ElderLaw Answers Blog

According to an article on the Congressional Quarterly website, Sen. Kennedy’s proposal to include basic long-term care insurance in health care reform has been calculated by the Congressional Budget Office to add $58 billion in revenue over the next 10 years.  The proposal, known as the CLASS Act, would give all participants about $50 a day towards their long-term care after paying in a monthly average premium of $65 for five years.

The five year requirement explains the positive cashflow for the first 10 years, since there would be now outflow of funds until year six.  In order to keep the program budget neutral beyond 10 years, Congress may have to increase the premiums or limit the benefit.

The Consumer Federation of America offers a service to consumers purchasing life insurance that helps them to determine whether they are getting the right policy.  For just $75, James H. Hunt, a former Vermont insurance commissioner, will evaluate your policy, tell you its expected return on investment, and if appropriate suggest better alternatives.

You can learn more about this service by clicking here.

As a news article on the ElderLawAnswers site details, Sen. Edward M. Kennedy’s just-released health care plan includes a new national long-term care insurance program offering basic help for the elderly and disabled. Under the proposal, Americans would pay a premium of roughly $65 per month. After they had contributed for at least five years, participants would be eligible for a benefit of not less than $50 a day that they could use for care in their home instead of care in a facility.

While insufficient, it’s a huge step in the right direction. No one wants nursing home care, Medicare generally only covers home care for a short period following hospitalization, and few people can afford long-term care insurance. (In 2006, private insurance — including Medicare supplemental policies as well as long-term care insurance — covered only 9 percent of the $180 billion spent on long-term care, according to the Kaiser Family Foundation.)

This means, that if people want to stay home, for the most part they must pay out-of-pocket. Many states’ Medicaid programs have been expanding their home health care coverage, which is a good thing. But consumers must wade through a patchwork of programs and qualify for Medicaid coverage, which has different rules in every state. The complications of this system help keep an army of elder law attorneys and other advocates in business, but it’s not good for consumers.

Sen. Kennedy’s proposal for a broad-based insurance plan for long-term care will help address the huge challenges millions of seniors and their families face every day. While $50 a day is insufficient to pay for the care many seniors and others need, it can help fill the gap. For many middle-income Americans, it may be just enough to make the difference and allow them to stay at home or to afford assisted living care.

In addition, it should be politically palatable because it doesn’t replace the long-term care insurance market. More affluent seniors may still want long-term care insurance to pay for all of their care. And it may make long-term care insurance more affordable for middle-income Americans since they won’t have to buy as much coverage. Finally, under Kennedy’s plan, taxpayers can opt out if they choose. This may undercut the social insurance model, but also may help blunt opposition to the plan.

The ElderLawAnswers home page includes a survey that we change every month or so.  The survey question usually solicits opinions on some aspect of law or public policy relevant to older Americans, but last month’s survey asked site visitors a more basic question: “Which term do you prefer for those age 65 and older?”  We listed as possible responses “Seniors,” “Elderly,” “Aged,” “Old” and “None of these.” 

To our surprise, it wasn’t even close – three-quarters of the respondents (74 percent, to be exact) favored “Seniors.”  A distant runner up was “None of these,” with 18 percent of the vote, followed by “elderly” (4 percent), “old” (3 percent) and “aged” (1 percent). 

Clearly, visitors to our site have spoken.  To what extent we should change our own references to the, ahem, elderly in our news articles and reviews is another question.  After all, our site is called “ElderLawAnswers” and attorneys who specialize in this area of law are professionally known as “elder law attorneys.” 

In referring to people older than 65 in our articles, we have usually used “elderly,” while throwing in the occasional “senior” or “older American” for variety’s sake.  We have always regarded “senior” as a euphemism best reserved for someone in their final year of college.  But I imagine that given these overwhelming results, we’ll start making more liberal use of “seniors.”  And if you were among the 18 percent who answered “none of these,” we’re open to further suggestions.

A recent study by the MetLife Mature Market Institute finds that purpose, rather than money, is the key to living the “good life.”

The study asked 1000 individuals between ages 45 and 75 whether they felt happy about their lives, what was important to them, and their hopes for the future.  It found that money is important, but that it only goes so far.  As long as the individual has enough money to be comfortable and is not preoccupied by the need to make ends meet, the key determinant in being happy is having meaning and purpose in life.  This was expecially true among the older respondents, who were less concerned about earning a living and saving enough for retirement.

This study, titled “Discovering What Matters: Balancing Money, Medicine and Meaning,” is relevant both to individuals and to their advisors in helping them make choices that can lead to the “good life” for them.  Financial and estate planning are important, but primarily to the extent that they can provide a means to allowing the individual to pursue meaning and purpose in his or her life.

To assist individuals in planning to achieve their own optimal balance, the MetLife Mature Market Institute provides a workbook that can be downloaded by clicking here.

If you’re reading this blog, you are active on the Internet.  You may have a LinkedIn or Facebook account.  You may bank and pay your bills on-line.  And you may save and share photographs on line through a number of services.

So, what happens to all of these accounts if you die or become disabled?  Does your spouse, a child or a friend have access?  Do they know your usernames and passwords?

