SENIOR BENEFITS GROUP World Class Senior Advice and Solutions Gregory S. Jordan, LUTCF, CSA

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      LONG TERM CARE

Articles:

It Only Happens to the Other Person

Cracks In The Nest Egg

Read about the long-term care crisis - an article by Congresswoman Nancy Johnson

     Senior Benefits offers a variety of Long Term/Nursing Care products through such highly rated carriers as Allianz, Mutual of Omaha, John Hancock and others.

     There are usually three things that determine what your Long Term Care premium will be:

• Daily Benefit -  the amount you want your Plan to pay per day if you need care.  The going rate per day in 2004 is $100 - $150 per day.  The higher the daily benefit, the higher your premium.

• Elimination Period -  when the Plan will start paying benefits.  For example, with a zero day elimination period, the plan pays benefits the first day coverage is needed.  With a 90 day elimination period, the Plan pays benefits after 90 days of confinement.  Options for the elimination period are 0 days, 30 days, 60 days, 90 days, 120 days, and 180 days.  The sooner the benefit starts, the higher your premium.

• Benefit Period - how long you want benefits to be paid.  Options for the benefit period are 2 years, 3 years, 5 years or unlimited benefits.  The longer the benefits are paid the higher your premium.

"It Only Happens to...

The Other Person..."  Right?  Hmmm...

A registry of American facts compiled by

Ronald J. Iverson, September, 2003

My Friend:

It Only Happens to...  "The Other Person"...   Right?

Hmmmm...

Maybe...   Maybe not...   But let's take a look at the real numbers...

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1)  The National Institutes of Health estimate costs of cancer...in the year 2002...at $15.5 billion for indirect costs of lost productivity due to illness."  The National Cancer Institute estimates that nearly 8.9 million Americans with a history of cancer were alive in January, 1999.  The five year relative survival rate for all cancers combined is 62%.   Source:  "Cancer Facts and Figures 2003," American Cancer Society.

2)  "Death rates from cancer are declining..."  Source;  USA Today, Sept. 3, 2003

3)  "Anyone can get cancer at any age; however, about 77% of all cancers are diagnosed in people of age 55 and older."  Source:  Cancer Reference Information, 2003, American Cancer Society, Inc.

COMMENT:  Americans are surviving cancer and death rates are declining, but the indirect costs for survivors (other than medical) are in the billions.  The facts also indicate that at age 45 or so, "the other person" should be aware that cancer, its survival, and its care costs, are serious possibilities.

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4)  "About 700,000 American each year suffer a new or recurrent stroke.  Stroke kills nearly 168,000 people a year."  Source:  "Stroke Facts 2003:  All Americans," American Stroke Association, via CDC/NCHS

5)  "Stroke is a leading cause of serious, long-term disability in the United States.  In 1999 more than 1,100,000 American adults reported difficulty with functional limitations, activities of daily living, etc. resulting from stroke.  The length of time to recover from a stroke depends on its severity.  50 to 70 percent of stroke survivors regain functional independence, but 15 to 30 percent are permanently disabled.  20 percent require institutional care at three months after onset."  Source:  "Heart Disease and Stroke Statistics-2003 Update, American Heart Association

COMMENT:  Again, Americans are surviving stroke, in fact, over 500,000 people per year.  But, 15 to 30 percent of surviving stroke victims are permanently disabled, and 20 percent require institutional care within three months.  "The other person" needs to know that it is no secret that stroke victims can linger for months, even years, with rehabilitative and home care needs.

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6)  The number of prevalent (existing living cases) of Coronary Heart Disease is 12,900,000 of which over 7,600,000 are myocardial infarctions (heart attacks).  This year an estimated 650,000 Americans will have a new coronary attack and about 450,000 will have a recurrent attack.  About two-thirds of heart attack patients don't make a complete recovery, but 88 percent of those under age 65 are able to return to work.  Source:  "Heart Disease and Stroke Statistics-2003 Update," American Heart Association

7)  The indirect costs of Lost productivity/Morbidity for heart disease, stroke, and hypertensive disease amount to $32.5 billion.  In addition, the expenditures for Nursing Home Care were $36 billion, and for Home Health Care were $10.8 billion.  These three figures represent nearly $80 billion of non-medical costs associated with heart problems.  Source:  "Heart Disease and Stroke Statistics-2003 Update," American Heart Association

COMMENT:  Notice that about two-thirds of heart attack patients don't make a complete recovery, but just as importantly, 12 percent of those under age 65 are apparently not able to return to work.  $80 billion of nursing home, home health care and lost productivity costs are significant to "the other person."

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8)  "The medical costs of Vehicle crashes alone (in 2000) totaled nearly $33 billion, while lost job productivity carried the highest price tag, at $61 billion."  "The number of injured dropped from 3.03 million in 2001 to 2.92 million in 2002...  Highway crashes cost society $230.6 billion a year, about $820 per person."  Source:  USDOT National Highway Traffic Safety Administration reports (July 17, 2003), for 2002

COMMENT:  This information would indicate that "the other person" is involved about 3 million times a year in traffic accident injuries.  Not only that, but lost job productivity is nearly twice that of the actual medical expenses.  This would reflect a need for care for those who are impervious to the other relative information regarding diseases.

