Archive for the ‘Long Term Care’ Category

The Need for Self Reliant Health Care

Tuesday, January 24th, 2012

 

I came across one of the best articles I’ve seen regarding Medicare funds or rather, the dissension thereof. For anyone over the age of 40, the issues at hand matter – a lot.

 

The biggest takeaway I got from the article? It is seemingly apparent relying on Medicare to provide like coverage in perpetuity is not very plausible. While it is difficult/annoying/painful for most of us to think 20 and 30 years beyond today, the potential for future health and financial challenges in our lives dictates otherwise.

 

One of the hardest hitting highlights of the article was an example about disbursements made using an average salary of $43,500 per year. A recently retired couple with that salary would have paid in almost $120,000 in Medicare taxes during their working lives. But according to the Urban Institute the medical benefits this couple would receive will average $357,000. Needless to say, this is not a sustainable model.

 

Another cited concern provided that 1 in 5 doctors restrict the number of Medicare patients they will take on at any given time. This number jumps to 31% for primary care physicians. The AMA reasons this is due to low reimbursement rates and that Medicare is deemed to be an unreliable payer by the medical profession.

 

Compounding these exasperating facts and figures is fictitious recipients. In 2010, it is reported that Medicare Part D paid $3.6 million to deceased beneficiaries. Similarly, 142,000 procedures on 5,000 dead people were paid for between 2004 and 2008 to the tune of $33 million.

 

According to the National Health Care Anti-Fraud Association, “The United States spends over $2.5 trillion on health care every year. Of that amount, NHCAA estimates that tens of billions of dollars are lost to health care fraud.” Mismanagement to say the least is costly and cannot be tolerated in any organization let alone one facing financial crisis.

 

Much is also written about “the gap in coverage” regarding prescription drugs. Yet the biggest gap occurs in long term care costs for home care, assisted living and skilled nursing facilities. Ironically, while our current system reimburses the deceased, it does not provide for the most financially devastating expenses the (still) living can incur.

 

This article is a major eye-opener to the current state of a program many of us are depending upon for health care services in retirement. Reading it should at the very least provoke further consideration for yourself and your family. Check out the entire article at Smart Money.

 

Kurt Rusch  CLU, ChFC

Healthcare Confidence, Behavior & Reform

Friday, November 11th, 2011

 

 

It has been more than a year – 18 months and 11 days to be exact – since the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA) of 2010 were passed. And still, after all this time, recent surveys show Americans are not extremely well versed on the new laws nor satisfied with current healthcare issues. It seems nothing has changed.

 

Amendments to the Acts and future application deadlines can all be attributed to the lack of knowledge regarding health care reform. Moreover, there are numerous concerns which polls are now returning regard confidence, behaviors and reform in the eyes of the American public.

 

Confidence

 

The Employee Benefit Research Institute (EBRI) has been conducting annual health confidence surveys (HCS) on healthcare since 1998. Highlights of this year’s survey provide:

 

1)     Dissatisfaction with the American health care system remains widespread. 56% of respondents rated the system as poor or fair. The percentage of Americans which rated the system as poor, doubled between1998 and 2004.

 

2)     60% of Americans are very satisfied with their own current health insurance coverage; 29% are somewhat satisfied.

 

3)     57% are very confident that their employment-based health coverage will continue to be offered by their or their spouse’s, employer or union. Confidence in this belief was 68% in 2000.

 

4)     Just 18% of people are extremely satisfied with the cost of their health insurance.

 

5)     Only 12% are extremely confident they are able to afford health care without financial hardship.

 

 

Behaviors

 

What human behaviors are impacting healthcare? Last September, the Thomas Reuters-NPR Health Poll released their query of 3,000 Americans on the subject of human behavior and healthcare.

 

Smoking was, of course, the top named impacting behavior, however, by less than a 1% difference, obesity was ranked second. Stress, by less than a 4% difference, was rated third. Taking the fourth and fifth top cited answers were alcohol use at 11.2% and workplace safety at 7.5%.

 

On the subject of cost, 84.8% of those polled believe that people who exercise, eat healthy and don’t smoke should receive a discount on their health insurance premiums. 30% say overweight people should have to pay more for health insurance. 11.3% went as far to say it is acceptable to deny employment based upon obesity.

 

Reform

 

The EBRI survey reports that confidence regarding today’s health care system has neither fallen nor increased as a result of the passage of health reform.

 

62% of Americans are also not familiar with a “key aspect of the law”. The unfamiliarity refers to legislation requiring that each state must set up a health care “exchange” by 2014, where health benefits can be shopped at competitive rates. This mandate is part of the Act’s objective to broaden health insurance coverage. The proposed goal is purposed to create an alternative coverage solution for the remaining minority of the American population without employment-based benefits.

