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Should Families Provide for Their Own? 

I.  Long-Term Care (LTC)?

Historically we have considered LTC institutionalized care. In other words long term care meant that an elderly person was placed in a nursing home or other "old folks" home. Today however, LTC has come to mean not only institutionalized care, but now includes all the services and programs designed to help anyone, but especially the elderly, remain at home during the last stages of life.

Today, long-term care has come to mean two types of care.

1. Community Based Long Term Care which provides services to someone who wants to remain in their home and/or in the community.
   
2. Institutionalized Long Term Care  that is provided in an institution or skilled nursing facility (nursing home).
   

1. How is community based long term care (LTC) financed?  

1. As you saw in our previous lectures,  80-90% of all community based LTC is provided by families in their homes. Who are these family caregivers?

• daughters
• husbands
• sons
• others/parents/siblings

It is generally estimated that 80% of caregiving for elders is done by unpaid, informal groups, largely family members. If the work of these
informal caregivers had to be replaced by paid staff, it would cost at least $ 60 billion a year. (Harry Moody, Teaching Gerontology, Jan10,2003)

 

Besides families paying the costs of LTC, the Older American's Act of 1965 helps provide services for community based LTC.

2. The Older American’s Act (OAA) was first passed in Congress in 1965. It provides programs that benefit older Americans. It is important for you to understand that the Older American's Act provides funds for many of the services you see in your community. Such as, home delivered meals, transportation programs (such as dial-a-ride), health screenings, and many more services for older adults. 

 Here are the stated goals for the OAA at the time it was enacted.

• An adequate income in retirement 

• The best possible physical and mental health which science can make available and without regard to economic status.

• Suitable housing,

• Full restorative services for those who require institutional care.

• Opportunity for employment 

• Retirement in health, honor, and dignity

• Pursuit of meaningful activity within the widest range of civic, cultural, and recreational opportunities.

• Efficient community services a coordinated manner and which are readily available 

• Immediate benefit from proven research knowledge 

• Freedom, independence, and the free exercise of individual initiative in planning and managing their own lives.

Resource: Log on to http://seniors-site.com/helpm/amer_act.html
and look for information on the Older American's Act.  This site is a BLOG but monitored by seniors and I have found it very accurate.

After the Federal government passed the OAA, they needed a method of distributing funds to the states. So states were invited to participate by creating aging networks. This would enable them to receive federal funds for older adults. In California, that led to the passage of the Older California's Act and the creation of today's California Department of Aging in Sacramento, Calif. 

Resource: Visit the California Department of Aging and check out the programs available in California. http://www.aging.ca.gov/ 

(NOTE: If you have trouble getting this or any site to link,  you may need to open another browser window. Check  your handout Browsing the Web if you need help or post your question in the discussion area using the word HELP in your subject line. 

For Californians, Federal monies from the Older American's Act are administered by the California's Department of Aging .The Department then issues grants to 33 area agencies that provide leadership in programs at the local level. http://www.n4a.org/ to visit the Area Agencies Web sites. 

Refer to the electronic handouts under week ten - The History of The Aging Network, California Area Agencies on Aging and Administration of Aging Services located at the Electronic Handouts

You may have noticed that services for older adults differ from one community to the next.  This is because not every community needs the same services.  Area Agencies conduct surveys to individualize services to the needs of each community. The idea is that each geographic area has different and unique problems to solve. For example, residents of a rural community many need more transportation services than a metropolitan city would.  Using a questionnaire, the elderly residents are asked to explain their needs . The surveys are then  used to develop a plan for each area. 

This site helps seniors and families wade through the multitude of  programs . You might check it for programs for a grandparent or parent. http://www.benefitscheckup.org/

3.  What about 24/7 care at home?    

Currently, there is a gap in community based LTC.  If an elderly person needs more constant care, such as help getting up at night, or supervision 24 hours per day, 7 days per week, OAA programs are not suitable. In other words, there are no OAA programs that provide for 24 hour home care. The elderly are then required to pay for these services themselves. Costs can be quite high. For example:

• Home care aides can cost between $18-20. per hour 
• An R.N. can cost $35.00 plus per hour depending on the state you live in.
• Round the clock help at home can cost thousands of dollars per month
• Many elderly go broke quickly paying for LTC

In many cases, older adults who cant pay these costs are institutionalized since Medicaid (Medi-Cal in California) will pick up the costs for low income folks.

