Posts Tagged ‘long-term care’

Unreachable Joint Account Makes Applicant Ineligible for Medicaid

NOVEMBER 14, 2016 VOLUME 23 NUMBER 43
Paul (that’s not his real name) needed long-term care. His health and his mental capability had both declined, and he could no longer handle his personal affairs nor take care of himself.

Paul’s assets included a car (titled in his and his daughter’s names) and three Bank of America (its real name) bank accounts. Those assets put him over the $2,000 eligibility limit for Arizona’s version of the federal/state Medicaid program, the Arizona Long Term Care System (ALTCS).

One problem: Paul’s daughter had her name on the bank accounts and on the car. She had the car in her possession, in fact — and she refused to turn it over.

Before he became incapacitated Paul had signed a power of attorney naming his sister as his agent. She went to Bank of America to get control of Paul’s accounts so she could use the money to pay for his care — and ultimately get him eligible for ALTCS coverage. That’s when she learned about a Bank of America rule: both signers on a joint account are permitted access the account, but an agent under a power of attorney may not exercise that authority on behalf of one owner without the other’s consent.

In other words, Paul’s sister could not close the account, remove Paul’s daughter’s name from the account, or even withdraw money to pay for his care — unless his daughter signed a form letting her do that. And Paul’s daughter refused to sign.

Paul’s sister applied for ALTCS coverage on his behalf. Even though he had assets over the $2,000 limit, she argued that those assets were actually unavailable. ALTCS regulations permit applicants to become eligible when assets are unavailable, and Paul’s sister argued that the situation with Paul’s bank accounts was no different from real estate owned jointly with an uncooperative family member, for instance.

ALTCS disagreed. The agency determined that Paul could get access to his own account if his sister just initiated a court proceeding — a conservatorship of his estate. Consequently, ALTCS declined to grant him eligibility.

Paul appealed (through his sister, of course). The court considering the agreed with her, and ordered ALTCS to cover Paul’s care costs. ALTCS appealed from that decision.

The Arizona Court of Appeals last week issued its opinion in the case. It agreed with the ALTCS agency, ruling that Paul could have access to the account by having his sister initiate a conservatorship. As conservator, reasoned the appellate court, she could then withdraw money from the account for Paul’s care — and that made the whole account a countable, available resource. Paul’s ALTCS eligibility was denied.

The Court of Appeals acknowledged that there would be some cost and difficulty getting access to Paul’s money. That, though, was not enough to prevent counting the asset as available. “Any practical inconvenience or accessibility difficulties are not relevant to determining whether assets are to be counted,” ruled the judges. McGovern v. AHCCCS, November 8, 2016.

The decision in Paul’s case simply fails to deal with the practical realities facing Paul and people in his circumstances. The opinion does not make clear how large the joint accounts might have been (except that they obviously exceed $2,000), but the practical reality is that a conservatorship proceeding might well cost thousands of dollars — and could cost even more if Paul’s daughter simply objected. She, after all, would have a higher priority for appointment as conservator than his sister, and her side of the story about the accounts is simply unmentioned in the appellate decision.

Even if Paul’s sister was appointed as conservator, that does not guarantee that she could get access to the accounts. Bank of America might well insist on getting the joint owners’ consent to close an account, or make other changes in the account structure. Paul’s daughter, when faced with the likelihood of losing the accounts, might actually close them out; she would not be hamstrung by the Bank of America rule about powers of attorney, after all.

And Paul’s vehicle? As joint owner, his daughter has absolute right to possess and use the vehicle. Getting it back for Paul, or forcing his daughter to buy out his interest, would almost certainly cost more than the value of the vehicle — and might not be successful even after significant expenditures.

The outcome is especially odd since ALTCS easily recognizes that joint ownership creates problems for other kinds of assets. Joint tenancy real estate, owned with a family member? No problem — eligibility can be granted (though it is described as “conditional” eligibility, requiring the ALTCS recipient to make efforts to sell their fractional interest). But bank accounts — even small accounts worth far less than a piece of real estate — are treated differently. Or at least the bank accounts in Paul’s case were treated differently.

Another irony: Paul had actually died before his case even got to the appellate level. The dispute was about whether ALTCS would have to pay for the care he had already received — and (though the opinion does not clarify this point) it is likely that his care facility is the one left without recourse, not his sister and not his daughter.

