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Thursday, August 30, 2012

Little-Known Strategies Could Boost Your Bottom Line

Increase your Social Security benefit.

With the economy in a tailspin and people having to work longer to make ends meet, it’s more important than ever to think through just how and when you claim Social Security benefits. You may be able to boost the amount you receive each month by employing two little-known strategies, described here.

These two approaches are available only if you’ve reached full retirement age—66, gradually increasing to 67. They are not widely used, so far. One reason is that most people begin claiming Social Security at the earliest eligible age, 62—before full retirement age—and that reality has spiked in recent months as people face financial pressure.

Mark Lassiter, spokesperson with Social Security, says these two strategies have been around a few years but not many people have used them. “They’re really just getting talked about in the past year,” he says.
If you or your spouse can hold off until full retirement age, the benefits may be significant.

1. Claim and suspend
If you’ve already started collecting Social Security but don’t need the money now, you can change your mind, thanks to a little-known provision called “claim and suspend.” That is, once you’ve claimed your benefits, you can turn around and suspend them for as long as you like. Claiming and suspending may add to your bottom line in three ways:
  • First, by signing up for Social Security, your spouse can also claim a spousal benefit, which typically is about 50 percent of yours. (The spousal benefit continues even if you suspend.)
  • Also, by suspending, then delaying your own benefit, the amount you’ll eventually receive each month continues to grow at 8 percent a year, until you’ve hit 70.
  • And, if you die first, the higher benefit is passed on.
Only Social Security recipients who are of full retirement age and have never collected early benefits can use the claim-and-suspend strategy.

2. Claim now, claim more later
This strategy works for married couples who claim benefits based on their own work record. If one of you has taken your benefit, the other can draw a spousal benefit, typically around 50 percent, even while continuing to work.

It works like this: If your husband (or wife) is receiving a benefit and you have reached full retirement age, you could claim a spousal benefit, rather than your own. You typically would get about half of what your spouse receives.

Meanwhile, your own retirement benefit continues to grow at 8 percent a year. When you reach 70 (when the amount no longer qualifies for the annual increase), you could switch from a spousal benefit to claim your own benefit, if it’s larger.

The purpose of the law
These strategies were included in the Senior Citizens Freedom to Work Act of 2000, passed to encourage people to continue working beyond their retirement age. One way to achieve that, explained Patricia Dilley, professor of law at the University of Florida and a former staffer on the House Social Security subcommittee, was to allow people to access some level of retirement benefits while they stayed on the job.
Other considerations
These approaches are not for everyone. First, they carry some risk. Most significantly, you need to live long enough to make waiting extra years to take your benefits worthwhile. Also, the benefit amount may affect your tax bill, so you may want to consult a tax attorney before signing on.

Critics say these strategies benefit people who are better educated, have higher incomes and may be able to work longer. And the fact that better-educated people are more likely to know about them in the first place undermines the goal of Social Security, which has been to provide a benefit available to society over all, says Alicia Munnell, director of the Center for Retirement Research at Boston College.

Finally, they offer greater benefits for married couples, notes Kathryn Garnett, a Seattle-based consultant in retirement planning. And many people with lower incomes, especially single older women, can’t afford to wait for higher benefits.

However, if you’re part of a couple with a modest or average income and you’re able to use these strategies, you’ll likely see a significant impact on your household finances, says David Yeske, a certified financial planner in San Francisco. “If you’re a professional making several hundred thousand dollars, the impact is trivial. But if your income is $50,000 and you bring in a spousal benefit, that could have a substantial impact on your household.”

It’s possible that Congress may change these rules down the road; although experts say that if you’ve already begun claiming benefits, it’s likely that you’d be grandfathered in.

Karen M. Kroll is a financial writer based in Minneapolis.

Monday, August 6, 2012

Social Security not deal it once was for workers

Tuesday, July 31, 2012

Women facing 'retirement income glass ceiling'

Savings crimped by lower wages, time outside the workforce

By Darla Mercado
July 31, 2012

Women face a unique set of hurdles when it comes to saving for retirement, and those difficulties set them far behind men once they stop working.

“Due to persisting income disparities, a retirement income glass ceiling has been placed over women, and it is limiting their ability to fund a secure retirement,” according to Cathy Weatherford, chief executive of the Insured Retirement Institute.
Research released by the IRI on Tuesday showed that over time, income disparities hurt the growth of women's retirement savings. After 30 years, female employees end up with a 25% to 30% shortfall in savings, compared with a male worker who has the same saving and investing habits.
Further, while half of male baby boomers have at least $200,000 socked away for retirement, just 35% of boomer women have that much in savings, according to the IRI, which conducted interviews with 503 people 50 to 66.
Women continue to earn close to 80 cents for every dollar earned by men. That difference inevitably affects the amount that women put away in their retirement plans.
Between 25 and 34, a woman's retirement savings is only about 64% of a man's, rising only slightly to 78% between 65 and 69, according to data from ING Groep NV and cited by the IRI.
Female workers' savings plans go awry when they take time off of work to care for family members.
Stepping out of the workforce to raise a child or to care for others means that these women end up missing out on career opportunities, as well as the time to contribute to a retirement plan at work.
The IRI cited data from the Family Caregiver Alliance that showed that a third of working women cut their working hours, while 29% took a pass on a promotion and 16% outright quit their job to take care of others.
Life events, such as divorce or death of a spouse, hurt women more keenly due to the loss of income and assets, particularly if these events take place later in life. Women tend to live three to four years longer than men, according to the Society of Actuaries, so they need to stretch their savings and income over a longer time period.
Following a divorce or separation, women's household income declines by an average of 41%, close to twice the amount of income loss men experienced, according to an analysis of people over 50 by the U.S. Government Accountability Office. Once a woman is widowed, her household income declines by 37%, compared with a 22% drop for men.
“Women face a unique set of circumstances that warrant special attention,” Barbara D. Bovbjerg, managing director of education, workforce and income security at the GAO, wrote in the report.
“Women may have a more difficult time saving for retirement and avoiding poverty late in life,” she wrote.

“[This is] partly due to the fact that they have a greater likelihood of being single, living longer, taking time out of the workforce to care for family members and having lower average earnings.”

Friday, July 27, 2012

Is LTC Insurance Worth It? Get Real...

CNBC lets you vote on the question “Would You Buy Long-Term Care Insurance?” here.

This article says the premiums are expensive. I hear that all the time.
Are they expensive?

I have to expand the question for those who make that statement.

Long-term care insurance premiums are expensive compared to ... what? Compared to the cost of long-term care? NO. Long-term care insurance premiums are a drop in the bucket compared to the cost of the type of care this valuable insurance pays for.

Take the group plan for state of Tennessee employees, for example.

A 50-year-old can get a $200 daily benefit to cover today’s cost of care with either a 3-year benefit period or a 5-year benefit period for only $159.14 a month or $224.26 a month respectively. If a spouse is also issued, the premium is reduced 10% for both the employee and the spouse and paying annually instead of monthly will reduce it an additional 8%. So now we’re at $1,591 for the 3-year benefit period and $2,242 for the 5-year benefit period.

