum required employment during those first five premium-paying years. This would have made eligibility problematic for those planning on retiring soon or for those who may become unemployed shortly after enrolling.

It is no surprise to many in the insurance business that it is impossible to price a plan that is actuarially unsound, asks no medical questions and has a premium that wouldn’t also entice healthy people to participate.

Apparently Health and Human Services came to the same conclusion. On Sept. 22, 2011, three weeks before the official announcement, CLASS' chief actuary resigned and said the office was being disbanded. Kathy Greenlee, administrator of the CLASS program stated in a report to HHS Secretary Sebelius that she does not see a path to move forward with CLASS at this time.

But the challenge of providing and paying for long-term care is not going away. By 2020 it is estimated that 15 million Americans will need some kind of long-term care and less that 3% have long-term care insurance. These people are our family, friends and neighbors. If they are to live independently and be productive they must have access to long-term care support systems that make this possible.

The end of CLASS Act does not eliminate the financial tsunami that is about to impact many American families. It should, however, serve as a wake up call. The probability of needing long-term care is significant, and you need to be aware that as far as paying for it, you are on your own.

Dorothy McMahon is a Long-Term Care Insurance Specialist who has been helping Michigan families plan for the potential need for Long-Term Care for many years. She can be reached at (248) 844-9787 or LTCINSUSA@aol.com. Visit her website at www.McMahonLTCINS.com.

Understanding the True and Total Cost of Long-Term Care

2011-09-27T19:37:00.002-04:00

Deciding where and how to live can be challenging. I once heard a homeowner lament: "It's one thing to buy a 4,000 square foot home, it's another thing to maintain it." While the purchase price and corresponding mortgage payment are critical components of home ownership, they are far from being the only costs. Landscaping, heating and air conditioning, water, interior and exterior painting, maintenance – the list goes on and on – must be added in.

The same can be said of long-term care. Surveys are invaluable for reaching a general understanding of the costs of care, whether for an assisted living facility, a nursing home, or for a home-care worker. However, they may not paint the complete picture, and there are always the unforeseeable and ancillary expenses.

True Total Costs
The reported cost of an assisted living facility may not accurately reflect the total amount that a resident is billed. Often the reported cost is a base cost that does not include individual personal care.

While services such as laundry and housecleaning typically are included in the base, services such as assistance with dressing, grooming and delivering medications to the resident at the appropriate time usually incur additional charges. And it doesn’t end there.

Elderly people frequently require specialized foot care by a podiatrist on a regular basis. Incontinence supplies, such as adult diapers, can be a significant and on-going out-of-pocket expense. Massage, exercise and other alternative therapies can be helpful in maintaining health and treating illness, but are seldom included in the base cost.

Meal services are another example of how additional fees can vary from one facility to another. When considering a long-term care facility, one should inquire whether the base price includes all meals, or only one or two a day. Moreover, some facilities charge extra for such services as transportation to physicians, hairdressers or other destinations. The best way to understand total cost is to ask for a list of all additional services and all of the fees associated with them.

Receiving Care at Home
Totaling the true total cost of receiving care at home is similarly complicated. If you were able to receive long-term care in your own home, you would have all of the expenses listed above, and in addition you would likely require housekeeping assistance, lawn care and home maintenance, none of which are free.

These days, many families are scattered and family members or friends may incur significant out-of-pocket expenses when visiting or caring for a loved one. In addition to airfare, rental cars, fuel, and mileage expenses, they may need hotel rooms and meals as well. Who will pay for these reasonable and significant expenses? Planning ahead of time can eliminate a lot of stress for everyone.

When planning for the possibility of long-term care, it’s important to consider the true total costs of where and how you want to live, and the best time to do that is before your needs become critical.

Dorothy McMahon is a Long-Term Care Insurance Specialist and president of McMahon and Associates, Ltd. She has been helping Michigan families with their long-term care needs for many years. Reach her at (248) 844-9787 or LTCIinsUSA@aol.com.

Little Known Advantages of Long-Term Care Insurance

2011-08-29T14:24:00.000-04:00

It should come as no surprise that long-term care insurance specialists are enthusiastic about the policies they offer, so much so that they are often dismayed that those advantages aren’t immediately apparent to others. Here’s a quick look at several little-known attributes of long-term care insurance policies and the advantages they provide for policy owners.

Guaranteed Renewable

Long-term care insurance (LTCI) is a guaranteed renewable policy, which means that once an insurance company approves an LTCI policy the company is contractually obligated to provide coverage for as long as the premium is paid.

This is one of the reasons that the health underwriting process is so vigorous for long-term care insurance. At the outset, the insurance company sees a snapshot of that person at a point in time and makes a no-recourse decision. The company can't change its mind, even if it adopts different underwriting guidelines in subsequent years. Nor can an insurance company modify the policy or cancel it for any reason other than nonpayment.

Even if the insurance company decides that it no longer wants to be in the long-term care insurance business and stops writing new policies, nothing would change for existing policyholders, whose contracts would continue to be in force.

Given the fact that many LTCI policyholders purchase coverage in their 40s and 50s – and may not file a claim for decades – it is easy to see the advantages of a guaranteed-renewable policy.

The Impact of Inflation Protection

Albert Einstein may or may not have actually said "The most powerful force in the universe is compound interest,” but it is true that compound inflation protection makes a dramatic difference in LTCI policy values over time. Consider this: if a 50-year old person purchased a policy with a $100 daily benefit and 5% compound inflation protection, in 10 years the daily benefit would have grown to $155; in 20 years it will be $253!

Assuming a claim at age 85, 35 years down the road, the daily benefit would be $412. At that point the yearly benefit, which started out at $36,500, would have become $150,239. A 5% compound inflation rider doubles policy values approximately every 10 years.

Adding built-in inflation protection to a policy can be an expensive policy option that your LTCI specialist may or may not recommend depending on your circumstances. For some people the advantage, especially in such economically turbulent times, could be very substantial.

Benefit Periods May Be Minimums, not Maximums

The typical LTCI policy states coverage in terms of a daily benefit and a benefit period. But the actual benefit period may bear little resemblance to the length of time policy benefits are paid.

Since most claims start at home, where the insured may not be using the full daily benefit, it's important to understand what happens to the unused daily-benefit balance. For example, imagine a policyholder who uses $100 a day and has a policy with a daily benefit of $200. What happens to the unused $100? That amount is not forfeited, but instead remains in place and available for the policyholder to access it.

Assuming a daily benefit of $200 and a policy benefit period of two years – and if the actual care costs only $100 per day – the policy would not be exhausted until four years had passed. Of course, if more expensive care were needed, and if that care exceeds the policy's daily benefit of $200 the insured individual will pay the difference out of pocket. Keep in mind that when the daily benefit is not completely used each day, the policy will continue to pay benefits beyond the stated benefit period until benefits are exhausted.

Taking responsibility for your long-term care can help you avoid years of poverty or substandard care. Long-Term Care Insurance doesn't have to be a complicated or unpleasant subject, but as with any financial product you will want to work with a credible, certified professional. Contact me for your confidential consultation.

Dorothy McMahon is a Certified Long-Term Care Insurance Specialist who has been helping Michigan families for many years. Reach her at (248) 844-9787 or LTCInsUSA@aol.com.

