I know what a depressing title for my first column of a New Year, but more on that later.
As I write this on January 1st, I have just finished reading all the comic’s in the Sunday paper and was amazed at how many of them made reference to the Mayan prediction of the end of the year in 2012. If you think that is a likely scenario then you have no need to read the rest of this article as this is about planning for a future hopefully beyond that timeframe.
In 2012 I will celebrate my 25th anniversary as a licensed insurance agent, and I have a feeling that things are coming full circle.
When I first started in the insurance profession I was primarily offering Long Term Care Insurance (LTCi) which at the time was far more affordable than it is today. At that time many professionals in the business were somewhat pessimistic in their outlook for the future as it was thought that the government would step in and mandate or cover LTC through either Medicare or another program.
In the ensuing 25 years many attempts have been made on both a national as well as a state basis with very limited, if any level of success.
First, let’s look at the problem. People are living longer and while most will have a far healthier lifestyle, of those who make it into their late 80’s many will require some level of assistance. Medicare does not cover LTC. Medicare will cover you fully for 20 days, and offer limited coverage up to 100 days for care in a Skilled Nursing Facility, but only if you meet the stringent requirements of three days of prior hospitalization as well the needing skilled nursing. Medicare does cover limited Home Health Care with very real limitations.
Medicare does not cover custodial care if that is the only level of service you require. Custodial care is when a person requires assistance with Activities of Daily Living (ADL’s). These ADL’s include things like bathing, toileting, transferring from bed to bathroom etc. These are services that are usually performed by persons who have had minimal training.
Medicare does not cover Assisted Living Facilities, where a person generally have their own room, and can ambulate themselves to the dining room etc.
Four attempts of government influence have been as follows.
In the early 1990’s the IRS created a provision where plans that were designed to be Tax Qualified allowed for LTCi premiums to be included as medical expenses and thereby be eligible for a tax deduction if a persons eligible medical expenses met a certain threshold.
This provision did stimulate for a short period of time increased consumer participation in the purchase of insurance plans.
Secondly the federal as well as several state governments (including Washington) introduced an LTCi plan that was available for employees on a Guaranteed Issue Basis (no health questions) as with limited underwriting for spouses and additional family members.
Thirdly state governments have implemented various attempts to encourage the purchase of LTCi plans. In Washington Gov. Gregoire sent a letter to all state residents over the age of 50 urging them to consider the purchase of LTCi. This had a very minimal impact as it was a suggestion or a recommendation with no incentives for the public.
A number of other states have introduced what are called Partnership Plans, where if a person purchased a plan with let’s say $300,000 of benefits, the state would allow that amount to be exempted as assets in the situation of a LTC confinement and application for Medicaid benefits. This has met with greater success as this has a very real and tangible benefit to policyholders.
Lastly and this is where the title of the article comes from. President Obama had introduced a program called the Community Living Assistance Services and Supports (CLASS act). This bill was to mandate the compulsory purchase of a limited LTCi plan by all employees, both in the public as well as the private sector.
The twin goals of the program was to provide meaningful benefits at a reasonable costs. These goals were basically incompatible with each other, as with everything in life, you get what you pay for.
This bill was repealed on November 30th, which by a strange coincidence was the final day of the annual National Long Term Care Awareness Month.
So folks, the news is that you are not alone as millions of other middle class people are in the same boat as you. How do you plan for a catastrophic personal expense, you hope you will never face.
The costs of care is expensive with assisted living costing around $5,000 per month and skilled nursing homes in the $6 ~ 8,000 per month. Care in your own home can be a less costly expense but has a whole other set of inherent problems.
The costs are guaranteed to only increase each year, and your options become more unpalatable as your age and health changes. So, why don’t you start the New Year by reviewing your options and facing the reality of this situation. Don’t procrastinate, learn the facts.
Many fine resources are available online from both the State of Washington as well as the Federal Government. The local SHIBA office located at 411 W. Washington, Sequim likewise have information and resources, as well as many local insurance agents and financial professionals.