Dorothy McMahon on Long-Term Care
Who's responsible for your health, wealth and well being?
Curriculum vitae
Dorothy McMahon, LUTCF, CSA, CLTC, LTCP is a Certified Long-Term Care Insurance Specialist and Consultant. She has been helping Michigan families since 1985 when she established her own insurance agency. She is the President of McMahon And Associates, Ltd. and has dedicated her career to educating seniors on the critical issue of planning for Long-Term Health Care. No one in Michigan has more of the crucial experience to serve your Long-Term Care Insurance needs than Dorothy McMahon. The insurance department often refers individuals to Dorothy for information that only a credible agent can provide.
Dorothy shows a seasoned understanding of the needs of retirees, successful professionals, business owners and baby boomers.
She has been the area’s top agent since 1987. Dorothy presents seminars and contributes articles to newspapers and magazines nationwide. She has appeared on television and radio addressing Long-Term Health Care issues and legislation. Her objective is to protect assets, independence, and dignity with the best possible Long-Term Care insurance policies from only the finest companies.
(248) 844-9787
LTCINSUSA@aol.com
Professional Associations
- - Women in Insurance & Financial Services (WIFS)
- - National Association of Insurance and Financial Advisors
- - National Association of Health Underwriters
- - Center for Long-Term Care
- - American Association for Long-Term Care
- - National Ethics Bureau
- - Better Business Bureau
- - Birmingham Area Senior Citizens Center - Chronic Illness Coalition
- - Citizens for Better Care
- - Geriatric Social Workers of Southeast Michigan
- - Michigan Society of Gerontology
- - National Family Caregivers
- - Senior Co-ordinating Aging Network
- - National Care Planning Council
- - Oakland Health Care Alliance
- - Greater Bloomfield Senior Association
- - The Education Association for Continuing Health
Long Term Care
Executive Briefing on Individual Long-Term Care Insurance
How many people choose to purchase long-term care insurance, and what kind of policies are they buying? How much money is being paid in claims, and where are those claimants receiving their care?
While the decision to recommend or buy long-term care insurance can be based on a number of highly individual factors, it’s enlightening to look at who is buying this protection, what they buy, and where they collect.
Twenty insurance companies participated in the “2010 Individual Long-Term Care Insurance Survey,” found in the July 2010 issue of Broker World magazine. Combined, these twenty companies sold 90% of all individual policies in 2009, the source year for the report's data.
CLAIMS
Fifteen of the twenty participating insurance companies reportedly paid out more than $2.3 billion in claims in 2009. More than 41% of claimants were collecting benefits at home or in adult daycare; 14% in assisted living facilities; and 44% in nursing homes.
POLICY CHARACTERISTICS
Multi-life sales of individual policies offered at an employer or other group, such as an association, have increased to 26% of total individual policies sold, more than doubling from 2007 to 2009.
MISCELLANEOUS
The top three LTC insurance carriers accounted for 55% of the industry’s first-year premium.
More than 58% of purchasers were women.
No matter their age, choice of policy design or of insurance company, long-term care insurance applicants make a deliberate decision to protect themselves against the financial consequences of needing extended care. Almost 200,000 people bought individual policies in 2009. If this isn’t a risk that you have personally addressed, perhaps some of the facts above will be helpful.
Dorothy McMahon is the founder of McMahon and Associates, an independent insurance agency that specializes in long-term care insurance. She will answer your questions and concerns clearly and concisely. Reach her at (248) 844-9787.
While the decision to recommend or buy long-term care insurance can be based on a number of highly individual factors, it’s enlightening to look at who is buying this protection, what they buy, and where they collect.
Twenty insurance companies participated in the “2010 Individual Long-Term Care Insurance Survey,” found in the July 2010 issue of Broker World magazine. Combined, these twenty companies sold 90% of all individual policies in 2009, the source year for the report's data.
CLAIMS
Fifteen of the twenty participating insurance companies reportedly paid out more than $2.3 billion in claims in 2009. More than 41% of claimants were collecting benefits at home or in adult daycare; 14% in assisted living facilities; and 44% in nursing homes.
POLICY CHARACTERISTICS
Multi-life sales of individual policies offered at an employer or other group, such as an association, have increased to 26% of total individual policies sold, more than doubling from 2007 to 2009.
- The average premium for new policies, excluding single premium sales, was $2,182 per year in 2009, down from $2,210 per year in 2008.
- The average age of a purchaser is 58 years. The trend since the advent of modern long-term care insurance in the late 1980s has been toward younger and younger purchaser ages.
- The average policy benefit period is 4.2 years. More than 14% of new purchases are for a lifetime benefit period.
- Approximately 70% of new policies include built-in inflation protection, such as 5% simple or compound.
MISCELLANEOUS
The top three LTC insurance carriers accounted for 55% of the industry’s first-year premium.
More than 58% of purchasers were women.
No matter their age, choice of policy design or of insurance company, long-term care insurance applicants make a deliberate decision to protect themselves against the financial consequences of needing extended care. Almost 200,000 people bought individual policies in 2009. If this isn’t a risk that you have personally addressed, perhaps some of the facts above will be helpful.
Dorothy McMahon is the founder of McMahon and Associates, an independent insurance agency that specializes in long-term care insurance. She will answer your questions and concerns clearly and concisely. Reach her at (248) 844-9787.
Your Money or Your Wife: Wives May Suffer When Husbands Refuse to Buy Long-Term Care Insurance
It’s a common scenario: a couple meets with their financial advisor who recommends they purchase long-term care insurance. Many times the husband refuses, saying that family history indicates care won’t be needed, that it’s too expensive, or that ‘we’ll take care of each other.’ But he may be in denial about the frailty that frequently accompanies old age, or he may simply be unaware of the consequences of failing to plan for long-term care, especially for his wife.
