Alyssa Gerace, Senior Housing News, December 18, 2011

According to a study by Avalere Health found that the 11.1 percent Medicare funding cut to nursing homes that went into effect on October 1 will ultimately reduce funding by $79 billion over the next 10 years. Alliance for Quality Nursing Home president Alan Rosenbloom says that if the cuts were phased in over a 3 year period, the impact would not be as drastic. “A gradual phase-in of the federal regulation—which has been done in the past for other provider sectors—can help alleviate a worsening direct care staff layoff crisis that is now a documented fact in Ohio,” said Rosenbloom in a statement. “We respectfully urge Congress to pursue a phase-in of the regulation, and we would be pleased to work with lawmakers to help achieve this logical, fair and responsible policy recourse before Congress adjourns for the year.” An Avalere Health survey also found that nursing homes across the nation plan to lay off a total of approximately 20,000 workers as a result of the cuts.

To read entire article, click here

When an individual applies for Medicaid, the State conducts a "look back" to find transfers of assets for 60 months prior to the date the individual is institutionalized or, if later, the date he or she applies for Medicaid.  All transfers made by the applicant or the applicant’s spouse subsequent to January 1, 2010, whether from an individual or to an individual or from a trust or to a trust, have a five year look-back period.

These provisions apply when assets are transferred by individuals in long-term care facilities or receiving home and community-based waiver services, or by their spouses, or someone else acting on their behalf. At state option, these provisions can also apply to various other eligibility groups.

Transferring ownership of a life insurance policy for less than its fair market value would be a violation of Medicaid’s asset transfer and look back requirements.  A policy can be surrendered for its cash value to be spent down on care or a policy can be converted for its market value and the benefit of that conversion can be used to pay for long term care as a qualified spend down.

Medicaid rules are very clear that a life insurance policy is an unqualified asset and counts against Medicaid eligibility. 

The owner of one or more policies has a variety of options to consider:

• A policy with more than a minimal amount of cash value (usually $1,500 or more depending on the state) must be liquidated with the proceeds spent down on care.
• A policy with no cash value does not need to be liquidated but the death benefit will be subject to Medicaid recovery efforts to return the amount of money spent on care.
• Many states will exempt a “final expense” policy if the full death benefit value is assigned to a funeral home.
• Assignment of a life insurance policy for less than its fair market value is a violation of asset transfer rules if done within the 60 month look back period.
• A policy owner has the legal right to convert a life insurance policy into a long term care benefit plan at its fair market value and extend their spend down period by covering cost of care while preserving a portion of the death benefit until exhausted.

“The two most important driving forces for the federal budget are the aging of the U.S. population and rapidly rising health-care costs.”

- Federal Reserve Chairman Ben Bernanke

Law makers from both sides of the aisle have come together to create a “Super Committee” comprised of six Democrats and six Republicans, half come from the House of Representatives and half come from the Senate.  The members of the Super Committee are tasked with finding at least $1.5 Trillion in budget cuts over 10 years.  Reports are that the Committee is struggling to meet its goal because they are facing deadlocks over how to handle a mix of cuts and taxes to bolster two of the biggest budget areas of our country—Medicare and Medicaid.   

The Super Committee must present their recommendations to Congress by November 23 to face an up or down vote before Christmas.  The question for Christmas this year is which groups will be visited by St. Nick and which will meet the Grinch.  Some very tough decisions need to be made and no area is protected.  Adding to the pressure of the situation is the fact that if Congress rejects the recommendations of the Super Committee then automatic cuts of $1.2 Trillion as well as possible tax increases will be enacted across the entire federal budget sparing no one. 

Families already under enormous economic pressure will find it even more difficult to pay for long term care services for loves ones.  Government dollars will pay for less and it will become more difficult to qualify.  It has become more important than at any time in our nation’s history to prepare for the costs of long term care and make use of programs such as long term care insurance, life insurance policy conversions to long term care benefit plans, and other financial vehicles to ensure sufficient private pay dollars are available when the time comes.

KFF quick reference MCaid stats 2009-2011.doc (187.00 kb)

By Harris Meyer

When her 86-year-old mother, a retired nurse with Alzheimer’s disease, started wandering away from her Tallahassee, Fla., home in 2007, LuMarie Polivka-West knew it was time to move her and her 94-year-old father into an assisted-living facility.

But because of the collapse in the real estate market, she couldn’t quickly sell her parents’ house to pay for a $3,200-per-month assisted-living apartment. So, for another year, while waiting for the house to sell, Polivka-West and her two brothers each contributed $600 a month to help their parents afford the assisted-living unit. "It was a significant cost to me and my brothers," says Polivka-West, the senior director of policy at the Florida Health Care Association, a nursing home trade group. As for her parents, "It didn’t cause them anxiety, just us," she says. "We didn’t let them know."