The Practical Benefits of Long-term Care Insurance

2011-08-10T09:24:00.000-04:00

Families all over this country are grappling with the need for long-term care and the challenge of paying for it. Although we don't see it in the headlines, needing long-term care can be a major life event not only for the person needing care, but also for the people who care for them. We have a tendency to look at long-term care insurance (LTCI) solely in terms of the cost of the policy, but let's not forget the very practical benefits of LTCI to the families and friends who would otherwise be providing the care.

It's Easier to Spend an Insurance Company's Money
When a spouse needs long-term care, there is a natural tendency to try to go it alone and conserve money. The healthy spouse then provides all of the care, 24/7! But long-term care insurance can make it much more likely that a couple gets professional quality care and the relief it can bring more quickly. After all, human nature means that it is easier for us to spend the insurance company's money than our own. That's O.K., that's why we have been paying those insurance premiums all those years!

Sometimes, when there are multiple children, the person needing care is reluctant to spend money on themselves for the sake of preserving an inheritance, and unfortunately children and their spouses may not see eye‐to‐eye on care decisions. But by providing money dedicated for exactly this need, LTCI can substantially mitigate this problem. LTCI can afford you the ability to make care decisions based on what's best for you and you alone.

Care Coordinators Help Friends and Family Members
At claim time, close friends and family members often are the ones left researching care options and helping the insured make difficult decisions. Emotions can run high and the process can be stressful. However, virtually all contemporary LTCI policies include a care-coordination benefit. A care coordinator has expertise in long-term care and he or she can help you navigate the caregiving landscape, from lining up initial care to helping you regroup and make decisions when changes are needed. No longer do friends and family have to shoulder this responsibility.

The World of Private Pay Options is Open to You
An exploding population of elderly people and a decline in both public money and the number of professional caregivers has led to an increase in private-pay solutions. Unheard of a decade ago, nonmedical, private-pay homecare businesses are booming. Continuing care retirement communities abound and are private pay only. Assisted living facilities, once a rarity, are abundant. They too are primarily private pay. The bottom line is this: without the ability to privately pay for long-term care, whether with personal funds, long-term care insurance or a combination of the two, your options for care are fewer. To put it bluntly, sometimes money talks and a long-term care insurance policy can speak volumes at claim time.

Dorothy McMahon is a Certified Long-Term Care Insurance Specialist who has been helping Michigan families for many years. Reach her at
(248) 844-9787 or LTCInsUSA@aol.com.

Your Budget for Long-term Care

2011-05-15T22:13:00.000-04:00

We've all read articles comparing the amount of time people spend planning a vacation to the amount of time they spend on more important matters, such as planning for retirement, or planning for future long-term care needs. Ask anyone who has booked a summer rental cottage. From research to contract, the process can take a few hours, almost like buying long-term care insurance.

 Another flavor of this type of story compares the cost of a private long-term care insurance policy to one's daily budget for coffee; two medium-sized coffees per day cost at $4 each translates into $120 per month, not unlike a typical long-term care insurance premium.

 This article is different because it aims straight for your budget, your budget for long-term care. You may not think of long-term care as a budget item, but it will be paid out of someone's budget!

 While both Medicare and Medicaid may be reformed, it's still useful to take a quick look at how they currently cover long-term care. After all, a lot of people are planning on those budgets to pay for their LTC.

 Here's what the federal government says about Medicare and long-term care expenses. The National Clearinghouse for Long-term Care, says "If you require primarily skilled or recuperative care for a short time, Medicare may pay."

Translation: “Medicare does NOT cover prolonged custodial care, such as that necessitated by strokes, Alzheimer’s, Parkinson’s, multiple sclerosis and the decline in abilities that can accompany old age.” The government's Medicare web site is more succinct: "Generally, Medicare doesn’t pay for long-term care."

 How about relying on the Medicaid budget to pay for your care? Back to the National Clearinghouse for Long-Term Care Information; it reports "If you meet functional eligibility criteria and have limited financial resources, or deplete them paying for care, Medicaid may pay for your care." Translation: “You must be poor to qualify for Medicaid.” Possible future reforms to Medicaid could include making it even more difficult to qualify than it is today.

 Is there another option? Yes, private long-term care insurance. By purchasing private LTC insurance, you trade a premium for a much larger benefit if you need long-term care. The insurance company sets up prudently invested reserves from which to pay out future claims. By having long-term care insurance, you use your current budget to plan for the potentially catastrophic cost of future care. This action can minimize the risk to your overall finances, and transfer risk to an insurance company.

 What if Medicare or Medicaid change? With the financial pressures on these programs, is it likely these programs will expand their coverage of long-term care? A recent poll reported little support among Americans for changes to either program, with 78% opposing cutting spending on Medicare to reduce the national debt, and 69% opposing cutting spending on Medicaid.

 We live in a time where government programs are under tougher and tougher scrutiny and pressure to reform. When it comes to choice of caregivers and setting, government programs pale in comparison to modern, comprehensive, private long-term care insurance. It is prudent to look into private LTC insurance well before the need for care arises.

  Dorothy McMahon has been working with individuals in the area of Long-Term Care insurance for many years. If you want to discuss how to protect your assets, dignity and lifestyle contact her at (248) 844-9787 or LTCInsUSA@aol.com. On the web at www.McMahonLTCIns.com.

The Voices of Experience

2011-03-28T21:56:00.000-04:00

Experience can be the best teacher, assuming the lesson is timely. A new study shows that first or even second-hand experience involving long-term care (LTC) can have a profound impact on a person's attitude toward LTC planning and LTC insurance.

Prudential recently conducted a poll of 983 Americans to measure attitudes towards and knowledge of long-term care insurance. The respondents were over age 30 with an annual household income of at least $50,000. Of those who knew someone requiring long-term care services, 78% expressed either a moderate or high degree of concern about needing LTC themselves in the future.

Of those with no similar experience, 58% said they were at least moderately concerned about needing long-term care. The same survey revealed Those who have personal or indirect experience with long-term care services also are almost twice as likely to have purchased long-term care insurance (21% vs. 11%).

According to the U.S. Department of Health and Human Services, 70% of individuals over age 65 will require at least some type of long-term care services during their lifetime, so why don’t more people purchase long-term care insurance?

The study yields some interesting insights:

More than 35% of consumers mistakenly believe that Medicare and health insurance pay for long-term care.

The truth is, and as the Medicare website itself states, "Generally, Medicare doesn’t pay for long-term care.“ Similarly, 36% of consumers mistakenly believe that personal health insurance pays for long-term care.

Consumers think that LTC insurance is more expensive than it is. Survey respondents estimated the average yearly cost of a LTC insurance policy at $3,906, when the actual average cost is $2,207.

The truth is that those who purchase coverage before the age of 40 pay an average annual premium of $881, compared to $2,249 for those who wait until the age of 60 to buy.

Many are confused about when to buy LTC insurance. Although two-thirds of adults between the ages of 35 and 65 believe that long-term care insurance is important, 40% think this coverage should be purchased after age 60, and another 30% are unsure at what age they should buy.

The truth is that LTC policies are often easier to obtain at younger ages due to health underwriting considerations. Additionally, the premiums are much less expensive when coverage is purchased at a younger age, as opposed to waiting for retirement. Purchasing coverage as a young adult can make sense, and it's generally advisable to consider purchasing coverage before age 60.

Statistics tell us the likelihood of needing long-term care in our retirement years is high, and by their purchasing decisions, those who have experienced LTC demonstrate that purchasing LTC insurance is a smart move. Older applicants are more likely to be declined due to health problems, and their premiums escalate with their age. More prudent and cost-conscious consumers do well by securing less expensive coverage while younger and healthier.