 

Changes to the Act since its March 2010 inception have altered the original passage, which further complicates American awareness. As of today, it is unknown whether any of the current court challenges filed by States, business and other parties regarding the constitutionality of certain mandates within the law will further modify how health care reform unfolds.

 

The EBRI survey also found that health care is not the issue that the majority of Americans consider to be most pressing in America today:

 

32% of those polled say the economy is the most critical issue at hand.

 

14% say the federal budget deficit is.

 

14% cite unemployment as most important.

 

12% believe healthcare is.

 

11% think education is top priority.

 

Thanks for reading,

Kurt Rusch  CLU, ChFC

 

 

 

New Medicaid Laws May Impact Families

Tuesday, November 1st, 2011

 

We just received confirmation from our Elder Care Attorney that the Illinois Medicaid Laws will change January 1, 2012.  Current and future planning needs are now at crucial issue.

 

Why should you care?

 

The current state laws are much more favorable to applicants and their families; the new laws will make it more difficult to receive Medicaid benefits.

 

This is extremely important news for all senior parents and adult children – those with current need and those who have yet to reach that advent.

 

Legislated changes such as these can severely impact assumed expectations. Assisted and higher level care can drain an average middle income estate very quickly; for those without long term care coverage, pre-planning for Medicaid in the event it may be needed should be of paramount consideration.

 

There are many changes to the Medicaid system which will take place in the coming year. These highlights examine the issues of timely application (all assets do not have to be spent down prior to filing a Medicaid application) and asset protection.

 

Applications Filed Prior to January 1, 2012 Will Fall Under Current Medicaid Laws

 

Under the current laws if a nursing home or supportive living resident applies for Medicaid benefits the applicant is required to provide three years for all financial records to verify their assets. This includes all bank, investment, pension and retirement account statements, life insurance policies, and tax returns.

 

Medicaid is particularly concerned with whether the applicant has given anything away during the three year “look back” period, such as a gift to help pay for a grandchild’s college tuition or to a son or daughter in need. The current laws allow any ineligibility created from the gifts to begin tolling immediately when the gift is given. This offers the Medicaid applicant an important advantage in avoiding any penalties which may result from the gift.

 

NOTE: For those who are planning to enter nursing home or supportive living facilities before January 1st,  it is essential to determine if Medicaid application should be filed before the implementation of the changes in Illinois law.

 

Applications Filed After January 1, 2012 Fall Under New Medicaid Laws

 

Applicants will be required to provide five years for all financial records to verify assets. More importantly, gifts will not begin to toll until the applicant is already spent down. This is a significant change between the old and new laws.

 

Under the new law, applicants will likely have to try to recoup any significant gifts that were made within five years of filing a Medicaid application. In the event that the applicant cannot recoup the funds that were given away, then they will have an opportunity to plead for a hardship waiver and hope that the waiver is granted in order to obtain Medicaid benefits. The criterion in which a hardship waiver will be granted is somewhat unclear at this time, but it is anticipated it will be a very difficult process.

 

The current laws allow the spouse (community spouse) of a Medicaid applicant to protect all the assets that the community spouse has held solely in their own name (for three years or more) prior to filing for Medicaid. Current laws also allow applicants and their spouse to divide their joint accounts in half, so that the community spouse can keep half of the joint accounts.

 

Under the new laws, joint accounts will not be permitted to be divided between spouses. The community spouse will be allowed to retain a specified amount of account funds (currently $109,560). This amount is also subject to change from year to year.

 

For many families, it may be extremely advantageous to file a Medicaid application prior to the law change from an asset protection planning standpoint. After January 1st, asset protection will become more difficult to navigate under the new rules.

 

Please consider these options now and do not hesitate to contact me if you are unsure of the timing regarding your family situation at hand.

 

Kurt Rusch CLU, ChFC

 

Many thanks to John Belconis, JD, for his help in sharing this information with us.

 


 

 

 

 

 

Proactive Retirement Planning

Tuesday, October 18th, 2011

 

I just read an article entitled, “5 Biggest Planning Retirement Mistakes”. The problem with titles like these in general is they are negative, and many times, as misleading as they are disheartening.

 

Proactive retirement planning on the other hand, is a different workhorse (pardon the pun) altogether. It should be ongoing and positive, starting over the course of your working years and cultivated throughout your retirement years. It also involves deliberate consideration beyond the lone act of making regular payments to employee contribution plans.

 

What type of proactive things should you be doing to plan for a life of leisure? Consider these 5 things now (even if you’re still working):

 

1.      VALUATION  

 

Project your current retirement programs forward to see how big of a lump sum you will have when you reach retirement and begin systematic liquidation.  While this may seem a monumental undertaking with market upheavals and historic lows in fixed income options, getting to that number will provide the baseline figure you need to work with.

