While long-term care insurance can be a good way to pay for a nursing home stay or a home health care worker, it doesn’t come cheap. Annual premiums vary significantly, depending on your age, health, and the type of policy, but policies can run as high as $5,000 per year. You do not need to pay that much, however. The following are some ways to reduce your costs.

• Shorter benefit period. The most significant cost-saving step you can take is to not purchase a lifetime policy. Unless you have a family history of a chronic illness, you aren’t likely to need coverage for more than five years. In fact a new study from the American Association of Long-term Care Insurance shows that a three-year benefit policy is sufficient for most people. According to the study of in-force long-term care policies, only 8 percent of people needed coverage for more than three years. By purchasing coverage for three, four, or five years instead of a lifetime, you can save thousands of dollars in premiums. If you do have a history of a chronic disease in your family, you may want to purchase coverage for 10 years, which would still be less than purchasing a lifetime policy.

• Buy younger. Long-term care insurance premiums rise as you age, so the younger you buy, the cheaper your premiums. Be careful, however, because insurance premiums can, and often do, increase considerably from your initial purchase price. Even if you have a policy that is “guaranteed renewable,” your premiums can still increase.

• Shared care policy. If both you and your spouse are purchasing long-term care insurance, a shared care policy might be able to give you more coverage for less money. With a shared care policy, you buy a pool of benefits that you can split between you and your spouse. For example, if you buy a five-year policy, you will have a total of 10 years between you and your spouse. If your spouse uses two years of the policy, you will have eight years. A shared care policy may cost more than separate policies with the same benefit period, but it will allow you to buy a shorter policy, knowing that you have a pool of benefits to work with.

• Longer elimination period. Most policies have a waiting period before coverage begins, typically 30-90 days. The longer you make this waiting period, the cheaper your premiums. Keep in mind, however, that you will have to pay for your care out of pocket until the waiting period is over and the insurance begins its coverage.

• Reduce the daily benefit. Instead of purchasing the maximum daily benefit you might need in a nursing home, you can consider paying for a portion of the daily benefit yourself. You can then insure for the maximum daily benefit minus the amount you plan to pay. A lower daily benefit will mean lower premiums.

• Inflation protection. Inflation protection increases the value of your benefit to keep up with inflation and is almost always recommended. But you can save on premiums by which method of protection you choose: compound-interest increases or simple-interest increases. If you are purchasing a long-term care policy and are younger than age 62 or 63, you will need to purchase compound inflation protection. This can, however, more than double your premium. If you purchase a policy after age 62 or 63, some experts believe that simple inflation increases should be enough, and you will save on premium costs.

You should also remember that your premiums may be tax-deductible. Premiums for “qualified” long-term care policies will be treated as a medical expense and will be deductible to the extent that they, along with other unreimbursed medical expenses (including “Medigap” insurance premiums), exceed 7.5 percent of the insured’s adjusted gross income.

The adult children of elderly parents in many states could be held liable for their parents’ nursing home bills as a result of the new Medicaid long-term care provisions scheduled to be voted on by the House of Representatives February 1. The children could even be subject to criminal penalties.

The 750-page Deficit Reduction Act of 2005 includes punitive new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. Essentially, the proposed law attempts to save the Medicaid program money by shifting more of the cost of long-term care to families and nursing homes.

One of the major ways it does this is by changing the start of the penalty period for transferred assets from the date of transfer, as is the case now, to the date when the individual would qualify for Medicaid coverage of nursing home care if not for the transfer. In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts.

If the law passes, nursing homes will likely be flooded with residents who need care but have no way to pay for it. In states that have so-called “filial responsibility laws,” the nursing homes may seek reimbursement from the residents’ children. These rarely-enforced laws, which are on the books in 30 states, hold adult children responsible for financial support of indigent parents and, in some cases, medical and nursing home costs.

For example, Pennsylvania recently re-enacted its law making children liable for the financial support of their indigent parents.  Fredrick P. Niemann, Esq. says the new Medicaid law could trigger a wave of lawsuits involving adult children.

