Long-term care is becoming an important issue for our nation to address. We have 78 million aging baby boomers. The costs of long-term care to these baby boomers can be catastrophic and few people have sufficient resources to pay for needed long-term care.
In an effort to deal with this growing concern, the Long-Term Care Financing Collaborative (the “Collaborative”) began meeting informally in 2012 for the purpose of finding a solution. They have since become a formalized group made up of a variety of national experts and stakeholders with varying ideological stances. Their common goal is to improve the way Americans pay and prepare for non-medical care (Long-term supports and services) needed by the elderly and those living with disabilities. On February 22, 2016, the Collaborative announced its third and final set of recommendations.
ABOUT THE COLLABORATIVE
The diverse groupis made up of policy experts, consumer advocates and representatives from service providers and the insurance industry. In addition, the group consists of senior executive branch officials in both the Democratic and Republican administrations, former congressional aides, and former top state health officials.
THE COSTS INVOLVED
The statistics surrounding long-term care or long-term supports and services (“LTSS”) are eye opening. According to the Collaborative, there are between 10 and 12 million adults today who require LTSS and that number is expected to double by the year 2030. More than two-thirds of older adults will need some assistance before they die and nearly half will have a high enough need that they will be eligible for private long-term care insurance or Medicaid to pay the bill. More than 6 million older adults need that level of care today and nearly 16 million will need it in 50 years.
The Collaborative defines Long-term supports and services (“LTSS”) as non-medical assistance. This would include help with such things as food preparation, personal hygiene, assistive devices and transportation, bathing, eating and the like.
Cost to the Elderly or Disabled:
The elderly or disabled persons who find themselves in need of LTSS try to pay for it out of their savings or income from their retirement along with help from family members. Often, this is insufficient to cover the costs and many people have to turn to Medicaid for help. The overall spending on LTSS is expected to double by 2050, which will cause even more people to depend on Medicaid to pay for it.
Few people have saved sufficiently for LTSS. In fact, the Collaborative reports that a typical American between the ages of 65 and 74 has financial assets of $95,000 and about $81,000 in home equity. This does not include retirement savings, which vary widely across the country. To pay for one’s lifetime medical expenses with a 90% certainty requires savings of about $130,000 and an additional $69,500 for LTSS costs. With this in mind, it is easy to see how people are running out of money.
Over all, individuals pay for about 55% of LTSS expenditures; Medicaid pays about 37%; and Private LTSS insurance pays for less than 5%.
Cost to Family and Friends:
In addition to the financial stress this places on the elderly and disabled, it also significantly affects their families. The Collaborative estimates that in 2013, family and friends provided 37 billion hours of uncompensated LTSS to adults. This care calculates to up to $470 billion, which is three times the amount Medicaid spent on LTSS the same year.
When family members provide caregiving to a loved one, it often comes at the cost of their job or a portion of their job. On average, the Collaborative reports, a woman in her 50s who leaves a job to care for her aging parents does so at a cost of $300,000 of income over her lifetime. The Collaborative states that “unpaid family caregivers lose an estimated $3 trillion in lost lifetime wages and benefits.”
Cost to Employers of Family and Friends:
The Collaborative reports that employers experience a loss of $17.1 to $33 billion in productivity due to absenteeism alone. In addition, they state that “costs of turnover and schedule adjustments for caregiving workers add an additional $17.7 billion in costs.”
THE COLLABORATIVE’S RECOMMENDATIONS
The Collaborative was able to agree to five key recommendations in three key areas. This final set of recommendations focused significantly on: 1) A need for universal catastrophic insurance; 2) Private market initiatives and public policies to revitalize the insurance market to help address non-catastrophic LTSS risk; and 3) Enhanced Medicaid LTSS for those with lower lifetime incomes.
The Collaborative calls for a strong government role in the solution. The group considered voluntary and universal insurance programs and came to the conclusion that universal was the only viable, long-term solution as it spread the risk across the entire population and avoided challenges of adverse selection. The Collaborative noted in the report, “As a result, universal insurance appears to offer broad-based insurance at a comparatively low lifetime cost.”