Sound like a lot? Here’s the value proposition: The premium for the 3-year plan will cost $47,730 over 30 years and the premium for the 5-year plan will cost $67,260. At 5% compound, the daily benefit will be $823.23 in 30 years, which means the benefit pool for the 3-year plan will be $901,433 and the benefit pool for the 5-year plan will be $1,577,508.

Let me restate this information to be crystal clear:

Buying long-term care insurance at the above premium means you would spend 4% to 5% of the potential benefits in 30 years. ($47,730 is 5% of $901,433 and $67,260 is 4% of $1.5 million)  But we’re not done.

The benefits will continue to grow each year at 5% compound for the rest of your life as long as you haven’t used them all up! At 5% compound, the benefits DOUBLE every 15 years.

I’ve told you what the benefits will be at age 80 for the 50-year-old. Could today’s 50-year-old live to be age 95? According to the Wall Street Journal, one in 10 people who turned age 65 in 2011 will see age 95, so it’s logical to think those odds will be even higher for someone 15 years younger.

At age 95, the 3-year plan will have grown to almost $2 million and the 5-year plan will be sitting at $3 million.
$1,591 x 45 years = $71,595 premium vs. $1.8 million in potential benefits
$2,242 x 45 years = $100,890 in premium vs. $3.1 million in potential benefits

Oh, and let’s see, should we mention that the premium STOPS once you start using the benefits?

But wait – I’m not saying that the premiums can increase on a class basis? Yes, they certainly can.

The company that insures the state of Tennessee has had one rate increase since 1987 and it happened in 2011. Can it have more? Of course. But look closely at the numbers above. Even if the premium doubled or tripled, is it still a great deal? I think so. Would I rather pay a million or $1.5 million out of my pocket or would I rather pay less than 10% of that amount?

What if you never use it? Then you’ve made a 4% to 5% mistake… But was it a mistake? Your 4% to 5% mistake bought peace of mind for you and your family for 30 to 45 years. To me, that’s priceless.

Tuesday, July 17, 2012

The Basics of Long-Term Care Insurance

Long-term care--particularly whether it will be needed, and how much it will cost--is enough to make anyone uncomfortable. That said, it's also a topic that often generates lots of questions and is frequently misunderstood.

We spend a lifetime saving our money to provide ourselves and our loved ones with a sense of financial security in the future. Many of us have a great deal of our retirement assets tied up in qualified funds like 401ks and IRAs. It would be a shame if proper planning is overlooked and financial security is diminished by the cost of care. If income is needed to pay for care, keep in mind that these types of assets are subject to federal and possibly state income taxes.

And how much does long-term care cost for those who truly need it? The average cost of nursing home care in the United States now exceeds $70,000 per year, but varies widely from state to state, according to AARP.

For the most part, those who need long-term care are left to foot the bill on their own. Neither Medicare, nor Medicare supplemental coverage ("Medigap"), nor standard health insurance policies cover long-term care unless you are impoverished.

This is where long-term care insurance plays a critical role. Premium costs are based on your age and health at the time of purchase, so the younger and healthier you are when you purchase a policy, the lower the premium you're apt to pay during the life of the plan.

As you evaluate long-term care insurance, keep the following variables in mind:

Coverage parameters. Policies differ in the types of services they support. Choose a policy that best meets your particular needs.

Benefits payout. How much does the policy pay per day for care in a particular setting? How does the policy pay out? (For example, is the payout a fixed daily amount, as reimbursement for the cost of care up to a daily maximum?) Does the policy have a maximum lifetime limit?

Eligibility. Does the policy use certain "triggers" to determine benefits eligibility, such as the formal diagnosis of an illness or disability? What is the maximum issue age for the policy?

Women may need more. Women tend to live longer and may need additional coverage.

Finally, keep in mind that most long-term care policies sold today are federally tax-qualified, which means premiums paid and out-of-pocket expenses are deductible. Also, long-term care benefits received are not taxed as income up to certain limits.

Protecting the work of a lifetime sometimes means being willing to address the sensitive topics of mortality, old age, and infirmity. These may be inevitable issues for all of us, but we can at least prepare from a financial perspective, and in the process, leave ourselves and our heirs with a better future.

Retrieved on 1/18/12 from http://finance.yahoo.com/news/basics-long-term-care-insurance-134726269.html;_ylt=AkvRDjmV.DuTdWZo.5qRyOvC34dG;_ylu=X3oDMTQwNWdibGJzBG1pdANQRiBJbnN1cmFuY2UEcGtnAzRhMjFmMWIyLWFmMmQtMzAyZi04YjEyLWE2NDc5NDBjOGMwYgRwb3MDMgRzZWMDTWVkaWFCTGlzdE1peGVkTFBDQQR2ZXIDZjgxOTc1MjYtMWFjOC0xMWUxLWE4YmQtNzhlN2QxNWU5MWUy;_ylg=X3oDMTJkMjNyZGpxBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANwZXJzb25hbGZpbmFuY2V8aW5zdXJhbmNlBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3

Wednesday, July 11, 2012

How Married Couples Can Boost Their Social Security Checks

Coombes: Strategies that can increase your retirement income. .


You'd think claiming Social Security would be a simple retirement decision -- you retire and you start your benefits. But there are certain complex strategies that can help pad a married couple's retirement savings with tens of thousands of dollars of additional income.

Don't make your claiming decision lightly, said Joe Elsasser, an Omaha, Neb., certified financial planner and creator of Social Security Timing, a software program for pre-retirees and advisers to run scenarios to assess strategies.

"It's a decision that's going to impact you for your entire life, and it's a decision that's going to make up a substantial portion of your income," he said.

Specific strategies can help maximize savings, but couples also need to avoid a common mistake. "Almost everyone thinks of it as their own earnings record, their own benefit, as opposed to integrating what they receive," Elsasser said.
Instead, make the decision as a couple. Consider a hypothetical situation. The husband, the higher earner, believes he's going to die relatively early and the wife thinks she'll live a long time. So the husband claims his benefits as early as possible and the wife delays.

"That's exactly opposite of the scenario that should happen," Elsasser said.

Each year you delay claiming your benefits past your normal retirement age, your benefit ticks about 8% higher, up to age 70, thanks to what the Social Security Administration calls "delayed retirement credits." And in the event of a spouse's death, the surviving spouse can take the higher of her own benefit or that of the dead spouse.

If the husband claims early and then dies first, "effectively he's shortchanged his wife's survivor benefit," Elsasser said. Instead, that husband should delay his claim, so if need be the wife can claim the highest possible benefit for the rest of her life. If the wife dies first, the husband simply keeps his own benefit.

"You're trying to maximize benefits over both spouses' lives. That's the key that most people miss," said Brett Horowitz, wealth manager at Evensky & Katz Wealth Management in Miami.

