Now that we have arrived at the long awaited generational stage in our society that “Baby Boomers” are reaching the age of Medicare eligibility, the need to address the question of who is going to pay for a massive increase in long term care spending has become paramount.  Exacerbating the growing crisis is the impact of the economy on the availability of private pay dollars and government spending.  For the last two years we have watched as one of the primary sources of private funds, equity in the homes of seniors has evaporated.  Simultaneously, state and federal budgets feeling the pinch of an eroding tax base and out of control spending on health care have started cutting back on Medicare and Medicaid spending. 

We are at a crisis point in our nation’s history.  The cost of long term care continues to rise every year, and seniors (and their families) confronting the realities of what it costs to provide home based care, assisted living, or long term nursing home care are looking for solutions.

For those families with a long term care insurance policy, a portion of these costs may be covered if they meet the necessary eligibility requirements.  And for those families with the last name Gates or Winfrey, they can just cut a check.  But what about the vast and often overlooked middle market?  Where do they find the resources to cover all or a portion of these costs?

For the ANSWER-- Click Here to read the complete article by Chris Orestis published by Insurance News Net Magazine

Two recent reports add more evidence to the alarming trend of financial pressure being pushed back onto seniors and their families as they reach the age that the costs of long term care play a central role in their lives.  In addition to Medicaid cuts in the states and cuts to Medicare being proposed as part of healthcare reform, more money will continue coming out of seniors’ pockets. 

The annual MetLife Mature Markets Institute study tracking the costs of long term care in assisted living, nursing homes and home healthcare was recently released showing significant increases in costs over the last year: 

-         Nursing Home costs rose 3.3%

-         Assisted Living costs rose 3.3%

-         Home Healthcare costs rose 5%

-         Adult Day care costs rose 4.7% 

The increasing costs of long term care can be attributed to the most basic economic principal there is: supply and demand.  The economic crisis has slowed the construction and expansion of facility based care.  Also, more people requiring long term care are having a difficult time selling their homes.  As the population of seniors demanding long term care services of every type increases, the supply of options and dollars is decreasing—driving up the costs. 

In another alarming report, the costs of Medicare premiums will rise 15% next year. This will push the monthly Medicare premium above $100 for the first time in history.  The final outcome of this increase, or measures to offset the increase, is being debated in Congress as part of healthcare reform.  Regardless of the outcome, this will now become a yearly struggle as the population going onto Medicare is exploding-- and just when the country is least prepared financially to accommodate the demand. 

Supply and demand will become a recurring theme over the years as the growing population of seniors needing to pay for long term care confronts the harsh reality of both a shrinking supply of dollars and ability to deliver housing and care. 

To read more about the MetLife Mature Markets study, click here. 

To read more about the increase in Medicare premiums, click here.

The Senior Living industry’s growth is driven by a couple of key factors that can trump the impact of a sagging economy: need and numbers. People don’t move into an assisted living community or a skilled nursing home because they want to—they do it because they need to.  When the health and safety of a loved one is in jeopardy by living alone, families must take action.  Adding to this need driven dynamic is the sheer number of seniors and now Baby Boomers beginning to reach the age where senior living is becoming a factor in the remaining years of their lives. 

Recent reports from leading providers of senior living and long term care such as Emeritus Senior Living, 5 Star Senior Living, Capital Senior Living, Horizon Bay, Belmont Villages, and numerous others bolster this trend.  This industry has shown minor growth or declines in occupancy and revenues across the country this year, but in comparison to many other industries such as automobiles, travel, real estate and financial services, the senior living industry appears to be almost recession proof.   

For families considering the best options for a loved one this is good news.  They can rest assured that there are numerous communities to chose from that are in great fiscal shape.  In addition, many of these same communities are offering “Funding Solutions” programs to help seniors pay for the costs of housing and care so they are not forced to wait for the sale of a home or the recovery of their investments. 

