CHAPTER TWO – WHO PAYS FOR LONG-TERM CARE?

COSTS OF LONG-TERM CARE

The numerous long‑term care options described in Chapter One lead to a discussion of the costs involved. Like the various options, the costs of long-term care vary extensively.

The costs of nursing home care depend upon the length of time that a patient stays in the nursing home. The above graph shows the percentage of people admitted to a nursing home, and the length of time of the stay. The percentage of persons in a nursing home that stay more than 36 months would show a steadily increasing line if this line were extended, but the number of people would decrease because of death.

WHAT ARE THE AVERAGE NURSING HOME COSTS?

The costs of staying in nursing homes ‑ the most frequent providers of long‑term care outside of the home ‑ have been widely studied. Nationally, the average cost is at $181 a day or $66,000. This average reflects the range of $96 (Shreveport, LA) to $429 (Alaska), according to a 2003 survey by Metropolitan Life Insurance Co. (as quoted in Consumer Reports, Nov. 2003). Following the historical level of increases in nursing home rates, by 2021 (when those age 60 today might need such care) the average rate will have risen to about $480 a day or $175,200 annually. This average does not reflect the economics of many parts of the country nor the actual services any given person might receive. The primary factors that affect actual costs are:

(1) The exact nature of the care and services provided and

(2) The geographical region where care and services occur.

Most nursing home care and services utilized are custodial in nature. The relatively few individuals who need on‑going skilled medical care are likely to be paying much more than the average. Furthermore, in some parts of the U.S., costs currently are as high as $6,000 to $7,500 monthly ‑ from $72,000 to 90,000 per year.

A recent study in Sarasota, Florida, where the majority of the residents are retired and nursing homes, assisted living facilities (assisted care facilities), and other such residences and facilities abound, reviewed the more than 25 nursing homes in the immediate vicinity, which range from modest but well-maintained establishments, to luxurious and very expensive places. Needless to say, the prices were all over the map, however some experts in this field agreed that one nursing home met all of their requirements, including affordability, which has an excellent reputation and is one of the older nursing and ACLF facilities, presently (2005) charges $195 daily, which includes nearly everything needed, such as laundry, etc. This would come total over $70,000 a year. Another facility, rated almost as high, charges $125 a day but does not cover many other items, such as laundry, etc. Still, looking at the annual costs of comparable patients in the 2 places shows that the minimum that a resident could get by with would be around $50,000.

WHO PAYS HOW MUCH FOR LONG-TERM CARE?

NURSING HOME COSTS?

Both statistical and anecdotal evidence suggests that not many people can afford genuinely extended long-term care at these rates. For a large percentage of the population, even a short‑term stay of three months or less, which 50% of older people will experience, can result in a significant financial crisis. Plus, the average stay in a nursing home is two and one half years and 5% to 7% of people over age 65 will remain in a nursing home permanently. The small percentages are no comfort to the people who actually make up those statistics and must find a way to finance long‑term care. Also remember that these are the costs today. Some experts predict that in less than 20 years the average yearly cost of a nursing home stay will be $83,000 or more.

WHAT ARE SOME OTHER LONG‑TERM CARE COSTS?

The preceding figures apply primarily to traditional nursing home settings ‑ skilled and intermediate nursing care, custodial care, and some of the other specialized types discussed. But since the various types of facilities provide a wide and varying range of services, so costs likewise vary widely. ACLF’s, board and care facilities, and similar residential arrangements may range from $1,000 to $3,000 monthly to much higher for the more luxurious appointments.

CCRC COSTS?

One of the most expensive options is a continuing‑care retirement community. Obviously, people pay dearly for the privilege of living in a CCRC and having access to the myriad of services they offer. CCRCs typically attract people who are relatively healthy and who own their own homes, but are no longer able or willing to maintain an independent residence. Selling the home provides a significant amount of income that can be used to pay a large fee to enter the community, followed by monthly payments that make the various services accessible.

Currently, CCRC entrance fees range from less than $20,000 to as much as $250,000, depending on how luxurious the community is. In addition, residents pay from $500 to several thousands of dollars in monthly fees. Some CCRCs offer different plans from which residents may choose, and under which higher entry fees and monthly payments allow unlimited access to all services and especially to nursing services; somewhat lower fees activate limits on the number of times nursing services may be accessed after which residents pay for the excess. The lowest fees provide only residential and social services, with the individual paying extra for nursing care and some other services.