The 'file and suspend' strategy

A claiming strategy called "file and suspend" can help get the most money. Say a husband plans to delay his benefit until age 70. He is allowed to claim his benefit at his normal retirement age -- say it's 66 -- and then immediately suspend it.

That way, his benefit amount keeps growing -- thanks to those delayed retirement credits -- but since he did make that initial claim, his wife, at her full retirement age, can file a "restricted" application to claim spousal benefits based on her husband's record, but not her earned benefit.

Generally, spousal benefits are up to 50% of the other spouse's monthly benefit at full retirement age (some age restrictions apply). In this scenario, her own benefit now can grow until she hits 70, too.

In one hypothetical "file and suspend" scenario, a couple, both 66, could collect an additional $60,000 by delaying their benefits and the wife taking spousal payouts while they wait, according to Lisa Colletti, New York-based director of wealth management at Aspiriant.

Say a husband and wife, both 66, are entitled to monthly benefits of $2,500 and $1,500, respectively. The husband decides to file and suspend -- he wants to delay until age 70, when his monthly benefit will be $3,300.

But, meanwhile, the wife can collect a 50% spousal benefit based on her husband's benefit at his full retirement age -- that's one-half of $2,500, or $1,250 a month -- from her age 66 to 70. Then, at 70 she switches to her benefit, which has grown to almost $2,000 a month.

End result: $60,000 more in benefits than had the couple simply delayed their benefits. This scenario assumes that delaying benefits until age 70 makes sense for the couple.

A 'restricted' application

Another use of a "restricted" application: Say a 66-year-old husband decides it makes sense for him to delay his benefits until he's 70. His wife started her benefits at 62.

"What the husband doesn't realize is he is entitled to 50% of his wife's benefit while he waits, because she already filed," Horowitz said.

When he turns his full retirement age, the husband can tell the Social Security Administration that, rather than filing for his own benefits, he wants to restrict his benefits to his wife's record. If he changes his mind, he can switch over to his own benefits at any time.

Assuming his wife's benefit at her full retirement age would have been $1,750 a month (she's getting less because she filed at age 62), the husband will get $875 a month.

"If he waits till age 70, he will receive $875 a month for 48 months, or $42,000," Horowitz said.

Note that the spouse who files a restricted application must be at least full retirement age. "If you apply for spousal benefits prior to full retirement age, then 'deemed filing' applies. You are deemed to have filed for both your own benefit and the spousal benefit at the same time," said Jim Blankenship, a certified financial planner in New Berlin, Ill., and author of "A Social Security Owner's Manual."

It's tough to generalize about Social Security strategies. Each spouse's age, benefit amounts and health outlook play a big role in how and when to claim. The point is, don't claim before you assess your options.

Retrieved 7/11/12 from http://www.smartmoney.com/retirement/planning/how-married-couples-can-boost-their-social-security-checks-1341249055117/.

Tuesday, July 10, 2012

GM follows in Ford's tracks, offers lump sum to retirees

Automaker also shifting balance of pension plan to Prudential

June 1, 2012 3:38 pm ET

Apparently, as Ford Motor goes, so goes GM.

General Motors Co. on Friday announced plans to cut its pension obligation by $26 billion by offering lump-sum payments to about 42,000 white-collar retirees. The nation's largest automaker is also shifting the balance of its plan to Prudential Insurance Co. of America.
“These actions represent a major step toward our objective of derisking our pension plans and will further strengthen our balance sheet and give us more financial flexibility,” Dan Ammann, GM's chief financial officer, said in a statement. GM's pension buyout announcement follows a similar move by Ford Motor Co. that offered lump-sum payments to about 90,000 salaried retirees.
The GM announcement affects retirees who retired before Dec. 1. GM retirees don't have to accept the offer. Those who don't will continue to receive monthly pension payments through a new group annuity contract administered by Prudential. The annuity contract is expected to be completed by the end of this year.
“This landmark agreement allows GM to maintain the value of U.S. salaried pension benefits for its retirees while significantly reducing its pension obligations,” said Christine Marcks, president of Prudential Retirement. “With our financial strength, investment capabilities and actuarial expertise, Prudential is uniquely suited to assume the responsibility of guaranteeing pension benefits.”
Leon LaBrecque, founder of LJPR, a firm managing over $431 million in assets, noted that choosing between the two payment types can be nettlesome. “The lump-sum vs. monthly pension benefit decision is an exceedingly complex one with, tax, estate, mortality, investment, and many more consequences," he said. "Retirees should study their options carefully before making a decision."
The GM and Ford announcements may be just the tip of the iceberg. A new report, “The Future of Retirement and Employee Benefits,” issued by Prudential and CFO Research Services last month found that senior finance executives in a broad cross-section of industries increasingly are exploring solutions to reduce or eliminate the effect of pension-funding volatility. Many respondents indicated that funding their pension obligations constrains their firm's cash flow, access to capital and ability to invest in growth opportunities.
The 2012 survey found an increase in the percentage of companies likely to transfer pension plan risk to a third-party insurer. More than 40% of respondents said they are likely to do so within the next two years, up from 30% in the 2010 survey.

Monday, June 25, 2012

Bankrolling adult kids imperils boomer retirement

By Liz Skinner

June 24, 2012

Economist Barry Bosworth was surprised to realize how much he and his wife still spend on their two adult sons, long after they put them through college.
Although the expenditures are mostly a lot of little things that add up each month, the couple also helped their sons buy homes and cars after they had secured doctorates but were earning low salaries in the early days of their careers.
“Children are still our largest expense, well after they leave home,” said Mr. Bosworth, a senior economics fellow at The Brookings Institution.
The amount that Americans spend on their adult children during years when they should be concentrating on saving for their own retirement worries some financial professionals.
Many parents can't see how paying down their children's debt or making mortgage payments for them could be hurting their own future, advisers said.
“Taking care of your adult children is one of those things that you don't expense for,” said Steve Hamant, a financial adviser affiliated with LPL Financial LLC. “I have to make sure that clients understand that money that's flowing out at this point will reduce their retirement.”

For many parents, even when they comprehend that the large checks that they write their kids may reduce their own future income, it is hard to deny them, Mr. Hamant said.
In fact, an Ameriprise Financial Inc. survey of 1,006 affluent baby boomers, conducted in December, found that 93% have provided some level of support to their adult children.
That rate isn't just a phenomenon that has occurred since the nation's economic recession. In a similar survey conducted in 2007, 92% said that they had helped their adult children.
Most of the money parents funnel to adult children is day-to-day spending coming from discretionary cash accounts rather than long-term savings, so the effect this could be having on retirement isn't as obvious, said Suzanna de Baca, vice president of wealth strategies for Ameriprise.
“If they aren't taking the money out of a retirement account, they aren't connecting the dots,” she said.
The data suggest that parents are helping even more now than in 2007 with paying off loans and covering housing costs.
About 71% of baby boomers in the recent survey said that they are helping pay their kids' student loans and 55% said that they have allowed their adult children to move back into their homes and live rent-free. About 53% have helped them buy a car, and nearly half help with car insurance, the study found.
At the same time, just 24% of responding boomers said that they are putting away money for the future, down from 44% when the survey was taken five years ago.
It is even more of a concern, considering that Americans spend an average of $235,000 to raise a child to 18 and then many help with college, which costs an average of $17,131 a year for an in-state four-year public school and $38,589 annually for a private-college education, according to The College Board.
According to advisers, parental support is lasting longer than it used to because of the flailing economy and high unemployment rates.
“People are especially sympathetic about helping their children now, given the economy,” said Donald Nicholson Jr., a financial adviser at Donald W. Nicholson & Associates Ltd.