It’s important that you record all of them and either share them with someone you trust.  Of course, that may defeat the purpose of all of these security protections if someone you don’t trust gets access to the information.

It’s no surprise that there’s now a company, Legacy Locker, that has come up with a digital solution.  For $29.99 a year, you can record all of your usernames and passwords on line so that your designated person or people can gain access when and if needed. 

The bottom line is that you need a system, whether it’s on line or you use the old fashioned pen and paper method.

According to a survey conducted by Harris Interactive for The Hartford Insurance Company, three in five parents of the 2.6 million children with special needs have no plan to cover their cost of care when the parents can no longer do so themselves. 

In addition, of the 38 percent with a plan, most make costly mistakes.  Half would give an inheritance directly to their children with special needs and 58 percent name them as a beneficiaries of retirement plans and life insurance policies.  Many people with special needs cannot manage their money and are suscetible to others who may take advantage of them and the direct receipt of funds can mean that they become ineligible for important benefits programs such as Supplemental Security Income and Medicaid.

A special needs trust should be used to protect any funds left to an individual with special needs.  In addition, life insurance can be a useful tool for making sure that there are enough funds for the child with special needs when the parents are not longer able to provide support.  For more information on special needs planning, go to the web site of the Academy of Special Needs Planners by clicking here.

Our previously reported survey found that just over half of respondents wanted no estate tax and a further 19 percent favored only taxing estates larger than $3.5 million or $7 million for married couples (the threshold this year).  The remaining 30 percent of respondents would tax estates beginning at $1 million or at $2 million (the threshold last year).

Interestingly, however, our newer survey asked whether respondents would prefer an estate tax to raising income tax rates to raise the funds lost be eliminating the estate tax and almost three quarters said they’d rather keep the estate tax.

As you can see, what policy the voters want Congress to adopt depends almost entirely on how the question is phrased.  No one wants to pay taxes.  But if taxes are necessary to pay for needed government services, voters may well prefer an estate tax to higher income taxes.

The recently passed Republican majority worked hard to eliminate the estate tax, in part by calling it a “death” tax.  Their campaign neglected to discuss the trade offs between one tax and another.  An honest presentation to voters needs to put the issue in such a larger context.

Almost two years ago, Senators Kennedy and Harkin and Representatives Pallone and Dingell introduced the Community Living Assistance Services and Support (CLASS) Act to finance long-term chronic care for Americans with disabilities.  The Act would be financed by a payroll deduction and would pay either $50 or $100 a day to beneficiaries depending on their level of impairment.  Workers would have the ability to opt out of the program if they so chose.

With the prospect of comprehensive health care reform more likely under the Obama administration, the CLASS Act is gaining momentum.  Senator Kennedy has stated that he will not support a health care reform package that does not include long-term care coverage.  Aging and disability organizations have joined together to host a national call-in day on Wednesday, May 13, from 8:00 am to 6:00 p.m. eastern time.  Call 1-866-459-9232 to be connected to your senator’s office.

I recently had a call from a prospective client in his early 60s who had been diagnosed with prostate cancer.  His doctors estimated his life expectancy at about 10 years.  Fortunately, the man feels healthy now.  But this news has changed his life choices dramatically. 

No longer does he have the the life expectancy of the average 60-year-old American male of 21 years.  As a result, he had decided to retire early and to make the most of his remaining healthy years.

Fortunately, most of us do not have this man’s death sentence.  But unfortunately, at least for estate and financial planning purposes, we don’t know how long we will live nor how long we will be healthy and able to work.  We don’t know if we will live to a ripe old age in perfect health, or suffer many years of disability and dementia.

According to the Society of Actuaries, a man who reaches age 65 has a one in two chance of living beyond age 85 and a one in four chance of living beyond age 92. Women are likely to live even longer. For a couple reaching age 65, there’s a one in two chance that one spouse will reach age 92 and a one in four chance that one will reach age 97.

That is a huge longevity risk.  These numbers indicate that a single person needs to plan to live to at least 90 and a married couple needs to plan for on spouse reaching age 100. 

But not all individuals have the same life expectancy.  They are affected by their own health — as in the case of my prospective client — their lifestyles, and their genetics.  A family history of longevity would argue for financial planning that anticipates needing resources to last to an old age.  A family history of Alzheimer’s disease would guide an individual to purchase long-term care insurance.

While we cannot know our future exactly, we can determine the likelihood of living a certain number of years, as well as the likelihood of being healthy or ill during that time.  Companies make these predictions in the context of personal injury law suits and for insurance companies.  They can do it for planning purposes as well.  Companies that provide these “Longevity Curve Reports” include 21st Services, which will provide a report for as little as $60.

Other on-line services will also provide a life expectancy estimate at no charge.  But these will be based on self-reported information as opposed to an examination of medical records and they will provide on a single number, rather than likelihood of reaching various ages.  For instance, it may say that you can expect to live until age 86, rather than saying that you have a 25 percent chance of dying by age 80, and a 25 percent chance of living beyond age 90.  One of these free calculators can be found at the web site Living to 100.

Whether you purchase a report, use a free service, or make your own estimate based on your health, lifestyle and family history, an idea of how long you will live can help guide your estate and financial planning.