From a Long-term Care Insurance standpoint, of great interest are the nursing services offered by a CCRC, whether they involve help with ADL's or medical care or both. When features and benefits of long‑term care policies are discussed, it will be noted that some of these services are covered and that people who are able to afford living in a CCRC are likely to be among those who can pay LTC Insurance policy premiums. For those who buy into one of the more limited CCRC plans, where nursing services cost extra, an LTC Insurance policy might be especially beneficial.

How likely is it that an agent will encounter people who do live or are planning to live in CCRCs in your LTC Insurance policy sales efforts? Currently, perhaps not all that likely since it's been estimated that fewer than 10% of retired people can afford CCRC living. Nevertheless, in view of the growing over‑65 population and as quickly as things change in the long-term care field, an agent needs to be aware of what's happening with CCRCs since anything related to long‑term care has the potential to impact insurers and agents involved with LTCI policies.

WHO PAYS FOR NURSING HOME COSTS?

The following chart shows the sources of nursing home payors as of 2003 as provided by the Center for Medicare and Medicaid Services. It is no surprise that Medicaid is the largest payor for nursing homecare (58.9%) and Medicare pays about 8% of the costs. Private funds including LTCI pays 38% and of that amount, LTCI only pays about 8%.

WHO IS PAYING FOR LONG-TERM CARE COSTS?

Government studies have addressed payment of nursing homecosts and the results show that, at present, government programs pay an increasing portion of the total. The Center for Medicare and Medicaid Services (formerly Health Care Financing Administration [HCFA]), placed the nationwide cost of nursing home care alone at $98.9 billion, of which less than 40% (38%) was paid out-of‑pocket by individuals and their families and by private insurance.

Nursing homes provide both short-term rehabilitative and long-term care for patients who require skilled nursing and therapy care on an inpatient basis. There are about 16,500 nursing homes certified by the government to provide and Medicare or Medicaid care in United States with approximately 1.8 million total beds available. About 3 1/2 million people live in the nursing home during the course of the year

Medicare considers a facility that provides beneficiaries in short-term, residential-based skilled nursing and therapy care as skilled nursing facilities. Medicare coverage is limited to 100 days per spell of illness where they are required daily skilled care following discharge from the state in a hospital lasting at least three days. It should be kept in mind, that Medicare does not cover skilled nursing facility care on a long-term basis. Once their assets are "spent down," then they became eligible for Medicaid. Most skilled nursing facilities are also certified as nursing facilities under Medicaid and therefore they can furnish Medicaid and private pay patients with rehabilitative care on long-term treatment for chronic conditions.

Medicare classifies about 15,000 nursing homes as skilled nursing facilities, about 85% of which are freestanding nursing homes while the other 15% are hospital-based.

About 65% of the nursing homes are owned for day profit entities, while 28% are owned by not –for- profit organizations, with the remainder owned by government agencies at the city or county level.

According to the Centers for Medicare and Medicaid Services, nursing home care was $98.9 billion in 2001, an increase of 5 1/2 percent from the previous year. Since 1980 Medicare nursing home expenditures have grown from $307 million to $9.6 billion, a growth rate of 3022%, an average annual rate of 30%.

Before 1997, Medicare paid skilled nursing facilities based on their own reported costs of care, subject to certain limits for routine costs, such as nursing, room and board, etc. Ancillary services skyrocketed during this period of time and utilization grew rapidly while the average acute care hospital length of stay decreased. In order to stop this explosion of rates, Congress passed laws establishing a prospective payment system for skilled nursing facilities, which caused spending to decline 18% in 1999 while nursing home spending grew only .5%. A major result of this change in the regulations, according to the financial experts, is that hospitals are encouraged to discharge patients "quicker and sicker," compared to a cost-based payment system.

According to an industry survey, for this coverage, the average Medicare daily payment of about $115 per day was inadequate by $9.78 per day in 2000. It was also estimated that unreimbursed Medicaid nursing care costs exceeding $3 billion in a survey taken of 37 states -- or 3 1/2 billion dollars when extrapolated to all 50 states in 2000.

