The Rising Need for Long-Term Care
Presented By: Krause Financial Services
Voiceover: There’s a looming crisis hurting the vast majority of middle-class Americans every day. They work their entire lives to live comfortably in retirement and pass on a legacy to their children. But most seniors end up losing those savings to the high cost of a nursing home.
Alex: 70% of seniors will require long-term care at some point in their lives. Even worse, 75% of single individuals and 50% of couples will exhaust their life savings within one year of entering a nursing home.
Voiceover: On average, seniors in a nursing home pay upwards of 7, 8, or even 9 thousand dollars every month out of their own pocket. Most don’t realize there are programs, such as Medicaid, that can help them with these devastating costs. Working with a qualified elder law attorney is crucial in these cases.
Dan: Hi, I’m Dan Slater, Creative Marketing Director here at Krause Financial Services. Today, I’m joined by Amy Beacham, our Communications Director, and we’re here to talk about the rising need for long-term care. So, Amy, if I’m not mistaken, there is close to 80 million people that are expected to be over the age of 65 in the coming years. Is that correct?
Amy: That’s correct.
Dan: I assume that, you know, long-term care is expensive. On average, it’s something like $8,500 a month. I mean, that’s more than some people’s paycheck.
Amy: Right, right. Nursing home costs will vary from state to state, but in some states, it’s over $10,000 a month.
Dan: So, who pays for long-term care?
Amy: Well, there are a couple of payors, Medicare being a small one. Medicare will pay for a nursing home stay in a rehabilitative setting. So that means that if you broke your hip and you went to the hospital for a couple of days, and now you need to rehabilitate in order to go back home, Medicare will help pay for that. So, if you are in a nursing home receiving Medicare benefits, it is only temporary.
Amy: Another potential payor would be the VA Aid & Attendance program. That does pay out a small monthly pension to qualified veterans or their surviving spouses. But typically, it’s not enough to pay for those $8,000 a month nursing home bills.
Dan: Okay. Alright. So far, we have Medicare, right? And we have the VA benefit. Who else pays for long-term care?
Amy: Well, many people just end up paying out of pocket. They don’t realize that there’s something they either could have done in the past to prevent this or that there’s something they can do currently to help with their long-term care costs. So, they will just exhaust their life savings.
Dan: Is there any kind of insurance or something people can do in advance to kind of…?
Amy: Well, there is Long-Term Care Insurance. This would be a form of pre-planning, so something you would do when you’re a little younger, a little healthier, to proactively plan for the potential need for long-term care.
Dan: Pre-planning… I know that at Krause Financial Services, here, we do a lot of crisis planning. What’s pre-planning?
Amy: Sure. Pre-planning is just taking those advance steps when you’re younger to protect yourself in the event of a nursing home stay. So whether it’s the purchase of Long-Term Care Insurance, which would provide you a monthly benefit, depending on what the specifics of the policies are, to help you pay for either a nursing home stay or an assisted living facility stay. Other forms of pre-planning could be developing an estate plan with an irrevocable trust. In those cases, you’re going to want to meet with an elder law attorney to discuss your options. But again, this must be done in advance of actually needing nursing home care.
Dan: So, if someone has done their due diligence in advance, they can purchase Long-Term Care Insurance or they can pre-plan for a situation that they might face down the road.
Dan: But what about the individual that hasn’t. What’s in store for them?
Amy: A lot of people think that if they fail to do any pre-planning, they’re out of options. And that’s not true. There’s also crisis planning.
Dan: Crisis planning, okay. What is crisis planning?
Amy: Crisis planning occurs if you’re already in a nursing home, you’re facing those long-term care costs each month, and you’re running out of all of your assets. It involves playing with your assets around Medicaid’s strict rules and accelerating your eligibility for benefits.
Dan: How would somebody solve a scenario like that? Where they’re in a pinch, they’re in a nursing home currently, and they’re privately paying, and they think that that’s the only option out there. What might be a potential solution for that individual?
