The Complex Issues faced by our Aging Population
Article submitted by Greg Gann

With the recent compilation of Census data, here is some demographic information that needs to be absorbed in order to assess the full impact of long term care.  Folks age 85 and over represent the fastest growing segment of the population of this country today.  There are roughly 50,000 Americans alive today age 100 or over and within the next forty years that number is projected to hit approximately 1.5 million.  One in two individuals reaching age 65 will utilize some nursing home care. When home care or assisted living is added to the equation, that percentage grows exponentially. There is a vast number of long term care claims that result from physical ailments, either accidental or otherwise. However, the National Association on Alzheimers finds that one of every two 85 year olds suffers from some form of dementia or Alzheimers. This is a pretty sobering statistic when you reflect on the fact that this age bracket is the fastest growing. It also means that half of your clients or family members who reach age 85 will need long term care solely on account of cognitive impairment, not to mention any physical limitations.

Long term care can affect any of us at and at any age, but seniors are clearly at greatest risk. Because females statistically outlive males by an average of five to seven years, seniors who are also female are most vulnerable. Wives are much more likely to provide informal care for their husbands than the reverse. A woman is twice as likely to be unmarried after age 65 than is a man, and she is three times more likely to be alone at age 75. In virtually every type of insurance gender plays a role in terms of cost. However, gender does not play a role in terms of the cost of long term care insurance. It is strictly age based. Because women are much less likely to receive informal care than their husbands and because women are much more likely to suffer a chronic illness and because of their increased life expectancies, women pose a much greater risk to insurance companies. Although their rate should reflect this increased risk, it doesn't. Therefore, while long term care protection is important for everybody, it is doubly important for women.

The cost of long term care (whether at home, assisted living or nursing home) ranges from $40,000 to $70,000 per year. The actual cost is much greater when you take into consideration the additional costs it takes and capital gains and the lost interest that the principal would yield. Because of demand, the cost of care is increasing at a rate far in excess of inflation. There are only four possible ways to covering this liability. They are: Medicare, Medicaid, your assets, or long term care insurance protection. Medicare will only cover the costs of a nursing home in full for twenty days and only if all five of the following conditions are satisfied.

1. You must be a patient in a hospital for at least three (3) nights. In today's era of managed care, this is no small feat.
2. You must be admitted into the nursing home within 30 days of your discharge from the hospital.
3. Your condition must warrant skilled care. Changing bandages or colostomy bags is not considered skilled care.
4. You must have a condition which is rehabilitative, i.e. the skilled care will make you better. This excludes many conditions.
5. The care must be on-going. Therefore you must require and receive treatment several times a week whether you are up to it or not.

Medicaid will only pay for long term care if an individual's assets are $2,500 or less. Living trusts do not protect assets from financial threshold. Nor does it matter in whose name a spouse's assets are titled. In fact, pre-nuptials don't even supersede these requirements.

Can anyone really rely on Medicare or Medicaid to cover the greatest financial risk most of us face in our lives - paying for long term care? For me, the answer emphatically is NO. So we are left with our assets versus long-term care insurance.

The cost of using our assets is that we will be paying for our care on a dollar for dollar basis, after taxes and expenses. A dollar spent on care is a dollar lost forever in terms of its earning capacity. Insurance enables us to leverage the cost through taking advantage of the principle of the law of large numbers. Insurance enables us to use Other Peoples' Money on a significantly discounted cost basis.

I recommend transferring the risk of long term care without impacting the individual's net worth. A 24-36 month benefit period for most will suffice. Then evaluate the total cumulative premium dollars spent versus the protection provided and almost everyone will wish to transfer at least a portion of the risk, particularly if a compound inflation factor is included. Assume the individual lives beyond his or her life expectancy in this evaluation, and the insurance will still come out ahead. It is a big mistake to need care and not have the protection. It is a little mistake to have the protection and not need the care.

Lastly not all long term care policies are created equally. It is much easier to qualify for coverage with some over others. The language in what triggers the contract is essential. Some waive premiums for both spouses even when only one spouse is on claim. Some strictly cover home care at a significantly reduced rate. Some even waive premiums for a surviving spouse. Because of the complexities and nuances, it is recommended to consult with an elder care planning and insurance specialist.

Greg Gann is an elder care lawyer and long term care insurance specialist.