In a report released this past Saturday, the government agency that administers Medicare and Medicaid detailed the possible impact of cuts proposed in healthcare reform passed by the House of Representatives.  The study states that the proposed $500 billion in cuts would be so severe that hospitals and nursing homes would be forced to stop accepting Medicare as payment. 

The report says that seniors would suffer form additional reductions in benefits and services to pay for the $500 billion in reduced spending. The White House answered back against the report’s findings by saying the reductions would come in the form of reduced wasted spending on fraud and abuse in the system and from administrative savings through such efficiencies as expanded use of electronic medical records.  Democrats also contend that these cuts would extend the life of Medicare a number of years before becoming insolvent. 

As is often the case, both sides are focusing on the aspects of this study that bolster their position in the debate.  But regardless of who is right, one truth is clear—seniors need to be preparing themselves for less and less financial support coming from the government.  The burden to cover the costs of senior housing and long term care will continue to be pushed back on seniors and their families and people should do all they can to prepare for the inevitable. 

To read more about the various points of view on the CMS study, click here.

The U.S. Senate begins debating healthcare reform legislation today.  Critical to the proceedings will be Medicare cuts and its impact on seniors across the country.  Click here to read more about how the votes are lining up.

Senate Democrats were able to hold a filibuster proof 60 vote majority to introduce the Senate verison of heathcare reform legislation for debate and a final vote.  Action on this legislation will begin after the Thanksgiving recess.  Click here to read more about how today's proceedings unfolded.

As states all across this country prepare budgets for 2009, one thing is clear: revenues are down, but the need to spend is never down.  Every state is facing a fiscal crisis unlike anything in the past.  California, Nevada, New York, Rhode Island, South Carolina and Utah are all looking at freezing or even reducing the numbers of people on Medicaid in their states.  Some states will start making it even more difficult to qualify and then remain Medicaid eligible.  Requirements to reapply twice a year and lowering of income/asset ceilings will remove thousands of people from Medicaid programs across the country.  These actions are being pushed into motion as a direct response to the budget crisis in every state.  

There is less money to pay for Medicaid and more people trying to get on the program.  Medicaid is the single biggest payor of long term care expenses and hundreds of thousands of seniors rely on the program to pay for the costs of living in a nursing home.  What will happen when states are looking for ways to save billions of dollars?  They will push more responsibility back on the individual.  This shift has been taking place now for some time, but the impact of the economic crisis and the reality of the surge of Baby Boomers entering their senior years looking for Medicaid to cover their long term care needs is going to accelerate this issue.

People need to educate themselves about what Medicaid and Medicare will, and will not cover.  And in light of the this situation; what are other private funding options to consider?  It would be very unwise in today’s environment to ignore all of the signs pointing towards what the future of senior housing and long term care will look like, and not know the answer to that question.

To read more about the growing Medicaid crisis, click here (1) and click here (2).

A report released on December 15^th shows that $2 trillion in the value of American home owners evaporated in 2008.  A report released by the National Association of Home Builders in June of this year showed $500 billion lost in home values at that time.  But now, 11.7 million home owners are carrying mortgages considered “underwater” because they owe more on their homes than they are worth.  The combination of negative equity and a continuing surge of foreclosures flooding the market have caused the loss of home values in the U.S. to accelerate by a factor of 3X in the last six months.

Home values have been declining for eight consecutive quarters and with projections of foreclosures and continuing declines in equity “with no end in sight”; there is no projection yet for when the market will begin to turn around.  The problem is that the real estate market is already flooded with undervalued and foreclosed homes and there are many more to come in the months ahead.  Compounding this problem is the ongoing struggles on Wall Street and increasing numbers of unemployed.

Seniors and their families that are counting on the sale of their home and/or their savings invested for the future are being hit particularly hard by this culmination of negative factors.  When money from the sale of a home or income from investments can not be counted on; seniors and their families must educate themselves about financial alternatives to pay for senior housing and care.