Amy: A potential solution would be using a Medicaid Complaint Annuity. That’s a product that our office specializes in. Essentially, it takes your assets, which are preventing you from qualifying for Medicaid, and converts it into an income stream that has no cash value. So, your assets are essentially eliminated. As the owner of the annuity, you receive monthly income back. So, if it’s a married couple, chances are the spouse that’s living at home will purchase the annuity and receive that income. Or, if you’re a single person, there might be some other strategies involved with a Medicaid Compliant Annuity. But either way, the result’s the same: assets are eliminated and saved–keep in mind, we’re not spending these assets–and your eligibility for Medicaid is accelerated.
Dan: Wow, okay. So, even for someone who hasn’t taken the steps in advance to set their scenario up down the road, it sounds like we can really help those individuals out so that they qualify for Medicaid and have a large portion of that bill–that $8,500 a month average–subsidized.
Dan: Can you tell me more about Medicaid Compliant Annuities and how they might work?
Amy: Sure. A Medicaid Compliant Annuity is essentially a single premium immediate annuity. That means it’s an annuity that you purchase right away, and it begins making payments back to you. So, you might be familiar with deferred annuities that will collect value over time. That’s not what this is. This is essentially an exchange. You give the insurance company the funds you’re trying to eliminate, and they, in turn, turn it into a monthly stream of income.
Dan: So, this is not the “I get a return on my money.”
Amy: Correct. Yep.
Dan: This is an exchange of format, almost.
Amy: Yes, yes.
Dan: Got it, okay.
Amy: Exactly. The annuity does have to meet some special requirements in order to comply with Medicaid’s regulations. Those requirements include being irrevocable, which means you cannot alter the parties of the contract. It means being non-assignable, which means you cannot sell the annuity on the secondary market. It means being actuarially sound. Now, this means that the term of the annuity–because it is a fixed term, it’s not a lifetime payout or anything like that–cannot exceed your Medicaid life expectancy. Your Medicaid life expectancy will be determined by your local state’s Medicaid manual. Another requirement is providing equal monthly payments, so no deferral or no balloon payments in this case. And then lastly, naming the state Medicaid agency as beneficiary. In most cases, it needs to be named primary beneficiary, but sometimes there are exceptions to this.
Dan: This sounds like a very powerful solution for so many people that are about to enter into the later stages of their life and might have to pay that $8,500 a month average bill. It sounds like we have a lot of options out there to help those individuals. What other services do we offer here?
Amy: We do case analysis for all of our clients. We will take your client’s case facts, we will review their situation, and we will provide a recommendation to use an annuity to accelerate their eligibility. This will be a full, comprehensive proposal that outlines the eligibility strategy and what the economic results of the plan are.
Dan: That’s great for the attorneys that we work with. That sounds like almost where we support them enough to do a breakdown for their clients on their behalf.
Amy: Yes. You give us your client’s financial information–everything is kept confidential–and we will, in turn, give you a strategy to help accelerate their eligibility. If you decide to proceed, we will walk you through the process step-by-step. From the time we receive the application through the contract being issued, we’re there to help you through that.
Dan: Perfect. So, if there’s attorneys out there right now that are interested in working with us, what steps can they take to work with Krause Financial Services?
Amy: The first thing you should do is call us, whether it’s actually calling into the office at 855-552-5893 or go online and use our quote request tool. Another option could be emailing our [email protected] Either way, just get us your client’s case facts. Once we have those, we will provide a proposal within one business day. And that proposal should contain all the information that you need to know whether or not this is right for your client.
Dan: Amy, thank you so much for answering all of our questions today. I know this has been a big help. I know there’s a lot of attorneys out there that might have clients in these types of situations that need that help. For those of you out there who have clients that are privately paying or being asked to privately pay every single month, we urge you to call 855-552-5893 today. Speak to one of our Benefits Planners and find out how Krause Financial Services can help you. We can also help you in your practice. Or check us out at medicaidannuity.com. That’s medicaidannuity.com.
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