In addition to recommending universal catastrophic insurance, the Collaborative also recommended taking some actions to revitalize the private insurance market. These included suggestions of employers offering long-term care insurance as part of their benefits packages. In addition, the group suggests that regulatory changes in the insurance industry, creating more standardization in policies, would save costs to consumers. The specifics of the regulatory change suggestions include increasing premiums and benefits as the individual ages. There is also a suggestion that this type of insurance be sold in conjunction with Medicare supplemental programs. Finally, the group suggests that policymakers continue to encourage and support efforts by the insurance industry to experiment with more hybrid products, combining long-term care insurance with other products.
Another recommendation given by the Collaborative was to encourage increased private savings for retirement. This encouragement might come in the form of ease of enrollment through employers’ benefits programs, expanded retirement products, tax subsidies and education.
Of note was a recommendation made by the Collaborative was to modernize Medicaid financing and eligibility. This recommendation is really one to expand Medicaid coverage to include more people, in more settings, for more care. Eligibility would be based on a functional assessment and a needs assessment rather than requiring an institutional level of care.
The Collaborative leaves us with a final recommendation to provide more education about LTSS. Many people are in denial about the possibility that they may need it some day and do not plan. While it is encouraging that the nationwide issue is being studied more and taken more seriously now, the problem is far from resolved. Until there is a firm solution, individuals must take responsibility and plan ahead.
If you or someone you know has questions about how to plan for the costs of long-term care, please feel free to contact our office.
ABOUT THE COLLABORATIVE
The diverse groupis made up of policy experts, consumer advocates and representatives from service providers and the insurance industry. In addition, the group consists of senior executive branch.
Written by Robert Nickerson
In the case of wills, documents, and full estate plans, there have been plenty of sad, badly timed, and simply weird situations that have affected clients in ways that were not considered. The good news is that everyone makes mistakes. It's a matter of just not repeating those mistakes. Badly written estate documents & files can lead to a lot of missteps with the rest of the family including paying outrageous tax bills and accidently cutting a loved one out of a beneficiary. Here are ten things that people tend to do wrong with their estate plan.
1. Beneficiary Blunders
Not being able to name a beneficiary to be responsible for retirement accounts and insurance policies or even reviewing old ones already signed before is the most common. With no one selected, then the default will usually mean the estate, which can be surrounded by probate, delays, complicated court matters and more. It’s a good idea to see where your beneficiary is now. A beneficiary can be stretched in expectancy, but an estate plan can last forever. This could lead into an ex-spouse as a beneficiary, even though you don't want them there now.
2. "Selling" Property for $1
This practice used to be very popular until the government stepped in and caught on with the theory. The idea is that a piece of land could be sold for a low price so that the taxes on the gain (whatever the land is worth compared to when the original person bought it) would not need to be paid and thus, be removed from the estate plan. It's a part of an idea that by doing this, taxes don't need to be paid, but the IRS will find it and still ask those doing this to pay even more.
3. Naming Specific Investments in your Will
If the person who died no longer owns a specific investment, his estate might be forced to buy it back at a higher price, even if the beneficiaries are not interested. Check to see if the specific investments still belong to the original party. If not, and it's not updated, then a ton of the assets could be used to pay the higher price.
4. Not Thinking all the way Through for a Well-Intended Gift
Let's say we had a father has three boys and he wanted to make sure his house became theirs after he died. What if it was stated that the home could not be sold unless everyone was also living in that town. It might be fine, but what if one of the sons did not have a home. Then the brothers would be stuck in court for a while before finally being able to sell the home. Check the estate plan to be sure that assets and their beneficiaries are set in stone to be transferred in a easy manner.
5. Leaving Assets Directly to a Minor Without Settling Guardianship Issues
So grandpa wants to leave little Billy a Babe Ruth signed baseball and $90,000. Who's going to handle all of this? If this isn't figured out, there is a chance for financial abuse.
6. Not Planning for the Death of a Beneficiary
What should happen if a beneficiary isn't alive when it's time for them to receive their benefit? Will it go the surviving heirs? Will it go into another account or foundation? There are a lot of people that will think of the future, but not everyone else's future. It may not be their fault, but anything is always possible. Consider having an alternate plan laid out just in case.
7. Ownership mistakes and Imbalances
Who owns the house? Business? Collection that's worth a lot? This could be troubling if too many of these are under one spouses names rather then a joint. It leads to an increase in taxes, both in life and in death. A more balanced account of assets will appear equal and reduces a chance of owing too much in taxes.