Parents aren't just helping children during their 20s and 30s as they establish careers.
Mr. Nicholson said that he has clients whose 40-something children are moving home after getting divorced and needing help getting back on their feet.
In addition to threatening retirement income, such financial support can have another negative consequence in families that have more than one child, Ms. de Baca said.
Many times providing support to one child and not others who may be taking care of their own finances creates resentment, she said.
“One of the biggest problems I hear about involves the inequity of support between children,” Ms. de Baca said.
It also is hard for parents to know when enough is enough, and they are hesitant to talk with their kids about becoming more independent.
“Parents feel a lot of pressure to continue providing support,” Ms. de Baca said.
Mr. Bosworth said that both his sons, now in their 40s, are doing well in academia, and he expects to be spending on grandchildren soon.
“I remember advising my sons to make their avocation their vocation, but I think that now I'd tell them that a little bit of money wouldn't hurt either,” he said.

Monday, June 4, 2012

Bought for $881, this LTC policy pays out $1.7M

By Darla Mercado

April 29, 2012

Insurance companies paid some $6.6 billion in LTC insurance benefits to about 200,000 policyholders last year, according to the American Association for Long-Term Care Insurance.
The group studied claims data from 10 LTC insurers.
While many holders of long-term care insurance complain about high premiums, analysis of claims data reveals that a select group of those covered have paid insurers relatively little for what has turned out to be years of benefit payments.
According to the AALTCI, the largest open claim is $1.7 million, belonging to a policyholder who bought her coverage at 43 at the cost of $881 per year.
The policyholder filed her claim at 46 and has been receiving benefits for close to 15 years.
The second-largest claim belongs to a man who bought his coverage at 45, made his claim close to four years later and has been receiving benefits for more than six years.
That policyholder paid $3,374 per year for his LTC insurance, which has paid out $1.2 million in claims.
In one situation, the buyer made her claim only three months after purchasing coverage.
That customer, who was 56 when she decided to buy LTC insurance for $4,520 per year, has been receiving benefits for 12 years and five months.
In that time, she has rung up $1.12 million in claims.

Often when young insured individuals make claims, it is either due to a debilitating accident or a chronic condition such as Lou Gehrig's disease or multiple sclerosis, said Jesse Slome, executive director of the AALTCI.
He added that the study didn't get into details about the specific causes of the largest claims.
The AALTCI found that just 10.4% of new individual claims that began last year started before the insured person reached 70.
“Long-term-care insurance is not the lottery,” Mr. Slome said.
“A policyholder who paid $3,000 in premiums and received benefits exceeding $1.5 million is not a winner,” he said.
“But having this protection in place can pay off, and for thousands of Americans, it increasingly [has],” Mr. Slome said.

Tuesday, May 22, 2012

Survive the Medicare Enrollment Maze

Enrolling in Medicare for the first time is a cinch for most seniors. Several months before your 65th birthday, the federal government sends you a "You're Eligible!" notice. You're automatically enrolled if you're getting Social Security benefits. Otherwise, you send in your application by the due date.

Mission accomplished!

But for a growing number of seniors, Medicare enrollment is a mission to bureaucratic hell. The rules can be perplexing for individuals who retire early or stick with their employer health plan after they turn 65 -- especially if their spouse is covered by their employer plan. It's easy to inadvertently miss an enrollment deadline. The possible consequences: months without insurance coverage and a lifetime of penalties.

Joe Baker, president of the Medicare Rights Center, an advocacy group, says confusion over enrollment rules is rising as people work longer, layoffs increase and dual-income families become more common. "It's no longer 65 and then you retire," he says. Corporate benefits managers sometimes are little help. "Folks are misinformed and uninformed about Medicare rules," he says.

Over the years, Kiplinger's Retirement Report has heard from many readers who have been tripped up by Medicare enrollment rules. To help avert further calamities, we're answering some of the most common questions regarding the interaction of Medicare with workplace coverage, including COBRA benefits, corporate retiree health coverage and federal health plans. A great resource is the Web site of the Medicare Rights Center at medicarerights.org. You also can call its helpline at 800-333-4114.

[More from Kiplinger: Special Report: Navigating Medicare]

First, the basics: You are eligible for premium-free Part A, which pays for hospital services, if either you or your spouse paid Medicare payroll taxes for at least ten years. If neither you nor your spouse meets the ten-year test, you can buy into Part A for $248 a month if you or your spouse worked at least 7.5 years in Medicare-covered employment. If neither you nor your spouse meets that test, the premium jumps to $451 a month. If you decide not to pay for Part A, you can still enroll in Part B, which pays for physician services.

If you are getting Social Security benefits when you turn 65, you will be automatically enrolled in Part A and Part B. Because you must pay a monthly premium for Part B ($99.90 for most people in 2012), you can turn it down. Follow the directions when you get your Medicare card to let the government know that you do not want Part B. Otherwise, the premium will be deducted from your Social Security payment.

You need to sign up yourself for Parts A and B if you have not started Social Security benefits by the time you turn 65. You should enroll in Medicare when you're first eligible during your seven-month "initial enrollment period," which begins three months before the month you turn 65 and ends three months after your birthday month. It's best to enroll during the first three months; otherwise, your coverage won't begin until after you turn 65.

An alternative is to sign up for a private Medicare Advantage plan during your initial enrollment period. An Advantage plan generally includes drug coverage, provides Part A and Part B, and covers many co-payments and deductibles as well.

If you don't sign up for Part B during your initial enrollment period, you will need to wait until the "general enrollment period" from January 1 to March 31. Your coverage will begin on July 1. You will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B. (If you're still working, you can sign up during a "special enrollment period" -- but we'll get to that later.) The general enrollment period for Medicare Advantage is October 15 to December 7.

You must have Parts A and B to buy a private Medigap supplemental insurance plan, which pays co-payments, deductibles and many other expenses that traditional Medicare doesn't cover. You have six months after you enroll in Part B to buy any Medigap policy regardless of your health condition. "You're only allowed one guaranteed-issue period," says Paul Gada, personal financial planning director of Allsup, in Belleville, Ill., whose Medicare Advisor service helps individuals choose health plans. After that, he says, an insurer can reject you or charge you more if you have a medical condition.

Moving beyond the basics, the information in this Q&A should help you navigate the Medicare enrollment maze.

I am turning 65 and still working. My wife and I have coverage from my employer, and we'd like to remain on that plan. Do I need to enroll in Medicare? How about my wife, who turns 65 in a year? The answer depends in part on the size of your employer.

