Thursday, August 28, 2008
AHIP (an association of health care plans) has website, videos on long term care and health insurance
I received an email today from a public relations firm called Edelman, from an associate named Jenna Kozel, about the firm’s client “America’s Health Insurance Plans”, link here. AHIP is a trade association represents 1300 companies providing benefits to 200 million Americans or more, according to the association’s home page. AHIP has created an informative website “My Life, My Family” (link) with a number of items related to long term care insurance.
The features include (1) basic information on financial planning and long-term-care insurance (2) “myths and facts” concerning long term care insurance (many of which I have covered in numerous postings already) (3) a quiz (4) videos giving testimonials of individuals who have purchased insurance. The visitor should have no problem finding the internal links or navigating the site.
As a retiree myself (at 65), I thought it was interesting to be contacted by a public relations firm, even though I understand corporate America must work that way. As I wrote on my main blog today (see my profile), if you are paid to speak for the interests of someone else, you may lose the right to speak publicly your own opinions for yourself.
Monday, August 25, 2008
As we head into the Democratic Convention in Denver, it’s apparent that Barack Obama’s plan to “save” social security leaves a lot of stones turned. There are lots of op-eds and even AP stories around on this, but a typical account seems to be Charles Babington’s in The Huffington Post, July 28, 2008, “Obama’s Social Security Plan Vague on Details,” here.
Apparently Obama would leave a doughnut hole on wage taxation (remember the term from Medicare Part D? – well, it’s back!) From $102,000 to $250,000 in wages, the payroll tax would not apply. Then it would come back, might be steeper, and might apply also to investment income.
Now, there has always been a philosophical, “moral” question as to whether Social Security is an “annuity” or is a “welfare” program. FDR started it out as the latter, because the earliest beneficiaries had contributed nothing. That anomaly, propagated, makes paying for the “bridge” to any (Republican or “libertarian”) privatization plan an issue. Obama is clearly looking at is as a tool to redistribute wealth.
True, he may have backed away into vagueness, as to the rates on upper income wages, and as to how serious he is about "all income." The Washington Post goes into this on Aug. 25 with the editorial "Social Security on Ice: The presidential candidates appear eager to avoid a serious debate about how to fix it," link here. Social Security had always been based on "work-related" wage income, and the Annual Earnings Test (for early retirees) reflects this. Would that change, too?
There is something else. He wants to target oil companies, to help pay the gasoline bills of “working families.” Oil company stocks are critical not only to pension funds but also to the personal retirement plans of many seniors. He seems to have forgotten that altogether.
Saturday, August 23, 2008
I am finding a lot of confusion on the web on the subject of “senior apartments” or age-restricted communities. Despite popular conception, there is no “one shoe fits all feet” rule for how they work, and prices and amenities for senior housing can vary considerably from one are of the country to another.
The underlying legislation (relating to the “age discrimination” allowed to set up seniors-only communities) appears to be the “Housing For Older Persons Act of 1995” (“HOPA”), Public Law 104-76, 104th Congress, link (PDF) here.
The rules are complex, and the law deregulated things a bit. Generally, senior apartments don’t have to supply a long list of amenities, but investor interest and market competition often encourages builders and property management to offer them, including, for example, cable and high speed Internet, as well as social amenities. Over time, as baby boomers mature and are more independent and information and computer literate, property management is likely to cater to their needs and market demands.
“Low rent” senior apartments should not be confused with Section 8 Housing, which has to do with vouchers and complicated social housing programs related to poverty or low income in general. In many cases, an apartment offers a secure and comfortable apartment at lower that prevailing market rent with minimum and maximum incomes. But the practice varies from one community or state to another. In Virginia, there are nice communities where the qualifying income is about twice the rent, designed for social security. In Texas, according to Apartment Selector, the requirement is often three times the rent. Qualifying minimum and maximums depend on local laws, terms of bond issues, contracts made by builders with local governments, and the like. Sometimes cosigner arrangements, or total assets are considered as well as montly income. Rental qualification requirements may tend to be politically influenced. Communities with high senior populations may offer better deals, because of political pressures from seniors as voters. In some areas, there are “moderate income” apartments and then “snob” developments for the wealthy, who still often prefer age-restricted living. This isn’t necessarily bad, as you have the “Trump Effect”; developers who find profit in building high end properties may become familiar enough with a market to become interested in developing moderate income properties as well.