Though experience is a great teacher, its lessons are bittersweet when they arrive too late.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

Why Married Couples Should Do Long-Term Care Planning

2011-03-07T22:47:00.000-05:00

Single people, especially those without children, are often quick to grasp the importance of long-term care planning. The absence of a spouse or child to potentially provide caregiving makes them immediately aware that when it comes to care, they are fending for themselves.

On the flip side of this situation are married couples who engage in nonsensical thinking about the importance of long-term care planning. One of their assumptions may be that they do not need to do long-term care planning since they will take care of each other. It doesn’t take much critical thinking to debunk this notion. Typically, one spouse needs care before the other, with the healthier spouse becoming the caregiver. Happily, some claims are of a limited duration, and are followed by a complete recovery. However, with the first chronic caregiving event, the stage is set for eventual problems. If one spouse passes away, the surviving spouse is now on his or her own. In some situations the caregiver spouse ends up needing care as well, at the same time. The phrase "the more the merrier" does not apply to long-term care; and so much for taking care of each other.

According to The Federal Interagency Forum on Aging-Related Statistics’ report “Older Americans 2010: Key Indicators of Well-Being,” married couples have higher net worth than households headed by single people. This means that they may have more to lose financially as the result of needing care. The median net worth of households headed by married people age 65 and older is $385,000, more than 2.5 times that of households headed by single people in the same age group. This higher net worth also means that married couples may also be more able to afford solutions such as long-term care insurance.

A prenuptial agreement is sometimes used to make clear who gets what in the event of divorce. A will performs a similar function at time of death. But what determines what happens financially in the event of long-term care? Wouldn't it be helpful if couples routinely drew up agreements outlining which financial assets would be used to pay if one of them needs professional long-term care? This could be especially helpful in the case of a marriage in which there is a child from a prior marriage. Otherwise, a child may resent seeing his or her inheritance used to pay for a stepparent's care, especially if his or her parent is now deceased.

When a married couple looks into long-term care planning and considers the purchase of long-term care insurance, good news awaits. Many insurance companies offer couple discounts, presumably in deference to the assumption that the need for professional care may be lessened because a caring spouse shares the home. Some insurance companies also offer certain policies that give couples the ability to share each others’ insurance benefits, if, say, one of them had a need for care that persisted longer than their own policy's benefit.

In planning for financial and insurance needs throughout working life and retirement, it’s important to realize that many married couples need protection against the financial costs of long-term care. The plan that some couples have to take care of each other falls apart when one spouse needs chronic caregiving, or upon the death of either spouse.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

Giffords’ Shooting Illustrates the Need for Long-Term Care Planning

2011-01-25T10:49:00.000-05:00

The attempted assassination of Arizona Representative Gabrielle Giffords (D-AZ) in January sparked discussions on a wide range of topics such as gun control, civility in politics and the rights of the mentally ill, but another aspect of the story is the challenge presented by the possibility of a protracted or incomplete recovery and the financial implications of a sudden debilitating illness.

Although the circumstances of the shooting, which killed six people and injured thirteen, is unique, tragedies of this magnitude can happen at any time and befall people of any age. While Giffords’ injuries may be different than those suffered in a severe car accident, the rehabilitation process may be similar in terms of duration, drama and expense.

The majority of Giffords’ doctor, hospital and rehabilitation bills likely will be covered by her health insurance, but health insurance will not cover all of the assistance that a severely injured person may require, such as help getting into and out of bed, dressing, eating and bathing. That type of care is only covered by Long-Term Care Insurance.

Members of Congress have access to Long-Term Care Insurance coverage through a group plan, but if Giffords had not yet purchased Long-Term Care Insurance, her injuries, incurred at the age of 40, would have made her ineligible for coverage for the rest of her life; to purchase a policy you must be insurable and as this crime illustrates there is always the possibility that any of us could become injured and uninsurable at any time.

Like many married couples, both Giffords and her husband worked prior to her injury. Would it make sense for Giffords’ husband Mark Kelly, an astronaut and space shuttle commander, to quit working to provide continual care for his wife? The presence of a Long-Term Care Insurance policy can make the choice between your career and income and caring for your loved one a moot point.

According to the National Clearinghouse for Long-Term Care, far fewer than 70% of Americans do Long-Term Care planning despite the fact that 70% of people over age 65 will require some Long-Term Care services at some point in their lives. Further, 49% of all those receiving Long-Term Care today are between the ages of 18 and 64.

Whether because of increasing longevity or the possibility of an accident or illness, comprehensive planning must include serious consideration of individually customized Long-Term Care Insurance.

Solutions for an Aging America

2010-11-15T17:48:00.000-05:00

First the good news: due to our nation's wealth and advances in medical science, Americans are living longer healthier lives. The not-so-good news is that many of us are likely to outlive our savings and may find ourselves dependent on family or the government for care, and that care is getting more expensive. Luckily, insurance is available to protect your assets, dignity and life style.

The need for long-term care insurance is urgent, unfortunately misinformation is plentiful. For example, according to a 2009 survey conducted by Prudential, 37% mistakenly believe that Medicare will cover their long-term care costs, or a stay in a nursing home, or that it entitles them to in-home care.

Thankfully, mainstream media outlets, such as the New York Times, in "Ignore Long-Term Care Planning at Your Peril," by Ron Lieber, and ABC News' "A Woman's Nation Takes on Alzheimer's," from "This Week with Christiane Amanpour," offer thoughtful stories on this difficult but important topic.

Both do an excellent job of conveying the physical, emotional and financial costs of receiving long-term care and emphasize the importance of communicating your desires with family and creating a plan that considers your age, health and economic resources.

Taking responsibility for your long-term care can help you avoid years of poverty or substandard care. Long-Term Care Insurance doesn't have to be a complicated or unpleasant subject, but as with any financial product you will want to work with a credible, certified professional.

Dorothy McMahon has been helping Michigan families since 1985. As a Certified Long-Term Care Insurance Specialist, she has dedicated her career to helping people find solutions that fit their specific needs and that preserve their assets, dignity and life style. She will answer your questions honestly and concisely. No one in the area is better prepared to serve your Long-Term Care Insurance needs.

Call Dorothy McMahon, a recognized expert on Long-Term Care Insurance, at (248) 844-9787. Visit LTCINSUSA.com, for her research, opinions and links to Long-Term Care resources.

Responding to “A Woman’s Nation Takes On Alzheimer’s”

2010-10-23T00:20:00.000-04:00

On Sunday, October 17, "This Week with Christiane Amanpour" featured Maria Shriver, First Lady of California, and Ann O’Leary, from the Berkley Center for Health, Economic and Family Security, to discuss "The Shriver Report: A Woman’s Nation takes on Alzheimer’s."

It is refreshing to know that the national spotlight is finally focusing on this critical issue, but O'Leary underestimates the cost of care and mistakenly creates the impression that there is no insurance to fund caregiving for Alzheimer’s patients, saying "we estimate families are spending $56,000 a year - they are paying out-of-pocket - we don’t have any insurance for this.” O’Leary does not clarify whether this figure is for one year of care at home, in an assisted living facility or in a nursing home.

In Michigan, the annual cost is estimated to be $24,700 for part time home care: five hours per day, five days per week; $32,832 for care in an assisted living facility and $80,665 for nursing home care. These numbers come from the 2009 MetLife Mature Market Institute “Long-Term Care Costs Market Survey.” To be fair, O’Leary does mention that some relief is possible under the Health-Care Reform bill, but I'd like to offer some additional clarification.