According to the National Center for Policy Analysis, 21 states allow a civil court action to obtain financial support or cost recovery, 12 states impose criminal penalties for filial nonsupport, and three states allow both civil and criminal actions.

The Senate passed the bill containing the new transfer provisions before Christmas, with Vice President Dick Cheney casting the tie-breaking vote. However, procedural moves by Senate Democrats require the House to vote on the bill a second time after having passed it by a 212-206 margin at the end of an all-night session.
Those who are concerned about the impact of this bill, S. 1932, on them or their loved ones may want to make their concerns known to their congressional representative. For contact information for your congressperson, click here.

A 55-year-old individual considering long-term care insurance protection can expect to pay $709 a year if married or $1,095 if single, according to the 2008 Long-Term Care Insurance Price Index, an annual report from the American Association for Long-Term Care Insurance, an industry group.

A 65-year-old purchasing comparable coverage will pay $1,342 (married) or $1,999 (single) according to the report. Costs for coverage increased about 4 percent over 2007.

The annual index measures current costs for top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits (base-level coverage), with protection increasing yearly as the individual ages. “That coverage will grow in value to over $305,000 of protection in 20 years,” explains Jesse Slome, the association’s executive director. The study compares costs for plans that provide benefits for three years or longer with an annual compound inflation option that increases the available insurance benefits by five percent compounded each year.

Below is the 2008 price index:

2008 National LTCi Price Index

Average price for a comprehensive long-term care insurance policy (100% home care benefit + skilled care coverage) 90-Day Elimination Period with 5% Compound Inflation Protection Option

Age 55
$100 Maximum Daily Benefit x 3 Year Benefit Period Cost: $709-per-year Individual Qualifies for Preferred Health and Spousal Discounts

Age 55
$100 Maximum Daily Benefit x 3 Year Benefit Period Cost: $1,095-per-year Individual is single (preferred health discount)

Age 55
$150 Maximum Daily Benefit x 3 Year Benefit Period Cost: $1,064-per-year Individual Qualifies for Preferred Health and Spousal Discounts

Age 55
$150 Maximum Daily Benefit x 3 Year Benefit Period Cost: $1,578-per-year Individual is single (preferred health discount)

Age 65
$100 Maximum Daily Benefit x 3 Year Benefit Period Cost: $1,342-per-year Individual Qualifies for Spousal Discounts (standard health)

Age 65
$100 Maximum Daily Benefit x 3 Year Benefit Period Cost: $1,999-per-year Individual is single (standard health)

Age 65
$150 Maximum Daily Benefit x 3 Year Benefit Period Cost: $2,013-per-year Individual Qualifies for Spousal Discounts (standard health)

Age 65
$150 Maximum Daily Benefit x 3 Year Benefit Period Cost: $2,998-per-year Individual is single (standard health)

Age 65
$240 Maximum Daily Benefit x 3 Year Benefit Period Cost: $3,221-per-year Individual Qualifies for Spousal Discounts (standard health)

Age 65
$240 Maximum Daily Benefit x 3 Year Benefit Period Cost: $4,729-per-year Individual is single (standard health)

You can eat at a five-star restaurant or stay at a five-star hotel. By year’s end, you’ll also be able to select a five-star nursing home.

The Centers for Medicare & Medicaid Services (CMS) has announced plans to implement a one- to five-star rating system for nursing homes to help consumers evaluate a nursing home’s quality when selecting a facility. The ratings would appear on the agency’s Nursing Home Compare Web site.
CMS will base the ratings on government inspection results, as well as staffing data and quality measures. Yet to be determined is whether the ratings will include other information, such as whether nursing homes treat patients with dementia or those on ventilators.

“We know the public is hungry for information,” said acting CMS Administrator Kerry Weems. He said lower ratings “will likely put” nursing homes “on the path to improvement . . . I don’t think we’re going to see many people who are very anxious to put a loved one in a one-star home.”

But the new rating system was criticized both by consumer advocates and the nursing home industry, for different reasons.

