I was recently interviewed about what our company has been doing to help seniors and their families with the costs of long term care. We also discussed the current state of the Life Settlement market and thoughts about its future.

 To read the interview in its entirety, click here.

A report tracking Medicaid spending going back over the last seven years showed that Medicaid underfunded payments for services to all patients by $14.17 everyday in 2009.  Projections are that this alarming underfunding trend will get worse in 2010 and 2011.  The economic crisis has robbed state budgets of funds available to support Medicaid funded programs and as a result there was a national deficit of almost $5 billion.   

Medicaid funds at least 2/3 of all spending for nursing home care. Spending shortfalls of this magnitude threaten the ability of nursing homes to offer the highest levels of care for the most vulnerable populations.  Frustratingly for nursing homes and those in their care, state governments were given money in 2009 via the American Recovery and Reinvestment Act to make up this deficit.  But guess what—governments diverted the money away from providing the healthcare it was intended, and instead used the money to shore up their own budget deficits.   

As readers of the Life Care Funding BLOG know, we continue to bring awareness to the unavoidable trend of reducing the amounts of money that are available for Medicare and Medicaid.  And why is that?  Because we are now in the throes of an explosion of Baby Boomers reaching retirement age at the same time that our country’s economy is under siege and entering unfamiliar territory.  Washington, DC and 50 state capitols have no choice but to figure out how to make do with less. 

They have two tools to work with:

1.      Make it harder for people to qualify for Medicare and Medicaid, and--

2.      Reduce what is available for those that do qualify. 

What tools do seniors and their families have to work with? 

1.      Information

2.      Time 

People need to arm themselves with information about how the system works and what kind of funding options (and limitations) they have to work with.  And, people need to stop waiting until the last minute to plan for their inevitable time in long term care.  In one form or another, (home or facility based) as people age and/or become frail they will need someone to help care for them.  That care will cost money and that money has to come from somewhere.  As the government makes it harder and harder to access less funding, people need to prepare to bear much of the financial burden on their own.  To ensure quality of life and dignity when the time for long term care arrives; people must make the effort today to understand what kind of financial options are out there such as the VA Benefit, Life Insurance Settlements, Credit Programs, Reverse Mortgages, Long Term Care Insurance and other sources of private funding.

To read more about Medicaid budget deficits, click here. 

State of Maine Announces proposal to cut 10% out of nursing home Medicaid spending in 2010:

Governor Baldacci released his proposed FY 2010-2011 State budget Friday afternoon. As in previous years, the Departments of Health and Human Services and Education are being asked to bear the brunt of significant cuts including 10% rate cuts to some MaineCare providers including nursing homes and residential care facilities. Preliminary analysis shows that the cut to nursing homes is in the area of $26 million. It is harder to separate the hit to res care, but we estimate it to be in the area of $10 million or a little over $9.00 per resident day. The newest figures (Nov. 2009) from AHCA indicate that Maine currently underfunds its nursing homes by $25.5 million per year. This translates to an average loss of $16.20 per resident per day. So, it seems reasonable to estimate that the proposed cuts will double those shortfalls.

Demand to help seniors with the costs of senior housing and long term care continues to rise across the country.  In response,  Life Care Funding Group has begun adding “Network Partners” at the local level around the U.S. to support senior living facilities and work directly with families.

Starting in the Midwest with Jo Letwaitis, Founder and CEO of the The Senior Site, Inc., senior care experts are being endorsed to represent Life Care Funding Group and make Funding Solutions available to help more people.

In the coming weeks, more Network Partners will be announced in other regions of the country.  To learn more about how to access the Network Partner program, contact Life Care Funding Group at info@lifecarefunding.com.

To read the Network Partner announcement, click here.

This past Friday we received a call from a woman who had just learned about the Life Care Funding option from the assisted living center where her husband had recently moved.  Her husband is 79 with advancing Alzheimer’s and they moved him into a care facility two months ago.  Covering the costs have been a stretch for her and her adult children and the facility told her that if they have a life insurance policy they could get money for it now through a life insurance settlement by contacting Life Care Funding Group. 

The good news is that they have been carrying a $100,000 life insurance policy for the last 25 years.  The bad news was that because of the financial strains they are under, she stopped paying the premiums two months ago and the policy was going to lapse (cancel) that next Monday.  She had called the insurance company and asked them what her options are and they told her she had two: pay the back premiums to keep the policy in-force (active), or let it lapse on Monday.   

They never told her she had a third option, sell the policy in the open market through a life settlement and receive as much as 40% of the death benefit right now in a lump sum payment.  After receiving premium payments for 25 years, the best option for the insurance company would be for the family to let the policy go now that her husband has Alzheimer’s and is facing a shortened life expectancy.  In that case, they keep every penny paid to them in premiums and never have to pay anything to the family! 