There are several different ways to pay for caregiving to Alzheimer’s patients, or anyone needing care for chronic illness or disability, including The CLASS Act, which will go in to effect in 2014, the Public-Private Partnership for Long-Term Care, and private Long-Term Care Insurance.

The CLASS Act is part of Health Care Reform that could provide Long-Term Care, but many argue that the benefits are structured poorly. This insurance-like plan will be available through employers and will have a low daily benefit, inadequate growth for inflation and an unlimited benefit period. People who know Medicaid are aware that if a person can't pay the difference between the benefit and the cost of care, that person quickly spends personal resources and soon goes on Medicaid.

A better plan would be to have a higher daily or monthly benefit with a 5% compound inflation and a shorter benefit period. That way the insurance has a chance to pay for at least the first two or three years of care. That would be enough to keep most of the 80 million baby boomers off of Medicaid for long-term care, thereby freeing public dollars to pay for the research that O'Leary and Shriver referred to.

Almost all of the states have implemented the Public-Private Partnership for Long-Term Care, which ensures that the private sector pays first and Medicaid pays last for extended health care. Some of the benefits are paid to families in cash; families can use the funds for in-home care or as they see fit. If the insurance is insufficient, then Medicaid would pay unlimited benefits, allowing that person to protect assets up to the value of their privately owned long-term care insurance policy.

Most Americans don’t know about the Partnership for Long-Term Care legislation of 2006 because Michigan, like many states, does not have the funds to educate the public about the plan. The Partnership for Long-Term Care is a proven strategy and four states have piloted this concept since the early 1990s. Partnership directors will tell you that out of the more than 325,000 policyholders, fewer than 500 have accessed Medicaid after first using their Partnership insurance plan. A partnership plan is being established in Michigan, but the condition of the economy has prevented it from moving forward.

We especially need the Partnership for Long-Term Care because there is no way that public dollars alone can pay the $20 trillion required for Alzheimer’s treatments over the next 40 years. In addition, 16 million younger adults will be added to the Medicaid rolls beginning January 1, 2014 via the Health Care Reform Bill.

The third way to pay for caregiving is personally-owned Long-Term Care Insurance, which is available through private insurance companies. Private Long-Term Care Insurance policies are very comprehensive, less expensive and have better benefits than the CLASS Act will provide. In addition, since January 1, 2010, Americans enjoy a new tax incentive that allows gains from a non-qualified annuity to be distributed tax free to pay for qualified Long-Term Care Insurance policies.

For example, if a woman with Alzheimer’s has a cash-benefit Long-Term Care Insurance policy that pays $5,100 per month with a 5% compound increase of the monthly benefit, and if she has paid $18,090 in premiums since 1993, it will take only three-and-a-half months to recoup the premiums when she receives care. Her premium would be waived as long as she is receiving care and her monthly benefit would continue to increase, even while she received the care.

Madams Shriver, O’Leary and Amanpour are correct when they say that women make up half of the U.S. workforce and are at great risk of losing careers and personal lifestyle choices when faced with the caregiving tsunami that is coming our way. They are also spot on, noting that our nation's productivity is headed for a serious decline as our population ages and more resources are spent on those requiring long-term care.

However, solutions are available for those willing to take responsibility for their own health and well being. Private Long-Term Care Insurance can help to avoid years of poverty or substandard care and remove some of the uncertainty associated with government provided services.

Dorothy McMahon, founder of McMahon and Associates Ltd., will address all of your questions and concerns regarding Long-Term Care and Long-Term Care Insurance. Reach her at (248) 844-9787 or ltcinsusa@aol.com.

New Tax Breaks Available for Long-Term Care Insurance

2010-10-03T15:59:00.000-04:00

The federal government has offered many incentives for people to purchase Long-Term Care Insurance (LTCI) over the years. The latest will make it easier and more lucrative for some annuity and life insurance owners to purchase LTCI.

The Pension Protection Act became law in 2006, but its broad-based LTCI tax break became effective on January 1, 2010. As of January, many owners of either annuity or life insurance policies now have the ability to use cash in these contracts to pay LTCI premiums with no tax bill due.This will apply to new or existing policies.

The mechanism is called a '1035 Exchange,' named after the section of the Internal Revenue Service code section in which it's found (IRC Section 1035). For decades, Section 1035 has allowed for a tax-free exchange between life insurance contacts, and between annuity contracts. As of January, this benefit has been available to allow funds in life or annuity contracts to pay LTCI premiums. In order to be eligible for a 1035 Exchange into LTCI, the original contract must have been purchased with after-tax, non-qualified, money.

What kind of LTCI? The quick answer is almost any kind. The LTCI must be tax-qualified, but almost all new policies are. In other words, traditional full-pay policies, limited-pay plans, such as 10-pay, and combo policies, annuity with LTCI, and life with LTCI, are all eligible to be paid with 1035 Exchange money. There are some restrictions, such as a life combo product cannot be purchased under a 1035 Exchange from an annuity. Consumers should seek competent tax advice before completing a 1035.

There are many advantages to the life or annuity contract owner. Among the advantages: Someone may prefer to pay an LTCI premium with a 1035 to avoid paying all of their Long-Term Care Insurance premium out of current income. Another advantage is the ability to take the gain out of an annuity contract tax-free, when used to pay Long-Term Care Insurance.

Black Swans and the Planning Prerogative

2010-09-27T17:50:00.000-04:00

Most of our daily choices are unimportant in the grand scheme of things: Coke or Pepsi? Dental floss or tape? Window or aisle seat? But people who consider important decisions may sidestep unpleasant outcomes. For example, most of us choose to file our taxes on time, schedule annual physicals, bring the car in for scheduled maintenance and buckle up before our foot touches the gas pedal. We do all these things because the cost of choosing to act is low and the outcome of our action or inaction is predictable. At some level, we have run a mental risk calculation.

Risk engineering professor and financial guru Nassim Nicholas Taleb is perhaps most famous for having brought the phrase “Black Swan” to the mainstream. In his book of the same name, he describes high-impact, hard to predict and rare events that are beyond the realm of normal expectations. As unlikely as Black Swan events are, however, they have enormous affects on civilizations, markets or individuals.

When it comes to retirement planning, though, most things are entirely predictable. Some day you will quit working. You will need a place to live. You will need to pay for your expenses, and you will want insurance to pay for your healthcare and potential liabilities. No credible person would debate the importance of a substantial and well balanced portfolio that includes appropriate insurance policies, but more people than you would imagine have not planned for the cost of professional long-term care, which could have a substantial negative impact should you need it.

The average lifetime likelihood of a woman over the age of 65 needing long-term care is 72% and for a male the likelihood is 44%, hardly a Black Swan event, and not only the elderly are at risk. In fact, 49% of those individuals requiring long-term health care today are between the ages of 18 and 65 and the numbers increase dramatically as we age.

Whether we are talking about financial or other decisions, it’s important to make choices that help us minimize the possibility of bad outcomes. The wise decision is to consider your long-term care options before you retire and take appropriate action. The most likely outcome of that decision is a greater sense of security as you age.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

The four seasons - Long-Term Care Planning for Baby Boomers

2010-08-30T14:40:00.000-04:00

With summer giving way to fall, the days shorten and cool, children leave us for school and we turn from our more active summer schedules to prepare for winter. As The Byrds sang, cribbing from Ecclesiastes, “To every thing there is a season, and a time to every purpose under the heaven.”