Toby Edelman, senior policy attorney with the Center for Medicare Advocacy, said that two of three criteria CMS plans to use for the ratings — staffing data and quality measures — are “self-reported by nursing facilities and are inaccurate.” Edelman said, “Relying on nursing homes to describe accurately how well they are doing . . . just doesn’t make sense”

Meanwhile, Bruce Yarwood, president of the American Health Care Association, a long-term care industry trade group, criticized CMS’s use of government inspection results as criteria for the ratings and said CMS should consider consumer and staff satisfaction. Yarwood said, “We do not believe that an index which relies on a broken survey system is an accurate way to measure quality”.

Introduction: Special Needs Trusts can themselves be complicated and confusing. The rules governing their creation and administration, and the effect on public benefits eligibility of specific trust payments, can be even more complicated. Let us try to simplify some of the rules, particularly those governing provision of food and shelter to a Special Needs Trust beneficiary.

Background: A “Special Needs” Trust is one established for the benefit of an individual with a disability — as that term is defined by federal Social Security rules. Such a trust is not counted as an available resource for a Supplemental Security Income (SSI) or Medicaid recipient. Its primary purpose — whether funded by gifts from others or with the beneficiary’s own money — is to improve the individual’s quality of life without the loss of public benefits.
 
Where the assets come from is critical and determine how SSI and Medicaid will view the trust, but many of the rules are the same regardless of the source of funds. While the trust is not a resource, payments from the trust may be counted as income to the beneficiary depending on how and to whom the payments are made.

If a disbursement is made in cash directly to the beneficiary, the money received is unearned income that will reduce the individual’s monthly SSI benefit dollar-for-dollar, after considering any applicable exclusion. Of course, if the beneficiary’s income is from Social Security Disability, or from some other Social Security program that is not means-tested (and there are several), then payments to the beneficiary will not have any effect on the Social Security payments. That does not mean that such payments are a good idea, however, as they might still affect Medicaid eligibility. Besides, if the beneficiary’s disability has an effect on his or her ability to handle money, outright distributions may cause problems beyond their effect on benefits eligibility.

Direct payments to others: If disbursements are made from the trust to third parties that result in the beneficiary receiving non-cash items (other than food or shelter), the beneficiary receives in-kind income if the items would not be a partially or totally excluded non-liquid resource if retained into the month after the month of receipt. Take as an example a trust which buys a car for the beneficiary, even though the beneficiary’s spouse already has a car which is being excluded for SSI eligibility calculations. The second car is income in the month of receipt since it would not be an excluded resource in the following month.

In-kind Support and Maintenance (ISM): If disbursements are made from the trust to third parties that result in the individual receiving food or shelter, the individual is charged with the receipt of income in the form of “in-kind support and maintenance.” Rather than causing a dollar-for-dollar reduction in benefits for the value of the ISM payment, however, it is valued at no more than the “presumed maximum value,” a concept unique to SSI regulations. The presumed maximum value is calculated each year for all SSI beneficiaries by dividing the maximum SSI payment ($637 in 2008 for a single person, and $955 for a married couple) by three, and then adding $20.00. That means that the “presumed maximum value” for 2008 is $232.33 for an individual and $338.33 for a couple.

For purposes of calculating this reduction, the notion of “shelter” which might be provided by in-kind payments includes only the following household operating expenses:

•    Mortgage payments
•    Home insurance (but only if it is required by the terms of a
      mortgage)
•    Rent
•    Real property taxes
•    Heating fuel
•    Gas
•    Electricity
•    Water
•    Sewer, and
•    Garbage removal.

Other in-kind payments from the trust: Other direct payments from the trust to providers do not result in the receipt of support and maintenance and are not treated as income for SSI purposes. Those disbursements might include payments for educational expenses, therapy, medical services not covered by Medicaid, phone bills, recreation, entertainment, therapy, companionship, and many other beneficial services.