In the fourth year of a depressed real estate market, experts say thousands of seniors remain unable to move into senior housing because they can’t sell their homes quickly enough or for the price they need. The upshot: Greater pressure on families to pay for parents’ and grandparents’ placements, or to care for them themselves.

Taylor recalls a woman who was on the verge of moving her elderly father, who had Parkinson’s disease, into an independent-living apartment. The Arizona Baptist facility in Phoenix had services to help him with mobility and daily activities. But then her parents decided they would both move into a regular apartment with no services, which cost 40 percent less, because they had sold their home for significantly less than they had anticipated. The daughter told Taylor she was sick with worry about her parents living on their own in that apartment.

In Florida alone, Polivka-West estimates there are 400,000 seniors with dementia living on their own at home, with few or no services. "The U.S. has a large aging population and we do not have a long-term care plan for this country," she frets.

A survey conducted by AgingCare.com found that although adult children are often responsible for paying for their elderly parent's care, the large majority of caregivers are vastly unprepared. The survey found:

• 63% of caregivers have no plan as to how they will pay for their parent's care over the next five years. 
• 62% say the cost of caring for a parent has impacted their ability to plan for their own financial future.

"With an estimated 34 million Americans providing care for older family members, the survey's results indicate a financial crisis in the making," says Joe Buckheit, Publisher of AgingCare.com, a website and online forum for family caregivers.

• 34% spend $300 or more per month out of their own pocket for care giving expenses.
• 54% have sacrificed spending money on themselves to pay for care of their parents.

Making matters worse, caring for aging parents often impacts adult children at their workplace as well. The survey found: 

• 43% have had to take time off work due to care giving responsibilities.
• 48% say they are earning less money at work as a result of care giving.
• 25% have been fired or had to quit their job as a result of care giving.
• 53% of care givers provide care 40 or more hours per week.
• 37% provide care more than 80 hours per week.
• 21% say they never get a break from care giving.
• 36% get a break of 5 hours or less a week.

The survey indicates that today's care givers face a triple financial threat: unplanned-for caregiving expenses, less money for their own needs and reduced time in the workplace.

To read the entire article on AgingCare.com, click here.

A Life Insurance Conversion Program is a new type of program and at the time of writing, there was only a single organization offering the program.  The program’s name is the Life Care Funding Assurance Benefit Plan (ABP).

For example, a policyholder sells their policy for $36,000.  They move into an assisted living community that costs $3,000 / month.  The policy buyer will pay directly to the assisted living community, the complete cost of care for one year ($3,000 / month x 12 months = $36,000).  Should the assisted living resident pass away before the year is complete, there is a preservation of assets clause that will pay out the remainder of the agreed upon amount to a designated individual. 

The policy would be of no value to the individual were it allowed to lapse and the cash surrender value might be very low relative to the policy amount.  By converting the policy into long term care payments, the policy holder is able to get greater economic value from the policy then the cash surrender value and they receive that benefit while they are alive and require care.  The other benefit of the Assurance program is that for the duration of the agreement, the family is freed from the administrative tasks of managing the policy and managing payments to their care provider.

To read the entire Assurance Benefit Analysis by Paying for Senior Care, click here

National Underwriter 

The average annual cost of a private room in a U.S. nursing home has increased to $77,745 this year, up 3.4% from the 2010 average.

Analysts at Genworth Financial Inc., Richmond, Va. (NYSE:GNW), have published those figures in a summary of results from a survey of 15,500 long term care providers in 437 regions throughout the United States.

Although the rate of increase is only about half the rate of increase in acute care costs, the rate of increase is up from 1.3% in 2010.

The cost of assisted living care has increased 2.4% this year, to $39,135, and the cost of in-home care has held steady at $18 per hour.

The average cost of home health aide services is $19 per hour.

- Allison Bell

State lawmakers understand the situation, and efforts throughout the country are underway to find alternative, private-market solutions to help pay for LTC services. Ten years ago it looked like long-term care insurance was going to be a major part of the solution. Unfortunately, growth in sales for the last decade has actually declined and serious market disruptions further hampered the product.

The combined impact of MetLife leaving the market in 2010 and The Guardian leaving the market in 2011, multiple rate increases from Genworth and John Hancock as well as states taking over entire blocks of business to ensure solvency, has undermined consumer confidence. Additionally, the CLASS Act may be well meaning but is entirely insufficient to address the magnitude of this problem. At this point. it is all too clear other solutions will be necessary.

Legislative leaders in the states have taken notice of the amount of life insurance in the hands of seniors and are focusing on opportunities for them to use it as a means to pay for LTC. According to the National Association of Insurance Commissioners, there is $10 trillion of in-force life insurance policies in the United States. Of that amount, there is $100 billion to $500 billion in the hands of seniors who could potentially use their policies as a living benefit to help pay for LTC.

To read the entire article published by Senior Market Advisor, click here.