8. Not Having a Residuary Clause
What a Residuary Clause in an Estate Plan does is remembering everything else not stated in your will, which includes assets not owned yet, but eventually does, before death. This is common and people will not consider this.
9. Not Planning for Your Own Mortality
Yep, we are all going to die someday. Whether you want to face that or not, it's going to happen. It's unfair to let your family deal with no plans just because you don't want to face the consequences. It's be better then litigation.
Most of us know of someone who has been diagnosed with dementia. It is a costly, heart-breaking and life-altering syndrome that is nearly doubling in numbers of people affected worldwide every 20 years. Dementia has affected the likes of Norman Rockwell, E.B. White, Rita Hayworth, Charlton Heston, Ronald Reagan, Charles Bronson, Margaret Thatcher and many other well-known people. It does not discriminate based on station in life, and its effects are widely dispersed. This edition of the ElderCounselorTMwill focus on recent findings as to economic, financial and societal impacts of dementia as well as what an Elder Law attorney can do to help.
What is Dementia?
Dementia is a general term for a decline in mental ability, severe enough to interfere with daily life. Memory loss is one such example. Alzheimer’s is the most common type of dementia. Symptoms of dementia can vary greatly, but is diagnosed when at least two of the following core mental functions are significantly impaired: memory, communication and language, ability to focus and pay attention, reasoning and judgment, and visual perception.
These symptoms can be displayed when the person with dementia has problems with short-term memory, keeping track of his/her purse or wallet, paying bills, planning and preparing meals, remembering appointments, or travelling out of the neighborhood. These often progressive symptoms will likely eventually necessitate assistance with daily activities, resulting in increased expense and stress on the individual, their family members, and society at large.
The RAND Study
The RAND Corporation recently concluded a nearly decade-long study on close to 11,000 people. The study sheds light on dementia statistics including rates of diagnosis and costs to society. The results of this study were recently published in the New England Journal of Medicinein early April 2013. The study’s reliability is significant—it was led by an independent, non-advocacy group and financed by the federal government.
The Cost of Dementia to Society
According to the RAND Corporation’s study, the cost of caring for those with dementia is projected to double by 2040 and is currently higher than caring for those with heart disease or cancer. The direct costs of dementia, including the cost of medicine and nursing homes, was $109 billion a year in 2010 compared to $102 billion for heart disease and $77 billion for cancer. This cost is pushed even higher, to $215 billion, when support from family members or other loved ones is given a cost value. This figure will rise to $511 billion by 2040. Information from the RAND study and from the Centers for Medicare & Medicaid Services indicates that, by 2020, dementia patients will account for about 10% of the elderly population while direct medical spending on them will equal about 17% of all spending projected for Medicare and Medicaid devoted to the aged.
The cost of dementia to society is great and is headed for a huge increase. In light of that, President Obama recently signed into law the National Alzheimer's Project Act, which calls for tracking of financial costs of dementia as well as increased efforts to find new treatments and better care for those with dementia.
The Cost of Dementia to the Family
While the cost to society is great and will likely have a substantial impact on all of us, the costs to individuals diagnosed with dementia and their loved ones is even more significant. As evidenced by the RAND study, each individual case of dementia costs between $41,000 and $56,000 a year. In addition to the financial drain on families, dementia increases the stress on the caregiver loved one. In fact, caregivers have been found to be at increased risk for depression and anxiety and long term medical problems, which impose a further financial burden on the family.
Dementia poses higher costs to society and individuals than heart disease or cancer and these costs are projected to continue rising. Most significant is the cost of care for the patient with dementia. The dementia-ridden person will progressively need more and more help with daily activities and this is the biggest cost of the debilitating syndrome. With the proper attention given to improvements in medicine with regards to dementia, society will be able to get a handle on this costly condition. And, with help from an Elder Law attorney, the family of those afflicted with dementia can obtain the support they need to care properly for their loved one.
An Elder Law attorney can help clients prepare or deal with an immediate need to find appropriate resources in dealing with dementia. We can support the loved one in making sure the dementia patient has access to the care and medical attention they need. Please contact us if you have a client or their loved one who has been diagnosed with dementia or is at risk for developing this debilitating syndrome. We would be honored to help.
***The Wall Street Journal, Dementia Will Take Toll on Health-Care Spending, April 8, 2013
The Wall Street Journal, Dementia Will Take Toll on Health-Care Spending, April 8, 2013
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!