Frequently the result for our hypothetical couple is that the husband, who typically is older, needs long-term care and his wife becomes the round-the-clock caregiver with no insurance funds to alleviate her burden.
In this case, the husband often receives his long-term care for free, but the true cost is borne by the wive, who may become ill when faced with the Herculean task of care giving. Looking to their own future, these women are likely to be widows by the time they need long-term care, which is why the vast majority of residents in nursing homes are female. They simply didn’t have the“built in caregiver” their husband did.
Many people are aware of the phenomenon in which a spouse dies within a year of their mate; it’s often referred to as “dying of a broken heart.” But less obvious has been the similar impact of spouses who need long-term care.
A Harvard study reported that an elderly person’s risk of dying rises when a spouse is hospitalized, especially if the spouse has a debilitating disease such as Alzheimer’s or other dementia, or chronic heart and pulmonary diseases. The stress involved with such a hospitalization raises the risk of dying by as much as 30% for the healthy spouse.
Dr. Nicholas Christakis of Harvard Medical School comments, “There can be illnesses in your spouse that can be worse for your health than the death of your spouse."
Just as we plan for bigger retirement nest eggs to cover longer lifespans, we must also plan for the long-term care we would need should we face decades of chronic illness. Just as purchasing life insurance demonstrates love of a spouse, purchasing long-term care insurance continues a legacy of caring financially for your spouse for better or worse.
Dorothy McMahon is a Long-Term Care Insurance Specialist. Reach her at (248) 944-9787 for “Straight Talk About Long-Term Care” and visit her web site at mcmahonltcins.com.
Frequently the result for our hypothetical couple is that the husband, who typically is older, needs long-term care and his wife becomes the round-the-clock caregiver with no insurance funds to alleviate her burden.
In this case, the husband often receives his long-term care for free, but the true cost is borne by the wive, who may become ill when faced with the Herculean task of care giving. Looking to their own future, these women are likely to be widows by the time they need long-term care, which is why the vast majority of residents in nursing homes are female. They simply didn’t have the“built in caregiver” their husband did.
Many people are aware of the phenomenon in which a spouse dies within a year of their mate; it’s often referred to as “dying of a broken heart.” But less obvious has been the similar impact of spouses who need long-term care.
A Harvard study reported that an elderly person’s risk of dying rises when a spouse is hospitalized, especially if the spouse has a debilitating disease such as Alzheimer’s or other dementia, or chronic heart and pulmonary diseases. The stress involved with such a hospitalization raises the risk of dying by as much as 30% for the healthy spouse.
Dr. Nicholas Christakis of Harvard Medical School comments, “There can be illnesses in your spouse that can be worse for your health than the death of your spouse."
Just as we plan for bigger retirement nest eggs to cover longer lifespans, we must also plan for the long-term care we would need should we face decades of chronic illness. Just as purchasing life insurance demonstrates love of a spouse, purchasing long-term care insurance continues a legacy of caring financially for your spouse for better or worse.
Dorothy McMahon is a Long-Term Care Insurance Specialist. Reach her at (248) 944-9787 for “Straight Talk About Long-Term Care” and visit her web site at mcmahonltcins.com.
What Long-Term Care Costs and How to Use the Information
Whether it's an unforeseen car repair or the Medicare drug 'donut hole,' no one likes a surprise bill,but for many, the ultimate surprise bill will be the cost of long-term care.
Because Medicare has a limited skilled-care nursing home benefit, some people mistakenly think long-term care is covered by Medicare. However Medicare provides for a maximum of 100 days of care and, under still some conditions, a skilled home-care benefit limited to medically necessary nondaily visits.
The vast majority of long-term care is nonmedical custodial care and is never covered by Medicare, Medicare supplements or health insurance. Long-term care insurance is the only insurance designed to cover these expenses. So,what does long-term care cost?
Cost information for every state is readily available in the 2010 Genworth Cost of Care Survey, which was released in April. The figures are medians, not averages. Here are some key figures from the report:
The national median hourly rate for a licensed home health aide is $19, and$152 for an eight hour shift, which is a 2.7% increase over last year.
The national median monthly cost of a one bedroom/single occupancy unit in an assisted living facility is $3,185, which is a 12% cost increase over last year.
The national median daily rate for a private room in a nursing home is $206, or $6,180 per month, a 5.1% increase over last year.
In addition to the cost, here are some other things to keep in mind when planing for your long-term care:
If you already have a long-term care insurance policy, this is a great time to do a policy review, comparing the cost of your current long-term care to your policy's benefit. You may find that your coverage is right where it should be, or it may make sense to consider a supplemental policy.
If you are not yet a policyholder, think about what the cost of long-term care could do for your financial plan and consult with an agent before another year goes by.
Dorothy McMahon is a Long-TermCare Insurance Specialist. Reach her at (248) 944-9787 for “Straight Talk About Long-Term Care” and visit her web site at mcmahonltcins.com.
Because Medicare has a limited skilled-care nursing home benefit, some people mistakenly think long-term care is covered by Medicare. However Medicare provides for a maximum of 100 days of care and, under still some conditions, a skilled home-care benefit limited to medically necessary nondaily visits.
The vast majority of long-term care is nonmedical custodial care and is never covered by Medicare, Medicare supplements or health insurance. Long-term care insurance is the only insurance designed to cover these expenses. So,what does long-term care cost?