 

If you tend to be risk averse, project your account balances into the future by using rates of return that could be obtained using less volatile investment choices. The worst case scenario here is that things change and you receive a higher rate of return netting a larger sum of distributable retirement funds.

 

On the other side of the coin, the market tends to be a lot more dependable over long periods of time than generally assumed. Utilizing these returns has not historically been as risky as you may think.  A volatile market is, in reality, a friend to those systematically investing via retirement plans at work and independently because: fixed amounts invested on a regular basis will always purchase more when the markets are at their lows and less when they are at their highs. This system allows you to buy low without ever having to consciously make investment decisions.

 

2.      DISRUPTION   

 

No one can possibly plan for every “what if?” in life, but addressing the types of disruptions to retirement income streams which may occur is essential.

 

Case in point; what would you do if Social Security changed drastically by the time you were counting on receiving it? Currently, with no modifications or adjustments, the Social Security Administration projects that by 2036 the Social Security Trust Fund will only be able to pay 75% of their obligations.  Would you be able to handle this decrease? Or any other type of unplanned reductions? If not, have you considered what you can do to make up possible shortfalls?

 

If you begin making up the gap sooner rather than later, the amount that would need to be set aside on a regular basis would be comparatively small. Conversely, if this gap is left unaddressed, the magnitude of future contributions could be daunting. Remember: Compound interest (really) is the Eighth Wonder of the World.

 

3.      VISUALIZATION 

 

Envision (literally) your retirement and what you (actually) want it to look like. While there are numerous statistics and figures utilized in planning, the best way to assure that you are planning for YOUR retirement is to personalize it.

 

Some people may think this silly but if you’ve never really taken a moment to think about how you’d like to see yourself in this future, you may be surprised what comes to mind. Are you planning on traveling a lot? Are you planning on working? If so, what is the magnitude of your commitment to work? What do you envision your living situation as being?

 

These kinds of questions and many more will affect the dynamics of your retirement plan. For example, if extensive travel is part of your plan, you must put more money aside than someone without these ambitions. On the other hand, if you plan on working, that may decrease the amount that must be set aside to meet expenses in retirement.

 

Housing will also greatly affect your financial situation. Many people “downsize” in retirement. Downsizing can often free up funds that can be invested to subsidize other plans already in place. These are just a few examples to consider.

 

4.      SAFEGUARDING

 

Have you safeguarded your plan for longevity?

 

If a husband and wife have plans in place as a couple in retirement, will they still be okay if one of them was no longer around? Upon passing, a surviving spouse will receive the higher of the two spouses’ Social Security payment. Would you be able to live the retirement lifestyle you envisioned without the aid of dual Social Security payments? Beyond Social Security, pension options must also be reviewed closely.

 

Pensions generally have irrevocable options that must be elected at the time of retirement. A sample of the array of these types of elections would include a single life option for the pensioner. This option would yield the highest monthly payment because it would continue only for the life of the pensioner. There would be no continuation of payment to a surviving spouse if the pensioner predeceased him/her.

 

At the other end of the spectrum, is a spousal option paying the surviving spouse 100% of the pensioner’s payment at the time of the pensioner’s death. This option would yield the lowest monthly payment to the recipient because essentially this pension plan is buying life insurance on the pensioner to be used to continue payments in the event of predeceasing their spouse. Examination of these costs should be made to see if the pensioner would be better off financially to receive the higher single life pension payment in combination with a taking out a private life policy to provide for the surviving spouse. This would also provide the flexibility to drop the policy or change beneficiaries to children in the event of the spouse predeceasing the pensioner.

 

5.      INCAPACITY   

 

Have you addressed the possibility of incapacity? While this is a very distasteful subject to broach, statistics indicate that up to 75% of couples will have at least one spouse needing some sort of long term care within their lifetimes. Given the state of rising healthcare costs, this situation can devastate a retirement plan very, very quickly.

 

Those who elect not to address the subject make a default decision to self-insure. This works out well only if you remain healthy without the need for support services. It is also a risky choice to make for the time period in your life when your options for financially rectifying an error in planning will be drastically limited.

 

Chicago nursing home costs currently run about $200 per day. For those who assume that this will be handled by Medicare, you are mostly incorrect. Medicare only covers follow up treatment after release from a hospital. There is no provision for convalescent care (long term daily living) from Medicare.

 

Coverage for long term care is available through Medicaid but to qualify, your assets must be liquidated and spent down. This radically limits your future choices. Home health care is also not covered by Medicaid. Many of the better nursing facilities may also refuse admittance to people   already on Medicaid. The last thing your loved ones need to face at a time like that is the challenge  of finding a geographically desirable and decent facility to take you in.

 

Valuation, Disruption, Visualization, Safeguarding and Incapacity are all key factors in planning for life after work. Safe, secure and solid navigation of this terrain should be done with the assistance of a licensed professional.

 

Kurt Rusch  CLU, ChFC