If payments from the trust to a third party result in the beneficiary receiving non-cash items other than food or shelter, they will not be counted as income when the item would become a totally or partially excluded non-liquid resource if retained into the month after the month of receipt. For example, if the trust purchases a computer for the beneficiary, there would be no affect on SSI or Medicaid benefits. Since the computer would be excluded from resources as household goods in the following month, the computer is not  income. The same principles would apply to purchases of furniture, adaptive or assistive devices, clothing and other goods.

Summary: This explanation of the “in-kind support and maintenance” rules may seem confusing, but the application and effect are straightforward. If a Special Needs Trust purchases services directly, the purchase will not cause a reduction or loss of the beneficiary’s SSI benefits. If the trust purchases goods that are exempt from being counted as assets, there should again be no effect. If, however, the trust pays for housing-related expenses or food, there may be a reduction in benefits and, in some limited cases, even a complete loss of eligibility. Similarly, purchase of non-exempt assets that could be converted to food or shelter will cause problems.

Of course, the best choice for the trustee of a Special Needs Trust is to seek competent legal advice before making a decision about paying any in-kind goods or services. A good special needs attorney will be able to explain the effect of proposed payments not only to the trustee, but also to the beneficiary and his or her family, who may have expectations that simply can not be met given the constraints of public benefits eligibility rules.

If you have any questions concerning a Special Needs Trust, click here to contact us.

Did you elect to take Social Security benefits before your full retirement age? If you did and are now looking for extra income, there may be an answer. Once you reach full retirement age, you can pay back the money you have received and reapply for full retirement benefits.

Although you can collect Social Security benefits between age 62 and your full retirement age, if you do, your benefits will be lower. For example, if you were born in 1944 and decide to retire at age 62, four years before your full retirement age of 66, your total benefit reduction is 25 percent. If your full benefit was to be $1,000 a month, your reduced benefit will be $750.

A little-known provision of Social Security allows you to withdraw your application for early benefits and reapply for your full benefits. The catch is that you must be able to pay back all the money you received so far. However, because you do not have to pay any interest on the benefits you received, if you can find the money to repay the benefits, it may be worth it. You could think of it as an interest-free loan.

Articles on the potential benefits of withdrawing your early Social Security benefit from USA Today and MSN have examples of how it works.

Click here to download the withdrawal of application form.

It is not uncommon for the elderly to become victims of financial abuse. They may be losing — or already have lost — some of their cognitive ability, and their judgment may be clouded. The perpetrator can be anyone from a stranger to a friend, caretaker, relative, or trusted financial advisor.

“As people grow older, they grow dependent on others for care, and part of that care means someone must help them with their finances,” says Larry Pickard, who supervises the unit that deals with financial abuse of the elderly at San Francisco Adult Protective Services.

I have seen this financial abuse in the course of my own work helping the elderly organize their finances.

Recently, Mr. Smith (all names in this article have been changed) was 101 years old and living independently in an upscale facility in Fairfield County, Connecticut. None of his children or relatives lived nearby. About three years ago, a family friend started helping him with his bill-paying and financial organization.  He visited him twice a month to sort through his mail and help him decide what was junk and what he needed to read. He also took all the bills back to my office to prepare the checks. During the entire time he worked with him, Mr. Smith was very independent, but he was starting to slow down physically. A few months ago, he fell, and it became obvious that he needed 24/7 care to stay out of assisted living. He gave in to having what he referred to as “24-hour surveillance.”

The home health aide, Maria, came from an agency and was recommended by the facility. She took good care of Mr. Smith, helping him bathe and dress, and staying constantly by his side. She won his trust and confidence. But then . . .

Maria started having Mr. Smith write checks payable to cash for drug store supplies and the few groceries he needed. She also started paying some of the bills, which the family friend believed is how she convinced him to sign the checks over to her. Maria then endorsed the checks with her own signature and deposited them to her own checking account. Since the family friend wasn’t a signer on his checking account, he didn’t notice this until it was too late. By the time the bank statement arrived, there was a total of $16,000 in either forged checks or checks Mr. Smith had been coerced to sign.