Cost information for every state is readily available in the 2010 Genworth Cost of Care Survey, which was released in April. The figures are medians, not averages. Here are some key figures from the report:
The national median hourly rate for a licensed home health aide is $19, and$152 for an eight hour shift, which is a 2.7% increase over last year.
The national median monthly cost of a one bedroom/single occupancy unit in an assisted living facility is $3,185, which is a 12% cost increase over last year.
The national median daily rate for a private room in a nursing home is $206, or $6,180 per month, a 5.1% increase over last year.
In addition to the cost, here are some other things to keep in mind when planing for your long-term care:
- Many purchasers of long-term care insurance don’t know where they will be living when they have a claim. That can complicate matters because costs vary from state to state. Some of the most expensive care is in New York City, Cape Cod, MA, Alaska and Hawaii. Barring a decision to retire to one of these ultra-high-cost areas, it makes sense for many people to use the national-cost averages for their planning. A good strategy is to buy a higher policy benefit than the national averages would indicate and shorten the benefit period. This will help keep your premium manageable. If you are in a higher-cost area at claim time, the higher benefit will be important; if one is in a lower cost area, whatever benefit isn't used each day extends the benefit period.
- Inflation will increase the cost of care over time, so it's important to keep inflation in mind when purchasing long-term care insurance. Most policies offer either built-in inflation riders or options to purchase more coverage, regardless of your health, in the future. Your agent can counsel you on how to best safeguard your own long-term care planning against inflation.
If you already have a long-term care insurance policy, this is a great time to do a policy review, comparing the cost of your current long-term care to your policy's benefit. You may find that your coverage is right where it should be, or it may make sense to consider a supplemental policy.
If you are not yet a policyholder, think about what the cost of long-term care could do for your financial plan and consult with an agent before another year goes by.
Dorothy McMahon is a Long-TermCare Insurance Specialist. Reach her at (248) 944-9787 for “Straight Talk About Long-Term Care” and visit her web site at mcmahonltcins.com.
Health Care Reform Includes New Long Term Care Insurance-like Program
In late March,President Obama signed into law The Patient Protection and Affordable Care Act. In addition to sweeping changes to health care, the law includes the Community Living Assistance Services and Supports, (CLASS),which establishes a national voluntary insurance program for purchasing community living assistance services.
Since plan details and premium costs are unlikely to be known before 2012 or even 2013, CLASS should have little impact on long-term care planning over the short term. Once plan details are available and the plan is implemented,long-term care specialists and other advisors will be able to help people figure out if their planning needs are best served by CLASS,private long-term care insurance, or some combination of both. Here's a list of what we currently do know:
Perhaps no part of CLASS is more controversial than premiums. Like private long-term care insurance, the monthly premium upon enrollment is designed to remain the same throughout enrollment. The bill states that no taxpayer funds can be used to pay benefits. Since the bill requires that premiums be recalculated if required for program solvency, and because there is no health underwriting for the CLASS program, many experts are concerned that the plan will attract a much less healthy sub population than those who can qualify for private insurance, and premiums will therefore need to be substantially higher than private long-term care insurance.
CLASS shall be treated for purposes of the IRS code of 1986 in the same manner as a qualified long-term care insurance contract.
CLASS is the first government program designed to allow people to plan for future long-term care expenses.Whether CLASS will provide meaningful benefits for a reasonable, stable cost will not be known for many years. In the meantime, most middle class and wealthy Americans are well-advised to consider private long-term care insurance to transfer the burden of paying for future care off their shoulders and those of their loved ones.
Dorothy McMahon is a Long-Term Care Insurance Specialist. Reach her at (248) 944-9787 for “Straight Talk About Long-Term Care” and visit her web site at mcmahonltcins.com.
Since plan details and premium costs are unlikely to be known before 2012 or even 2013, CLASS should have little impact on long-term care planning over the short term. Once plan details are available and the plan is implemented,long-term care specialists and other advisors will be able to help people figure out if their planning needs are best served by CLASS,private long-term care insurance, or some combination of both. Here's a list of what we currently do know:
- People will be automatically enrolled for CLASS through their employer. There will be an opt-out provision and an annual disenrollment period. There will also be provisions made for self-employed people to enroll.
- People must be employed to be eligible to enroll in CLASS, although private long-term care insurance has no such requirement. Non-working family members are ineligible for the program and there is a minimum earnings threshold.
- In order to be eligible for benefits, an eligible enrollee must first pay into the plan for five years. Private long term care insurance policyholders enjoy immediate coverage.
- Plan benefits will be paid in cash with no lifetime or aggregate limit. There is no elimination period or deductible to be satisfied. Plan benefits can be used to buy an assortment of services, including payment for a family member. Benefits will be increased each year in accordance with the Consumer Price Index for all urban consumers.
- The benefit triggers for CLASS may be two or three activities of daily living (ADL), such as feeding ourselves, bathing, dressing, grooming, or substantial cognitive impairment.
- The bill states that the benefit amount will be not less than an average of $50 per day, in an amount scaled to functional ability. Note that this amount is barely enough to pay for two to three hours of a home health aide, based on the national average cost of a licensed home health aide of $18.50/hour, as per the 2009 Genworth Cost of Care Survey.
Perhaps no part of CLASS is more controversial than premiums. Like private long-term care insurance, the monthly premium upon enrollment is designed to remain the same throughout enrollment. The bill states that no taxpayer funds can be used to pay benefits. Since the bill requires that premiums be recalculated if required for program solvency, and because there is no health underwriting for the CLASS program, many experts are concerned that the plan will attract a much less healthy sub population than those who can qualify for private insurance, and premiums will therefore need to be substantially higher than private long-term care insurance.
