Bridging The Long-Term Care Gap

Providing for adequate health care is one of the top concerns for today’s seniors. And yet, many find themselves coming up short when that need is for long term care. With costs skyrocketing and government purse strings tightening, planning for such care has never been more important. Don’t let long term care costs take you by surprise. Read on to make sure you’re prepared. My last two articles discussed in detail the gap that exists between what seniors need in long term care and what Medicare and Medicaid will cover. Combine that with the proposed Congressional bill restricting Medicaid nursing home coverage, and it’s clear to see that seniors and those nearing retirement simply can’t afford to ignore this important issue. How you approach your long term care needs, which include custodial and skilled nursing in-home care, assisted living facilities and nursing home care, depends greatly on your economic situation. For those with low incomes and little assets, there are few choices. Most likely, should the need for long term care arise, you’ll quickly spend down your assets and easily qualify for Medicaid. For those with an annual incomes exceeding $75,000 and with assets of $500,000 or more, you could simply pay for it out of pocket. But with nursing homes costing thousands of dollars a month and some seniors needing years of such care, even a well-lined nest egg could experience a drastic drop in value. A more prudent approach would be to purchase long term care insurance and use that to pay for any long term care you or your spouse may need. The real conundrum exists for those seniors of moderate means, those with incomes between $30,000 and $50,000 who have a few hundred thousand dollars in assets. Long term care needs could gut your life savings and impoverish the healthy spouse. But long term care insurance can be very expensive and hard for these seniors to afford. Long term care insurance is complicated and there are many issues you must understand when considering it. My next article will be devoted purely to better understanding long term care insurance and what to look for when buying it. If purchasing long term care insurance isn’t an option for you, there are still some strategies you can use to cover that care should you need it. Selling your life insurance policies, called a life settlement, is one option. Reverse mortgages can also free up needed cash. Selling your home, however unpleasant that may be, can also provided needed funds. But in all of these strategies it is better to leverage those proceeds by using them to buy long term care insurance, if possible. But for now, let’s consider some issues that none of us like to think about, but will greatly influence how we each address our long term care needs. When someone is no longer able to care for themselves, usually the healthy spouse, if there is one, will take over the care. Few seniors, wealthy or not, are quick to dip into their savings to hire nurses or other care givers to help out. The result is that the healthy spouse often sacrifices their own health and well-being to care for the sick one. We’ve all seen it happen, how the ‘healthy’ spouse becomes exhausted and emotionally spent trying to meet the overwhelming needs of the other. If they’re lucky, their adult children will step in to help shoulder the burden. Some families have gone on like this for years, with sons and daughters spoon feeding their parents and changing their diapers. The emotional toll on the family in these situations is indescribable. How much easier life is when seniors take active steps to provide for this care properly. Then the family can spend their emotional and physical strength on cherishing their loved one, without ruining their own lives in the process. No one can predict with certainty how their end-of-life will go. But the fact remains that nearly half of all seniors will need nursing home care. Those who don’t are likely to need some kind of outside help. Plan now for how you’re going to provide for your long term care. Your health, and the health of your loved ones, depends on it. I’ll personally respond to your questions, free of charge. Go to http://www.guardingyourwealth.com and click on ‘Ask Jeff’. In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.