[More from Kiplinger: 10 Worst States for Retiree Taxes]

If your employer has 20 or more employees, neither you nor your wife has to enroll in Part B while you are still working. You should both enroll in Part A as soon as you are eligible because it's free, although your employer's insurance will be your primary coverage.

When you leave your job, you and your wife (as long as she is at least 65) can enroll in Part B without penalty during a special enrollment period, which lasts for eight months after you stop working. To avoid a coverage gap, enroll in Medicare a month or so before your employer coverage ends. If you miss your special enrollment period, you will need to wait until the next general enrollment period on January 1 to enroll in Part B and possibly pay late-enrollment penalties.

If you change your mind while you're still working, you can drop your employer coverage and enroll in Part B. You will not owe the 10% late-enrollment penalty as long as you are working and covered by an employer plan up to the time you enroll.

If your employer has fewer than 20 employees, you should enroll in Medicare as soon as you are eligible because it becomes the primary payer, even if you have not enrolled. That means that your employer's plan will not pay for any expenses covered by Medicare. These rules apply to your wife as soon as she is 65; until that time, she can continue on your employer plan as long as you keep the coverage for yourself as secondary.

Baker of the Medicare Rights Center says some small firms mistakenly tell employees that they do not have to enroll in Medicare. "What they do not realize is that the insurers do audits and check dates of birth," he says. If an insurer pays a bill Medicare would have covered, it "can ask for the money back," he says.

Can I enroll in Part B and keep my employer's insurance? Won't that give me more coverage? That rarely makes sense. If you work for a large employer and are on the company plan, Medicare won't necessarily fill in the gaps. Say you have a $1,000 procedure, and your company plan pays $800. If Medicare's rate for that procedure is $600, it won't pay the $200 co-payment. Part B will only shell out if the private plan pays less than the government rate, Allsup's Gada says.

While you're still working, you can always decide later to drop your private insurance and sign up for Medicare without having to pay late-enrollment penalties. You should first compare coverage and costs of both plans, says Maura Carley, president and chief executive officer of Healthcare Navigation, a Shelton, Conn., firm that helps individuals find the best coverage and manage claims and appeals. "If the benefits in the company plan are comprehensive and the company is paying for a majority of your premiums, you're almost always better off staying with the company plan," says Carley, author of Health Insurance: Navigating Traps and Gaps (Ampersand, $20). Also, she notes, corporate drug plans tend to be better than the coverage offered by Part D.

If you work for a firm with fewer than 20 employees, it's rarely worth the cost of paying for the company plan as gap coverage unless your spouse needs it. Also, Baker notes that many health plans at small companies limit the choice of providers. "Medicare with Medigap and Part D provides good coverage," he says.

I am 65 and covered by a large group plan. If I leave my job in a year or two and enroll in Part B, will I be penalized for waiting to enroll in a Medigap plan? As long as you buy a Medigap plan within six months after enrolling in Part B during your special enrollment period, the insurance company generally must provide you with coverage at a favorable rate regardless of your health condition. Medigap rules vary by state, so check with your state's insurance commissioner.

I am leaving my job at 67. I took a severance package with three years of full retiree health benefits. Will I need to sign up for Part B, or can I continue with my employer-based benefits? What about my husband? This is where a lot of retirees get into trouble. And, unfortunately, some well-meaning company benefits managers don't understand the Medicare rules. It's the end of your employment -- not the end of your employer benefits -- that starts the clock ticking on enrollment periods.

It is absolutely essential to enroll in Part B as soon as you are no longer employed -- even if you have corporate retiree health benefits. Because you are older than 65 when you're leaving your job, you can enroll during your eight-month special enrollment period. The same goes for your husband, if he is 65 or older. Those who turn 65 after retiring must enroll during the seven-month initial enrollment period.

Once you are no longer employed, your group health plan will no longer be your primary coverage -- even if you have not enrolled in Medicare. It will pay only for expenses that Part B won't cover, and in some cases, it won't pay at all. Once the insurance company realizes a beneficiary is eligible for Medicare, it may try to recoup any benefits it already paid out.

[More from Kiplinger: Maximizing Social Security Benefits]

Even worse, you could find yourself without benefits for many months. Let's say you leave your job in November and decide to stay on your retiree health plan. You don't enroll in Medicare during your special enrollment period, which ends July 31. Your former employer's health plan finally realizes that you should have enrolled in Medicare, and it stops paying claims. You can't enroll in Medicare until January, and coverage won't start for another six months -- that's 11 months without coverage.

You generally can keep your retiree benefits as a supplement. But if those benefits expire or your former employer cancels them, you'll need to buy a Medigap policy. If you keep retiree benefits more than six months after you enroll in Part B, the Medigap company could refuse to sell you a policy.

I am retiring at 64, and I plan to go on COBRA. Can I stay on COBRA once I turn 65? If you are on COBRA and become eligible for Medicare, your COBRA coverage will probably end, according to the Medicare Rights Center. You should enroll in Part B during your seven-month initial enrollment period.

If you delay enrolling in Part B until after your COBRA benefits expire in 18 months, you will face a lifetime of late-enrollment penalties. Even worse, you won't be able to sign up for Part B until the next general enrollment period.

If you're already on Medicare when you become eligible for COBRA, you are allowed to enroll in COBRA. But COBRA becomes the secondary payer, so don't drop Part B. Because COBRA is so expensive, it usually doesn't make sense to keep it. With COBRA, you pay up to 102% of the cost of the employer plan. "The only time to take COBRA is if you have enormously expensive drugs," says Carley.

I've been on my husband's employer plan. He recently retired, and we went on COBRA. He's turning 65 and applying for Medicare. I'm not yet 65. Can I get on the COBRA plan? Yes. A spouse can continue coverage after an employee who qualifies for COBRA is no longer covered by an employer plan. As a spouse, you can continue on COBRA for up to 36 months or until you're eligible for Medicare.

I am eligible for the Federal Employee Health Benefits program (FEHB). Am I better off signing up for Medicare? The federal plan works differently from other types of employer insurance. You can choose FEHB, Medicare Part B or both. No matter what you choose, enroll in Part A because it's free.

The first option is to take FEHB only. The program provides comprehensive coverage and better drug benefits than a Part D plan, says David Snell, director of retirement benefit services of the National Active and Retired Federal Employees Association.

In this case, Part A becomes the primary payer for hospital bills and the federal plan will fill in the gaps. However, you will still have to pay all co-payments, deductibles and co-insurance for your physician costs.

A second option is to take both FEHB and Part B. You're paying two premiums, and, Snell notes, "most of the benefits you get with Part B duplicate what you get with the federal plan." Medicare will act as the primary payer, and FEHB will pay the co-payments and other out-of-pocket expenses for hospital and physician services.

If you choose this option, Snell suggests buying a lower-cost FEHB plan. "It will take some of the pain away from paying the additional Part B premium, and you'll still get complete coverage," he says.