Long-Term Care Insurance: A 2013 Update

MARCH 16, 2013 VOLUME 20 NUMBER 11
A colleague recently asked if we knew why long-term care insurance premiums might be climbing significantly in the next month or so. We didn’t, but it got us thinking about how the industry has changed over the past few years. Is it still a good idea to purchase insurance to cover possible costs of institutional or home care in the future? If so, who should be considering such policies, and what should they expect to pay?

First, the cost figures. The American Association for Long-Term Care Insurance, an industry trade group, conducts a survey of prices every year. The AALTCI’s 2013 figures were released, as it happens, this month. The short version: long-term care insurance costs have risen significantly in the past year. They calculate, for instance, that a 55-year old buying a typical policy might expect to pay $2,065 per year in premiums; the same policy last year would have cost $1,720. That’s about a 20% increase in cost, during a year where the general cost of living increased at something more like 2%.

Of course, your mileage may vary. If you are older or younger, married rather than single, or purchase a “richer” policy or one with less coverage, you might see a greater or lesser increase. But there’s no doubt that the cost of long-term care insurance has increased in the past year, continuing a trend of the past several years. Jane Bryant Quinn, a leading columnist for AARP Magazine, last year reported that premiums were up as much as 50% over the preceding five-year period.

More significant, perhaps, is the problem of a contracting market. Both buyers and insurance companies are leaving the long-term care insurance marketplace (though the number of new policies has rebounded somewhat since the economic downturn of five years ago).

So what’s happening to the marketplace? Historically low interest rates have the perverse effect of increasing insurance costs (since insurance companies are investing your premium dollars in order to generate income to pay future claims, costs of administration and profits). Life expectancies continue to increase, and uncertainty about the length of a policy-holder’s life makes actuaries a little twitchy — and conservative. Medical advances introduce the possibility of cures for some of the diseases that cut life expectancies short — and create the paradoxical possibility of extended nursing home stays. And, surprisingly, existing policyholders are not dropping their policies at the rate predicted years ago — meaning that more claims are being made on older policies than insurance companies anticipated. While most insurance products experience a “lapse” rate of about 5%, the figure for long-term care insurance is more like 1%. In short, the long-term care insurance industry is in trouble.

That might mean that long-term care insurance is more expensive, or harder to locate, but it doesn’t necessarily mean that consumers should avoid the product. The cost of long-term care can easily exceed $100,000 per year in a nursing home or in home care (in fact, home care is often more expensive than institutional placement).

It is, of course, impossible to predict which potential buyers will need long-term care insurance. But there are some generalizations about the purchasers of LTCI policies that might give some guidance — if only on the theory that the marketplace is wiser than individual buyers. Here are some observations about typical buyers and policies, drawn from the American Association for Long-Term Care Insurance reports and financial writers over the past few years:

  • The average age of new LTCI policy purchasers is dropping. Twenty years ago it was almost 70. Today it is below 60 (it was 59 in 2010-2011, according to America’s Health Insurance Plans, an insurance industry trade group).
  • Not too surprisingly, wealthier people buy more policies. The AHIP study reports that more than half of policies are purchased by people with incomes over $75,000 per year; more than three-quarters of all policies are owned by people with liquid assets of more than $100,000.
  • There is a correlation between education levels and policy purchases. Nearly three-quarters of long-term care insurance buyers are college-educated. For comparison purposes: about a quarter of all those over age 50 have college degrees.
  • Women and men buy long-term care insurance policies at rates almost exactly equal to their respective shares of the over-50 population. Married people buy policies at a slightly higher rate than their representation in the age group, and divorced, separated and widowed seniors are much less likely to purchase policies.
  • One of the significant drivers of cost of a particular LTCI policy: inflation protection. About three-quarters of policies sold in  recent years include a provision for automatic increases in coverage — most of those provide for about a 3%/year increase, down from the 5%/year that was more common twenty years ago.
  • In 1990 nearly two-thirds of LTCI policies covered nursing home or institutional care only. Today almost all policies (95%) cover both nursing home and home care. But more than half of the more modern policies will still be exhausted if the buyer spends four years in a nursing home.

Does all this mean that you don’t have to worry about long-term care costs unless you are age 59, college-educated and earning an income of $75,000 or more? Of course not. In fact, it may be more important that you shop for insurance if you are younger and more solidly middle-class (as judged by your income and assets). You might have more to lose, and a harder time paying for nursing care you might end up needing. We urge you to talk with an insurance salesperson about long-term care coverage.

What Is “Elder Law”?

OCTOBER 15, 2012 VOLUME 19 NUMBER 38
At Fleming & Curti, PLC, we practice “elder law.” But what does that mean? Are all our attorneys elderly? (No) Are they all senior members of a religious group? (No) Are all our clients above a certain age? (No) Then what is the significance of the term “elder law”?

