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Posts Tagged ‘senior care’

One rule that I always adhere is that I don’t discuss politics and religion unless I am with my close friends and relatives, it’s just too easy to cross the line from thought-provoking to offensive, most especially for someone who is as opinionated and outspoken as I am. After reading a recent article on President Bush’s 2.9 trillion spending plan for 2008, however, I feel I have no choice but to break my rule. President Bush recently went before Congress, controlled by the Democratic Party for the first time in his presidency, and proposed a 2.9 trillion budget that will entirely cut down 70 billion in funding from Medicare and Medicaid over the next 5 years, while increasing military spending and without affecting first-term tax cuts. While the proposed time frame is in line with Democratic goals, there seems to be some dissonance in terms of federal priorities.  If you are a higher-income beneficiary, you could expect to pay much higher long term care insurance premiums and more for drug coverage.

One more component of the plan, according to the New York Times: ” freezing Medicare payments to home health care agencies and reducing inflation allowance paid to hospitals, nursing homes and other providers. ” Considering Congress, negative response to the president’s proposal from last year, which suggested smaller Medicare reductions, it’s unlikely this plan will be accepted as is. Whether you bat for the left or the right, though, there’s no denying that the fast increase in the retirement-age population puts a lot of pressure on the federal budget. Remember that entitlement for the older Americans come from income taxes on people of working age. It takes five working Americans to support one senior citizen’s entitlements. How would, or should, the government respond if Social Security trustees have projected accurately, and by 2030 there are only three workers for every adult older than 65?

It is entirely possible for Medicare, Medicaid and Social Security to consume federal spending. Are there options that don’t involve spending cuts or tax increases? How and where should we conserve to avoid a fiscal crisis without stripping Americans of the care to which they’re entitled?

Most individuals are aware of the gaps within the original Medicare plan. For one, there’s no “stop loss” feature. Other long term care insurance policies will pay 100 percent towards certain medical services after you have meet your deductible, for example, you might have to pay $1,500 per year before your benefits will kick in. If you have Original Medicare and need hospital care or must enter a  nursing home, this applies to you. A lot of people buy Medicare Supplemental (Medigap) Insurance policies to fill in the gaps within their existing coverage, which might include co-payments or deductibles. Medicare Advantage Plans usually cover all the same services that original Medicare covers, and potentially some it doesn’t.

These plans are usually offered in some parts of the country through private insurance companies, but are still part of the Medicare program. If you’d like to switch to a Medicare Advantage Plan, now’s the perfect time. Open enrollment for Medicare Advantage extends from January 1st through March 31st. You are eligible for a Medicare Advantage Plan if you currently have Medicare Part A or Part B. You will, however, need to see doctors and use hospitals within the plan, much like you would with an HMO. If you’d like to switch plans, keep in mind that you cannot drop Medicare prescription drug coverage. If your existing plan has prescription drug coverage, then your new one needs to have it as well. For more information on the plans available in your area, visit Medicare’s web site or call 1-800-633-4227.

Your new plan should be effective on the first of the month after  your request is received. Still not sure what all the Medicare plans cover? Gilbert Guide lists all of the major types of insurance as well as what they cover. For a detailed explanation, check out Gilbert Guide’s Medicare Explained or Senior Care Reimbursement Overview, which will show you where each type of insurance pays benefits.

In a survey conducted by the AARP a few days ago, the findings showed that there is confusion between what most individuals think about long-term care costs and the actual cost of care itself. In fact, after surveying 1,456 people over the age of 45, only one in 12 came within 20% of estimating long-term care costs accurately. Most felt that only $500–1000 a month would do the trick nicely. This is something of an unrealistic outlook when I work with old folks and help them out in making a plan for their long term care needs. Quite often, they are shocked when they see the premium cost for a long-term care policy, especially if they happen to be in their sixties or seventies.

But there are two very important reasons that LTCI costs as much as it does. One is that the costs of care in this industry are rising more than 5% annually on the average, and have done so consistently for so many years now. For the most part, average inflationary costs for the rest of the economy averages around 2–3% a year. However, that is usually not the case with home health care, especially long-term care. To put those figures into perspective, a 5% inflationary measure means costs double every fifteen years or so. So let’s say that if facility costs are $150 a day in your area nowadays, in fifteen years they will most likely be around $300 per day. And in fifteen more years, that figure balloons to $600 a day. The questions that each person must ask themselves about preparing for that kind of expense are whether they have the funds available now to pay for their care, and whether they will have the additional funds in the future to make up for the increases caused by inflation? Will those funds be liquid enough to be accessed quickly and without major financial loss to necessary retirement income?