If you're very healthy with limited drug costs, your cheapest option may be to suspend FEHB and go with a Medicare Advantage plan. Snell says that federal law allows individuals to suspend FEHB, enroll in an Advantage plan and "return at a later date if an individual needs additional coverage." You cannot return if you only had Parts A and B and not Advantage, he notes.

Thursday, May 17, 2012

Will Adult Children Have to Pay Mom's Nursing Home Costs?

via Forbes Network Activity by Howard Gleckman on 5/16/12

A Pennsylvania state appeals court has ruled that the adult son of a nursing home resident is responsible for her unpaid $93,000 bill. And the decision has some elder care lawyers wondering if this is just the beginning of a trend.

Pennsylvania is one of 30 states that have filial responsibility statutes—laws that impose a duty on adult children to care for their indigent parents. About two-thirds of those states, including Pennsylvania, allow long-term care providers to sue family members to recover unpaid costs.

The rest, including states such as Massachusetts, have no recovery provisions. However, failing to care for a parent is a criminal offense. In the Bay State, the penalty is a $200 fine or up to one year in jail.

The rules vary widely from state to state. But most take into consideration the adult child’s ability to pay. For example, a daughter would be protected if she also has extensive bills for her own child’s college education. In some states, such as Maryland, only the nursing home resident is responsible for a bill, although family members can voluntarily agree to help pay.

And federal law prohibits states from going after families after someone is already eligible for Medicaid long-term care benefits or from including an adult child’s income and assets when determining whether a parent is eligible for Medicaid. As a result, these laws apply only before people enroll in Medicaid.

The Pennsylvania case involved a woman who spent six months in a nursing facility recovering from an auto accident. She had monthly Social Security and pension income of only $1,000, far less than the cost of her care. While she applied for Medicaid, that process can take many months and, in this case, the woman left the facility while her application was pending.

As a result, the nursing facility sued her son for her unpaid bill. He argued that she was not indigent since she had some income and that, even if she was, other family members also had an obligation to help and all the burden should not be placed on him.

The appeals court disagreed. It said that in Pennsylvania someone does not have to be destitute to be indigent. Family members are responsible even if she has income but has insufficient means to pay for her own care.

The court also ruled that the facility could arbitrarily go after any family member it wanted, as long as it could prove that relative had the resources to pay. For more details about the case, take a look at the Elder Law Answers Website, which brought the case to my attention.

These filial repsonsibility laws are not new. In fact, they can be traced back 400 years to Poor Relief laws in England. In the U.S. many states have had them on the books for decades, but they have been rarely enforced.

That may be changing. With the costs of long-term care rising (an average nursing home stay now exceeds $200/day), and with increasingly strict Medicaid rules making it tougher for people to receive government assistance, senior services providers may find themselves with more unpaid bills. These suits may generate bad publicity but may also be a facility’s only recourse.

While these laws don’t directly apply to Medicaid recipients, they may force children to pick up their parents’ long-term care costs long before mom is ever eligible for Medicaid. Such a step could still shift significant costs from states to families.

Friday, May 11, 2012

Shift in hospital admission policy can have costly implications for patients

If you find yourself in a hospital for more than a few hours, make sure you find out if you have been admitted for inpatient care or if you are merely considered an outpatient under what is called "observation care."

If you haven't been admitted to the hospital, the costs you may have to pay out of pocket for medical services and drugs could be considerable. You could also be denied Medicare coverage for follow-up nursing care.

Patients getting emergency department services, observation services, outpatient surgery, lab tests or X-rays, but for whom the doctor hasn't written an order of admission, are considered outpatients even if they spend the night. Even if you stay in the hospital for a few days, don't assume you have been admitted. Ask about your status!

Why are hospitals doing this? In November 2010, the American Hospital Association warned that changes in policy by the federal Centers for Medicare and Medicaid Services "are causing hospitals to place patients in observation status for more than 48 hours instead of admitting them." As a result, observation claims have increased by more than 46 percent since 2006. According to Kaiser Health News, observation stays longer than 24 hours increased more than 300 percent from 2006 to 2010.

The National Senior Citizens Law Center and the Center for Medicare Advocacy filed a class-action lawsuit last November on behalf of seven individual patients, seeking to end the practice of putting Medicare patients in a hospital without formal admission. The plaintiffs claim this practice "interferes with their benefits because, as non-admittees, they can't satisfy their Medicare three-day inpatient hospital stay requirement."

When a patient is not formally admitted, Medicare will not pay for drugs prescribed for chronic conditions such as diabetes. If Medicare won't pay, neither will a patient's supplementary insurance. Moreover, Medicare has no control over the amount that a hospital can charge for drugs. Hospitals are not required to tell a patient that he has not been formally admitted, or that he will be responsible for paying any non-covered Medicare expenses. Medicare recommends that patients should remain under observation for no more than 24 to 48 hours, after which they should be admitted. However, this is a recommendation, not a requirement.

The most unpleasant surprise for non-admitted patients is the cost of drugs. Susan Jaffe of Kaiser Health News recently documented examples of patients charged much more for common drugs than they would have paid at a local pharmacy. A patient in Boca Raton, Fla., for instance, was charged $71 for a blood pressure pill for which her neighborhood pharmacy charges 16 cents.

Patients who have Medicare Part D will find that the drugs prescribed in the hospital will not necessarily be covered under their policy. Patients may bring their own medications, but the hospital is under no obligation to allow their use.

A patient can contact his insurance company to ask for help in appealing a hospital bill. Jaffe reported that a Medicare Advantage patient appealed the hospital's decision to disallow insurance from covering her hospital drugs. Her insurer requires its hospitals "to notify a member before delivering a non-covered service." Since the hospital did not obtain the patient's written consent, the hospital couldn't bill the patient.

Naturally, an emergency patient isn't thinking about hospital status. However, being an inpatient can mean significant savings to you. So you should ask your doctor to see that you are admitted. In addition, do not hesitate to ask your insurer for assistance in appeals if you believe that the bill you received is incorrect.

It is best to be prepared before a medical situation arises. I urge you to consult Medicare's pamphlet on observation care, which can be found online at http://www.medicare.gov/publications/pubs/pdf/11435.pdf. For further information, you may call Medicare at 1-800-MEDICARE (800-633-4227) or e-mail extendedobservation@cms.hhs.gov.

Wednesday, February 29, 2012

Do You Need Life Insurance in Retirement?

As you age, the idea of life insurance seems increasingly unnecessary. Many retirees prefer not to continue paying life insurance premiums when they no longer have young families to take care of. However, before you shrug off the idea of life insurance in retirement, it's a good idea to consider that life insurance still has its virtues.

You may still have dependents. Many retirees no longer have young children who will suffer financially if they pass on. But even once your children have established their own lives, you might have another dependent: Your spouse.

Your spouse might need to be protected from the loss of your income, even if you are retired. Check out the conditions of your pension or annuity. Also, consider that your Social Security check forms a portion of your retirement household income. When you die, your spouse's income is likely to be affected. Pension payments might stop, Social Security income often decreases, and annuity payouts might also cease, or getting at the remaining benefits might prove expensive.