CLASS shall be treated for purposes of the IRS code of 1986 in the same manner as a qualified long-term care insurance contract.
CLASS is the first government program designed to allow people to plan for future long-term care expenses.Whether CLASS will provide meaningful benefits for a reasonable, stable cost will not be known for many years. In the meantime, most middle class and wealthy Americans are well-advised to consider private long-term care insurance to transfer the burden of paying for future care off their shoulders and those of their loved ones.
Dorothy McMahon is a Long-Term Care Insurance Specialist. Reach her at (248) 944-9787 for “Straight Talk About Long-Term Care” and visit her web site at mcmahonltcins.com.
Once Again, Buyer Beware
Is it ever a good idea to trick someone into doing something that is good for them? This question opens up the debate about the CLASS Act, or Community Living Assistance Services and Support Act, which is part of both the House and Senate bills on Health Care Reform.
Americans who are actively at work would automatically be signed up to participate in this voluntary program, unless they opt out. Payments ranging anywhere from $160 to $240 per month would be deducted from your paychecks, unless of you had signed a form saying you want to keep your money. Students and those who are poor would be able to enroll in the program for $5 per month, which means the actively-at-work population in the program would subsidize them. This sounds like Medicaid, which is already the largest payer of long-term care for the aging population and others needing chronic care; and it is already straining federal and state budgets.
Individuals would have to make the premium payments for five years before being able to make a claim. The premiums supposedly would remain the same over a person’s lifetime, unless the government had to increase premiums to keep the program solvent.
The benefits for this government sponsored long-term care plan would be approximately $50 per day after a person became cognitively impaired or needed help with two or three ‘activities of daily living,’ such as bathing, dressing, eating or other things you must be able to do for yourself to get through the day.
The plan would have no medical underwriting, so anyone could qualify for the coverage, regardless of their state of health. Some are concerned that very few healthy people would enroll, and those who do would be those at a higher risk of needing the care.
At first glance this may appear to be a good thing. However, even at the $160 per month, an annual premium would be $1,920. That’s pretty steep! At today’s cost, $50 would pay for about two-and-a-half hours of care. Who in their right mind would pay $160 to $240 per month for a benefit with a five year waiting period that would then pay $60.78 per day, which reflects the $50 per day benefit with a 5% compound annual increase.
A note to the wise, before enrolling in the program through an employer, educate yourself on what is available on the private market before moving forward. Long-term care doesn't have to be a complicated and unpleasant subject. Taking responsibility for your own health and welfare can help you avoid years of poverty or substandard care.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance,” contact her at (248) 844-9787 or visit www.mcmahonltcins.com.
Americans who are actively at work would automatically be signed up to participate in this voluntary program, unless they opt out. Payments ranging anywhere from $160 to $240 per month would be deducted from your paychecks, unless of you had signed a form saying you want to keep your money. Students and those who are poor would be able to enroll in the program for $5 per month, which means the actively-at-work population in the program would subsidize them. This sounds like Medicaid, which is already the largest payer of long-term care for the aging population and others needing chronic care; and it is already straining federal and state budgets.
Individuals would have to make the premium payments for five years before being able to make a claim. The premiums supposedly would remain the same over a person’s lifetime, unless the government had to increase premiums to keep the program solvent.
The benefits for this government sponsored long-term care plan would be approximately $50 per day after a person became cognitively impaired or needed help with two or three ‘activities of daily living,’ such as bathing, dressing, eating or other things you must be able to do for yourself to get through the day.
The plan would have no medical underwriting, so anyone could qualify for the coverage, regardless of their state of health. Some are concerned that very few healthy people would enroll, and those who do would be those at a higher risk of needing the care.
At first glance this may appear to be a good thing. However, even at the $160 per month, an annual premium would be $1,920. That’s pretty steep! At today’s cost, $50 would pay for about two-and-a-half hours of care. Who in their right mind would pay $160 to $240 per month for a benefit with a five year waiting period that would then pay $60.78 per day, which reflects the $50 per day benefit with a 5% compound annual increase.
A note to the wise, before enrolling in the program through an employer, educate yourself on what is available on the private market before moving forward. Long-term care doesn't have to be a complicated and unpleasant subject. Taking responsibility for your own health and welfare can help you avoid years of poverty or substandard care.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance,” contact her at (248) 844-9787 or visit www.mcmahonltcins.com.
From Rhode Island to Taipei: Calls for Change in Long-term Care
In general, people are reluctant to change. It’s been said that most people only make the decision to change when the pain of the status quo becomes worse than the pain associated with change.
The same can be said about governments and long-term care reform. For years, U.S. public policy has largely ignored the impending fiscal train wreck of an aging population that shows little appetite to privately fund its future long-term care needs. Instead, the government’s Medicaid program is the de facto long-term care funding mechanism for Americans who have either a small bank balance or a willingness to hide money to qualify.
If there’s one good thing that can be said about the current recession, it’s that it may lead us to rational Medicaid reform. At the very least, economic uncertainty is sharpening the debate about what services the taxpayers should be paying for, what those services will look like and who qualifies for government-provided services.
Before the recession caused tax receipts to fall precipitously, politicians could avoid and delay the topic of Medicaid reform. Now, with many states on the verge of bankruptcy, and Medicaid one of their largest line items, that’s no longer the case. Since Medicaid is funded by both states and the federal government, it’s getting attention at both levels of government.