Sometimes we rebel against the term. When asked what kind of law we practice, we might say something like: “We limit our practice to guardianship, conservatorship, estate planning, probate, long-term care planning, trust administration and special needs planning.” The problem with that formulation is obvious: it seems oxymoronic to “limit” your practice to seven items — and to be complete we probably should thrown in two or three others.

No one practicing “elder law” likes the term. It is not descriptive of our clients: a significant number of the cases we handle involve children — often even toddlers — and many of our clients are middle-aged children of aging parents. It is not easy for clients to relate to: when asked what constitutes an elder or senior citizen, most of our clients immediately think of someone just a few years older than themselves.

All elder law attorneys think from time to time about better descriptions they might use. The problem with that effort, though, is that no one has come up with a better label, or even one that comes closer to describing what we do.

What do we (elder law attorneys) do? For that matter, what do we (Fleming & Curti, PLC) do? Here’s a sampling:

Guardianship and Conservatorship. In Arizona, a guardian is a court-appointed person who makes medical and placement decisions for an incapacitated adult or a minor child whose parents are not available to handle those duties. A conservator fills a similar role, but handles money; a conservator can be appointed for an adult who is unable to manage his or her finances because of a disability, or for a child. Note that there is no requirement of a finding that the child can not handle money, or that the child’s parents can not do so; a child is legally incapacitated no matter how capable he or she might be, and the child’s parents do not have any automatic right to make financial decisions for him or her (as they do for medical and placement decisions). So that means guardianship and conservatorship may be necessary for the very young, and for adults who are incapacitated — whether by dementia or by other illness or condition.

Getting a guardian and/or conservator appointed is only part of the battle. Once appointed, a guardian or conservator is answerable to the courts, and must file annual reports and accounts. It is an intensive exposure to the legal system, and very difficult to navigate without the help of counsel. Like us.

Estate Planning. We write wills, trusts, powers of attorney and other estate planning documents. Most of our clients in this area are older than, say, their mid-50s — but not because that’s who needs estate planning. Younger people (including the parents of minor children, anyone who drives a vehicle, anyone who has ever seen a doctor) also need to complete estate planning. They just tend not to until they reach an age where they see the value. As one of our clients wisely said: “the two kinds of people you hate to deal with are doctors and lawyers — and when you get older you spend a lot of time with both.”

Older people may have more complicated estate plans. They may have larger tax concerns (because they have had time to acquire more assets). They may have others (children with disabilities, spouses with failing abilities, long-time friends they have helped over the years) who rely on them and need their consideration. They also may feel somewhat more mortal. And so they tend to be the ones who get to the lawyer’s office — and hence the estate planning business seems to be (but should not be) an issue for elders.

Long-term Care Planning. Nursing home costs will likely bankrupt most families if someone has to spend more than a few months in a care facility. Planning for how to deal with that should start early, and include (among other things) long-term care insurance. But most people don’t plan for possible institutionalization. Instead, they bravely insist that “I am never going into the nursing home.” Many of them turn out to be wrong, but most of those won’t know how wrong they were until they are, well, elderly. Most (but certainly not all) of the residents of nursing homes and assisted living facilities are elderly. So the practice of preparing people for that eventuality, and of helping spouses and children get ready to place a loved one in such a facility, has come to be thought of as “elder” law.

Trust Administration. While creating and funding a living trust may avoid the probate process, that is not the same as saying that your (successor) trustee will not need any contact with lawyers or accountants. In fact, your trustee will probably need both. But even your trustee will probably be elderly by the time you die. Odds are that you will be, too. So this tends to look like a legal problem involving the elderly, though plenty of trustees are younger and a lot of people sign trusts when they are younger, too.

Probate. Some people don’t plan for probate avoidance, either because they didn’t get around to it or because they consciously engaged in a cost/benefit analysis and decided it wasn’t worth the expense (to them, at the time). Whatever. Probate administration, like trust administration, is an area of practice that often — but not always — involves people who are elderly.

Special Needs Trusts and Planning. This one has the most tenuous link to the elderly. The beneficiaries of most special needs trusts are young — often infants or toddlers. Even the parents of special needs trust beneficiaries may be young — perhaps even in their 20s. So how does this become an “elder law” issue? It’s simple: the government programs and rules that are involved in special needs trust planning, establishment and administration are the same programs and rules involved in long-term care for the elderly. But saying “I’m an elder and special needs lawyer” just doesn’t trip lightly off the tongue, and it begins to sound like we are trying to describe our own circumstances, not those of the people we strive to help.