Massive Wall Street losses since its highs less than two years ago have cut many retirement accounts in half, reports University of Illinois Law Professor Richard L. Kaplan.  The average costs of staying in an assisted living or skilled nursing property can be quite high; and with the losses on Wall Street combined with historic lows in the real estate market, the ability of seniors to afford care by means other than meeting poverty levels to qualify for Medicaid is quickly becoming impossible for many.  Events from this year impacting owners of long term care insurance polices have made that option less reliable and added fuel to the flames of concern shared by seniors everywhere. 

People want to continue their high quality of life even after it becomes necessary to leave their homes-- and to do so it will be necessary to understand every possible funding option available and be in a position to act when the time comes. 

Click here to read more on the UPI report.

A large number of long term care insurance policies sold by Conseco Insurance company a number of years ago needed to be moved to a state managed risk pool last month to ensure they would remain solvent.  The Pennsylvania Insurance Department took over 150,000 policies-- taking an action described as a “shocker”.  These were older policies that had been under priced when sold years ago and had been a drag on the insurance company’s revenues ever since. 

According to the Insurance Commissioner of Pennsylvania, policy owners impacted by this move should expect to choose between higher rates or reduced benefits.  With 8 million long term care insurance polices having been sold in the United States, it is important that every policy owner double check with their insurance company about the solvency of their policy.  Conseco receives one of the lowest ratings among the major long term care insurance companies (B+ by A.M. Best) and higher rated companies such as MetLife, John Hancock and Genworth were not involved in this situation.  None the less, all consumers should take the time to make sure they understand the condition of any company before they buy a policy or if they currently own a policy.

This is also an important reminder why seniors and their families need to do all they can to inform themselves of the various funding options available to help pay for the costs of senior housing and long term care.  With the impact of this economic crisis being felt on every front, knowledge and access to financial tools will be the key to making it through the coming months and years.

Click here to read more about the long term care insurance situation in U.S. News and World Report.

In response to the economic slump, growth of the Baby Boom population and pressure on state budgets, the federal government will allow states to begin charging premiums and increasing co-pays for those on Medicaid.  This is another warning sign to seniors and their families that they need to be preparing to take on more and more of the financial burden to cover the costs of senior housing and long term care.  As the growing population of Baby Boomers and seniors hits in concert with a shrinking economy, the pressure on the federal budget to support entitlement programs such as Social Security and Medicare and on state budgets to fund Medicaid programs is creating more pressure to push back on citizens to carry more of the load.

Medicaid pays the vast majority of costs associated with the almost 1.5 million people receiving housing and long term care in skilled nursing facilities.  Medicaid is now moving in the direction of operating more like health insurance and by charging premiums will deflect a portion of the costs back on the individual.  And by charging higher co-pays, they hope to motivate people to be more cost conscious when spending Medicaid dollars.  Each state runs its own Medicaid program and will have discretion to set premium and co-pay amounts as they wish.

It is important that people understand these early warning signs of what is to come.  Federal and state budgets can only accommodate so much, and when dollars are shrinking while populations are growing it becomes pretty simple math to see that something has to give.  If history is our guide, then it will be the individual who ends up giving the most.  Now is the time to be preparing by understanding the funding options that are available to help cover these costs as they become more and more the responsibility of the individual.  

Click here to read the New York Times article about the Medicaid situation.

That’s today’s headline on CNN.com, just days after the New York Times wrote an in depth feature about the housing slump and its impact on seniors trying to raise money for a move into assisted living.  The S&P Case Schiller Home Price Index recorded a record drop in home prices in the third quarter of this year (during the summer months before the economic crisis really kicked in).  Home prices have shrunk back to 2004 levels wiping out home equity gains from almost the last five years.  

The Index shows drops in the major markets tracked as: “Phoenix the 12-month loss came to 31.9%. Las Vegas prices plummeted 31.3% and San Francisco recorded a 29.5% decline. The best performing markets, Dallas and Charlotte, N.C., still posted drops of 2.7% in Dallas and 3.5% in Charlotte.  

Miami is down 28.4% year-over-year; Los Angeles, down 27.6%; San Diego, down 26.3%; Washington, down 17%; Chicago, down 10.1%; New York, down 7.3%; Boston, down 5.7%; and Denver, down 5.4%.