One of the best examples of Medicaid reform is happening right now in the smallest state in the union: Rhode Island. The state was granted the first ever “global waiver” by the federal government in regards to its Medicaid program. What this means is that Rhode Island is allowed to revamp/reinvent the way that it delivers Medicaid benefits without having to ask permission of the Center Medicare and Medicaid Services (CMS). Stakeholders and politicians in “Little Rhodie” are just now figuring out what the future of Medicaid will be in the state. Like New Hampshire is to presidential elections, what happens in Rhode Island may have influence clear across the country as governments grapple with long-term care funding.
Lest you think the United States is alone in facing the financial burden of an aging population, the Taipei Times ran a letter in its July 20, 2009 edition titled “Programs that matter, not empty promises.” The paper described how Taiwan’s Cabinet Task Force on long-term care insurance recently held its first meeting to report preliminary results. Two suggestions were made: a national insurance plan and compulsory insurance for those older than 40.
Meanwhile, the U.S. Senate’s version of Health Care Reform includes the Class Act: a federal long-term care insurance plan designed to pay an average benefit of $50/day to people that have paid in premiums for at least five years.
Often overshadowed by the economy, health care reform and Iraq, long-term care financing may not be front page news. However, it’s showing up frequently in legislative briefings, agendas and bills. The economy may finally force the kind of reform that will make long-term care insurance as mainstream as Medicare supplements.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or visit mcmahonltcins.com.
The same can be said about governments and long-term care reform. For years, U.S. public policy has largely ignored the impending fiscal train wreck of an aging population that shows little appetite to privately fund its future long-term care needs. Instead, the government’s Medicaid program is the de facto long-term care funding mechanism for Americans who have either a small bank balance or a willingness to hide money to qualify.
If there’s one good thing that can be said about the current recession, it’s that it may lead us to rational Medicaid reform. At the very least, economic uncertainty is sharpening the debate about what services the taxpayers should be paying for, what those services will look like and who qualifies for government-provided services.
Before the recession caused tax receipts to fall precipitously, politicians could avoid and delay the topic of Medicaid reform. Now, with many states on the verge of bankruptcy, and Medicaid one of their largest line items, that’s no longer the case. Since Medicaid is funded by both states and the federal government, it’s getting attention at both levels of government.
One of the best examples of Medicaid reform is happening right now in the smallest state in the union: Rhode Island. The state was granted the first ever “global waiver” by the federal government in regards to its Medicaid program. What this means is that Rhode Island is allowed to revamp/reinvent the way that it delivers Medicaid benefits without having to ask permission of the Center Medicare and Medicaid Services (CMS). Stakeholders and politicians in “Little Rhodie” are just now figuring out what the future of Medicaid will be in the state. Like New Hampshire is to presidential elections, what happens in Rhode Island may have influence clear across the country as governments grapple with long-term care funding.
Lest you think the United States is alone in facing the financial burden of an aging population, the Taipei Times ran a letter in its July 20, 2009 edition titled “Programs that matter, not empty promises.” The paper described how Taiwan’s Cabinet Task Force on long-term care insurance recently held its first meeting to report preliminary results. Two suggestions were made: a national insurance plan and compulsory insurance for those older than 40.
Meanwhile, the U.S. Senate’s version of Health Care Reform includes the Class Act: a federal long-term care insurance plan designed to pay an average benefit of $50/day to people that have paid in premiums for at least five years.
Often overshadowed by the economy, health care reform and Iraq, long-term care financing may not be front page news. However, it’s showing up frequently in legislative briefings, agendas and bills. The economy may finally force the kind of reform that will make long-term care insurance as mainstream as Medicare supplements.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or visit mcmahonltcins.com.
Premise vs. Promise: When an Assisted Living Facility Declares Bankruptcy
Is it possible that planning for your long-term care could actually leave you in a more vulnerable position than if you had made no plans?
One of the ways to plan for future long-term care is to move into a continuing-care retirement community (CCRC). CCRCs offer a variety of living arrangements and support, including independent living, assisted living and skilled nursing care. The financial arrangements and amenities on site are designed to provide peace of mind to residents, and some new residents are motivated to move to a CCRC thinking it's the last move they will ever make.
Although the premise of a CCRC is relatively consistent across states and operators, the promise of a worry-free future is only as strong as the legal entity on the other side of the contract. That's a tough lesson being learned by the 200 or so residents of Covenant at South Hills, a CCRC community in Mt. Lebanon, Pennsylvania. Covenant is under Chapter 11 bankruptcy protection and attorneys are trying to work out a sale that would allow two bondholders to recoup the almost $50 million they say they are owed.
Covenant at South Hills is typical of the ‘flat price, no matter what care you need’ financial model. Residents pay a fee to move in, usually several hundred thousand dollars. Thereafter, they pay a monthly fee of several thousand dollars. A large percentage of the entrance fee usually is refunded when a resident leaves or dies. While living at Covenant, a resident pays the same monthly fee, whether or not they are receiving care. Another CCRC model is the ‘pay-as-you-go model,’ where care expenses are paid when incurred, above and beyond regular monthly fees. As reported in the May 17, 2009 issue of the Tribune-Review, Covenant had promised lifelong care; and with an average age of 87, the residents are hardly in a position to regroup and rebound from the negative implications of the bankruptcy.
Pouring salt in the wound, the CCRC was built using $59 million in tax-exempt bonds, and the sponsoring organization is a highly-respected international religious charity. Some residents thought that the religious charity would back up the promises being made. However, the charity was not legally guaranteeing the risk.
The Tribune-Review also reported only 74% of the apartments are full. When a CCRC built for 270 has only 200 residents, it's financially handicapped. The financial cushion that could be provided by an additional 70 residents is not there, and if a significant number of the 200 residents unexpectedly need more care sooner or for longer than anticipated, the financial model falters quickly.