One may look around at the proliferation of nursing homes as sometimes in certain areas they appear to be planted on every corner. However, the fact is that there is an acute shortage of nursing home beds due to several reasons, primarily expenses. Nursing facilities have rapidly escalating labor costs which when added to the well–publicized nursing shortage, contributed to deteriorating financial performances. Employee costs are the largest expenses of nursing facilities -- approximately 55 to 65% of net revenues.

Next to labor costs is the rising cost of liability insurance and settlement payments. Some nursing homes report that settlement payments have increased by as much as 50% over the past four years and liability insurance costs continue to grow between 25% and 35%. The average liability loss costs per occupied long-term care bed grew 11% in 2001 and 23% in 2002. The average size of a professional liability claim remained static in 2001 but increased by 9% in 2002. The average claim per year per 1000 beds grew from 11% in 2001 to 13% in 2002. This increase in statistics is the reason that many insurance carriers have exited from the long–term care provider liability market altogether. A result of this is that some smaller and independent nursing facilities have elected to operate without insurance. For instance, before Florida required all nursing facilities to have liability coverage, 20% of the facilities were without coverage. In Texas, it is estimated that half of the nursing facilities operate without liability coverage.

Three nursing facility chains filed for bankruptcy during the past six months and six of the top 15 nursing facility chains have filed since 1999.

While these statistics apply to nursing home costs, there is no reason to believe any funding sources will pay more for long‑term care provided in settings other than nursing homes unless significant changes occur in health care programs. LTC Insurance is one possible way to shift the burden from individuals to private insurance companies ‑ a solution many people think is preferable to shifting more of the burden to government.

HOW DOES MEDICARE (MEDIGAP) PARTICIPATE?

Among the large for-profit nursing facility companies, Medicare usually comprises 10-15% of the number of residents and about 25% of revenue. The revenue has dropped because of the Balanced Budget Act of 1997 and the changes in reimbursements in 1998 (as mentioned above).

While state and federal governments participate to some extent in long‑term care costs, a very small percentage of that participation occurs through Medicare. While many people today are aware that Medicare covers very little of the cost of long‑term care, there are many that are not so informed. It is important that a summary of the Medicare rules for paying for such care in order be studied so as to advise potential LTC Insurance clients.

Medicare covers nursing home care only when:

The individual is admitted to a skilled nursing facility (SNF).
The SNF is Medicare ‑ certified.
The individual is receiving skilled medical care that can be provided only in the SNF and only by skilled medical personnel.
The individual was previously hospitalized for at least three consecutive days.
The individual is admitted to the SNF no more than 30 days after discharge from the hospital.
Admission to the SNF is to receive care for the same illness or condition for which the individual was previously hospitalized.

Every one of these requirements must be met in order for Medicare to pay any part of nursing home costs. Then, coverage lasts for no more than 100 days.

Medicare pays the full cost only for the first 20 days. The individual must pay part of the cost for days 21 through 100. In the year 2005, the individual's part is $114 per day. The individual's portion changes every year as prescribed by the Social Security Administration. If more than 100 days of care are required, the individual must pay all costs.

Conversely, what does Medicare not pay? There is no coverage for:

Care in an intermediate or custodial care facility or any community‑based residential facility. About 75% of nursing facilities are this type; only about 25% are skilled.
Care in a SNF that Medicare has not approved. Only about 40% of SNF's are Medicare ‑ certified.
Custodial care, even if it is provided in a Medicare ‑ certified SNF, if that is the primary type of care being provided.
Admissions not preceded by three consecutive days in the hospital.
Admissions later than 30 days after hospital discharge.

The facts are that most people who require long‑term care (1) do not require the one type of care Medicare pays for ‑ skilled nursing ‑ and (2) are not hospitalized prior to admission to a nursing facility. One study for the U.S. government found that as many as 95% of people requiring long‑term care need only custodial care‑help with the activities of daily living.

Medicare Supplement regulations do not allow the sale of any insurance policy that duplicates Medicare Supplement coverage; however, a Long-term Care Insurance policy is now excluded.

Some companies require the insured to sign a statement attesting to the fact that the LTC Insurance policy may not cover all long-term care costs incurred and the insured is requested to review the policy carefully. Conversely, some companies or General Agencies, require that an applicant for a Medicare Supplement policy, sign a statement that the Medicare Supplement does not cover most types of long-term care and that the agent has explained how such coverage can be obtained. This accomplishes two things – (1) if a family member would ever accuse the agent of not offering LTC coverage when the insured becomes unable to take care of themselves, and Medicare does not cover the disability, this will avoid an errors-and-omission suit, and (2) it forces an agent who is making a (relatively) easy Medicare Supplement sale, to introduce his client to possible new coverages.