Detroit is down 18.6%; Tampa, Fla., down 18.5%; Minneapolis, down 14%; Seattle, down 9.8%; Atlanta, down 9.5%; Portland, Ore., down 8.6%; and Cleveland, down 6.4%.”

These numbers do not take into account the impact of the drop in the stock market, increases in foreclosures, growing unemployment or any other bad economic news over the last couple of months. The scary part is how these numbers are going to look once the bad news that started hitting in October and November are factored into the next Index report. 

To read more about the Index report, click here.

The New York Times correctly identified a critical problem that will only grow for both seniors and the Assisted Living industry: the virtual collapse of the U.S. housing market.  The drop in home values and the difficulty sellers are having finding buyers is severely hampering the ability of seniors and their families trying to raise enough money to be able to move into assisted living communities.  In June, 2008 the National Association of Home Builders released a report showing almost $500 billion in home equity had vanished.  Since then, as the economic situation has gotten considerably worse, it would be safe to assume that number has grown. 

The New York Times article interviews a number of families who have had to delay or forego all together moving into an assisted living property.  These are people for whom living on their own becomes more and more dangerous, but they can not afford to secure the appropriate living environment.  They don’t need to move into a nursing home and go onto Medicaid, yet they are now at the stage that the level of attention and care they would receive in an assisted living property has become a necessity. Families and assisted living communities need to do all they can to access alternatives for funding.  There are numerous options available to raise money from assets other than a home—and in today’s economically challenged environment it is critical that families take the time to learn about what is available to them. 

Click here to read the New York Times article: Unable to Sell Homes, Elderly Forgo Move to Assisted Living

In the last month two reports came out that should be of concern to seniors and their families.  Just this past week the Federal Reserve released their economic projections through 2009 anticipating Gross Domestic Product (GDP) for the U.S. may contract by as much as a full percentage point.  We are watching what the Secretary of the Treasury recently described as a “once in a Century” tumult in the U.S. economy.  The impact on unemployment could be alarming with the unemployment rate of 4.5% last year jumping to 7.6% next year which would be the highest levels in two decades.

In October, the annual MetLife Mature Markets study was released and it highlighted the continuing increase in the costs of senior housing and care.  The national average cost of staying in a semi-private room in a nursing home grew from $189 per day / $68,985 annually in 2007 to $191 per day / $69,715 annually in 2008. The national average cost of living in an assisted living facility grew from $2,969 per month / $35,628 annually in 2007 to $3,031 per month / $36,372 annually in 2008. 

When you combine the impact of an economy in a true crisis that will take at least a couple of years to sort out, and the cost impact of living in a nursing home or assisted living community; it starts to become obvious why families must do all they can to inform themselves of all their financial options.  Our best advice to the people we speak with-- don’t wait until you are in a crisis to start planning for the future.  Start now!

Click here to read more details about the MetLife Mature Markets Study 2008.

The impact of this economy on seniors and their families has been particularly difficult.  Housing values are down significantly and the time it takes to sell a home is now measured in months instead of weeks. Income from retirement accounts and investments have been reduced in many cases by half or more due to the volatile stock market.  For those now facing decisions about retirement and possible moves into senior housing, assisted living and long term care the impact of the economic crisis has been rapid and unforgiving.  Further compounding the problem is the fact that experts agree we are still in the early stages of this situation and not only unsure of how this crisis will continue to unfold, but how many years it will take for things to return to "normal". 

As we talk to seniors and their families all around the country every day they are sharing their frustration and fears with us.  They had worked and planned for years to enjoy a reasonably comfortable and secure retirement; and when the time came to move into an assisted living community or long term care nursing center they were counting on the value of their assets to be there to cover those expenses.  When the value of your primary assets such as a home or an investment portfolio is cut in half-- it does not leave you with many attractive options.  That is why during these troubled times it is critical that people take the time to understand how their personal finances have been impacted and how that projects out for the future.  Too many people wait until it is too late to learn about all of their options and what they can do with the assets available to them to try and secure their financial future. 

The article attached is a sobering look at what it happening to people as they reach their retirement years in the midst of this economic crisis.