It's important to look over the conditions attached to the income your spouse receives upon your death. If you care for your spouse, you want to make sure he or she is taken care of financially. The right life insurance policy can ensure that, when you pass, your spouse can make up the shortfall that comes with the loss of income from sources tied to your lifespan.

Life insurance can be used in estate planning. Heirs generally do not have to pay taxes on life insurance benefits. In some cases, retirees can use life insurance as a way to help their heirs pay estate taxes. Life insurance trusts, when used properly and set up with the help of a knowledgeable estate planner, can be a valuable tool for a retiree.

For some people, life insurance in retirement isn't very practical. However, for others, life insurance coverage can provide a solid estate planning strategy, as well as provide for a spouse later on.

Remember that you are more likely to save money by renewing an existing policy than by purchasing a new life insurance policy after age 50. So, before you let your life insurance lapse, make sure you run the numbers. You might need life insurance in retirement after all.

Tuesday, February 7, 2012

Enduring Love...

We insure many things...our cars, our home, our jewelry. And for good reason. They're valuable possessions. But what about love? Is that something that can be insured? Actually, yes it is.

When you own life insurance, you're letting your loved ones know you care even after you're gone.

It's an act of enduring love.


Friday, January 27, 2012

Long-term-care insurance offers protection, but it’s not right for everyone

By Caroline E. Mayer, Published: January 23

In the last years of Martin Privot’s life, his family had to start selling his assets to pay for his nursing home costs. “He needed 24-hour care and couldn’t be left alone,” recalls his daughter Toni Footer. “My biggest fear was we would run [through his money] and wouldn’t be able to provide the care that he needed.”
Privot died in 2008, from post-surgical complications and other ailments, before all his assets were depleted. Yet Footer, 61, says her dad’s experience “reinforced my already strong feelings that long-term-care [insurance] is a necessity.” The Rockville resident says she pays about $2,500 every year for such coverage for herself. “It’s expensive — in fact, it’s gone up twice — but it’s worth every penny. It provides a peace of mind that my family won’t have to struggle to find money to pay for my care.”

Mary McClelland came to the opposite conclusion after seeing how her mother’s expenses were often deemed exempt from coverage.

Her mother, Ruth Mezick, purchased long-term-care, or LTC, insurance in 1990 at age 78 when she was in fairly good health, paying an annual premium of $2,827 until she died 11 years later. In her mid-80s, her health began to deteriorate and she spent time in a nursing home, at home with help and in assisted living. But her policy — which promised to pay $100 a day — failed to cover much of those expenses because it kicked in only after she had been in one institution more than 100 days.

“She was never in one place long enough to qualify. She ended up getting about 10 days’ coverage, worth about $1,000,” says McClelland, who lives in Arlington. “That was a lesson to me; I decided it doesn’t always pay off.”

The question of whether to get LTC insurance bedevils consumers and their advisers. Unlike medical insurance, it is intended primarily to cover people who need assistance with so-called activities of daily living — for example, the care of a dementia patient or someone recovering from a broken hip. It can be expensive: Premiums range from $1,000 to $5,000 a year, depending on the age, sex and health of the purchaser as well as the extent of the coverage. And policy details can be confusing.

Even advocates acknowledge that it isn’t for everyone. Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an industry group, sums it up well: “Long-term care is a universal issue facing all Americans who are getting older. But long-term-care insurance is not a universal solution.”

So how great is the need for such coverage? It depends on how you look at the data. “One in two Americans are likely to need long-term-care services sometime in their lives,” says Amy Pahl, a consulting actuary for Milliman Inc, a leading actuarial and consulting company. However, Pahl adds, of those who might need long-term care, about a third will not meet the most common deductible period of 90 days because they will either die or recover before then.

To determine if a long-term-care policy makes sense for you, it is important to understand how the coverage works and what’s available.

Medicare is not the answer
Most standard health insurance plans do not cover long-term care. Nor does Medicare or insurance policies that supplement Medicare.

Medicaid, however, is the largest source of coverage for long-term care. The program pays for more than two-thirds of nursing home residents, according to data from the Kaiser Family Foundation.

But Medicaid comes with significant limitations. The choice of facilities that accept Medicaid is narrow, and the program is restricted to people with extremely limited income and virtually no resources, which forces middle-income consumers to spend down their assets if they want to qualify.

“Medicaid is supposed to be a safety net, but unfortunately it rests just about a half-inch off the floor,” says Tom West, a Northern Virginia financial adviser and long-term-care expert.

Yet Kansas Insurance Commissioner Sandy Praeger cautions that LTC policies may not be a good investment for some people. “It’s mostly a policy to protect your assets [so you don’t have to sell everything to pay for care] in case you get sick. If you don’t have assets to protect, then you shouldn’t be buying it.” Unfortunately, that can leave those consumers with limited flexibility if they do need long-term care.

How the coverage works
Typically, a policy pays a fixed daily benefit ($150 is common) for a certain period of time (often three to five years) starting at a specified time (90 days is common) after the beneficiary becomes disabled. The policy covers nursing home expenses, assisted living charges or less costly in-home-care bills.

Many policies also allow the initial fixed daily benefit to rise 3 or 5 percent annually to keep up with health-care costs. The policyholder agrees to a premium that can increase only if the change is approved by state regulators. Such increases have occurred frequently in recent years and, as a result, once-flat premiums have risen sharply. So have nursing home costs, which averaged about $214 a day — or more than $78,000 annually — for a semi-private room last year, according to a national survey by the insurer MetLife.

As people’s needs have changed, LTC policies have expanded to cover assisted living and home care; some new policies are flexible enough to anticipate technologies that don’t yet exist, such as robotic care.
“The policies have become very innovative,” says Slome. “Today you can go in and design coverage for particular needs and desires; you can even buy long-term-care insurance to enable you to get your care on a cruise line if you want it — and can afford it.”

Today’s policies can also allow couples to share benefits, so a husband and wife can each buy a shorter-term policy, for example three years of benefits. About 70 percent of coverage today is sold to couples, Slome said. If it turns out that the husband needs more than three years’ coverage, he can tap into his wife’s benefit pool. And in some policies, if the husband completely exhausts the couple’s coverage, the wife may still receive some nominal benefits if she needs care, too.

At the end of 2010, about 7 million Americans had LTC insurance, according to LIMRA, an association of life insurance and financial service companies. About 422,000 new policies were written in 2010.
The 2010 health-care law has a provision creating a voluntary program of LTC insurance. However, in October, the Obama administration announced it would not implement the provision because it was financially unsustainable.

According to Slome, the average age of the buyer is 57, with three-quarters of the policies written when purchasers are between 45 and 64.

When buying insurance, the younger the consumer, the lower the annual premiums. Today, according to Slome’s association, a 55-year-old couple in generally good health can expect to pay $2,675 a year for $338,000 of benefits; that figure would grow to $800,000 by the time they reach 80 if the policy contained a 3 percent annual compounded escalation clause. If they are 65, however, that same policy would cost $4,660 a year and grow to only $527,000 in coverage when they are 80.