HOW ABOUT HOME CARE?

Because so many services are now available in an Individual's home, from professional nursing care to housekeeping, it is difficult to attach an actual dollar figure. People are likely to think of home care as being considerably less costly than care in an institution, and in some cases that's true. For example, a home health aide, earning $10 an hour in some locales, who helps in the home for two hours a day three times a week does create a large expense. However, HIAA estimates that many people receiving help at home with ADL’s alone currently pay as much as $1000 per month ‑ $12,000 annually. Skilled professionals such as a registered nurse or physical therapist may be paid up to $70 per hour for home visits.

Adult day care is no less expensive than day care for children‑and is often more expensive because of the availability of extra services, particularly those related to health care. Daily charges can range from $50 to $200 according to the American Association of Retired Persons (AARP), probably the best known organization serving older people in the U.S.

These figures emphasize both the lower and upper extremes. Recent figures from a state located in one of the average‑cost geographical regions of the, U.S. indicate that home care, adult day care, respite care and hospice care costs average $15,000 or less per year. However, the more frequently the services are provided and/or the more skilled the person providing them, the more costly they will be in any region.

According to the Centers for Medicare and Medicaid Services, expenditures for home health care dropped from $18 billion in 1997 to $10 billion in 2002.

One of the most frequent objections to Long-term Care Insurance by Senior Citizens, especially those who reside in retirement areas, is that Medicare will take care of them in their own home if they should need long-term care. In the past, there has been some truth to this, but recently there has been a definite tightening of the Medicare rules and the abuse has diminished considerably.

As quoted in the Medicare Guide: "Medicare pays the full cost of medically necessary home health visits by a Medicare-approved home health agency. A home health agency is a public or private agency that provides skilled nursing care, physical therapy, speech therapy, and other therapeutic services. A visiting nurse and/or home health aide provides services on an intermittent or part-time basis, not full-time.”

“To qualify for coverage you must:

Need intermittent skilled nursing care, physical therapy, or speech therapy,
Be confined to your home,
Be under a doctor’s care.

A stay in the hospital is not needed to qualify for the home health benefit, and you do not have to pay a deductible or coinsurance for services. You do have to pay 20 percent of the approved amount for durable medical equipment such as wheelchairs and hospital beds provided under a plan-of-care set up and reviewed periodically by a doctor.”

“You pay:

For full-time nursing care and drugs.
For meals delivered to your home.
Twenty percent of the Medicare-approved amount for durable medical equipment, plus charges in excess of the approved amount on unassigned claims.
For homemaker services that are primarily to assist you in meeting personal care or housekeeping needs.”

Note the key requirements:

Services must be skilled nursing care, physical therapy, speech therapy or other therapeutic services. Many Seniors are convinced that they will receive full time care and Medicare or their Medicare Supplemental policy will cover it.
The patient must be homebound, confined to the house, and not able to go shopping or visiting with friends and family.
The patient is fully responsible for homemaker services to assist them in personal care or housekeeping needs.

In the past, doctors have been very lenient and have continued Medicare home health care even after the patient no longer needed skilled nursing care. With the recent emphasis on Medicare abuse, these abuses have diminished and ceased almost entirely in most areas.

An important point to remember is that a Medicare Supplement only pays for those costs that are Medicare approved, i.e. as a general rule, if Medicare does not pay, the Supplement will not pay. (There are some exceptions, such as a physical examination under certain Select policies and some drug benefits under the more expensive H, I and J Supplemental plans)

WHO PAYS THE MOST FOR LONG-TERM CARE?

HOW MUCH DOES MEDICAID PARTICIPATE?

Unlike Medicare, Medicaid does pay for long‑term care‑but at a great cost for most people since Medicaid (Medi‑Cal in California) requires near‑impoverishment in order to qualify. Medicaid is now the largest insurer of long‑term care for all Americans, covering nearly 60% of nursing home residents and over 48% of nursing home costs in 2003. On the other hand, Medicaid pays only a little more than 21% of home health care costs in the U.S. and 16% of Medicare payments are for nursing home care nationally.

WHAT ARE IMPOVERISHMENT OR "SPEND‑DOWN" RULES?