To learn more about these Funding Solutions from Kiplinger.com, click here

In a recent commentary for CNN Politics, Bob Greene wrote a very compelling piece about the economic injustice currently being done to our nation’s senior citizens.  In it he observes that the mantra being repeated in the media to keep everyone from jumping off a cliff is to “wait out the storm”.  We are reminded of the conventional wisdom that economic busts and booms are cyclical, but that in the long term the stock market will steadily increase in value and after a few years people will recover their losses. 

But as readers of this blog know, we have been reminding people that our seniors don’t have that time to wait.  Many are in situations where they need the money from their investments or the sale of their home right now to pay for things such as senior housing and care.  If that money has evaporated ($11 trillion of wealth in America has disappeared in the last year alone!) what will people do if it is no longer safe or possible for them to live without assistance?  The people who built this country, fought its wars, and made our prosperity possible are now the ones left holding the bag. 

Mr. Greene is absolutely correct when he says it is unfair to force this generation to sacrifice again-- just when they should be able to enjoy a peaceful retirement in safe and nurturing surroundings.  Fortunately, there are options that our nation’s seniors and their family can turn too for financial security.  There are Funding Solutions that can be accessed to help ease the hardships of this economic calamity.  We have been writing about this situation and the potential solutions for a long time.  Kiplinger’s Retirement Report (March, 2009) issued an excellent resource analyzing this crisis situation and in it, they discuss Funding Solutions from companies such as Life Care Funding Group (see page 4).

 To read the commentary by Bob Greene, “We owe oldest Americans an apology”, click here.

That recent headline by MSN Money.com sure is an attention grabber.  But the cold hard facts of this economic crisis and its impact on seniors should be grabbing everyone’s attention.  The equity in the vast majority of people’s homes is their single greatest source of net worth.  The unprecedented slide in the real estate market is a huge hit for just about everyone.  Recent statistics show that in less than a year the total amount of home equity in American’s homes that has vanished rose from $500 billion in 2008 to $3 trillion by the beginning of this year.

Families are trying to find ways to cope with this catastrophe.  The number of seniors living with their adult children is sharply on the rise with a 62% increase from 2000 to 2007.  Many of these seniors are experiencing declining health and would be better served to live in an assisted living environment, but they can no longer afford the costs.  Assisted Living companies all across the country are reporting declines in occupancy and are now reacting to this crisis by providing additional resources and incentives to help people make the move.

Some companies are offering incentives such as paying for moving expenses, waiving the first month rent or offering shared living and shared expenses with another resident.  Funding programs such as life insurance settlements, bridge loans and VA benefits are being offered by more assisted living properties to help people overcome the loss of equity in their home or investment portfolios.  It is in times of crisis when people must do all they can to adapt and inform themselves of what options are available to help them raise the money they will need.

To read the MSN Money article “Seniors Crushed by Housing Crisis”, click here.

The economic downturn has forced seniors that once could rely on selling a home and investment income to pay for the costs of senior housing and care to look for new sources of funding.  One funding tool that is rapidly gaining attention is selling an existing life insurance policy in the Life Settlement market.  A Life Insurance Settlement is the sale of an existing life insurance policy, while the policy holder is still alive, in a straightforward process that takes 30-90 days.  The seller of the policy will receive a lump sum payment for their policy and will no longer be responsible for paying the monthly premiums. 

A life insurance policy is an asset that the owner can sell just like they would with any other form of personal property such as a home or stocks.  And just like selling a home, there are no restrictions or limitations on how much can be raised or what the owner can do with their money.  For people looking to raise money to cover the costs of senior housing and care this makes the Life Insurance Settlement an ideal funding option. According to a recent Wall Street Journal story about the growth of the Life Settlement market, there was over $13 billion in Life Settlement transactions done for seniors last year.  

To read more from the Wall Street Journal about the growth of the Life Settlement market, click here.

Surveys have found that the economic crisis is discouraging or outright scaring people away from saving for their future needs.  Many are looking at the daily headlines and are afraid to put money away and watch it shrink or disappear.  Others can not afford to save as they try to keep up with the costs of daily living. Compounding the decline in our nation’s already anemic 1% saving rate is the rise in unemployment and the loss of investment income and home equity. 