The family friend reported this to the police and Maria was fired from the agency. Since the agency was bonded, it had to make good on the losses. Unfortunately, Mr. Smith was devastated to learn that someone he trusted took such advantage of his sweet, trusting, and generous nature. A few weeks later, Mr. Smith passed away. It was terrible for him to spend his final weeks knowing about this crime.

Family Members Often the Culprits

Financial abuse of the elderly knows no boundaries. It can occur when someone steals or embezzles money, Social Security checks, or other property from an older person. It can be as simple as taking money from a wallet or manipulating a victim to turn over or sell personal property or belongings. In many cases, the financial abuse is done by someone the victim knows and trusts. Family members commit more than half of the crimes of financial abuse of the elderly, according to the National Association of Adult Protective Services Administrators.

Sometimes the abuser has gambling, substance abuse, or financial problems. After Mrs. Green’s daughter passed away suddenly at age 50, her teenage granddaughter stole her grandmother’s credit cards and charged, with interest, more than $20,000. Mrs. Green’s surviving daughter took her mother’s medications to feed her own substance abuse problem. This daughter also stole money, perhaps thinking it was “rightfully” hers. Mrs. Green could barely make ends meet, and the fact that her own relatives were stealing from her made it even worse.

Often the elderly are afraid to report this abuse, fearing that their children will consider them too demanding or unfit to handle their finances. They may fear losing an important part of their independence and can be embarrassed that they can’t handle the situation themselves. Mrs. Green did not want to report these crimes, because she was afraid of alienating her only surviving daughter and getting her granddaughter into more trouble. She was also depressed over the loss of her daughter.

Americans over the age of 55 control 70 percent of the nation’s wealth. Many of the elderly do not realize the value of their assets and how those assets make them vulnerable. A recent FBI investigation found that fraudulent telemarketers were directing nearly 80 percent of their calls to seniors; the elderly are often dependent on others for help, and a “helpful” voice at the end of the telephone line can exert a significant influence.

How to Detect Financial Abuse and What to Do About It

There are many signs to watch for in detecting financial abuse of the elderly. Someone could force an elderly person to sell or give away property or to sign a power of attorney. Valuable objects may start to disappear. There may be unusual activity in bank accounts, such as sudden withdrawals of large amounts, many checks made out to cash, and low bank balances when there should be plenty of available funds. A new “best friend” or “sweetheart” might appear on the scene. Signatures on checks do not resemble the older person’s signature. A name may be added to an older person’s bank account.

There are several ways to prevent this financial abuse. One way is to have several family members be involved with the older person. Encourage the elderly to become involved with the community, senior centers, or religious groups, which all can provide a strong support system. Take advantage of direct deposit of income checks, including Social Security and dividends. Carefully screen and verify caregivers’ references and do a thorough background check.

Advocates for Nursing Home Reform estimate that only one in six cases of financial abuse is ever reported. Any person who suspects that financial abuse has occurred should report it either to her local police department or to a trusted social worker or adult child, assuming the child is not also the abuser. When in doubt, err on the side of caution. Financial abuse can continue and can escalate if there is no intervention. Reporting the abuse and intervening in time can save the assets, health, and dignity of the elderly. 

If you have questions about this article, contact Fredrick P. Niemann, Esq. at FNiemann@hnlawfirm.com or call him at 732-863-9900.

Costs for nursing homes, assisted living facilities and some in-home care services have risen for the fifth consecutive year and might continue to rise unless more long-term care workers can be found, according to a new survey by Genworth Financial.

A private room in a nursing home now costs $76,460 a year or $209 daily, a 17 percent increase since 2004, Genworth’s 2008 Cost of Care survey found. A semiprivate room in a nursing home is now $68,408.

The cost of assisted living facilities is shooting up even faster, having risen 25 percent since 2004 to a current average of $36,090 a year for a one-bedroom unit. Assisted living costs ranged from a high of $4,921 a month in New Jersey to a low of $1,981 a month in Arkansas.