The second reason that LTCI costs as much as it does is that it is one of the most commonly used forms of assisted care insurance that you can buy. A Metlife Mature Market study was made in 2000 revealed that out of 1,000 people age 65 and older, only five will ever lose their home to a fire. Only 70 will experience an auto accident that requires them to file a claim on their auto insurance. But in the same age group, 600 will require some form of long-term care. It saddens me when I see so many people working so hard to put away money for their retirement years, and yet not understand the single greatest risk to their retirement income that exists. I encourage everyone to take a hard, realistic look at the rising costs of long-term care and start as early as possible to prepare to meet the financial challenges ahead.

Becoming familiar with the foundational features and options of a good long-term care insurance (LTCI) policy requires taking the time to educate yourself before making your final decision. This will help ensure that you get the policy that will best fit your particular needs. The next step is to find the insurance provider that will suit you best. Since there are a number of LTCI carriers to choose from, here are a few suggestions for  selecting a company that is worthy of your trust in the many years and also offers a quality product.

Among numerous companies that offer LTCI, there are a few that have an outstanding reputation. What I mean is that these companies have already distinguished themselves over a long period of time as financially solid, rate-stable carriers with an excellent customer service record. Unfortunately, we see so many stories in the media these days of other LTCI companies whose record in these areas is being seriously challenged. It’s been reported that some have appeared to excessively deny claims for the sole purpose of making a profit. Others have had to request hefty premium increases due to a much higher number of claims than they had projected. While these stories may hold some truth,  what we don’t hear is the good stuff: LTCI companies that really adhere to their claims of the  customer being #1.

In the June 18, 2007 issue of the Newsweek magazine recommended the following four companies as being major carriers that can be worthy of your consideration: Genworth, John Hancock,  MetLife, and Allianz Life. Of course, that does not mean that there aren’t other fine companies represented in the LTCI  field, but the four carriers identified by Newsweek are among the oldest and financially strongest in the industry. They are also the ones with extremely favorable records of customer satisfaction.

Genworth, John Hancock, MetLife and Allianz Life are all fine choices if you are in excellent health. But if you have health issues which are not serious enough to render you uninsurable, but will most likely disqualify you for ” preferred ” rates, then the company you have selected can have a significant impact on your premium. The reason for this is that each company has its own underwriting procedures that it uses for rating policyholders. These procedures can be different from one company to the next. For instance, one company will not issue a ” preferred ” rating  to anyone who uses even a single blood pressure medication, while others will allow the use of up to four of these  medications and still award the highest rate classification for long term care

Once you have more serious health conditions, the difference in the way individual carriers treat those issues can even be more serious. In other words, some health conditions that one carrier may decide to accept may be cause for rejection  by another provider. Here is where having the assistance of a knowledgeable, experienced agent who can choose  from several top companies in the LTCI field, can be a real asset in finding the company that is not only  trustworthy and reliable, but also best fits your particular needs and home health care history.

If affordability is one of the concerns keeping you from investing in a LTCI policy, consider the tax benefits that go along with LTCI. It would indeed be wonderful if the Congress has allowed all LTCI policyholders to deduct the full premium on their taxes. However, our lawmakers have not yet enacted such legislation. As is often the case, they are waiting until the system is almost broke before they will do anything like that. And with the approaching flood of baby boomers quickly becoming seniors, it doesn’t take much to realize that we have a train heading off the tracks at full speed. However, despite the impending train wreck, there are some tax benefits that have been approved thus far. If you are considering the purchase of long term care insurance you should know about them.

Nowadays, most of the tax deduction benefits go to the employers and the self-employed. If you don’t fall into that category, the Congress will require you to itemize your LTCI policy premiums along with all other health expenses during the year. Anything over 7.5% of your adjusted gross income can be used as a deduction. If you have a health savings account (also known as an HSA medical plan), however, you may be able to deduct even more if you are a retired person or an employee.  If you are a sole proprietor, a partner, or own an S corporation or LLC, even if it is just a small business, you can eliminate that 7.5% threshold and instead deduct premiums up to a certain maximum that increases with age. The schedule for tax that lists this table for qualified deductions is available for download on my Web site. If you would like to learn more about the specific deductions that may be available, you can find it at http://www.duanelipham.com/tax_summary.pdf.

If you own a C corporation, you are fortunate enough to be able to declare the entire premium as tax deductible. The amount of money you will save depends to a large degree on your tax bracket. Many self-employed folks in the 30% tax bracket who use the tax schedule mentioned above may be able to save 20% or more of their long term care insurance premiums in tax benefits. For those who can deduct the entire premium, even greater savings can be realized. Of course, it is wise to consult your accountant or tax attorney to be sure of the tax benefits that may apply to you specifically. The tax benefits that surround LTCI can save you money in the long run, and we all know what the home health care benefits can save: in some cases, your life.