Another complicating fact is that, in the senior market, the availability of access to increased assistance or nursing care greatly affects price. Some properties are “apartments only” and offer social activities but no services normally called “assisted living”. The offer of custodial or nursing services on the premises (even if an individual resident doesn’t need them) tends to increase the rent rapidly.
The Department of Housing and Urban Development (HID) maintains some web pages, that to a novice seem a bit scattered and confusing. One of the main pages is “Fair Housing – It’s Your Right”, here. It discusses the provisions of the Fair Housing Act of 1968 and the 1995 law for seniors. The “Senior Housing Information Center” page (here)doesn’t seem to say a lot.
One of the best non-government websites is “Senior Resource” with a conceptual overview of senior apartments here. It explains two levels of restriction. For age 55, at least one person in a household must be 55 or older, and at least 80% of the residents must be 55 or older. If the age cutoff is 62, then everyone must be 62 or older. Communities may vary widely as to the mix of properties available for rent.
I haven’t found any one database or website that lists properties nationwide, along with rents, qualifications, and amenities. That would be a nice service for an Internet company to develop, wouldn’t it. Maybe the MLS could develop a service like this.
Another resource for senior apartments in many states is "Apartment Guide", here.
And a resource that may help with utilities and especially cable and Internet is called "All Connect", here.
Picture: A community in south Arlington, VA (not necessarily senior, just a neighborhood).
Sunday, August 17, 2008
John Hancock Life Insurance is planning to raise premiums on some long term care insurance policies (link for LTC products), especially those from the 1990s, and some partnership policies with New York State. John Hancock works closely with ING and other large employers. This increase is said to be John Hancock's first ever. Recently, a competitor, Genworth (which works with the AARP) announced that rates could increase 8 to 12 percent for 440000 policyholders. Genworth's LTC link is here.
Financial planners have expected companies to raise rates because of demographics and actuarial experience. They generally advise holding on to policies anyway, put possibly increasing “deductible” or length of “self-pay” periods, or increase the threshold number of conditions that qualify for care with some kinds of policies (from 2 to 3).
The Washington Post story, in the Sunday August 17 paper, on p. F3 of the business section, is authored by Kimberly Kankford, is titled “Long Term Care Rates Set to Increase” and has this URL. Apparently the story originated with Kiplinger Personal Finance.
Thursday, August 14, 2008
I’ve written a lot about Social Security’s Annual Earnings Test on this blog. That is a rule that applies to people who start collecting benefits, at actuarially determined lower amounts, before full retirement age. Though determined by law and even though Social Security is required to administer it to the letter, I’ve always thought it was silly and a waste of resources. If Social Security were viewed as an annuity (which is what Republicans generally propose as part of reform), the beneficiary would be able to control when to start it, no strings attached (other than the amount, given life expectancy). It is true that since people now live longer, it can be unwise to start receiving benefits early, but employers tend to push the idea.
Kelly Greene wrote about this in the Wall Street Journal during the weekend addition of June 28-29. I picked this up at a convenience store this morning, not noticing that it was an old paper until I got home. I can’t find that now on WSJ, but I did find it on the San Diego Union-Tribune, on July 13. The article starts with a straightforward question from a Massachusetts reader. Here is the link. The article also explains how Social Security recoups overpayments.
Social Security online allows beneficiaries to check their benefit levels, and whether they owe any money back. It also provides Medicare premium information (for Part B). The site says when income was last reported, and in practice I find that day very far behind. There are some cosmetic display problems in the information page that many private companies would fix. The site is supposed to be up except from 1 AM to 5 AM Eastern time, but it is often down for maintenance on weekends and often around 8 or 9 PM on weeknights. When it is down, it will let you log on and then tell you that your request cannot be completed, as if something were wrong with your account. There is not; it is just sloppy error reporting. I have gotten database errors sometimes in Mozilla, and found that it will work in Internet Explorer. I don’t see how this can happen. I think Social Security has its information in IBM mainframes (for employees) and replicates it to other servers for online access from home.
Tuesday, August 12, 2008
I mentioned a small law firm that does trusts on my June 11, 2008 entry here. I went to a symposium and learned more about the subject.
A living trust substitutes for the person while he or she still lives and then continues to “live” after death. That gives the “person” the ability to control the disbursement of inheritance to heirs with a “metering-out” process that may depend on the heir’s behavior, or it simply be timed to provide income. The speaker demonstrated the concept by using a wooden tray as a "trust" and placing toy objects (like a toy house and car, and play money) in the tray.