But fortunately for this family, we spoke to them before the policy lapsed and the insurance company received the premium payment in time to keep the policy in-force (the insurance company was hoping they would not see that check arrive in an overnight packet).  We are now working with the family to take their policy out to the life settlement market to receive multiple bids for the policy.  Based on their husband’s health, the potential for them to receive anywhere from $20,000-$40,000 is very real.  That amount of money will get back the premium payments made over the years, and will make all the difference in the world to their ability to provide the best possible housing and care for their loved one. 

Too few people know about the life settlement option. We hear from families every day who have let a policy lapse, or are about too, and they lose out on their opportunity to receive money that could help their loved ones during a time of crisis.  As the country debates health care reform and contemplates the imminent long term care funding crisis, the life insurance industry must stop suppressing the legal rights of policy owners.  Two states have passed laws (ME and WA) requiring life insurance companies to inform citizens of their legal right to a life settlement.  Let’s hope the other 48 states start listening and do the same.

To read more about the legal rights of a life insurance policy owner, click below:

Legal Rights of Policy Owners.doc (31.00 kb)

The Governor of the state of Maine signed into law a bill requiring life insurance companies to inform citizens of the state their legal right to engage in a life settlement instead of allowing a policy to lapse or be surrendered.  Maine and Washington State are now the first two states to pass this important consumer protection law.  Many more states, including Kentucky and Indiana, are currently considering the laws adoption.   

The consumer protection law also prohibits insurance companies from engaging in anti-consumer activities.  It will now be illegal for insurance companies to stand in the way of people who would be better off to sell their insurance policy through a life settlement, instead of surrendering it back to the insurance company for much less money or allowing it to lapse.  As much as 90% of life insurance policies issued are allowed to lapse every year, and to date, life insurance companies do not inform people of life settlements as an alternative option.  This law will begin changing that intentional oversight around the country.  

"These new consumer disclosures and consumer protections represent a substantial step forward in ensuring that seniors who are faced with the lapse or surrender of unaffordable or unwanted life insurance policies can sell their policies and are not prevented from doing so by the acts of big insurance companies," said Doug Head, Life Insurance Settlement Association (LISA) Executive Director. "These measures respond to the documented evidence of carriers trying to block life settlements through threats to insurance agents and providing misleading information to seniors."  

With seniors and baby boomers facing economic challenges and shrinking government dollars to help pay for the costs of senior housing and long term care, the need for alternative financial options is at an all time high.  Options such as life insurance settlements, which can pay out as much as 500% more than the cash surrender value of a policy, have been suppressed by the life insurance industry because it cuts into their profits.  But now, instead of allowing a life insurance policy that has re-sale value to just terminate, seniors can tap into that value through a life settlement.  With this law passing, the citizens of Maine and Washington will now be informed of the life settlement option as a legal right to raise the most money possible through their valuable asset-- and soon many more states around the country will benefit from this important consumer law.

To read more about the life settlement consumer protection law, 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

The right of a policy owner to engage in a Life Settlement is guaranteed by the landmark Supreme Court decision; Grigbsy v. Russell establishing that life insurance possessed all the ordinary characteristics of property, and therefore represented an asset that a policy owner could transfer without limitation.  Life insurance is personal property and the owner is protected by all the same inalienable rights that any owner of real estate, stocks or any other assets enjoy. 

As seniors look for assets they can use to offset lack of savings or losses in equity; the Life Settlement market has grown rapidly, with $13 billion in transactions completed in 2008.   90 million senior citizens own more than $500 billion worth of life insurance, of which over $100 billion was owned by seniors eligible for Life Insurance Settlements.  The Wharton Business School issued a study about Life Settlements where they observed, “Life insurance policies are typically assignable, which means that a policyholder is free to transfer their ownership of the policy to another person.  A policyholder’s right to assign their policy to someone other than the insurance carrier has existed for some time.”  The study also went on to observe that a Life Settlement “gives the policyholder the economic freedom to choose between a number of buyers and, in so doing, to receive the fair market price for their policy.” 

Among the legal rights of a life insurance policy owner are:

 · Sell the policy to another party  · Name the policy beneficiary  · Change the beneficiary designation  · Assign the policy as collateral for a loan  · Borrow against the policy

A number of insurance industry organizations such as the National Association of Insurance Commissioners (NAIC), National Council of Insurance Legislators (NCOIL), American Council of Life Insurers (ACLI), National Association of Insurance and Financial Advisors (NAIFA), American Association of Life Underwriters (AALU) and the Life Insurance Settlement Association (LISA) support the legal rights of a policy owner to liquidate a life insurance policy through a Life Settlement.

Read the Grigsby v. Russell decision issued by Justice Oliver Wendell Holmes in 1911: Supreme Court Ruling on Life Insurance as Transferable Property.doc (42.00 kb)