Vogel & Dubois

550 Forest Avenue Suite 205
P.O. Box 3649
Portland, ME 04104
Phone: 207-761-7796
Fax: 207-761-6946

Timothy M. Vogel, Esq.
Matthew R. Dubois, Esq.
Elder Law Q&A
creating lifetime answers for older persons and their families

Nine Steps to Long-Term Care Security

At Vogel & Associates we stress Private Sector Long-Term Care Planning. It is the answer to the question we have been asked many times:  "I really do believe that the government will not take care of me as I age ... Now what do I do?"

By T. Vogel

A prior version of this article was published in the Maine Lawyers Review, January 29, 1997

Commercials tell older Americans they have earned their retirement. However, the demographics of our aging America plus the cost of long term care force older Americans to plan with diligence if they are to have any security in their future. What older persons need is answers as to how they can use the income, savings and property they have acquired over a lifetime of hard work to provide them with stable living conditions and access to quality health care and long term care for the remainder of their lives.

An Elder Law attorney focuses on helping older persons and their families. The role of the Elder Law attorney is to help clients develop strategies for their individual legal, financial, medical, and long term care issues.

To make answers that work for clients, the Elder Law attorney must coordinate the efforts of other professionals -- accountant, financial advisor, long term care insurance professional, and elder care manager. Almost all older persons, except those with the lowest of incomes and the smallest of savings, need to make plans that will use family resources and private sector financial products to plan for future long term care expenses -- in a nursing home, assisted living or at home with home health care. Such persons will have little or no expectation of assistance with such long term care expenses from state or federal governments, through such programs as Medicaid.  Pressure on federal and state budgets will cause program uncertainty, managed care restrictions, and declining quality in Medicare, Medicaid and other government assistance for the elderly. Older Americans must rely on their own financial resources to create strategies to protect themselves for the balance of their lives without relying on government programs.

For the years ahead, there will be such great pressure on living conditions, health care and long term care for older persons. For many older persons and their families planning for their future care and security will become very important.  Leaving an inheritance for the family or reducing estate taxes will become secondary. Here are 9 elements for older persons and their families to consider when planing for their livelihood and long term care.
1. INCOME. All older persons have income, most commonly Social Security, pensions, fixed annuity payments, employment wages, or self employment earnings. Most of this income is fixed or with small cost of living increases. If feasible, wages or self employment earnings can be a welcomed way to increase income and funds available for investment.
2. INVESTMENTS. Funds held for investment can take many forms today including: cash, bank accounts, CDs, IRAs and other retirement plans, life insurance, stocks, bonds, mutual funds, deferred annuities and other investment products. Older individuals need a qualified financial advisor aware of their needs.  For most older persons the capital growth of investments combined with investment dividends and earnings are the most available methods, at this stage in their lives, to improve their financial situation.
3. THE HOME.  Most older persons are very attached to the homes they have worked hard to acquire and maintain.  They must realize there are several ways in which their home is important for their future well being. Besides being their residence, it is frequently their most valuable investment. The home may be where in the future they will receive long term care, especially as home health care services improve in quality and availability.  The functional usefulness of the home should be judged in terms of the care, mobility and transportation needs of both spouses. The maintenance costs of the property should not be underestimated.

Many elderly do not appreciate the significant role of their home for their future care and security. With declining government support for long term care services, it may become necessary to access the value of the home for essential long term care expenses. The financial value of the home may be made available through a home equity loan, reverse annuity mortgage, or the proceeds from the sale of the home. Many older persons desire to make either a lifetime gift or bequest of the home to their family without appreciating the financial, tax and long term case impact of such a transfer. More older persons will have to use the home to provide financing for adequate care for themselves and their spouse during the remainder of both their lives.
4. LONG TERM CARE INSURANCE. The three primary financial supports of the elders are income, investments and the home. Long term care insurance can provide a fourth essential financial component.  Long term care insurance does not have to insure 100% of the person's potential long term expenses, but the scope of benefits as well as the benefit amounts covered in policy must be appropriate given the person's financial circumstances. Older persons should work with a qualified long term care insurance professional to plan appropriate policy components and premium costs for your clients. The primary purpose of long term care insurance is to provide access to quality long term care services. It is a mistake to think of long term care insurance as protecting a person's assets until the person can qualify for Medicaid. When that person needs nursing home or home health care, Medicaid may not exist, may have undesirable restrictions, or may offer lesser quality services.