This points to one of the flaws in trying to use a micro approach to long-term care risk as opposed to a macro approach. The ultimate micro-approach would be for your spouse or child to take care of you. That plan has obvious risks. Your spouse may predecease you. Your child may be unable or unwilling to provide proper care over months or years, while holding down a job and juggling other responsibilities.
Compare that to the millions of policies issued by long-term care insurance companies. Insurance companies benefit from a macro approach: the health of 200 people is irrelevant to insurance pricing. Medical underwriting, the process of deciding whether to enter a contract with the individual, is often much more stringent when done by an insurance company than a CCRC admissions employee.
When making long-term plans, it's prudent to consider who or what is legally behind the promise. Even in this economic downturn, insurance holding companies stand relatively unscathed compared to investment firms and banks. Meeting contractual promises for worst-case scenarios in the future is the bread-and-butter premise of insurance companies. It's their premise, and a promise on which policyholders can rely.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787.
One of the ways to plan for future long-term care is to move into a continuing-care retirement community (CCRC). CCRCs offer a variety of living arrangements and support, including independent living, assisted living and skilled nursing care. The financial arrangements and amenities on site are designed to provide peace of mind to residents, and some new residents are motivated to move to a CCRC thinking it's the last move they will ever make.
Although the premise of a CCRC is relatively consistent across states and operators, the promise of a worry-free future is only as strong as the legal entity on the other side of the contract. That's a tough lesson being learned by the 200 or so residents of Covenant at South Hills, a CCRC community in Mt. Lebanon, Pennsylvania. Covenant is under Chapter 11 bankruptcy protection and attorneys are trying to work out a sale that would allow two bondholders to recoup the almost $50 million they say they are owed.
Covenant at South Hills is typical of the ‘flat price, no matter what care you need’ financial model. Residents pay a fee to move in, usually several hundred thousand dollars. Thereafter, they pay a monthly fee of several thousand dollars. A large percentage of the entrance fee usually is refunded when a resident leaves or dies. While living at Covenant, a resident pays the same monthly fee, whether or not they are receiving care. Another CCRC model is the ‘pay-as-you-go model,’ where care expenses are paid when incurred, above and beyond regular monthly fees. As reported in the May 17, 2009 issue of the Tribune-Review, Covenant had promised lifelong care; and with an average age of 87, the residents are hardly in a position to regroup and rebound from the negative implications of the bankruptcy.
Pouring salt in the wound, the CCRC was built using $59 million in tax-exempt bonds, and the sponsoring organization is a highly-respected international religious charity. Some residents thought that the religious charity would back up the promises being made. However, the charity was not legally guaranteeing the risk.
The Tribune-Review also reported only 74% of the apartments are full. When a CCRC built for 270 has only 200 residents, it's financially handicapped. The financial cushion that could be provided by an additional 70 residents is not there, and if a significant number of the 200 residents unexpectedly need more care sooner or for longer than anticipated, the financial model falters quickly.
This points to one of the flaws in trying to use a micro approach to long-term care risk as opposed to a macro approach. The ultimate micro-approach would be for your spouse or child to take care of you. That plan has obvious risks. Your spouse may predecease you. Your child may be unable or unwilling to provide proper care over months or years, while holding down a job and juggling other responsibilities.
Compare that to the millions of policies issued by long-term care insurance companies. Insurance companies benefit from a macro approach: the health of 200 people is irrelevant to insurance pricing. Medical underwriting, the process of deciding whether to enter a contract with the individual, is often much more stringent when done by an insurance company than a CCRC admissions employee.
When making long-term plans, it's prudent to consider who or what is legally behind the promise. Even in this economic downturn, insurance holding companies stand relatively unscathed compared to investment firms and banks. Meeting contractual promises for worst-case scenarios in the future is the bread-and-butter premise of insurance companies. It's their premise, and a promise on which policyholders can rely.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787.
What’s The Right Season for Long-Term Care Planning?
The days are growing shorter and we all know what that means: Fall is on the way. Clubs and associations resume meetings, television shows launch new seasons, kids go back to school and it’s time again to get serious.
Is this the best season to consider purchasing long-term care insurance? If you think you may want it at anytime in the future, now’s the best time.
It’s an especially good time if you have a birthday coming up in the next three months. Long-term care policy premiums are based on your age when you apply; it would be a shame to pay a higher rate for years simply because you delayed your application for a few weeks.
How much more would a policy cost if you wait until after your next birthday to apply? Although the exact answer varies depending on the insurance company, the policy design you select, your age and your health, you can expect to pay approximately 10% higher premium for each year that you delay purchasing equivalent coverage.
By equivalent coverage, here’s what I mean. Suppose you are looking at a policy with a $200 daily benefit and the policy includes 5% inflation protection. If you delayed the purchase for one year, you would then need to purchase a policy with a daily benefit of $210 to equal the benefit of the previous policy.
If you are getting the feeling that putting off buying long-term care insurance doesn’t make sense, you understand intuitively how insurance works.
While an insurance company looks at a variety of factors in pricing a policy, let’s focus on the most relevant factor: your current age relative to the typical claim age.
Actuaries calculate how many years you are likely to pay premiums before making a claim. Now suppose the typical age of claim is 82. If you purchase a policy at age 79, you will pay for three years before the insurance company is on the hook to start paying your policy benefit.
However, if you went on claim at age 82, but purchased your policy at age 49, you would have paid premiums for 33 years. It doesn’t take a rocket scientist to understand that the premium at age 49 can be significantly less, simply because the insurance company has many more years to cover their expenses, set up policy reserves and so on, until claim time.