In order for Medicaid to pay for long‑term care costs, people who are not already receiving Medicaid assistance when they begin receiving long‑term care must first spend most of their assets in order to be eligible. Recent changes in Medicaid regulations allow people to retain slightly more assets than in the past, especially when a spouse remains at home while the other individual enters a nursing home but the restrictions are still fairly severe. We will not attempt an in‑depth explanation of these complex regulations, which vary in detail from state to state, however some of the general rules should be discussed.

Certain assets are exempt from the "spend‑down" requirements. These include the home, if a spouse or other dependent will continue to live there, prepaid burial trusts, a car, certain personal possessions and household goods and a very small amount of life insurance (inone state, no more than $1,400 cash value is permitted). It is a joke in some retirement areas, that in actuality may be more than a joke, that the spouse of a person going into a nursing home purchases the most expensive Mercedes. In addition, a state‑stipulated living allowance is exempt. The value of non‑exempt assets, then, may not exceed a certain amount that, again, differs from state to state, but is also subject to a 1989 Federallaw.

Under this federal law in order for one spouse to receive Medicaid assistance, the other spouse may retain no more than 50% of all marital assets up to a federal maximum. It doesn't matter whether only one of the spouses owns these assets; all assets are considered marital assets for Medicaid eligibility purposes. The federal maximum is 50% of assets up to $87,060 (2003), adjusted annually for inflation.

Couples who have greater assets must spend or give away the excess above the federal maximum in order to get Medicaid assistance. For example, assume total marital assets for Tom and Sue are $300,000 at the time Tom is confined to a nursing home. Since 50% is $150,000, Tom must spend down his $150,000 to no more than the level specified in his state. Then, assuming the federal maximum is $87,960, Sue must spend or give away $63,040 in order not to exceed the maximum; otherwise Tom will not be eligible for Medicaid assistance.

As an example, in the state of Florida, in order to receive Medicaid, the patient must have assets worth no more than $2,000. For these purposes, assets are bank accounts, IRA’s, CD’s etc. Income can not be more than $1,500 per month; if more than that an income trust must be established for the excess. When a person is receiving Medicaid, they are allowed to keep $35 a month for their own personal use.

A Long-term Care Insurance agent should contact the local Medicaid office for details as to what is exempted in their state. It is rather difficult to get exact answers as to how much Medicaid will take from an estate that exceeds the maximum amount, as they look at each case individually.

The solution appears obvious ‑ give away the assets to children grandchildren or siblings, and start receiving Medicaid assistance. The problem with this solution is that the individual must give away assets long before entering a nursing home. Federal law requires an investigation to determine whether any assets were given away during the 36 months prior to entering a nursing home. If so, the individual must wait 36 months from the time of the giveaway before receiving Medicaid. (Before passage of the 1993 Omnibus Budget Reconciliation Act, the period was 30 months.)

The Medicaid program is fraught with ethical and economic dilemmas. Many overburdened taxpayers would say it is outrageously unfair to allow anyone who has significant assets to give them away, wait three years, and then receive nursing home care at the expense of other taxpayers. Others believe they have contributed to the taxes that support Medicaid, so why not get something back? No matter how one feels about it, at this timethis is perfectly legal as long as one follows the rules.

Feeling the ever‑tightening pinch of Medicaid costs, though, several states have begun to develop alternate systems for handling long‑term care costs, with partial funding from a health‑related philanthropic group, the Robert Wood Johnson Foundation. This type of program, “the Partnership” plans, are which are in place in four states and are being considered by several others.

HOW CAN ASSETS BE TRANSFERRED FOR MEDICAID ELIGIBILITY?

To reiterate, people who apply for Medicaid to pay for long-term care usually will not qualify until their savings are depleted and they have spent down their assets. Until this get to this point, they will be spending thousands of dollars a month for long-term care. There are some spousal impoverishment provisions in the Medicaid law which offers some limited protection for the spouse of a person needing long-term care. The spouse will be entitled to a monthly income or to a maximum stipulated by state law, and is usually allowed to keep assets such as a burial plot, a car and residence.