Don’t Rely On Medicaid For Long-Term Care

Millions of retirees expect to rely on Medicaid to cover the cost of their long-term care needs. If you or your parents have that expectation then you must read this article. You shouldn’t rely on this program and by doing so you may end up becoming dependent on family and friends for care. Medicaid is a government program designed to provide medical care for those who are impoverished. The costs for this program are exploding. Federal Medicaid expenditures now account for the fifth largest budget item behind Social Security, defense, debt service and Medicare. Based on its current rate of growth, Medicaid expenditures will soon be greater then those spent on Medicare. The majority of the cost is due to the growing number of Medicaid recipients. Currently, 1 in 4 nursing home residents are covered by Medicaid. That number has been growing almost 12% per year. Aging baby boomers will only increase this rate of growth further. There isn’t money in Federal or State budgets to cover this expected growth. In an effort to reign in costs, Congress is working on a bill that will make it harder to qualify for Medicaid. Here are a few of the bill’s provisions: 1) Medicaid coverage of nursing home care will be prohibited for those with home equity of $500,000 or more. 2) The ‘look back’ period for the transfer of assets will be extended to 5 years. 3) Certain annuities previously set up to shield assets from Medicaid would now have to name Medicaid as the beneficiary, with the remainder going to Medicaid after death. 4) States are given more leeway in reducing what they pay and limiting benefits for certain enrollees. The purpose of this legislation is to keep people from ‘gaming’ the system. Medicaid is designed for the impoverished. It isn’t designed for those who want the government to pay their nursing home costs while they pass on significant assets to their loved ones. In the past, you could reduce your assets by gifting them to your loved ones. As long as you didn’t apply for Medicaid within three years of that gift, it would not be counted as an asset. Now, you’ll have to wait five years. You’ll no longer be able to buy an annuity, hoping that only the income will be counted, thus ‘shielding’ that asset. The government is eliminating this loophole. If you live in a part of the country that has seen exponential real estate growth, such as Southern California, look out. Seniors in such places, even if they have few other assets, may be forced to sell their homes and spend that money before qualifying for Medicaid. ‘Medicaid planning’, the taking of steps to move and shield assets so that they aren’t counted by Medicaid, won’t be as effective as it was in the past. And qualifying for Medicaid is no cake walk. In general, a person can only have $2,000 in what are referred to as resource assets in order to qualify. A resource is any asset that can be used to produce income. If both husband and wife attempt to qualify, the amount is $3,000. The coverage for in-home care is very restricted in Medicaid. Plus, it will only provide limited funds specifically for care. That means it will continue to be your responsibility to pay the mortgage, taxes, insurance, utility and food bills. This is designed to shift care to those in nursing homes where it is cheaper. If you need skilled nursing care at home, custodial care is also provided. But if you need custodial care alone, its coverage is very restricted. If you want to remain in your home, independent, as long as possible, then don’t expect to rely on Medicaid. For those needing care at a nursing home, Medicaid doesn’t cover the entire bill. Any income you receive is first applied to the bill. This includes your Social Security, pension, annuity and other income. Medicaid then pays for the remainder. The bottom line is that you and your parents should not rely on Medicaid to meet your long-term care needs. Nor should you rely on your ability to transfer assets to your loved ones and still qualify. I’ll discuss viable alternatives in the next article. I’ll personally respond to your questions, free of charge. Go to http://www.guardingyourwealth.com and click on ‘Ask Jeff’. In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.

Long-Term Nightmare

Recent legislation in Congress may make it even more difficult for seniors to qualify for government-paid long-term care coverage. If you don’t take action now, you may be setting you and your family up for a Long Term Nightmare! This problem is so potentially damaging, yet so little understood, I’ve decided to dedicate multiple articles to covering it. In this article, I’ll expose the problem. Future articles will explain possible solutions. Seniors know the potential cost of long-term care could devastate them financially. The thought of seeing the nest egg they’ve worked years to build evaporate to pay for their care is hard to take. Some seniors seek to find ways to manipulate the system so that they can qualify for government assistance. Others mistakenly believe that Medicare and Medicaid will pay for their care. The reason that many feel the government should cover this cost is because Medicare and Medicaid are designed to provide health insurance to those over 65 (MediCARE) or to those who are impoverished (MedicAID). Since the need for care is usually the result of failing health, why shouldn’t it, they reason. The terms ‘long-term care’ and ‘skilled-nursing care’ refer to different needs. Understanding the difference is critical to understanding the problems you and your family may face. Knowing the difference will prevent a false sense of security. ‘Long-term care’ is a generalized term that refers to the assisted care individuals may require in their homes, an assisted-living facility or a nursing home. ‘Skilled-nursing care’ is a specific term used when that assistance must be provided by a licensed or registered nurse. ‘Long-term care’ includes the need for both custodial care and skilled-nursing care. ‘Skilled-nursing care’ does NOT include the need for custodial care. That’s the issue that creates the Long Term Nightmare. For instance, if someone needs assistance because they can’t bathe, cook or dress themselves, they need custodial care. If someone has dementia and needs to be supervised, that is referred to as custodial care. If someone needs intravenous fluids (IV), they need skilled-nursing care because it cannot be administered by anyone else. Custodial care can be done by a family member. Skilled-nursing care is provided by licensed nurses. The assistance provided by Medicare to those over 65 is only for skilled-nursing care. Typically this care occurs in a nursing home while the patient recovers from a surgery or illness that required at least a 3-day hospital stay. If the hospital stay didn’t occur, Medicare won’t pay for it. Even then, Medicare will only cover roughly 100 days. Medicare does NOT provide any coverage when the assistance needed is custodial. Those costs must be paid entirely by the individual and/or their family. Medicare will not pay for stays in an assisted-living facility. For the impoverished who qualify, Medicaid will cover nursing home costs. But the number of Medicaid beds is limited and recipients may face long waiting periods to get into such a facility. Sometimes Medicaid will cover assisted living facilities and home health care, which includes custodial care. But these benefits are harder to receive reimbursement for. Rules and benefits vary from state to state. The bottom line for those depending on Medicaid is that you will be left with few options and limited care. The greatest need for long-term care as we age is often custodial in nature. At some point, we are all likely to need help with our medications, cooking and cleaning. Worse, we may be suffering from the chronic effects of a long term illness. Even though we may not be able to care for ourselves as a result, Medicare will not pay for any help unless it requires a skilled nurse. They will, however, cover hospice care for terminally ill patients. Many families find themselves caught in the nightmare of having to provide the care that isn’t covered by insurance or the government. This problem will not go away—the government is likely to cover even less care in the future. Take action now. In a future article, I will talk about the long-term care coverage provided by Medicaid and what is required to qualify for it. Then I will outline steps you can take to avoid a Long-Term Nightmare. Have a financial question? Send me an email and I’ll personally respond, free of charge. Go to http://www.guardingyourwealth.com and click on ‘Ask Jeff’. In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.