So that’s what we do as “elder law” attorneys. Is that all we do? No, we also have a few other areas we might work in — like guardianship of minors, advance directive preparation and interpretation, or recovering from abuse, neglect or exploitation. But that’s the bulk of our work.

Feel free to come up with a better, shorter, more user-friendly term. We’ve been working on it for years, but we are confident that there is a good answer out there. Somewhere.

In-Home Caretaker Wages Deductible Based on Doctor’s Letter

SEPTEMBER 5, 2011 VOLUME 18 NUMBER 31
Queens (New York) resident Lillian Baral was in her early 90s. She lived at home, but she required full-time assistance with her care. In 2007 she paid two caretakers a total of $49,580 for live-in care (one lived with her for five weeks while the primary caretaker took a vacation). Were the payments deductible on her income tax return?

The short answer, according to the U.S. Tax Court: yes. Not surprisingly, the more complete answer is complicated and depends on the specific facts of Ms. Baral’s case.

Ms. Baral had been diagnosed as suffering from dementia as early as 2004, three years before her long-term care costs became a tax issue. In December, 2006, her physician wrote an evaluation of her then-current mental status. He found her to be confused, unable to communicate clearly and at risk of falling in her home. Because of her memory deficits she would require assistance with the activities of daily living, he wrote. She needed full-time assistance and supervision for medical and safety reasons if she was going to stay at home.

Ms. Baral’s financial affairs were being handled by her brother David, relying on a power of attorney she had signed some time before. He paid all her bills, handled her checking and other accounts, and hired the nursing service to care for her in her home. By the end of 2006, in an effort to save money, he had discharged the nursing service and hired one of their caretakers directly to live with his sister and oversee her care.

Mr. Baral did not, however, remember to file his sister’s income tax returns for 2007. The Internal Revenue Service noticed, and near the end of 2009 they filed a “substitute for return” based on records available to the IRS. The form indicated that her income for 2007 had been $94,229; after including a personal exemption and a standard deduction, the IRS calculated that Ms. Baral owed $17,681 plus interest and penalties.

By the time the IRS sent out its notice, Ms. Baral had died. Her brother had been appointed as personal representative of her estate; he argued that (a) she had not been required to file a tax return at all, and (b) she was entitled to a medical expense deduction for the long-term care costs she had incurred. The IRS disagreed on both scores.

The dispute ultimately found its way to the United States Tax Court, which hears claims and defenses regarding income tax returns (along with other tax-related proceedings). The Tax Court ruled that the key legal question was whether Ms. Baral was a “chronically ill individual.” If she was, then her caretakers’ salaries would be “qualified long-term care services” and therefore deductible. The court noted that there are three ways to identify a “chronically ill individual”:

  1. Was Ms. Baral unable to perform at least two of the six “activities of daily living”? The six ADLs are: eating, toileting, transferring, bathing, dressing, and continence. Although her physician had said that she required assistance with her ADLs, he had not identified which ones — and therefore the court could not determine whether she was deficient as to only one, or as to two or more. She did not meet this standard.
  2. Did Ms. Baral have a level of disability “similar to” the ADL standard? Again, the court found that the physician’s evaluation was not clear.
  3. Did Ms. Baral require substantial supervision to protect her from threats to her health and safety because of “severe cognitive impairment”? Applying this test to Ms. Baral’s condition and circumstances was a little easier for the court. Because her physician had described her as demented, and at risk for falls or failure to take prescribed medication, Ms. Baral met this test.

Fortunately for Ms. Baral’s tax situation, only one of the three standards had to be met. Because of the evaluation by her primary care physician in 2006, the cost of her live-in caretakers would be a legitimate deduction on her income taxes — or at least it would be deductible to the extent that it exceeded 7% of her adjusted gross income.

Ms. Baral’s brother had also argued that he should be able to deduct the $760 paid in 2007 to her physicians (the Tax Court agreed) and the $5,566 she paid to caretakers for reimbursement of expenses they incurred on her behalf. The Tax Court denied the deduction for reimbursement, since there was no evidence that the payments were for medical items. If Mr. Baral had been able to show that they were, for example, co-payments on prescription medications, or over-the-counter medications at the direction of her physician, or medical supplies, they would have also been deductible. Estate of Baral v. Commissioner, July 5, 2011.