It would be hard to find a better sentiment around which to build a talk about planning your long-term care. Things change and time does march on. Common sense and experience show that a robust youth and adulthood don't insure a healthy transition to middle age or late adulthood.

In the United States, life expectancy keeps rising. The World Bank reports that in 1960, life expectancy at birth was 69.8 years. In 2008, it had increased to 78.4 years, and of course, many people will live even longer. That’s great, but for some those later years will be filled with challenges ranging from frailty to cognitive impairment.

As we age, our health will change, too. The National Institute of Health reports just a 1% incidence of cognitive impairment, ranging from mild cognitive impairment to Alzheimer's disease, at age 60. By age 85, the rate increases to 42%.

Another thing that has changed is the size of our families. In the United States, the size of the average family grew from 1940 until 1957, when the average number of children per family peaked at 3.7. That number then went into decline. Since 1972, the average family has borne just two children. Smaller average family size means that there are fewer family caregivers, and we are geographically more spread out.

Since the mid-1900s, cars have become our dominant form of transportation, leading to sprawling suburbs and longer commutes. Families are no longer clustered near each other and geographically scattered families can only contribute so much as long-distance caregivers.

One thing that remains constant, though, is the desire for personal independence and the ability to manage one’s legacy. Have you ever heard anyone say “I want to be a burden on my children”? Or “I want my kids to go through what I went through when my parent’s health failed”?

As more baby boomers begin to care for their elderly parents, they can’t help but reflect on their own aging. Long-term care insurance can offer peace of mind that when your time comes, the money will be there to pay for long-term care, lifting some of the burden of caregiving off smaller families.

Dorothy McMahon, founder of McMahon and Associates, is an independent insurance agent who specializes in Long-Term Care Insurance. She will answer your questions clearly and concisely. Reach her at (248) 844-9787. www.mcmahonltcins.com.

Executive Briefing on Individual Long-Term Care Insurance

2010-07-30T15:46:00.000-04:00

How many people choose to purchase long-term care insurance, and what kind of policies are they buying? How much money is being paid in claims, and where are those claimants receiving their care?

While the decision to recommend or buy long-term care insurance can be based on a number of highly individual factors, it’s enlightening to look at who is buying this protection, what they buy, and where they collect.

Twenty insurance companies participated in the “2010 Individual Long-Term Care Insurance Survey,” found in the July 2010 issue of Broker World magazine. Combined, these twenty companies sold 90% of all individual policies in 2009, the source year for the report's data.

CLAIMS
Fifteen of the twenty participating insurance companies reportedly paid out more than $2.3 billion in claims in 2009. More than 41% of claimants were collecting benefits at home or in adult daycare; 14% in assisted living facilities; and 44% in nursing homes.

POLICY CHARACTERISTICS
Multi-life sales of individual policies offered at an employer or other group, such as an association, have increased to 26% of total individual policies sold, more than doubling from 2007 to 2009.

The average premium for new policies, excluding single premium sales, was $2,182 per year in 2009, down from $2,210 per year in 2008.

The average age of a purchaser is 58 years. The trend since the advent of modern long-term care insurance in the late 1980s has been toward younger and younger purchaser ages.

The average policy benefit period is 4.2 years. More than 14% of new purchases are for a lifetime benefit period.

Approximately 70% of new policies include built-in inflation protection, such as 5% simple or compound.

MISCELLANEOUS
The top three LTC insurance carriers accounted for 55% of the industry’s first-year premium.

More than 58% of purchasers were women.

No matter their age, choice of policy design or of insurance company, long-term care insurance applicants make a deliberate decision to protect themselves against the financial consequences of needing extended care. Almost 200,000 people bought individual policies in 2009. If this isn’t a risk that you have personally addressed, perhaps some of the facts above will be helpful.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or to schedule an appointment or a program for your group.

Vacation and the Caregivers' Dilemma

2010-06-23T15:09:00.000-04:00

It's summertime and, as the song goes, the living is easy. But that's not necessarily true for America’s estimated 34 million caregivers. Being a long-term caregiver entails a spectrum of responsibilities, from delivering care one-on-one, including dressing, bathing and using the toilet, to managing medical appointments, housekeeping and yard maintenance, to managing all of these functions long-distance.

The heaviest burden falls on the shoulders of those who live with the person needing care. While even professional caregivers can burn out, the stress caused by round-the-clock care by unpaid friends and family members can be a recipe for disaster. The cost of caregiving can be both physical and mental, including exhaustion and depression. According to the Center for Disease Control, more than half of caregivers indicate that a decline in their own health has compromised their ability to provide care.

Caregivers who see neighbors and friends planning summer day trips and vacations may wonder when and how they can get a break. Many are unaware that several options exist to give them a much-needed rest and recharge their own batteries. The caregivers' dilemma is that, in order to provide the best care for their loved one, they must occasionally care for themselves. But there is an answer.

Respite Care Offers Relief

Respite care refers to short-term breaks in caregiving responsibilities and may mean a temporary move to an assisted living facility or nursing home, allowing a caregiver to take a vacation.

Ongoing respite care can allow the caregiver the opportunity to do grocery shopping, socialize with friends, or even to exercise at a gym. It can be arranged through a variety of sources. You can get details on facility-based respite care by calling either the director of marketing or admissions at a local facility.
Respite care providers may offer day-long adult health programs, volunteer visits through church or community groups, or even companion care through a non-medical home care agency.

Long Term Care Insurance Often Pays for Respite Care

Many long-term care insurance policies pay for respite care. The benefit is typically equal to one month of benefits in each policy year. The respite care benefit can make it possible for informal caregivers to get a break by taking advantage of professional services and this benefit is often available without first having to meet a deductible.

Modern long-term caregiving is often more like a marathon than a sprint and caring for yourself, including scheduled breaks from your caregiving duties, is critical when you have to go the distance.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

Your Money or Your Wife: Wives May Suffer When Husbands Refuse to Buy Long-Term Care Insurance

2010-06-15T13:33:00.000-04:00

It’s a common scenario: a couple meets with their financial advisor who recommends they purchase long-term care insurance. Many times the husband refuses, saying that family history indicates care won’t be needed, that it’s too expensive, or that ‘we’ll take care of each other.’ But he may be in denial about the frailty that frequently accompanies old age, or he may simply be unaware of the consequences of failing to plan for long-term care, especially for his wife.

Frequently the result for our hypothetical couple is that the husband, who typically is older, needs long-term care and his wife becomes the round-the-clock caregiver with no insurance funds to alleviate her burden.

In this case, the husband often receives his long-term care for free, but the true cost is borne by the wive, who may become ill when faced with the Herculean task of caregiving. Looking to their own future, these women are likely to be widows by the time they need long-term care, which is why the vast majority of residents in nursing homes are female 1. They simply didn’t have the “built in caregiver” their husband did.

Many people are aware of the phenomenon in which a spouse dies within a year of their mate; it’s often referred to as “dying of a broken heart.” But less obvious has been the similar impact of spouses who need long-term care.

A Harvard study reported that an elderly person’s risk of dying rises when a spouse is hospitalized, especially if the spouse has a debilitating disease such as Alzheimer’s or other dementia, or chronic heart and pulmonary diseases. The stress involved with such a hospitalization raises the risk of dying by as much as 30% for the healthy spouse 2.