Here’s the kicker: the 49-year-old who purchases a policy has coverage for 33 years. That policy can pay for long-term care, triggered by any accident or illness, for decades. And you have locked in coverage when young and healthy. As long as you pay your premiums, coverage can’t be cancelled.
Here’s kicker number two: Assuming the same claim age, although the 79-year-old will only pay for three years, he or she typically would pay no less than the 49-year-old when you take into account the time value of money, depending on the interest rate, regardless of their age when they purchased the insurance.
So when is the best time to buy long-term care insurance? Since you can’t save money by waiting, the best time is now. The cost only increases if you wait, and so does the likelihood that, like the ducks and geese of summer, your health goes south. Then you can’t get coverage at any price!
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM and visit www.mcmahonltcins.com.
Is this the best season to consider purchasing long-term care insurance? If you think you may want it at anytime in the future, now’s the best time.
It’s an especially good time if you have a birthday coming up in the next three months. Long-term care policy premiums are based on your age when you apply; it would be a shame to pay a higher rate for years simply because you delayed your application for a few weeks.
How much more would a policy cost if you wait until after your next birthday to apply? Although the exact answer varies depending on the insurance company, the policy design you select, your age and your health, you can expect to pay approximately 10% higher premium for each year that you delay purchasing equivalent coverage.
By equivalent coverage, here’s what I mean. Suppose you are looking at a policy with a $200 daily benefit and the policy includes 5% inflation protection. If you delayed the purchase for one year, you would then need to purchase a policy with a daily benefit of $210 to equal the benefit of the previous policy.
If you are getting the feeling that putting off buying long-term care insurance doesn’t make sense, you understand intuitively how insurance works.
While an insurance company looks at a variety of factors in pricing a policy, let’s focus on the most relevant factor: your current age relative to the typical claim age.
Actuaries calculate how many years you are likely to pay premiums before making a claim. Now suppose the typical age of claim is 82. If you purchase a policy at age 79, you will pay for three years before the insurance company is on the hook to start paying your policy benefit.
However, if you went on claim at age 82, but purchased your policy at age 49, you would have paid premiums for 33 years. It doesn’t take a rocket scientist to understand that the premium at age 49 can be significantly less, simply because the insurance company has many more years to cover their expenses, set up policy reserves and so on, until claim time.
Here’s the kicker: the 49-year-old who purchases a policy has coverage for 33 years. That policy can pay for long-term care, triggered by any accident or illness, for decades. And you have locked in coverage when young and healthy. As long as you pay your premiums, coverage can’t be cancelled.
Here’s kicker number two: Assuming the same claim age, although the 79-year-old will only pay for three years, he or she typically would pay no less than the 49-year-old when you take into account the time value of money, depending on the interest rate, regardless of their age when they purchased the insurance.
So when is the best time to buy long-term care insurance? Since you can’t save money by waiting, the best time is now. The cost only increases if you wait, and so does the likelihood that, like the ducks and geese of summer, your health goes south. Then you can’t get coverage at any price!
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM and visit www.mcmahonltcins.com.
Say Uncle (Sam)!
Are you relying on the federal government’s program to cover your living expenses in the event you become disabled?
Probably not, Social Security’s Disability Program is notorious for its long wait for benefits and its stringent qualification requirements. Even if you meet its definition of disability, benefits aren’t payable until the fifth full month after disability begins. The Question and Answer page on Disability Benefits states “It can take a long time to process an application for disability benefits (three to five months).”
Because Social Security Disability can’t be counted on for comprehensive income protection, employers often sponsor and sometimes pay for private disability coverage. Some self-employed people, and even some employees who have coverage at work, choose to purchase private individual disability policies to help replace their income if they were to become disabled. These plans, combined with social security disability program benefits, can provide peace of mind in case the unthinkable happens and you can no longer work.
Not to change the subject, but are you relying on the federal government’s program to provide you with a comfortable retirement income?
I hope not, since, as the government itself states, Social Security Retirement Income will replace only about 40% of your income if you have average earnings, and the “percentage is lower for people in the upper income brackets.” On the same web page, the program notes “You'll need to supplement your benefits with a pension, savings or investments.”
Let’s recap:
We cannot rely on government programs to provide for a comfortable quality of life if we become disabled, or when we retire.
So, why do many of us expect a government solution when it comes to long-term care?
We don’t solely rely on the government for disability protection or for retirement income, but ironically many of us do expect to rely on the government when we become disabled in retirement!
As of now, there is no federal government program financed by payroll deductions, like Social Security, that provides a long-term care benefit. The only federal program that covers any long-term care is Medicaid. You know Medicaid; it pays for the kind of care you least desire, such as nursing-home care, and requires that you be poor to qualify.
The Health Care Reform proposal currently making its way through the Senate includes a groundbreaking provision for a government long-term care program. Premiums would be paid for by workers. However, the coverage is designed to provide an average daily benefit of just $50 to allow people to bring services into their homes. This coverage would be available after you have paid premiums for five years.
The proposal making its way through the House of Representatives includes no such new program for a federal long-term care program.
From experience with Social Security disability and retirement income benefits, we know that even if the proposal were to become law, most of us wouldn’t want to count on it. We’d supplement it with private insurance and our own nest eggs.
Have you ever heard a baby boomer say that they are not going to worry about long-term care planning? That, because there are so many of us, the government will have to come up with a plan to fix the problem?
When you take a look at all the other solutions that government has offered us, there’s only one logical response: “Don’t count on it!”
