Archive for the ‘Insurance’ Category

As an elder law and special needs attorney I get a track-side seat for a pile of planning train wrecks: Here are the best ones . . .

This is a column for the contrarians among us who will insist, against mounds of advice, on creating maximum legal havoc. Here are ten great ways to insure a successful train wreck!

Great Idea One: Do not have a will. Let state law determine how assets will be divided (they won’t all go to a spouse if there are any children). Without a will many valuable planning opportunities are missed, thus insuring maximum havoc.

Great Idea Two: Do not have an effective power of attorney. Without a power of attorney, a guardianship may be the only option, which will be expensive and subject the guardian to court supervision and bonding.

Great Idea Three: Sign over all property to the kids if bad results are the goal. Mom may believe she is protecting her property, but she is subjecting the property to the liabilities and risks of the kids (divorce, anyone?), not to mention that some of the kids may be thinking of moving to Rio. Giving the property to the kids can also insure they pay maximum capital gains taxes when they sell the property. Certain types of trusts are a much better alternative, but not as much fun if creating maximum damage is the goal!

Great Idea Four: Skip the health care advance directives. Let everyone argue among themselves to decide who gets to make health care decisions.

Great Idea Five: Do not do any long term care planning. Buying long term care insurance is way too responsible. Also, it is better to wait until there is a crisis (Dad has gone into the nursing home) because at that time there are fewer options and any course of action will likely be more expensive.

Great Idea Six: If there is a disabled child, duck parental responsibilities and avoid taking advantage of the many planning opportunities available for a special needs child. Disinherit the child and leave everything to the siblings. Maybe “they’ll do the right thing.”

Great Idea Seven: Carry inadequate insurance. This is a real winner! Do not carry a good Medicare supplemental policy so that there will be maximum exposure to whatever Medicare does not cover (which is plenty).

Great Idea Eight: Do not do any planning after a “late” second marriage, especially if there are children from the previous marriages. In this manner a perfect storm of battling families can be hoped for. Also, treasured family assets can be used to pay for the nursing home expenses of old Whatsisname instead of going to the kids.

Great Idea Nine: Do not, under any circumstances, update an old estate plan. Laws may change, but the dedicated Train Wrecker knows that he need never change!

Great Idea Ten: Never, ever seek good professional advice. With good professional assistance things may go too smoothly. If you absolutely must have some help, limit expenses to less than $100 and buy something online. Or better yet, seek the advice of a neighbor.

Bonus: Do not do anything.

Someone told me not to write this because it would be bad for business (because guess who gets to clean up the wreck?).  “Nope,” I said, “people will do it anyway!”

Times are tight. The health care debate was strangely silent with respect to financing long term care for those elderly with chronic diseases. But do not be deceived. It will not be long before Medicaid nursing home rules come under the knife.

As an elder law attorney, I offer a solution so radical that many of my colleagues and clients will stand aghast. Scrap the Medicaid nursing home rules! The system is a mess. But let us “scrap intelligently.”

Like it or not Medicaid has become a middle class nursing home financing system. Not out of greed, but out of necessity.

The last attempt Congress took at “reforming” the Medicaid rules, they simply came up with more complex rules and “kicked the can down the road.”

Our standard approach to political problem solving is part of the problem. Namely, too much “either-or” thinking, and not enough “and” thinking.

The Current System

Trying To Figure It Out

According to Prudential’s Long Term Care Cost Study 2010 nursing home costs can easily approach $70,000 annually in North Carolina and Georgia. Also, the annual out-of-pocket costs for a family caregiver can be huge, not to mention a heavy burden in physical, mental and emotional pain. Altered work schedules, depression and stress can cost employers billions in lost productivity.

Long term care insurance, until a few years ago, was not a viable alternative. That market is just now maturing. Even then, the coverage can be expensive on a tight budget. In any event, many are not insurable.

The existing Medicaid-based system offers fairly comprehensive coverage for the poor, but for the middle class the problem with the current system is that they are – well – middle class. To become eligible, people must impoverish themselves. That comes easily enough after a year or two in a nursing home.

“Either” The Private Option –

Proposals to enhance private insurance would largely leave the current structure in place. That does little to relieve the current insurance underwriting standards and the fiscal pain of either privately paying or qualifying for Medicaid.

Also, if Medicare Advantage plans are any indication of the magic elixir of private insurance, we cannot be encouraged. Uncle Sam spends 20% more on each Medicare Advantage beneficiary and then complains the Medicare system is going broke.

“Or” The Universal Healthcare Option –

Simply replace the current welfare-based system with social insurance. The program could be managed as a new Medicare benefit or though a new independent, quasi-government entity.

While attractive to some, the loss of choice, the expense of another huge bureaucracy, possible rationing of care and dictating more rules and regulations is mind-boggling. Cup of “tea,” anyone?

The “And” Approach

Why not a hybrid public-private system?

Scrap or greatly limit Medicaid coverage. Grandfather-in those who are currently uninsurable. Allow private insurers to offer standardized long term care insurance coverage (similar to the way Medigap policies are offered – which makes comparison shopping easier). To make private insurance more affordable and reduce the need for underwriting, require a mandatory beginning age and require insurers to accept all buyers without underwriting (again, similar to Medigap policies). Make Medicaid a painful alternative for those who simply elected to skip the affordable premiums when they had their chance.

The Community Living Assistance Services and Support Act (the “CLASS Act”) signed by President Obama last March contains a few of the features I outlined above, but has a few significant drawbacks, even after it kicks in during 2012. I will post a summary of the CLASS Act in the near future.

Any solution, it seems, must provide some mix of public and private financing to be politically and economically palatable.

This particular system is most definitely broken, so let’s fix it . . . intelligently.

Medicare will only pay for up to 100 days of nursing care following a hospital stay, and there are serious limitations on those benefits. Further, Medicare will not pay for long-term care that involves non-medical help with daily tasks, e.g., bathing, dressing. Also, Medigap policies and regular health insurance do not pay for long-term care that involves non-medical help.

Medicaid, the federal-state public assistance program for the poor, does pay for nursing home costs but only after a person essentially gives up many of his or her assets and qualifies for aid. See NC Medicaid Rules Explained on this website.  Although we can assist you with Medicaid Planning, for many individuals and couples the process is either impractical or emotionally trying. The rules are constantly tightening.

According to an article in Kiplinger’s Retirement Guide, nursing home care costs an average of $72,000 per year. In North Carolina the costs can easily climb to $75,000 to $80,000 per year. The American Council of Life Insurance projects that by 2030, nursing home care will average about $190,000 per year.

Most people prefer to receive care in their homes. According to an article in Kiplinger’s Retirement Guide, nation-wide, daily home-care costs average $45,000 per year. If you purchase long-term-care insurance and select the right benefits then you can decide where and what care you will receive. If you purchase long-term-care insurance, you will receive care and at the same time protect your life savings.

As a law firm, we do not sell any insurance; our job is to counsel and advise you. However, we can assist you with the evaluation and selection of an appropriate long-term care insurance policy suitable for your needs.