2. How is Institutionally Based LTC Financed?

1. The cost of nursing home care today can exceed $100,000 per year. 

 How are these costs paid?

• After a hospitalization Medicare (if you recall it is a program of Social Security) will cover the costs while a person is receiving rehabilitative care. Some people are not well enough to go directly home after they no longer need hospital care. Rehab hospitals provide a step-down level of care. 
  
  To review, Although up to 100 days, after a hospitalization, is technically covered, just 21 of those days are covered at 100 percent. After 100 days however, the patient is responsible for 100% of the costs. 
  MediCare pays only 2% of nursing home costs as an extension of hospital care under the Social Security Program. 
  
• Medi- Cal  is a program for low income people in California. It is a program under the federal Medicaid program and is different from Medicare. 
  
  Each state receives money from the federal government to implement a state run medical program. 
  If we lived in Arizona maybe it would be called Medi-Ariz (its not, but you get my point).
  
  It is a means tested program, meaning that one must be low income and meet qualifying criteria. Medi-Cal 
  has become on of the largest financiers of LTC. The program funds 2/3 of nursing home residents and pays 36% of America's nursing home costs. Nearly 40% of all Medicaid benefits go to older adults, mainly 
  for nursing home care. Medicaid was not created to serve this purpose, but to provide health care for low-income individuals of any age. Its costs are rising rapidly. 
  
• Private pay- individuals pay out of their pocket for their care.
  • Of those who enter a nursing home as a private pay nearly 90% are impoverished with in a year. Then often they qualify for Medi-Cal the program for low income people.
    

2. Long-term care insurance - 

   Costs of long term care are also paid by Long-term care insurance

The purchase of private long-term care insurance is a recent option for those who want to plan for their future long-term care needs. Nearly 3 million policies are held with over 100 different companies at present. However, these policies represent just 7% of the total funding of long-term care costs in the U.S. today. 

However, people are not buying Long Term Care insurance policies in the numbers needed to support the program. Its no wonder with rising premiums, decreasing benefits and uncertainty if the policy will cover needed services. You can read more about it here. http://www.forbes.com/sites/howardgleckman/2012/08/29/whats-killing-the-long-term-care-insurance-industry/

Other factors affecting the purchase of Long Term care insurance include:

• Age
• health status
• overall retirement objectives
• and income
  

For example, if your only source of income is minimum Social Security benefits or SSI (supplemental security income) you should not purchase a policy. You would probably benefit from Medicaid spend down . Medicaid spend down (or divestment planning )involves making one look improvised so they qualify, financially, for this program. This option is discussed in more detail below. 

People with significant assets may wish to buy LTC insurance if they want to save these assets for family members, of if they want to maintain their independence and not burden their children with nursing home bills.

Experts are questioning -- Given the cost of LTC and the impoverishment rates, why aren’t more families buying LTC insurance?

Whats Wong with Long Term Care? No one is buying it http://www.forbes.com/sites/howardgleckman/2012/08/29/whats-killing-the-long-term-care-insurance-industry/

3. Let's Look at Some of the Issues

1. When Might You Not Need LTC Insurance?
   If one qualifies for Medi-Cal (which at the federal level is called Medicaid), and needs to be institutionalized, there would be no need for Long-term care insurance. Remember, Medi-Cal pays for 100% of institutionalized care if one qualifies. But many middle-class people do not qualify for Medicaid.

To qualify  one must have an income of 133% below the poverty line ( increased by the Affordable Care Act of 2010) or just over $1200. per month for a single person.

That is not much money. Some argue that these strict guidelines are discriminatory towards women since women live longer and are more likely to be widowed and in need of LTC.

2. Divestment Planning:
   Because of the costs of LTC and the requirements to qualify, many families are using a technique called divestment planning.

This is an approach used by middle class families to help make it possible to qualify for Medicaid coverage for nursing home costs.

The technique is to appear to be poor by taking advantage of legal loopholes .