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM and visit www.mcmahonltcins.com.
Probably not, Social Security’s Disability Program is notorious for its long wait for benefits and its stringent qualification requirements. Even if you meet its definition of disability, benefits aren’t payable until the fifth full month after disability begins. The Question and Answer page on Disability Benefits states “It can take a long time to process an application for disability benefits (three to five months).”
Because Social Security Disability can’t be counted on for comprehensive income protection, employers often sponsor and sometimes pay for private disability coverage. Some self-employed people, and even some employees who have coverage at work, choose to purchase private individual disability policies to help replace their income if they were to become disabled. These plans, combined with social security disability program benefits, can provide peace of mind in case the unthinkable happens and you can no longer work.
Not to change the subject, but are you relying on the federal government’s program to provide you with a comfortable retirement income?
I hope not, since, as the government itself states, Social Security Retirement Income will replace only about 40% of your income if you have average earnings, and the “percentage is lower for people in the upper income brackets.” On the same web page, the program notes “You'll need to supplement your benefits with a pension, savings or investments.”
Let’s recap:
We cannot rely on government programs to provide for a comfortable quality of life if we become disabled, or when we retire.
So, why do many of us expect a government solution when it comes to long-term care?
We don’t solely rely on the government for disability protection or for retirement income, but ironically many of us do expect to rely on the government when we become disabled in retirement!
As of now, there is no federal government program financed by payroll deductions, like Social Security, that provides a long-term care benefit. The only federal program that covers any long-term care is Medicaid. You know Medicaid; it pays for the kind of care you least desire, such as nursing-home care, and requires that you be poor to qualify.
The Health Care Reform proposal currently making its way through the Senate includes a groundbreaking provision for a government long-term care program. Premiums would be paid for by workers. However, the coverage is designed to provide an average daily benefit of just $50 to allow people to bring services into their homes. This coverage would be available after you have paid premiums for five years.
The proposal making its way through the House of Representatives includes no such new program for a federal long-term care program.
From experience with Social Security disability and retirement income benefits, we know that even if the proposal were to become law, most of us wouldn’t want to count on it. We’d supplement it with private insurance and our own nest eggs.
Have you ever heard a baby boomer say that they are not going to worry about long-term care planning? That, because there are so many of us, the government will have to come up with a plan to fix the problem?
When you take a look at all the other solutions that government has offered us, there’s only one logical response: “Don’t count on it!”
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM and visit www.mcmahonltcins.com.
Reduce your LTC Insurance Premiums
How much you'll pay for long-term care insurance is based on three factors. Your age, when you apply, how much protection you want and your health when you apply. Where you live today and where you plan to retire also play a part.
But here is information that's most important for Bloomfield Hills, MI residents. Your long-term care insurance can be far more reasonable than you think.
Let me share a few ways people I work with significantly reduce the cost of long-term care insurance. Before I share, I thought the following statistic from the American Association for Long-Term Care Insurance was especially interesting. In 2008, individuals between the ages of 55 and 59 paid as little as $844-a-year for LTC insurance protection. The maximum paid by someone in this age range was $6,939.
So, how can one reduce the cost? Start by considering a policy that might protect a specific amount of your savings and assets. The coverage you buy today can increase in value over time. So, a policy that provides $115,000 of protection today can grow to $305,000 in 20 years. If you are married, some long-term care insurance policies allow one spouse to access the other spouse's benefit pool. That's an option well worth looking into.
Consider adding a deductible to your long-term care insurance policy. Most people have a deductible on their car insurance and their homeowner's policy. When it comes to long-term care insurance, adding a deductible will significantly reduce the cost and the majority of people select a 90-to-100 day period. The average savings will be about 20 percent annually.
Finally, know that costs vary significantly from one long-term care insurance company to another. I am a member of the industry's long-term care insurance association and they share enormous information. Once a year they undertake a Price Index Study and the costs for almost identical coverage can vary by as much as 100 percent depending on your age and marital status.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM and visit www.mcmahonltcins.com.
But here is information that's most important for Bloomfield Hills, MI residents. Your long-term care insurance can be far more reasonable than you think.
Let me share a few ways people I work with significantly reduce the cost of long-term care insurance. Before I share, I thought the following statistic from the American Association for Long-Term Care Insurance was especially interesting. In 2008, individuals between the ages of 55 and 59 paid as little as $844-a-year for LTC insurance protection. The maximum paid by someone in this age range was $6,939.
So, how can one reduce the cost? Start by considering a policy that might protect a specific amount of your savings and assets. The coverage you buy today can increase in value over time. So, a policy that provides $115,000 of protection today can grow to $305,000 in 20 years. If you are married, some long-term care insurance policies allow one spouse to access the other spouse's benefit pool. That's an option well worth looking into.
Consider adding a deductible to your long-term care insurance policy. Most people have a deductible on their car insurance and their homeowner's policy. When it comes to long-term care insurance, adding a deductible will significantly reduce the cost and the majority of people select a 90-to-100 day period. The average savings will be about 20 percent annually.
Finally, know that costs vary significantly from one long-term care insurance company to another. I am a member of the industry's long-term care insurance association and they share enormous information. Once a year they undertake a Price Index Study and the costs for almost identical coverage can vary by as much as 100 percent depending on your age and marital status.
Dorothy McMahon, president of McMahon and Associates in Bloomfield Hills, is a specialist offering “Straight Talk about Long-Term Care Insurance.” She has brought her program to professional associations, family support groups, meetings, and conferences. Contact her at (248) 844-9787 or LTCINSUSA@AOL.COM and visit www.mcmahonltcins.com.