This trend will have a harsh impact on seniors as they begin to enter the “Senior Living” stage of their lives and need to move into some form of assisted living. Most people do not understand the costs associated with the kinds of housing and care they expect to receive in the future.  Many do not know the differences between Medicaid, Medicare, and Social Security.  Most people do not have long term care insurance, and for those that do they have seen significant disruptions and rate increases with their policies. It is important that people not bury their heads in the sand and wait for everything to return to “normal”.  

Now is the time to take action and seek information about “Senior Living” and the various financial options.  It is also important to have a realistic understanding of the costs involved and where the money is coming from.  It would be a mistake to assume the government is going to take care of everything—and then find out too late that it doesn’t work like that. There are very specific requirements to qualify for Medicare and Medicaid and limitations to what those programs will cover. Also, these entitlement programs are not a free ride and there are expenses associated with both.  

More and more emphasis is being placed back on the individual to shoulder the burden of paying for senior housing and long term care.  There are many “Funding Solution” programs for seniors and now is the time to be researching options and planning for the future—because the future always seem to come when you least expect it and at the most inconvenient times. 

To read more about the decline in savings and financial confusion, click here.

In reaction to the deepening economic crisis, “senior living” companies that provide independent living, assisted living, continuing care retirement communities and skilled nursing care have begun actively offering “Funding Solutions” programs to seniors and their families.  Deep losses in the value of homes and investment portfolios, as well as the decline of long term care insurance companies, have had a very painful impact on people preparing to enter the stage of life where living at home alone is no longer a viable option.  Making this move is difficult both emotionally and financially—and the difficulty has been made much greater over the last year.

Leading companies such as Emeritus Senior Living, 5 Star Quality Care, EPOCH Senior Living, Belmont, Good Neighbor Care, and Legend Senior Living among many others (click here for a complete list of participating companies) have begun introducing comprehensive “Funding Solution” programs to give seniors and their families more choices and resources for financial assistance.  What was once an area largely left up to the individual to figure out on their own, has now become a critical area for support and action by senior living companies.  The range of financial services include: life insurance settlements, bridge loans, VA benefits, real estate programs, and other innovative ways to help people bridge possible financial gaps preventing them from accessing the housing and care that they most need.

Industry trade groups such as the American Health Care Association (AHCA), the Assisted Living Federation of America (ALFA), and the American Senior Housing Association (ASHA) have all been bringing attention to the importance of “Funding Solutions” for the consumer through various forums to communicate with and educate the senior living companies that are their members.  The media has also been discussing this phenomenon over the last year in periodicals such as the Wall Street Journal, the New York Times, Eldercare News, Senior Care Investor and countless other local media outlets.

With the economy continuing its downward climb for possibly years to come, it is important to see the kind of action being taken by the industry charged with caring for our nation’s elderly to put information and financial tools into the hands of the people that need it most.

“This is not the time for business as usual,” AARP CEO Bill Novelli said at a press briefing. “It is time to demonstrate bold leadership, to take our agenda to the people and our nation’s leaders, to demand change and to work hard to bring about that change.”

And with that, the AARP, representing more than 40 million Americans over the age of fifty, put the incoming Obama administration and the next Congress on notice that they would be playing a very active role in any discussions about healthcare reform and economic recovery efforts.  They correctly identified the fact that long term care is always one of the first areas to be ignored or gouged when it comes to government budgets.  They also called for $50 billion in aid to Medicaid programs—just at a time when state and federal budgets had made it clear that Medicaid budgets would be in jeopardy due to the economy.

This is important good news for seniors and families that are being hit hard right now by the effects of the economic crunch.  Economic indicators continue to get worse as reports issued by the Federal Reserve, the auto industry, the housing industry and the Labor Department show continued declines at unprecedented levels. Seniors will need help securing and paying for appropriate levels of housing and long term care.  Help from the government and private sector innovations to provide funding solutions for senior living are going to become critical—especially over the next two and three years.

To read more about the AARP’s legislative priorities, click here.  

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.