What does Ms. Baral’s case tell us about tax issues surrounding home care? Several things:

  • Keep good receipts. To the extent possible, segregate clearly deductible expenses from questionable or non-deductible expenses, and make sure the purchases are identifiable.
  • Get a good doctor’s letter. Ask the attending physician for a letter that specifically addresses ADLs, the need for caretakers to protect the patient’s safety AND a general description of limitations on the patient’s abilities.
  • If you are in charge of the patient’s finances, file their income tax returns. Someone with $95,000 of income — even if much of it is Social Security and pension income — is almost certainly going to need to file a return. Mr. Baral would have had a much easier time if he had filed the return claiming the deductions, rather than having to argue about the IRS’s “substitute for return” after the fact. Note that the IRS action was delayed, too — it can be that much harder to prove the taxpayer’s condition two (or three, or four) years after the fact, and it is not uncommon to be addressing these issues after the taxpayer’s death.

Medicaid Underpays Nursing Homes By $9 Per Patient Day

SEPTEMBER 24, 2001 VOLUME 9, NUMBER 13

A new study commissioned by the American Health Care Association confirms what most senior advocates have long suspected: funding for long-term care services (and particularly nursing home care) is insufficient to pay the actual cost of care. While there is significant variation among the states, the federal-state Medicaid partnership program underpays providers by more than $3 billion each year.

The AHCA study was actually completed by accounting firm BDO Seidman, based on data collected from individual state Medicaid agencies. Arizona’s AHCCCS program failed to respond to the study, but 36 states did provide information from which the accounting firm could determine rough national figures for the Medicaid underpayment.

Most analysts agree that slightly less than half of all 65-year-olds can expect to spend at least some portion of the rest of their lives in a nursing home, so the payment system for nursing home care is important to a large portion of the senior population. A majority of nursing home residents (over 67% nationally and 63% in Arizona) receive Medicaid benefits, making the program’s reimbursement rates critically important for ensuring future quality in long-term care facilities.

The AHCA study looked at 1999 reimbursement rates for the 36 states providing data. On average, Medicaid’s shortfall was a little more than $9 for each day a Medicaid patient spent in the nursing home; with just over a million Medicaid patients in nursing homes nationwide on any given day, the annual shortfall exceeds $3.3 billion nationwide.

New Jersey and New York showed the largest shortfall per patient and total shortfall, respectively. Alabama was the only state which paid more in Medicaid benefits than the cost of patient care; its reimbursement of $102.78 per Medicaid patient day was actually $2.48 more than the facility’s costs.

Although most states in the West (notably Nevada, Oregon, and Utah) underpaid by more than the national average, Colorado, California and New Mexico helped keep the region’s average underpayment lower than the national figure. The South (including Texas, Alabama and Virginia, three of the states with the lowest underpayment rates) demonstrated regional rates closest to the allowable Medicaid costs—despite including Florida, one of the least generous states. Underpayments in the Northeast exceeded the national average in every state except Connecticut and West Virginia. The average shortfall for states in the Midwest was almost identical to (and slightly below) the national average shortfall.

The AHCA website (www.ahca.org) contains more detail about the study as well as other statistical details.

New Studies Show Children As Caregivers For Aging Parents

APRIL 7, 1997 VOLUME 4, NUMBER 40

Two recent studies demonstrate that children of the frail elderly spend more time and money on care of their parents than is widely supposed. Despite the popular image of “baby-boomer” children as self-involved and neglectful of their elders’ needs, the research indicates that the amount of effort invested in elder care has actually increased over the past decade.

In 1987, according to one of the studies (sponsored by the American Association of Retired Persons, the National Alliance for Caregiving and others), seven million families were involved in providing long-term care for parents or other relatives. That number has more than tripled, to 22.4 million.

Fully half of employed caregivers have missed work time to care for their elders in recent years, reflecting an increase from just over two-fifths a decade ago. Another surprise: almost half of long-distance caregivers are male, despite the stereotype of daughters providing all the care for aging parents. The average age of long-distance caregivers: 46–which places the average caregiver solidly in the baby boom generation.

Long-distance caregivers make up a distinct portion of the children providing care for elderly relatives. 70% of those out-of-town care providers are employed, and they provide assistance with everything from bill-paying to hiring and managing on-site caretakers.

The second recent study, commissioned by the National Council on Aging, shows similar results. The NCOA focused its study on caregivers who live at least an hour from their elders. While that study showed that only 15% of caregivers have taken unpaid leave from their jobs to deal with elder care responsibilities, it suggests that out-of-town caretakers provide more than just their time to support aging elders. In fact, the NCOA caretakers had spent an average of $196 per month of their own money to provide or oversee care, and spent 35 hours per month on making the arrangements and visits necessary to keep their elders safe and provided for.