Dr. Nicholas Christakis of Harvard Medical School comments, “There can be illnesses in your spouse that can be worse for your health than the death of your spouse 3."

Just as we plan for bigger retirement nest eggs to cover longer lifespans, we must also plan for the long-term care we would need should we face decades of chronic illness. Just as purchasing life insurance demonstrates love of a spouse, purchasing long-term care insurance continues a legacy of caring financially for your spouse for better or worse.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

1 US Census, National Nursing Home Survey (NNHS), conducted 1999,
www.census.gov/prod/1/pop/p23-190/p23190-d.pdf
2 The New England Journal of Medicine, Mortality after the Hospitalization of a Spouse, published
February 16, 2006
3 ”When one spouse ails, health risks rise for both” The Boston Globe, March 12, 2006

What Long-Term Care Costs and How to Use the Information

2010-05-21T10:02:00.000-04:00

Whether it's an unforeseen car repair or the Medicare drug 'donut hole,' no one likes a surprise bill, but for many, the ultimate surprise bill will be the cost of long-term care.

Because Medicare has a limited skilled-care nursing home benefit, some people mistakenly think long-term care is covered by Medicare. However Medicare provides for a maximum of 100 days of care and, under still some conditions, a skilled home-care benefit limited to medically necessary nondaily visits.

The vast majority of long-term care is nonmedical custodial care and is never covered by Medicare, Medicare supplements or health insurance. Long-term care insurance is the only insurance designed to cover these expenses. So, what does long-term care cost?

Cost information for every state is readily available in the 2010 Genworth Cost of Care Survey, which was released in April. The figures are medians, not averages. Here are some key figures from the report:

The national median hourly rate for a licensed home health aide is $19, and $152 for an eight hour shift, which is a 2.7% increase over last year.

The national median monthly cost of a one bedroom/single occupancy unit in an assisted living facility is $3,185, which is a 12% cost increase over last year.

The national median daily rate for a private room in a nursing home is $206, or $6,180 per month, a 5.1% increase over last year.

In addition to the cost, here are some other things to keep in mind when planing for your long-term care:

Many purchasers of long-term care insurance don’t know where they will be living when they have a claim. That can complicate matters because costs vary from state to state. Some of the most expensive care is in New York City, Cape Cod, MA, Alaska and Hawaii. Barring a decision to retire to one of these ultra-high-cost areas, it makes sense for many people to use the national-cost averages for their planning. A good strategy is to buy a higher policy benefit than the national averages would indicate and shorten the benefit period. This will help keep your premium manageable. If you are in a higher-cost area at claim time, the higher benefit will be important; if one is in a lower cost area, whatever benefit isn't used each day extends the benefit period.
Inflation will increase the cost of care over time, so it's important to keep inflation in mind when purchasing long-term care insurance. Most policies offer either built-in inflation riders or options to purchase more coverage, regardless of your health, in the future. Your agent can counsel you on how to best safeguard your own long-term care planning against inflation.

If you already have a long-term care insurance policy, this is a great time to do a policy review, comparing the cost of your current long-term care to your policy's benefit. You may find that your coverage is right where it should be, or it may make sense to consider a supplemental policy.

If you are not yet a policyholder, think about what the cost of long-term care could do for your financial plan and consult with an agent before another year goes by

Health Care Reform Includes New Long Term Care Insurance-like Program

2010-04-22T17:07:00.000-04:00

In late March, President Obama signed into law The Patient Protection and Affordable Care Act. In addition to sweeping changes to health care, the law includes the Community Living Assistance Services and Supports, (CLASS), which establishes a national voluntary insurance program for purchasing community living assistance services.

Since plan details and premium costs are unlikely to be known before 2012 or even 2013, CLASS should have little impact on long-term care planning over the short term. Once plan details are available and the plan is implemented, long-term care specialists and other advisors will be able to help people figure out if their planning needs are best served by CLASS, private long-term care insurance, or some combination of both. Here's a list of what we currently do know:

People will be automatically enrolled for CLASS through their employer. There will be an opt-out provision and an annual disenrollment period. There will also be provisions made for self-employed people to enroll.
People must be employed to be eligible to enroll in CLASS, although private long-term care insurance has no such requirement. Non-working family members are ineligible for the program and there is a minimum earnings threshold.
In order to be eligible for benefits, an eligible enrollee must first pay into the plan for five years. Private long term care insurance policyholders enjoy immediate coverage.
Plan benefits will be paid in cash with no lifetime or aggregate limit. There is no elimination period or deductible to be satisfied. Plan benefits can be used to buy an assortment of services, including payment for a family member. Benefits will be increased each year in accordance with the Consumer Price Index for all urban consumers.
The benefit triggers for CLASS may be two or three activities of daily living (ADL), such as feeding ourselves, bathing, dressing, grooming, or substantial cognitive impairment.
The bill states that the benefit amount will be not less than an average of $50 per day, in an amount scaled to functional ability. Note that this amount is barely enough to pay for two to three hours of a home health aide, based on the national average cost of a licensed home health aide of $18.50/hour, as per the 2009 Genworth Cost of Care Survey.

Perhaps no part of CLASS is more controversial than premiums. Like private long-term care insurance, the monthly premium upon enrollment is designed to remain the same throughout enrollment. The bill states that no taxpayer funds can be used to pay benefits. Since the bill requires that premiums be recalculated if required for program solvency, and because there is no health underwriting for the CLASS program, many experts are concerned that the plan will attract a much less healthy sub population than those who can qualify for private insurance, and premiums will therefore need to be substantially higher than private long-term care insurance.

CLASS shall be treated for purposes of the IRS code of 1986 in the same manner as a qualified long-term care insurance contract.

CLASS is the first government program designed to allow people to plan for future long-term care expenses. Whether CLASS will provide meaningful benefits for a reasonable, stable cost will not be known for many years. In the meantime, most middle class and wealthy Americans are well-advised to consider private long-term care insurance to transfer the burden of paying for future care off their shoulders and those of their loved ones.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

From Rhode Island to Taipei: Calls for Change in Long-term Care

2009-10-03T12:15:00.000-04:00

Contact: Dorothy McMahon
Phone: (248) 844-9787

In general, people are reluctant to change. It’s been said that most people only make the decision to change when the pain of the status quo becomes worse than the pain associated with change.

The same can be said about governments and long-term care reform. For years, U.S. public policy has largely ignored the impending fiscal train wreck of an aging population that shows little appetite to privately fund its future long-term care needs. Instead, the government’s Medicaid program is the de facto long-term care funding mechanism for Americans who have either a small bank balance or a willingness to hide money to qualify.

If there’s one good thing that can be said about the current recession, it’s that it may lead us to rational Medicaid reform. At the very least, economic uncertainty is sharpening the debate about what services the taxpayers should be paying for, what those services will look like and who qualifies for government-provided services.

Before the recession caused tax receipts to fall precipitously, politicians could avoid and delay the topic of Medicaid reform. Now, with many states on the verge of bankruptcy, and Medicaid one of their largest line items, that’s no longer the case. Since Medicaid is funded by both states and the federal government, it’s getting attention at both levels of government.

One of the best examples of Medicaid reform is happening right now in the smallest state in the union: Rhode Island. The state was granted the first ever “global waiver” by the federal government in regards to its Medicaid program. What this means is that Rhode Island is allowed to revamp/reinvent the way that it delivers Medicaid benefits without having to ask permission of the Center Medicare and Medicaid Services (CMS). Stakeholders and politicians in “Little Rhodie” are just now figuring out what the future of Medicaid will be in the state. Like New Hampshire is to presidential elections, what happens in Rhode Island may have influence clear across the country as governments grapple with long-term care funding.