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9)  Diabetes is becoming more common in the United States.  Improper diet and exercise seem to be the leading contributors to this condition.  The National Diabetes fact sheet states:  "Prevalence of diabetes - Total: 17 million people - 6.2% of the population - have diabetes.&  Diagnosed: 11.1 million people.  Undiagnosed: 5.9 million people.  The cost of diabetes in the United States - Total: (direct and indirect): $132 billion.  Direct medical costs: $92 billion.  Indirect costs: $40 billion."  Source:  U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, 2002

COMMENT:  Again, the indirect costs of $40 billion are related to care and lost income sources.  The problem of the 17million diabetes cases is associated with the complications of the disease; such as heart disease, stroke, blindness, kidney disease, nervous system disease, and amputations, which become "care" items, in addition to medical items, for "the other person.

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10)  "An estimated 4.5 million Americans have Alzheimer's disease... One in 10 persons over 65 and nearly have of those over 85 have Alzheimer's... A small percentage of people as young as their 30's and 40's get the disease... U.S. society spends at least $100 billion a year on Alzheimer's disease... Neither Medicare nor most private health insurance covers the long-term care most patients need... Alzheimer's disease is costing American business $61 billion a year.  $36.5 billion is the cost to business of care giving (lost productivity from absenteeism of employees who care for family members with Alzheimer's); the rest is the business share of the cost of health and long-term care... More than 7 of 10 people with Alzheimer's disease live at home.  Almost 75% of the home care is provided by family and friends - the remainder is "paid" care costing an average of $12,500 per year.  Families pay almost all of that out-of-pocket."   Source:  "Statistics about Alzheimer's Disease" Alzheimer's Association

COMMENT:  What more is there to say?  Hmmm...  "The Other Person."  Right.

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11)  50% of Bankruptcies in the US are related to a medical reason and 79.1% of those people had Medical Insurance!  Source:  Norton Bankruptcy Law Advisor, 2000

COMMENT:  Why did this happen?  Because Medical insurance seldom covers the indirect expense associated with 1) the need for Home Care, 2) Assisted Living, and if need be, 3) Nursing Home Care and Alzheimer's, or "memory care" units.  When you add up the number of "other people" listed above, add a rather old, but standard statistic developed by the U.S. Accounting Office in 1995 - the fact that 43% of people under age 65 have a need for Long Term Care utilization at some state of their life.  "Scary" isn't it?  Especially if you have something to protect, and in case you become "The Other Person."

Cracks in the Nest Egg

The Wall Street Journal, October 22, 2001

     People make all types of mistakes with their money, but few are more painful than those that involve the nest egg.  One of two financial missteps with your retirement savings, and you could pay a penalty well into later life.

     Until early last year (2000), of course, a remedy for such mistakes was close at hand.  A healthy stock marked - in the 18th year of a bull run, by some measures - covered a multitude of sins.  Need to borrow $20,000 from your 401(k)?  No problem.  By the end of the year, the markets probably gave you back that much and more.

     Eighteen months later, the landscape has changed considerably.

     With that in mind, we decided to canvass financial planners and educators across the country and ask this single question:  What are the biggest mistakes investors today are making with their nest eggs, both before and after they retire?

     From their answers, we've culled what might be called the whoppers - the 10 errors that were mentioned most frequently and that cause the most damage.  Long-term care topped the list.

1)  Failing to consider long-term care needs -

     When people think about threats to their retirement savings, "they primarily think about market losses," says Joe Bowie, chief executive officer of Retirement Investment Advisors Inc. in Oklahoma City.  What they fail to consider, he explains, are "the non-market-related threats - health care, long0term care - the catastrophic events" that can cause as much harm, or more, as a volatile market.

 

     First, the good news:  Most of us will never end up in a nursing home.  Now the bad news:  More than 50% of Americans will need some form of long-term care, either home care or institutional care, at some point in their lives, according to the Health Insurance Association of America.  And the daily cost of good home care already approaches that of a nursing home; about $128 for the former vs. $157 for the latter, according to Phyllis Shelton, an insurance consultant in Nashville, Tenn., and author of a book on long-term care.

 

     So, the question you have to ask yourself is simple:  Could you finance potential costs of long-term care out of your nest egg?  And the key word is "your."  No one else will pick up the tab.  Medicare and private insurance don't pay for most long-term care.  And forget about transferring your assets to your kids so that Medicaid will step in.  Impoverish yourself and you "simply don't have as many choices as a private-pay patient." Ms. Shelton says.

 

     Yes, premiums for long-term care insurance can be steep.  The average annual tab is $1,700.  But "the notion of spending a few thousand dollars a year vs. hundreds of thousands of dollars in the future is smart money management,"  says Michael K. Stein, a certified financial planner in Boulder, Colo., and author of a book on retirement finances.

The other nine errors were:

2)  Failing to consider the effects of inflation and taxes.

3)  Failing to take advantage of the years immediately before retirement.

4)  Making large loans to family and friends.

5)  Over-estimating how much you can withdraw from your nest egg.

6)  Over-managing a retirement portfolio.

7)  Taking too much risk with investments.

8)  Under-estimating life expectancy.

9)  Under-estimating expenses in retirement.

10)  Focusing on your nest egg to the exclusion of all else.

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