The NCOA study (funded by the Pew Charitable Trusts) also revealed another important detail about long-distance elder care: the length of time such arrangements continue. According to the study, the average long-distance caretaker had been involved in helping out for just over five years.

Both studies demonstrate the reality of caregiving at a time when public policy debates focus on the spiraling costs of long-term care. According to the conventional wisdom, children (and especially baby boomers) are interested primarily in receiving their depression-era parents’ estates as quickly as possible. That is the view that invests policy determinations, from Congress’ recent attempt to make criminals out of parents who give away property before institutionalization to Medicaid’s refusal to provide any substantial home care alternative to nursing home placement.

Even as the American population ages inexorably, the public debate shifts away from reasoned solutions of the growing funding problem associated with long-term care and toward demonizing of the segment of society most likely to require assistance. The long-term care insurance industry, eager to develop a market in this growth field (a tiny fraction of long-term care costs is currently paid by insurance, with the majority of funding coming from the federal Medicaid program), has led the charge with a two-fold attack: accusing children of the frail elderly of greed while trying to frighten the elderly themselves with visions of bankrupt government programs and allegedly substandard care. Unfortunately for those who make the first claim, the AARP and NCOA studies clearly demonstrate that the elderly receive tremendous assistance from their children, even across long distances.

Long Term Care Insurance: Who Needs It? Which Policy?

JANUARY 27, 1997 VOLUME 4, NUMBER 30

With nursing home costs approaching $40,000 per year for most residents, the government’s Medicaid program has for decades been the “safety net” for families with long-term care needs. In recent years, escalating Medicaid costs and increases in the portion of national nursing home bill paid by the program have resulted in Congressional efforts to reduce Medicaid eligibility and coverage. Prudent elders should be considering other ways to ensure that nursing home stays can be paid for if needed.

A relative handful of individuals have long-term care available from religious or service group affiliations. Another small portion of the population can rely on government programs other than Medicaid, but for most elders the only alternatives are to accumulate substantial personal wealth (a common goal, though sometimes difficult to realize) or purchase long-term care insurance (LTCI).

A recent review of LTCI purchasing strategies by Elder Law Forum (a newsletter published by Legal Counsel for the Elderly, Inc., and sponsored by AARP) points out some of the considerations for typical buyers. The review makes several points for the “typical” LTCI buyer:

  • About half of 65-year-old women and a third of the men will spend some time in a nursing home.
  • Most nursing home stays will be short, with the median length of institutionalization being slightly less than one year.
  • LTCI premiums currently average about $1,000 per year for 60-year-olds, and rise to $1,500 for 65-year-olds and $2,000 for 70-year-olds.

If you (or a relative or client) are concerned about long-term care costs, some pertinent questions to consider include:

  • When should you buy? The average age of new policyholders is currently 67. Many employers now offer group plans, and a few younger people may buy policies. But for most people, waiting until age 60 to make the purchase is probably reasonable.
  • Should both a husband and wife buy policies? In many cases, one spouse or the other may be uninsurable due to illness or age. The “well” spouse should particularly consider LTCI, since she (most commonly) is likely to survive the “ill” spouse, and therefore have no spouse to care for her. Of course, this is another way of saying that the well spouse is likely to spend some considerable time providing care for the ill, uninsurable spouse, as well.
  • Does family history matter? If a potential LTCI buyer has a family history of strokes, high blood pressure, dementia, Parkinson’s or other conditions likely to require long-term care, insurance is more strongly indicated. Such persons should make the initial purchase at younger ages, since the onset of disability will usually make them uninsurable.
  • Does net worth make a difference? Couples with a net worth of less than $100,000 (not counting the family home), and individuals worth less than $50,000, may not need to consider LTCI, since (current) Medicaid rules will permit them to receive government assistance within a year or two of nursing home admission. Prospective LTCI buyers with large estates may not need the insurance, particularly if their estates generate $40,000 in annual income over and above their (or their spouse’s) other living expenses. In other words, LTCI is primarily of interest to the middle-class elderly.
  • How important are individual policy provisions? Very. Some policies provide excellent coverage for home health care, while others do not; a policy without home care provisions might unnecessarily force the owner into an institution.