Lest you think the United States is alone in facing the financial burden of an aging population, the Taipei Times ran a letter in its July 20, 2009 edition titled “Programs that matter, not empty promises.” The paper described how Taiwan’s Cabinet Task Force on long-term care insurance recently held its first meeting to report preliminary results. Two suggestions were made: a national insurance plan and compulsory insurance for those older than 40.

Meanwhile, the U.S. Senate’s version of Health Care Reform includes the Class Act: a federal long-term care insurance plan designed to pay an average benefit of $50/day to people that have paid in premiums for at least five years.

Often overshadowed by the economy, health care reform and Iraq, long-term care financing may not be front page news. However, it’s showing up frequently in legislative briefings, agendas and bills. The economy may finally force the kind of reform that will make long-term care insurance as mainstream as Medicare supplements.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or ltcinsusa@aol.com and visit www.mcmahonltcins.com.

Premise vs. Promise: When an Assisted Living Facility Declares Bankruptcy

2009-09-11T16:06:00.000-04:00

Is it possible that planning for your long-term care could actually leave you in a more vulnerable position than if you had made no plans?

One of the ways to plan for future long-term care is to move into a continuing-care retirement community (CCRC). CCRCs offer a variety of living arrangements and support, including independent living, assisted living and skilled nursing care. The financial arrangements and amenities on site are designed to provide peace of mind to residents, and some new residents are motivated to move to a CCRC thinking it's the last move they will ever make.

Although the premise of a CCRC is relatively consistent across states and operators, the promise of a worry-free future is only as strong as the legal entity on the other side of the contract. That's a tough lesson being learned by the 200 or so residents of Covenant at South Hills, a CCRC community in Mt. Lebanon, Pennsylvania. Covenant is under Chapter 11 bankruptcy protection and attorneys are trying to work out a sale that would allow two bondholders to recoup the almost $50 million they say they are owed.

Covenant at South Hills is typical of the ‘flat price, no matter what care you need’ financial model. Residents pay a fee to move in, usually several hundred thousand dollars. Thereafter, they pay a monthly fee of several thousand dollars. A large percentage of the entrance fee usually is refunded when a resident leaves or dies. While living at Covenant, a resident pays the same monthly fee, whether or not they are receiving care. Another CCRC model is the ‘pay-as-you-go model,’ where care expenses are paid when incurred, above and beyond regular monthly fees. As reported in the May 17, 2009 issue of the Tribune-Review, Covenant had promised lifelong care; and with an average age of 87, the residents are hardly in a position to regroup and rebound from the negative implications of the bankruptcy.

Pouring salt in the wound, the CCRC was built using $59 million in tax-exempt bonds, and the sponsoring organization is a highly-respected international religious charity. Some residents thought that the religious charity would back up the promises being made. However, the charity was not legally guaranteeing the risk.

The Tribune-Review also reported only 74% of the apartments are full. When a CCRC built for 270 has only 200 residents, it's financially handicapped. The financial cushion that could be provided by an additional 70 residents is not there, and if a significant number of the 200 residents unexpectedly need more care sooner or for longer than anticipated, the financial model falters quickly.

This points to one of the flaws in trying to use a micro approach to long-term care risk as opposed to a macro approach. The ultimate micro-approach would be for your spouse or child to take care of you. That plan has obvious risks. Your spouse may predecease you. Your child may be unable or unwilling to provide proper care over months or years, while holding down a job and juggling other responsibilities.

Compare that to the millions of policies issued by long-term care insurance companies. Insurance companies benefit from a macro approach: the health of 200 people is irrelevant to insurance pricing. Medical underwriting, the process of deciding whether to enter a contract with the individual, is often much more stringent when done by an insurance company than a CCRC admissions employee.

When making long-term plans, it's prudent to consider who or what is legally behind the promise. Even in this economic downturn, insurance holding companies stand relatively unscathed compared to investment firms and banks. Meeting contractual promises for worst-case scenarios in the future is the bread-and-butter premise of insurance companies. It's their premise, and a promise on which policyholders can rely.

Dorothy McMahon, president of McMahon and Associates Ltd. in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

What’s The Right Season for Long-Term Care Planning?

2009-08-24T10:20:00.000-04:00

The days are growing shorter and we all know what that means: Fall is on the way. Clubs and associations resume meetings, television shows launch new seasons, kids go back to school and it’s time again to get serious.

Is this the best season to consider purchasing long-term care insurance? If you think you may want it at anytime in the future, now’s the best time.

It’s an especially good time if you have a birthday coming up in the next three months. Long-term care policy premiums are based on your age when you apply; it would be a shame to pay a higher rate for years simply because you delayed your application for a few weeks.

How much more would a policy cost if you wait until after your next birthday to apply? Although the exact answer varies depending on the insurance company, the policy design you select, your age and your health, you can expect to pay approximately 10% higher premium for each year that you delay purchasing equivalent coverage.

By equivalent coverage, here’s what I mean. Suppose you are looking at a policy with a $200 daily benefit and the policy includes 5% inflation protection. If you delayed the purchase for one year, you would then need to purchase a policy with a daily benefit of $210 to equal the benefit of the previous policy.

If you are getting the feeling that putting off buying long-term care insurance doesn’t make sense, you understand intuitively how insurance works.

While an insurance company looks at a variety of factors in pricing a policy, let’s focus on the most relevant factor: your current age relative to the typical claim age.

Actuaries calculate how many years you are likely to pay premiums before making a claim. Now suppose the typical age of claim is 82. If you purchase a policy at age 79, you will pay for three years before the insurance company is on the hook to start paying your policy benefit.

However, if you went on claim at age 82, but purchased your policy at age 49, you would have paid premiums for 33 years. It doesn’t take a rocket scientist to understand that the premium at age 49 can be significantly less, simply because the insurance company has many more years to cover their expenses, set up policy reserves and so on, until claim time.

Here’s the kicker: the 49-year-old who purchases a policy has coverage for 33 years. That policy can pay for long-term care, triggered by any accident or illness, for decades. And you have locked in coverage when young and healthy. As long as you pay your premiums, coverage can’t be cancelled.

Here’s kicker number two: Assuming the same claim age, although the 79-year-old will only pay for three years, he or she typically would pay no less than the 49-year-old when you take into account the time value of money, depending on the interest rate, regardless of their age when they purchased the insurance.

So when is the best time to buy long-term care insurance? Since you can’t save money by waiting, the best time is now. The cost only increases if you wait, and so does the likelihood that, like the ducks and geese of summer, your health goes south. Then you can’t get coverage at any price!

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

Say Uncle (Sam)!

2009-08-22T14:41:00.001-04:00

Are you relying on the federal government’s program to cover your living expenses in the event you become disabled?

Probably not, Social Security’s Disability Program is notorious for its long wait for benefits and its stringent qualification requirements. Even if you meet its definition of disability, benefits aren’t payable until the fifth full month after disability begins. The Question and Answer page on Disability Benefits states “It can take a long time to process an application for disability benefits (three to five months) [http://www.ssa.gov/pubs/10029.html ].”