Don’t Scramble Your Eggs

Financial advisors have been preaching the use of portfolio diversification to reduce risk for years. Unfortunately, the way most do it leaves your portfolio vulnerable! Read on to find out how to properly diversify your portfolio. We’ve all heard that it’s not wise to put all of your eggs in one basket. For safety, we are told that it is better to divide our eggs among several baskets because if one gets dropped it isn’t going to break all our eggs. Wall Street refers to this as diversification. Many people think that if they own more than one investment that they are diversified. Others think that diversifying means that they should not keep all of their money with one institution or the same advisor. This isn’t diversification. The egg analogy doesn’t accurately reflect the underlying reasons for diversification. There are many different risks we face. There is market risk, interest rate risk, credit risk and inflation risk, just to name a few. The purpose of diversification is to help you reduce your exposure to all of these risks, not just one or two of them. There’s no such thing as the Perfect Investment. EVERY investment has risks and rewards. Combining investments with different risks and rewards can result in the reward of one offsetting the risk of another. Here’s a simplified example. Many retirees recognize that there is greater risk of losing their principle when investing in the stock market then there is in a Certificate of Deposit (CD). As a result, many choose to avoid the stock market all together. Neither CDs nor a stock market investment are perfect. The reward of CDs is their stability. But they aren’t designed to protect you from inflation risk. A stock market-based investment is designed to protect you from inflation risk but it lacks the stability of the CD. That’s where diversification helps. Spreading your money among both CDs and stock market-based investments is a way to reduce the risks associated with each. Doing so reduces the overall risk of your portfolio and increases the probability that you will achieve your goals. Spreading your portfolio between CDs and stocks won’t adequately protect you from all the risks you face. Portfolios should be divided among cash, bonds, real-estate and equities, further sub-divided into different classes and then the classes into different investments. Many advisors do this but that’s where they stop…and fail. Most advisors fail to properly diversify a portfolio by strategy. If your entire portfolio is based on the same strategy then your entire portfolio is exposed to the risks associated with that strategy. Probably 98 out of 100 advisors will tell you that the Buy and Hold strategy is the only successful way to invest in the stock market. Doing so puts YOU at risk. That’s why so many investors suffered losses of 30-50% or more between 2000 and 2002. The problem wasn’t the type of investment, the problem was the advisor failed to diversify your portfolio by strategy. There are many different strategies available. I’m not sold out to any single strategy. Just like investments, each strategy has strengths and weaknesses. That’s why I diversify clients between different types of investments AND different underlying strategies. I’ll use a Buy and Hold strategy, but I will offset its risks with a proprietary strategy designed to significantly reduce stock market losses. I use traditional investments but I also find other ways to meet my client’s needs. I develop different strategies to meet different needs—diversifying along the way. For instance, one of my high-income strategies uses a type of investment unfamiliar to most advisors (because they can’t earn a commission on them). To reduce risk, it’s diversified among 20 individual investments. Three of them lost money in 2005—one lost 29%! The other 17 more thn made up for that, though, with 7 having gains over 40% each. As good as this strategy is, I’ll only use it for a portion of a portfolio. Diversification can be used to reduce the specific risks your portfolio faces. Use different categories, classes and individual investments. And make sure that you use more than one strategy. Doing so will help you protect what you have and make it grow. Have a financial question? Send me an email and I’ll personally respond, free of charge. Go to www.guardingyourwealth.com and click on ‘Ask Jeff’. In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.