A checklist for comparison shoppers can help frame some of the issues. For a helpful checklist, contact FLEMING & CURTI at the fax, e-mail or street address below.
330 N. Granada Avenue, Tucson, Arizona 85701
520-622-0400 / FAX: 520-203-0240

Family Care-Givers of Elderly Recognized for Budget Impact

DECEMBER 23, 1996 VOLUME 4, NUMBER 25

National policy considerations regarding long-term care of the elderly and disabled are beginning to be noticed by business and political leaders. When the business-oriented Wall Street Journalwrites about the issue, conservative politicians and policy makers can not be far behind.

In a December 11, 1996, article titled Families of Elders Have a Lot Riding On Budget Debates, the Journal recognizes the profound effect Congressional action can have on the quality of life for elders and their caregivers. Of particular interest is the analysis of the recent Kassebaum-Kennedy law criminalizing some gifts by those facing long-term care expenses (see Elder Law Issues, August 19, 1996). The Journal article refers to the new law as the “throw-Granny-in-jail” law.

Although Medicaid now pays for approximately half of all formal long-term care for seniors and the disabled, the Journal article points out a more profound statistic: as much as 80% of long-term care is provided directly by family members. Nearly all of that care is provided in the home, where Medicaid is the least likely to be considered as a possible substitute.

Government involvement in long-term care has focused primarily on nursing home placement. In the past five years, however, the government’s role has begun to shift. While Medicaid provided $3.4 billion in home care services in 1990, by 1995 the figure had tripled (to $10.33 billion). At the same time, Medicare (which has traditionally provided more home care services than Medicaid, but still has focused on institutional care) increased its home care benefits from $3.66 billion to $14.90 billion, a four-fold increase.

Now Congress is seeking ways to cut the federal budget, and particularly the federal-state commitment to Medicaid care. The “throw-Granny-in-jail” law is an early attempt to restrict payments for long-term care (though some discussion is being undertaken in Congress about repealing the new law altogether). Any significant change in government benefits is likely to have a devastating effect on the ability of families to provide some care to their aging seniors. As theJournal article points out, it could also lead to the paradox of increasing nursing home costs as the family members providing 80% of care find themselves unable to make their care plans work.

1997 Medicare Figures

Beginning with the Social Security checks due January 3, 1997, Medicare premium deductions will increase to $43.80 per month (up from $42.50 per month in 1996). Since the new year also brings a 2.9% increase in the Social Security benefit, most people will still see a larger total check.

Other Medicare figures will also change beginning with the new year. The initial hospitalization deductible increases from $736 (1996) to $760 (1997). Coinsurance (the amount which Medicare beneficiaries must pay for their 61st through 90th days in the hospital) will increase from $184/day (1996) to $190/day (1997). “Lifetime reserve” days will have a copayment increase from $368 (1996) to $380 (1997).

Skilled nursing care copayments will also increase, from $92/day (1996) to $95/day (1997). Since Medicare has no deductible or copayment from the first twenty days of skilled nursing care, however, the copayment amount only applies to the 21st through 100th day of nursing home placement.

Medicare HMO participants will not be affected by the new copayments and deductibles. HMO programs are permitted to charge less than Medicare copayments and deductibles, and most (in the Tucson area, at least) charge only a single per-visit copayment. Similarly, Medicare beneficiaries with Medigap coverage will not be directly affected by the increases.

Congress Says Some Medicaid Planning Is A Federal Crime

AUGUST 19, 1996 VOLUME 4, NUMBER 7

Congress has acted once again to make it more difficult for families to secure government assistance with the costs of long-term nursing care. This time, the changes from Washington add a much more punitive element.

In enacting the Health Reform Bill (usually referred to as the Kassebaum-Kennedy bill, after its original sponsors), Congress included a provision turning ordinary citizens in crisis into criminals. Under the new act, it becomes a crime to transfer assets (or to assist someone else to transfer assets) when the transfer causes a period of ineligibility for Medicaid long-term care.

Curiously, the criminal sanctions are imposed for actions which already cause a period of Medicaid disqualification. The new law does not extend that disqualification or change the method of calculation in any way. Apparently, Congress believes that the principal cause of the runaway cost of long-term health care is the occasional practice of giving one’s assets away to qualify for assistance. Increases in per-patient costs, and demographic shifts adding tens of thousands of older patients to nursing home beds have once again been ignored as causes of a difficult social, medical and tax problem.

The criminal sanction for making disqualifying gifts is chillingly severe. Although the new law is so poorly drafted that it is impossible to tell whether the offense is a misdemeanor or felony, the lower penalty is up to a $10,000 fine and one year in prison; sanctions might be as high as a $25,000 fine and five years in prison. Cynical observers have already noted that the new law actually provides for easier access to public support; those who make transfers causing periods of ineligibility will be disqualified from receiving Medicaid assistance for a period of months or years, but could spend the intervening period in penal institutions at public expense. The supposed new practice is being referred to, with black humor, as “penitentiary planning.”