Because Social Security Disability can’t be counted on for comprehensive income protection, employers often sponsor and sometimes pay for private disability coverage. Some self-employed people, and even some employees who have coverage at work, choose to purchase private individual disability policies to help replace their income if they were to become disabled. These plans, combined with social security disability program benefits, can provide peace of mind in case the unthinkable happens and you can no longer work.

Not to change the subject, but are you relying on the federal government’s program to provide you with a comfortable retirement income?

I hope not, since, as the government itself states, Social Security Retirement Income will replace only about 40% of your income if you have average earnings [http://www.socialsecurity.gov/r&m6.htm ], and the “percentage is lower for people in the upper income brackets.” On the same web page, the program notes “You'll need to supplement your benefits with a pension, savings or investments.”

Let’s recap:

We cannot rely on government programs to provide for a comfortable quality of life if we become disabled, or when we retire.

So, why do many of us expect a government solution when it comes to long-term care?

We don’t solely rely on the government for disability protection or for retirement income, but ironically many of us do expect to rely on the government when we become disabled in retirement!

As of now, there is no federal government program financed by payroll deductions, like Social Security, that provides a long-term care benefit. The only federal program that covers any long-term care is Medicaid. You know Medicaid; it pays for the kind of care you least desire, such as nursing-home care, and requires that you be poor to qualify.

The Health Care Reform proposal currently making its way through the Senate includes a groundbreaking provision for a government long-term care program. Premiums would be paid for by workers. However, the coverage is designed to provide an average daily benefit of just $50 to allow people to bring services into their homes. This coverage would be available after you have paid premiums for five years.

The proposal making its way through the House of Representatives includes no such new program for a federal long-term care program.

From experience with Social Security disability and retirement income benefits, we know that even if the proposal were to become law, most of us wouldn’t want to count on it. We’d supplement it with private insurance and our own nest eggs.

Have you ever heard a baby boomer say that they are not going to worry about long-term care planning? That, because there are so many of us, the government will have to come up with a plan to fix the problem?

When you take a look at all the other solutions that government has offered us, there’s only one logical response: “Don’t count on it!”

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM to schedule an appointment or a program for your group.

Reduce your LTC Insurance Premiums

2009-08-13T23:48:00.000-04:00

How much you'll pay for long-term care insurance is based on three factors. Your age, when you apply, how much protection you want and your health when you apply. Where you live today and where you plan to retire also play a part.

But here is information that's most important for Bloomfield Hills, MI residents. Your long-term care insurance can be far more reasonable than you think.

Let me share a few ways people I work with significantly reduce the cost of long-term care insurance. Before I share, I thought the following statistic from the American Association for Long-Term Care Insurance was especially interesting. In 2008, individuals between the ages of 55 and 59 paid as little as $844-a-year for LTC insurance protection. The maximum paid by someone in this age range was $6,939.

So, how can one reduce the cost? Start by considering a policy that might protect a specific amount of your savings and assets. The coverage you buy today can increase in value over time. So, a policy that provides $115,000 of protection today can grow to $305,000 in 20 years. If you are married, some long-term care insurance policies allow one spouse to access the other spouse's benefit pool. That's an option well worth looking into.

Consider adding a deductible to your long-term care insurance policy. Most people have a deductible on their car insurance and their homeowner's policy. When it comes to long-term care insurance, adding a deductible will significantly reduce the cost and the majority of people select a 90-to-100 day period. The average savings will be about 20 percent annually.

Finally, know that costs vary significantly from one long-term care insurance company to another. I am a member of the industry's long-term care insurance association and they share enormous information. Once a year they undertake a Price Index Study and the costs for almost identical coverage can vary by as much as 100 percent depending on your age and marital status.

If you’d like to learn more on long term care insurance please take a moment to call me at (248) 844-2392 or e-mail me at LTCINSUSA@aol.com.

Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering straight talk on Long-Term Care Insurance. She has brought her program “Speaking from the Heart on Long-Term Care” to professional association and family support group meetings, conferences and neighborhood coffees. Contact her to schedule an appointment or a program for your group.

Getting your LTC Insurance claim paid

2009-08-13T22:46:00.000-04:00

The May 2, 2009 issue of Kiplinger's Personal Finance magazine includes an article on the topic of Long-Term Care claims (click here to read: Make Sure Your Insurer Pays Up).

It’s a decent piece of work, and as the author says, "getting a long-term-care claim approved is the easy part." Here I'd like to offer a few observations and pointers based on 20-plus years experience as a Long-Term Care Insurance professional.

Making a claim on your Long-Term Care Insurance (LTC) should be no more difficult or complicated than making a claim on a homeowners, auto or disability insurance and there are many things you can do at claim time to simplify and speed the process.

If you're just now buying LTC insurance, buy from a knowledgeable agent who cares about his or her clients. An agent can be a tremendous help at claim time. The agent should be intimately familiar with your policy and can often help you avoid miscommunications and other problems during what can be a highly emotional time.

At claim time, your first phone call should be to your agent. He or she can often guide you through the claims process and help eliminate needless frustration and delays.

Since many years typically pass between when a policy is purchased and when a claim is made, you likely would benefit from reviewing your policy, paying attention to these points:

* Deductible: Review how the deductible, usually called an ‘elimination period’ is covered.

* Licensing requirements: Pay attention to the caregiver’s licensing requirements to make sure you maximize the benefits from your policy.

* Proof of licensing: Make sure your claim paperwork includes copies of any required proof of licensing, or the claim could be delayed. Call your claims representative with any questions to make certain your claim is not delayed due to insufficient documentation.

Also, pay attention to the process

* Start a file: Dedicate a spiral bound notebook to the claim. Keep a record of any and all phone conversations with the claims representative, care coordinator and caregivers. Include date, time, who initiated call and who you spoke with. Keeping everything in one place will make it easier if there is a problem.

* Send all claims forms via return receipt mail so you know when they have been received at the insurance company. Give the insurer several days to process the paperwork before you call and ask for a status. Proof of receipt is important in the event of a claims appeal, since your contract will state the number of days the insurer has to respond to your appeal (day one is the date they receive your paperwork to respond).

* Keep your policy handy, not in a safe deposit box. Give a complete photocopy of your policy to a close relative or friend in case you are unable to find your policy at claim time.

* Name at least one person in the third-party notification section of your application. That person will be notified if your policy is ever in danger of lapsing. Whether the danger is from an extended trip, an oversight, or because of a lapse in cognitive ability, this safeguard is designed to make sure your policy is in force at claim time! If you don't name someone during the application process, you can do it any time after the policy is issued.

A report by the National Association of Insurance Commissioners said the Long-Term Care insurance industry has no systemic issue in regards to claims payments. However, there are many things you can do to simplify and speed the process of making a claim.

Long-Term Care doesn't have to be a complicated and unpleasant subject. In fact, taking responsibility for your own health and welfare can help you avoid years of poverty or substandard care. Everyone must have a Long-Term Care plan in place that will fit their lifestyle and budget.

Under Age 65? Need Health Insurance?

2009-08-11T18:19:00.000-04:00

Under Age 65? Need Health Insurance? We offer individual health insurance.

And you will want to talk with us about other insurance products such as: Life Insurance and Voluntary Benefits for Employees including: Disability Income Insurance, Life, Health, Short and Long Term Disability, Critical Illness Coverage, Accidental Death, Long-Term Care, Dental / Vision and Critical Illness insurance.

Additionally, McMahon and Associates is affiliated with a Property Casualty Insurance Agency that can fill all your Personal and Business insurance needs.