While the cost of in-home care by workers who are not certified by Medicare remained about the same, at an average hourly rate of $18 for homemaker services and $19 for home health aide services, the cost of a Medicare-certified home health aide rose to an average $38 an hour.

The survey also priced adult day care for the first time, finding that the daily cost is averaging $59, or about $15,000 a year for five days a week of care.  Adult day care facilities provide care and companionship outside of the home and give the elderly a chance to interact with peers. Sometimes based in a community center, the facilities can provide social or therapeutic activities and provide supervision for participants with cognitive problems.

The study, which was conducted by CareScout on behalf of Genworth, surveyed more than 40,000 providers in all 50 states and the District of Columbia between December 2007 and February 2008.

Genworth Financial sells long-term care insurance policies. Buck Stinson, president of Genworth’s long-term care insurance unit, said the results of the Cost of Care survey indicate that “the expense of just a few years of long-term care in a facility or at home can very quickly wipe out a lifetime of savings.”

In a companion report, Genworth says that the nation faces an impending caregiver shortage that could drive costs even higher.

Genworth’s Cost of Care survey features an interactive map allowing consumers to see long-term care costs and trends in their state. For both the survey and caregiver report, click here.

While you generally do not have to sell your home in order to qualify for Medicaid coverage of nursing home care, it is possible the state can file a claim against your house after you die. If you get help from Medicaid to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called “estate recovery,” and given the rules for Medicaid eligibility, the only property of substantial value that a Medicaid recipient is likely to own at death is his or her home. If possible, you should consult with an attorney before entering a nursing home, or as soon as possible afterwards, in order to discuss ways to protect your home.

In those states that have implemented the Deficit Reduction Act of 2005, the home is not counted as an asset for Medicaid eligibility purposes if the equity is less than $500,000 ($750,000 in some states). In all states, you may keep your house with no equity limit if your spouse or another dependent relative lives there.

Transferring a Home
In most states, transferring your house to your children (or someone else) may lead to a Medicaid penalty period, which would make you ineligible for Medicaid for a period of time. There are circumstances in which it is legal to transfer a house, however, so consult an attorney before making any transfers. (For example, transfers to a disabled child or one who qualifies as a “caregiver child” are permitted.) While you can sell your house for fair market value, it may make you ineligible for Medicaid and you may have to apply the proceeds of the sale to your nursing home bills.

Lien on Home
Except in certain circumstances, Medicaid may put a lien on your house for the amount of money spent on your care. If the property is sold while you are still living, you would have to satisfy the lien by paying back the state. The exceptions to this rule are cases where a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there.

Estate Recovery
If your spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house, lives in the house, the state cannot file a claim against the house for reimbursement of Medicaid nursing home expenses. However, once your spouse or dependent relative dies or moves out, the state can try to collect.

But there are some circumstances under which the value of a house can be protected from Medicaid recovery. The state cannot recover if you and your spouse owned the home as tenants by the entireties or if the house is in your spouse’s name and you have relinquished your interest. If the house is in an irrevocable trust, the state cannot recover from it.

In addition, some children or relatives may be able to protect a nursing home resident’s house if they qualify for an undue hardship waiver. For example, if your daughter took care of you before you entered the nursing home and has no other permanent residence, she may be able to avoid a claim against your house after you die. Consult with an attorney to find out if the undue hardship waiver may be applicable.

The average annual price of a private U.S. nursing home room has increased to $76,460 this year, up 2% from the 2007 average.

Researchers at Genworth Financial Inc., Richmond, Va., have published that finding in a summary of results from their latest survey of nursing homes, assisted living facilities, home care providers and, for the first time, adult day care providers.   A total of about 10,000 providers participated.

The cost of a semiprivate nursing home rose 4%, to $68,408, while the cost of an hour of care from a non-skilled home health aide held steady at about $19, the Genworth researchers report.

The hourly cost of care by a skilled, Medicare-certified provider increased 18%, to $38.
Adult day care cost about $59 per hour.