Who is targeted by this new law? Two groups are at immediate risk: the middle class elderly and their lawyers. Poorer patients need not worry about transfers of assets–they will qualify for public benefits relatively easily. Wealthier patients will have sufficient resources to avoid any ineligibility problems associated with transfers. Congress apparently hopes to terrorize the rest into using every penny of their savings for nursing home care, without regard to how hard they may have worked to accumulate their modest wealth, or the needs of those relying on them (including spouses, disabled children or family members who may have contributed mightily to care before institutionalization).

But the real targets of the new law are elder law attorneys. While tax attorneys routinely counsel clients on how to avoid paying millions of dollars to the government in legal, ethical and financially sound ways, Congress wants to prevent elder law attorneys from giving similar kinds of information to their middle-class clients. Because the law makes criminals out of transferors and anyone who aids or abets them, lawyers, spouses, family members and care providers are all at risk of prosecution. Congress apparently hopes that by imposing this draconian penalty they can make the problem of health care for an aging population simply go away.

Who benefits from this new provision? Arguably, insurance companies (middle-aged consumers are now supposed to buy more long term care insurance policies) and nursing home operators (more patients paying higher private-pay rates means more revenues). Unfortunately, Congress has ignored root problems in both industries. Insurance is too difficult to obtain and too expensive for most prospective patients. And nursing homes will lose more to Medicaid cost cutting than they can hope to make up from higher private-pay rates.

Seniors May Be Unable to Buy Long Term Care Insurance

JULY 29, 1996 VOLUME 4, NUMBER 5

Many political and public policy analysts argue that an important component of the funding for long term care in the future will be the private insurance industry. The cost of long term care continues to rise, and the share of the federal budget devoted to such care is expected to increase dramatically in the next few decades.

In order for insurance to be an effective tool for payment of long term care costs, purchasers will need to begin buying policies in larger numbers and at younger ages. Currently, long term care insurance pays for a tiny fraction of the total cost of care.

A new study published by the Agency for Health Care Policy and Research brings the need for younger customers to purchase long term care policies into stark relief. The study considered whether current insurance underwriting practices permitted substantial numbers of seniors to acquire such policies.

According to the study, 65-year-olds should expect to be rejected for long term care insurance between 12% and 23% of the time. At age 75, the rejection rate rises to between 20% and 31%. In other words, at least one out of ten concerned seniors who wait to purchase long term care insurance will find that they are unable to secure coverage at any price.

The study assumed that insurance companies would apply their current underwriting policies to all applicants, even if the pool of potential customers were to increase dramatically. Specifically, the study found that an applicant would be unable to purchase a policy if he or she was already in a nursing home, or if he or she suffered from cognitive impairments (such as Alzheimer’s Disease), cancer, cirrhosis, diabetes, chronic obstructive pulmonary disease or other major illness. Those applicants who were unable to perform activities of daily living, regardless of the cause of their disability, were also found to be uninsurable under present standards.

While it begins to be difficult to purchase long term care insurance at age 65, that is precisely the age group currently buying policies. As Elder Law Issues reported last February, a recent study by the Health Insurance Association of America found that half of new long term care policy purchasers are over age 70, and only one in five of those over age 55 even consider long term care insurance.

When Can You …

Some important ages for seniors to know:

55–You can withdraw funds from IRAs, 401(k)s, Keoghs, SEPs and other retirement plans without paying the 10% tax penalty if you retire, quit or are fired.

59½–You can withdraw funds from retirement plans without the tax penalty in any event.

60–You are eligible for Social Security benefits if you are a widow or widower.

62–You are eligible for early retirement (at a reduced rate) for Social Security; many private pension plans permit retirement.

65–You are eligible to retire with full Social Security benefits. You are eligible for Medicare. Most private pension plans provide full benefits. (Note, however, that the age for full Social Security retirement will increase gradually to 67 over the next quarter century; Medicare’s eligibility age is likely to change as well, though it is not presently scheduled to do so.)

70–You can receive full Social Security benefits regardless of how much you earn from employment. Until this age, your benefits are reduced if you have earned income over certain threshold amounts.

70½–You must begin withdrawing money from your IRA or other tax-deferred savings plan. The minimum required withdrawal is calculated by dividing the present value of your IRA by your life expectancy, taken from IRS actuarial tables.

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