Individuals spend down their lifetime accumulated assets until they become impoverished and are eligible for assistance. This results in Medicaid planning, or planning for impoverishment. This is accomplished by:

• Transferring assets at least 30 months ahead of applying for Medicaid
  
• Transfer of assets between husband and wife 
  (only in non-community property states).
  
• Seek protection through a court order
  
• Keep assets in a form exempt from Medicaid, such as buying a large home
  
• Set up a trust account. One company describes a trust account as 
  ". . . providing a safe haven for your assets, while you maintain control by limiting
   the duties of the trustee to precisely the extent to which you are comfortable".

Elder Law attorneys help older people plan for protection of their assets. They specialize in financial and other issues for older adults.

Something to remember about LTC planning
When a non-married Medi-Cal recipient dies, the state may put a lien against the estate to recover the costs incurred.  If the recipient is married, the state may put a lien against the estate when both spouses die.  

3.  Objections:
   
   There are however, those who oppose divestment planning on social and ethical grounds. 

Some say it is equal to what corporations do to avoid paying taxes. Critics argue that this form of Medicaid planning is socially immoral and bankrupts an already overburdened system. Although legal, they feel that it stands at the borderline of not being legally and social moral.

Critics also feel that taxpayers should not pay to protect the inheritances of affluent families since divestment planning often protects inheritances. For these critics it seems wrong for some to preserve inheritance while people who can't pay for attorneys are forced to impoverish themselves to pay for LTC .

Congress tried to close these loophole in 1982 by allowing liens on the property of living recipients and tried to recover the cost of  LTC from the estates of deceased recipients.

The intent was to assure that all the resources available to an institutionalized individual, including equity in a home, would be used to defray the cost of supporting the individual in the institution.

However, states have been lax in implementing this law. Can you guess why?

It was politically unpopular with voting constituents and because the elderly vote in record numbers politicians could not afford to alienate a large section of voters. 

Although the law was full of loopholes only one state fully used the lien power.

We all agree that we should plan ahead for LTC, but is the transfer of assets immoral? Some say it is no different from planning ahead to minimize taxes. Others say that the transfer of assets is a very troubling practice. What do you think?

4.  Choices
   
   In your text, Moss argues that perhaps we should, as a society, give people a clear choice between access to public funding for LTC or preservation of their estates- not both.
   

• His argument goes back to the issue of individual equity and social responsibility. 
  If people know that they can not protect themselves privately against the risk of
  LTC costs then their government will provide the necessary care.
  
• But if they own property, Moss argues,  they must understand that it will be recovered 
  when it is no longer needed for their livelihood or for their immediate dependents.
  
• Moss  also argues that such a policy would pay for publicly funded care and ensure that 
  the same benefits will be available for others.
  
• No doubt, his policy would increase the demand for private risk-sharing products like 
  Long-Term Care insurance, create more suppliers of LTC insurance, and create more 
  competition. Perhaps maybe even stimulate the birth of better policies.

But how can low income seniors pay for LTC coverage? Many elderly are house rich and cash poor. That means that they bought homes that have sharply increased in value. These homes are valuable assets. Yet, many do not have large sums of cash to pay for insurance. If adult children are faced with the potential loss of their inheritances, will they contribute voluntarily towards LTC  insurance premiums? Would you?

II. Other Questions To Consider

Is LTC insurance a good buy?  Nearly 82% of the general  public state that they recognize that they could not afford to pay the cost of community or institutional long term care. Policies have many exclusions and limitations that complicate comparisons among competing products. For example insurance companies generally will not write insurance for preexisting conditions. This excludes coverage of many chronic diseases.

What is the ideal age to buy a policy? Most experts say that mid-50's is the ideal age. What income level should one have  to make insurance worth while? Generally, if you can't divestment plan, you need LTC.

Generally policies pay a fixed dollar amount for each day of care covered. One's life expectancy should be considered when purchasing a policy.

Be sure to check for inflation protection. Without inflation protection a person buying LTC coverage at age 60 may find the policy inadequate when it is needed at age 80. It is helpful to remember that companies can and do raise premium rates without notice.

And lastly, states have different requirements and laws for LTC insurance. Be sure to check out the  Long-Term Care Insurance handout

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