5. FAMILY CARE AND ASSISTANCE. With declining government assistance, family help will become essential for many older persons. When family is available locally, such help may be care giver assistance or the coordination of hired home care providers. For some older persons, financial contributions from their children and other family members may be important. However, only in limited circumstances can a child claim a tax deduction for financial support of a parent. The tax deduction is allowed only if the parent becomes the child's dependent because the child provided more than half of the parent's income. This is uncommon as very few children contribute enough to overbalance the parent's Social Security, pension and other income. Congress could improve tax law by providing children with a tax deduction for financial contributions they make to their parents.

With the decline of Medicaid and other government long term care programs, many families will discover the importance of alternative and combined housing for their older family members. There will be an increase of 'in-law apartments.' Families may be able to provide quality long term care services for their parents for a number of months or years through an in-law apartment or an addition onto either the parent's or the children's homes. It is possible to finance such improvements if the parents and the children both sell their existing homes and purchase a new property specially designed to accommodate both families.
6. HEALTH AND MEDICAL INSURANCE.  Most elderly have hospital, physician, and some skilled and rehabilitation care through Medicare along with the companion Medicare supplement insurance known as Medigap insurance. Some companies pay their retirees for all or part of the premiums for Medicare Part B and Medigap.  Fewer companies offer separate retiree health insurance policies.

Following the last Presidential election there has been an agreement among politicians from both parties that something must be done about Medicare. Premiums will likely grow for all Medicare recipients, and may possibly be increased more for wealthier individuals. While health insurance is well fairly defined and stable at this time, any major Medicare change will cause great uncertainty in future health care and financial planning for older persons.
7. LEGAL PLANNING AND DOCUMENTS.  The elderly need legal planning so their personal, financial and business matters are properly arranged and managed both before and after their death. It is most important to plan for smooth decision if one or both spouses become disabled through accident or illness. This is done through a Durable Financial Power of Attorney and a Power of Attorney for Health Care. Arrangements for the passing of property after death are controlled through a Last Will and Testament. If minor children may inherit, then a Testamentary Trust for Education and Support is very useful. In cases of disability, complex investments and probate avoidance a Revocable Trust may be what is needed.  Special care must be taken to provide for long term care services for both spouses, as well as sufficient financial support of the surviving spouse.  For some incapacitated persons Guardianship and Conservatorship may be necessary, especially when a valid Power of Attorney is not available.  For persons with taxable estates in excess of $600,000, appropriate steps to reduce or eliminate estate taxes should be taken.
8. ELDER CARE MANAGERS. This new profession is becoming established in Maine. An Elder Care Manager serves older and disabled clients by evaluating their care needs, coordinating their care services, and advocating for the health care and long term services of the client.  Elder Care mangers can be independent private sector businesses, or a division of an area agency on aging or home health care agency. Elder Care mangers can be of great assistance when all children and family are out of state.  Some Elder Care mangers are willing to help older persons by being named as an Agent under the person's Power of Attorney. Some Elder Care Managers help older persons pay bills and act as their bookkeeper. An Elder Care manager may be the most essential professional to help your older persons and their families develop and maintain an adequate system of long term care. When an Elder Care manager knows an older person's needs and circumstances, that Elder Care manager can provide essential information as the patient is transferred from home to hospital to skilled nursing facility to intermediate nursing facility to residential care facility to home, and then back again.
9. FEDERAL AND STATE LONG TERM CARE PROGRAMS TO AVOID.  For most middle income persons Medicaid is not a viable option for planning payment for nursing home care or other long term care services. Such individuals must balance their income, investments, home equity, and private long term care insurance. There will always be persons with low income and few assets. There will also be persons who have not made sufficient legal, financial and long term care plans before they suffer an abrupt illness or accident.  Whenever possible older persons and their families should not rely on future Medicaid eligibility in their long term care strategies.

With changes in Washington and Augusta, the future of Medicaid is too uncertain for financial planning. Congress may transfer much Medicaid eligibility, coverage and funding authority to the states. That will cause great variations among the Medicaid program in various states, such as Maine, Massachusetts, and Florida.  Financial eligibility and coverage is likely to become much more restrictive under any new Medicaid or other government long term care program. Managed care rationing, such as the type Maine is using to cut Medicaid nursing home coverage through the strict MED96 reviews, will increase. The Medicaid Estate Claim will continue to collect for the cost of Medicaid the deceased received from the home or any other real estate left by the deceased.  Congress considered, but did not pass in 1996, a bill to allow the states to make children immediately and personally financially liable when their parent receives Medicaid.

All these elements of Medicaid -- uncertainty, instability, restrictive eligibility and coverage, and increased cost recovery -- are clear messages that older persons should avoid Medicaid if at all possible. Older persons and their families will be able to rely on their own legal, financial and long term care plans much more than they can rely on federal or state programs.

Vogel & Dubois
Helping Your Family in Maine When You're Not There

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