For Washington area residents, even that coverage can be less than needed. The Guide to Retirement Living SourceBook, a comprehensive listing of retirement community, nursing home, assisted living and rehab facilities and home-care options in the area, puts the daily local cost per person of nursing home care at $235 to $304, or nearly $86,000 to $110,000 a year. Daily assisted living costs run between $108 and $162. (The SourceBook is owned by The Washington Post Co.)

Steep rate increases
One of the key concerns among consumers is the rise of premiums.
“It’s probably the most frequent complaint I hear,” says Praeger, who heads the National Association of Insurance Commissioners’ health and managed care committee. “The problem is, the older policies weren’t priced right to begin with. Companies expected about 8 percent of customers to stop paying their premiums, when, in fact the lapse rate is closer to 2 percent.” That meant the insurers had to cover more beneficiaries than they expected at a time when the economic downturn has meant less return on their investments.
Praeger acknowledges that rate increase requests have posed a dilemma for insurance commissioners. “If we don’t give them the rate increase they need, the insurance carriers could become financially impaired, and that doesn’t help people,” she says. In fact, in recent years, a number of companies have stopped selling policies. As a result, she adds, it’s hard to turn the increases down.

The policies can be very complicated, and Praeger advises consumers to consult with their accountant, attorney or other trusted financial adviser before purchasing a policy.

This article was produced in collaboration with Kaiser Health News. KHN is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy research and communication organization not affiliated with Kaiser Permanente.

Wednesday, January 18, 2012

Long-Term Care Insurance Gets a Makeover

By Lou Carlozo | Reuters EG – Wed, Sep 14, 2011 3:00 AM EDT

Less than two decades ago, Meryl Comer and her husband Dr. Harvey Gralnick embodied the American Dream: He was a physician, while she had built a career as an Emmy-winning reporter, producer and broadcast journalist. Everything looked perfectly in place for their careers to soar, their nest egg to grow.

Then came the news any couple would dread: Gralnick was diagnosed with early-onset Alzheimer's Disease at 57. Soon he couldn't recognize Meryl, and the couple went into financial free-fall as Comer took over his round-the-clock care.

"Here we have two people without income, and all the financial planning we have in place has disappeared," Comer recalls. "It's a straight financial bleed. With dementia, you're easily looking at $9,000 a month."

How does she make it, then, considering the couple had no long-term healthcare plan? "I don't," she says. "I'm going broke. The house will go next."

Comer, who serves as president of the Geoffrey Beene Foundation Alzheimer's Initiative, has become an outspoken advocate of long-term care insurance — an option barely understood, if not downright ignored, by most American consumers, including an alarmingly large percentage of Baby Boomers.

With long-term care policies, the costs of assisted living facilities, in-home care and private nursing homes are covered, in many cases with inflation protection. But since not many people are signing up for policies, the companies that offer them are trying to make them more palatable. Genworth Life Insurance Company recently launched Privileged Choice Flex, a long-term care solution that allows consumers to more easily choose an insurance plan that best suits their lifestyle and budget.

"It's been 24 months in development and it will be another eight months before it's fully available across the United States," says Matthew Sharpe, Genworth's long-term care product manager. "It takes a long time. We had three different products in the marketplace and combined them into one offering."

Some features of Privileged Choice Flex include a shared benefit where a husband or wife can reach into their spouse's portion of the policy for additional coverage. Even if a sick spouse exhausts the total benefit, the well spouse still maintains 50 percent minimum coverage, Sharpe says.
Privileged Choice Flex also allows access to Genworth's new Live+Well, a wellness program run in partnership with the Mayo Clinic that provides tools, resources and services to long-term care policyholders, and their spouses or partners.
"We wanted to provide a feature that would be available immediately, and that fills the gap between employer benefits and a long-term benefit," Sharpe says.

Genworth has been in the long-term care business more than 35 years, and was the first such provider in the U.S. Even so, the company has faced challenges educating consumers about long-term care policies because most people avoid the subject.

"Long-term care is definitely under-penetrated, there's no doubt about it," Sharpe says. "About 4 percent of the population that is eligible actually has a policy. But it's a tough topic to broach. We're still fighting this battle."

"Long-term care is a growing, looming threat to retirement security," says Whit Cornman, spokesman for the American Council of Life Insurers in Washington D.C. He cited figures from Genworth's 2011 Cost of Care Survey, which shows a private nursing home stay rising 3.4 percent over the last year to $77,745 annually. That cost, Cornman says, "is only going to go up" — to a whopping $330,000 in 2040.

"It's incredible," Cornman says, "and really the only product that can help people pay for it is long-term care insurance. When you're looking at retirement savings, a 401(k), or a pension if you're lucky, it's still going to be very difficult to save for retirement and still pay for long-term care."

The eye-popping numbers explain why Jim Darguzis, a State Farm Insurance agent based in Shorewood, Illinois, bought a long-term care policy for his wife two years ago. The couple is healthy but Darguzis, 67, wants to make sure any potential health problems won't impact his children and grandchildren.

"My mother was in a nursing home for two years and the cost at that time, 11 years ago, was $100 a day," Darguzis says. Now it's $175. He tells people that they've worked hard all their lives to accumulate a nest egg, and "the long-term care policy is designed to protect that nest egg, so they don't have to spend what they've accumulated."

Darguzis says a policy with 5 percent inflation protection for a 50-year-old male, offering $127,750 in lifetime benefits today, would more than double to almost $323,000 in benefits if long-term care begins at 70. The annual premium would start at $2,261, or less than $190 a month.

Those counting on the Affordable Care Act of 2010 to provide long-term care coverage shouldn't wait. Such protections won't be announced until later this year at earliest. "The law is still being written, and a lot of questions are being raised by the Congressional Budget Office and the American Academy of Actuaries," Cornman says.

Meanwhile, Comer has a warning for those who'd rather roll the dice and hope their assets can cover a crisis like the one she's endured. Today she not only cares for her husband, now in his mid-70s, but also a second family member with Alzheimer's: her mother, who stays in the family dining room.

"If you're 60 and rather act like 40, go for it, but don't kid yourself," she says. "Anticipate the future. Who wants to be remembered as a burden to their kids?"

Comer draws a long sigh. She pauses. Her voice conveys equal parts pain and imperative: "Anticipate, anticipate, anticipate."

Retrieved from http://finance.yahoo.com/news/long-term-care-insurance-gets-070000729.html;_ylc=X3oDMTNucnM3MzBqBF9TAzExODMzMTE5OTYEYWN0A21haWxfY2IEY3QDYQRpbnRsA3VzBGxhbmcDZW4tVVMEcGtnAzYzZTU3MDNiLTcwYTUtM2VhZC05ZWQ0LWY0NjRiOTliMzlhNgRzZWMDbWl0X3NoYXJlBHNsawNtYWlsBHRlc3QD;_ylv=3 on 1/18/12.