Even for a neophyte, it appears obvious that when a person becomes serious about entering a nursing home, they could get rid of their assets and thereby qualify for Medicaid. Maybe years ago, but not now. The Omnibus Reconciliation Act of 1993 (OBRA 1993) clamped down hard on this obvious evasion of regulations. The “look-back” period was extended to 36 months on gifts and transfers, so any gifts and transfers that were made within 36 month period prior to going into a nursing home can jeopardize any Medicaid entitlement. In addition, there is a look-back period of 60 months on transfers to trusts established after 1993. (In case you are wondering, trusts are treated differently because they are more complicated than a regular property transfer and some are specifically designed to circumvent the Medicaid laws.)

F Medicaid is a welfare program and is not designed to provide long-term care for those who are financially able to provide it for themselves.

OBRA 1993 also requires states to attempt to recover payments made by Medicaid – they had previously been entirely at the discretion of the state whether such attempts were made. States are now required to make a claim against the estate of a Medicaid recipient or of the recipient’s spouse.

In 1997 a law called “Granny’s Lawyer Goes to Jail,” imposed a term of one year for anyone who advises individuals to dispose of assets to become eligible for Medicaid. This was not a popular law and some attorneys continue to advertise that they can help people qualify for Medicaid without losing all of their assets. This is unethical in the minds of many because the program was designed to help the poor and they would be rewarding people who can afford to purchase LTCI.

Interesting, many lawyers who specialize in Medicaid planning contend that LTCI is a viable option only for the wealthy and healthy. Middle-class and lower-middle class seniors can be forced into poverty as they cannot afford the LTCI premiums.

If the subject of transferring assets to qualify for Medicaid arises, it should be pointed out that transferring assets to another, even between close family members, does not guarantee that the individual will receive the long-term care that they need or that he will receive the quality of life that they expect.

Another problem is that many facilities do not accept Medicaid patients and/or seek to get rid of the ones that they have. In 1998, ABC News reported that some Medicaid patients were being moved out of nursing homes because the company that owned the nursing homes claimed it was losing money on these patients. The result of this publicity was legislation that now bars nursing homes from evicting or transferring Medicaid patients. The nursing homes may not transfer or evict these people in order to make room for those who pay out of their own pockets.

Further, while these nursing homes can convert entirely to a private pay policy and refuse new Medicaid patients, by law they must continue to house those who are already residents of the facility. One must wonder as to the quality of care that those remaining Medicaid patients will receive, even though they are undoubtedly under a microscope in this respect.

There is now available through Medicaid for home and community-based services, a waiver program that is available in some areas that allows qualified individuals to receive care in their own home, rather than in a nursing home, including physical therapy, home health care, counseling, companion aid and personal care. These persons must be at least 60 years old and must choose to receive these services in their home or community setting. These services must not exceed 80% of the average Medicaid payment for a state-approved nursing home.

Another program to reduce Medicaid spending is the “Partnership Program” discussed in the last chapter.

WHAT IS FLORIDA GOING TO DO ABOUT IT?

Florida, as everyone knows, has many retirees and a huge senior population, which means that they have a lot of people in nursing homes. Naturally, Medicaid hits the state budget very hard, so the legislative is trying to introduce a program supported by Gov. Jeb Bush who wants the Medicaid program to change. Medicaid in Florida eats up 25% of this year’s $61 billion Florida budget. At current rates, it would represent half of the state’s spending in 10 years!

The $4 billion program introduced by the Agency for Health Care Administration is called “Senior Health Choices” and was presented to the legislature on Jan. 29, 2005 for their vote without going through the usual committees. Needless to say, it ruffled feathers and so it is stalled, they hope temporarily.

Their approach is interesting, whether it will work or not is anyone’s guess, but it is worth a shot it seems. Under the plan, the managed care organizations would be responsible for providing services equivalent to those required in the present system –– primarily care, acute care, prescription drugs, nursing facility, co-pays and deductibles.

Of course, there are those politicians who say that this plan would only benefit large, powerful HMOs entrenched in the state (only HMOs licensed under a specific Florida statute could participate), which is probably a “my-nose-is-out-of-joint-because I didn’t-think-of-it.” The legislature voted last spring for some form of a long-term care proposal, which they envisioned as an “integrated, long-term, fixed payment, delivery system for Medical beneficiaries age 65 and older.”

If this ever passes, which it believed it will, in some form or other, the question is how this will affect LTCI. It could hurt sales because people would think that “Florida is going to take care of me if I have to go to a nursing home.” Conversely, as anyone who has sold or worked around HMOs is aware, there are people who just hate them because they don’t allow seniors their choice of doctors or hospitals or specialists, on and on ad infinitum. Maybe LTCI will give these people a reasonable alternative.

