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.

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)

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.

Penn Treaty American Insurance Company has failed, and now Pennsylvania insurance regulators are contemplating what to do with the defunct company.  The Pennsylvania department was forced to take over a large block of Conseco polices only a few weeks ago, and now they will assume responsibility for all existing policies that were sold by Penn Treaty American and its subsidiary, American Network Insurance Company.  

Penn Treaty American fell victim to the same situation that has plagued so many other long term care insurers—in the quest for market share and growth of sales, their policies were priced too low and the company could not support the policies any longer.  The Pennsylvania Insurance Department has done the right thing to step in and take over these policies and protect the consumer, but this will only further shake the faith of consumers in the safety of long term care insurance.

The timing of these events could not be worse.  People are becoming more and more responsible for financing their own long term housing and care.  Now, people will need to look even harder for reliable mechanisms to finance their needs, and until the long term care industry can clean up this mess, many people will be looking elsewhere.  Fortunately, there are other funding solutions for senior living, and people are becoming more aware of these options every day.

To read more about the collapse of Penn Treaty American, click here.

“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.  

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.