HOW ABOUT ANNUITIES TO AVOID MEDICAID RULES?

According to the laws of many states, annuity payments are excluded from Medicaid regulations regarding the spending-down of assets. The individual must be receiving a steady stream of payments and this exclusion was probably devised to protect income from sources such as life insurance benefit payments. However, astute agents discovered that this was one way to “beat the system.”

Since the residence and automobile were exempt, all the other assets were turned into cash when the individual needed to go to a nursing home. These funds were then used to purchase a single premium immediate annuity, with payments usually for life of the individual, or there could be mechanisms to leave some of the assets to the surviving spouse at the death of the annuitant. Medicaid could not reach these funds; therefore the individual would more easily qualify for Medicaid benefits as they had spent-down assets to buy the annuity and the annuity payments were exempt from qualifying for Medicaid.

Be forewarned, however, that some states have already taken action against this obvious method of avoiding Medicaid regulations. California has passed particularly stringent laws this past year in this respect and agents are forbidden to offer such plans in that state. Other states will follow suit, so while some insurers in other states may tout these plans, one must be very careful that this is legal in that jurisdiction. There may be criminal penalties for attempting to fraudulently transfer assets to qualify for Medicaid.

HOW MANY OWN LONG-TERM CARE INSURANCE – ACTUALLY?

A survey was conducted by UNUM Life Insurance Company of America, conducted by AgeWave, a company specializing in needs of the senior population, produced some surprising but troubling findings.

According to the survey, one in three people ages 40–70 believe that they already own long-term care insurance. Actually less than one percent of the population, and less than 6% of those over age 65, own a long-term care policy.

To make it even worse, 25% of those people recognized a LTCI policy when it was described to them. Makes one wonder what in the world they thought was being described.

STUDY QUESTIONS

1. The costs of nursing home care depend upon the

A. length of time that a patient stays in the nursing home.

B. charges allowed by Medicare.

C. Medicaid reimbursements.

D. benefits paid by LTCI policies.

2. Overall nursing home charges depend upon both the geographical region where the services occur and

A. the number of residents in the nursing home.

B. state nursing home room charges allowed.

C. the exact nature of the care and services provided.

D. the insurance companies that issue LTCI policies there.

3. One of the most expensive options to nursing home care for long-term care is

A. home health care.

B. adult day care.

C. continuing-care retirement communities.

D. ACLFs.

4. The largest payor or nursing home costs is

A. Medicaid.

B. LTCI.

C. Medicare.

D. private funds.

5. According to an industry survey in 2000, the average amount of nursing home care payments by Medicaid

A. was more than ample to cover the nursing home costs.

B. was exactly the amount needed to cover the nursing home costs.

C. was totally irrelevant and miniscule.

D. was inadequate by nearly $1 day.

6. Among the large for-profit nursing facility companies, Medicare usually comprises 10% to 15% of residents, and

A. 85% of revenue.

B. 25% of revenue.

C. 10% of revenue.

D. all of the facilities revenue.

7. Medicare does NOT pay for

A. care in an intermediate or custodial care facility or any community-based

residential facility.

B. care if the individual was previous hospitalized for at least 3 consecutive days.

C. care in a nursing home if the individual is receiving skilled medical care.

D. services if the individual is admitted to a skilled nursing facility.

8. To qualify for Medicare coverage for home health care on an intermittent or part-time basis, an individual must

A. be confined to their home and be under a doctor’s care.

B. pay the first 35% of each visit by a nurse or health care aide.

C. have a Registered Nurse only provide the care.

D. live in New York, Indiana, California, Connecticut or Illinois.

9. If a person applies to have Medicaid pay for nursing home charges, there are certain assets that are exempt from the “spend-down” requirements, including

A. the home, a car and some household goods.

B. country club and health club memberships.

C. personal collections of valuable crystal displayed in a public museum.

D. assets that were very recently transferred to another person.

10. Medicaid is a

A. social service available to all citizens.

B. provides nursing home services only to those over age 65.

C. subsidiary of Social Security.

D. welfare program.

ANSWERS TO STUDY QUESTIONS

1A 2C 3C 4A 5D 6B 7A 8A 9A 10D