The colloquial name for the supervision of an heir after death through a trust is “the dead hand.” The problem has been covered in the movies (sometimes comedies about marriage or in one case a drama about having to provide a male heir) and sometimes in novels, especially in Britain. In some cases courts may nullify requirements that violate “public policy,” such as requiring that a spouse of an heir be of a particular race. So it’s easy to imagine future litigation or challenges in this area as social values change.
Parents may feel very strongly that they want some very personal aspects of their wishes, reflective of their marriage, honored. So the law gives them considerable latitude to do this. However, there may be some wishes that would be wrong to implement, such as trying to suppress of change the person’s basic sense of identity.
Living trusts can have much more “benign” objectives. One is to manage complicated situations with several children in various life situations.
Another is simply that, even with a will, probate in many states is a time-consuming and expensive process, taking up to eighteen months and costing about 5% of the value of the assets. Even when a person dies intestate, the state has an “estate plan” for him or her: probate.
In simpler situations, aging parents sometimes place an adult child’s name on their bank accounts so that the child can pay their bills if they become incapacitated. The adult child must be trustworthy, of course, but one danger is that the accounts could become fair game if the adult child is sued and ordered to pay a judgment based on his own activity. In many states, that still might not be the case if the child can show that he or she has never used the parent’s co-named account for personal purposes. But it is safer to place the money in a trust, and then allow the adult child to have the proper legal authority to sign for the checks. The bank goes by signature cards on the check, not by legal ownership on the account.
Trusts can also own life insurance policies (that doesn’t make them the payers). Then the trust can pay the beneficiaries according to the rules of the trust. There are complicated rules, changing each year (because of a complicated Congressional political compromise), about what is subject to estate tax, which is not necessarily what is subject to income tax when paid out. With real estate, there are issues of cost basis and appreciation.
There was also a short segment on long term care insurance. It’s possible to vary the number of symptoms (usually 2 or 3) of impairment that must be present before the patient is eligible for benefits, and usually the “deductible” refers to the number of days of self-paid care. Long term care insurance may not make sense to families with few assets and likely Medicaid eligibility, but adult children should be careful about impoverished parents, because states may start enforcing filial responsibility laws in the future, although they could probably be challenged in court. Another topic, not covered tonight but discussed before in this blog, is the “look-back” period.
Saturday, August 09, 2008
In recent years, financial advisors have warned families about the tightening of federal rules on the previous practices of some elderly persons of “giving away” assets to their children as a kind of “viatical inheritance” before applying for Medicaid when going into nursing homes. Recently, I gave reference to a recent Kiplinger explanation of how the rules work now. They are a bit complex, and families should indeed be careful. Right now, I even wonder how viatical settlements from life insurance policies could affect these rules (when elders outlive their expectancies).
But there is a deeper problem, as I’ve often noted on this blog in the past year or so, that 28 states have “filial responsibility” laws that would allow states to pursue adult children for support of indigent parents. These law might apply in nursing home admission situations, or they could occur because of some other use of social services due to indigence. This scenario is different from the “look-back period” problem described by Kiplinger, because they can occur with no giving away of assets at all; they are intended to apply to poverty.
Generally, the media has been very lax in reporting this problem, because states generally have not enforced the laws. In a couple of cases courts have blocked their use in certain specific scenarios. Social conservatives argue that they should be enforced as a way to meet growing state budget problems, especially with Medicaid, and also out of a desire to force the childless and unmarried to share “family responsibility.” Other societies, like China, may have a stronger tradition of “filial piety’ than ours does now; but our country used to, until Medicare was passed in the 1960s as part of LBJ’s “Great Society.”
A few states incorporate grandparents and siblings into their laws. A few have time limits. No one seems to handle what happens across state lines, or how responsibility is divided among more than one adult child; presumably all are equally liable.
The expectation, as I’ve noted, is that some states will feel increased pressure to try to enforce these laws in the future. This is particularly true of medicine keeps people living longer but does not maintain their ability to care for themselves or remain active (or even employed). The life span issue seems to apply more with females than males. It doesn’t take much imagination to see profound ethical questions in the way elder medicine is practiced in the future. These questions persist regardless of whether a society has a full single payer system for non-custodial care (like Canada) or partial (like the US for Medicare).
It also raises serious questions about social and family values. No one is saying adult children should not love or care for or honor their parents. But there are serious questions in a competitive world how individuals can set their own priorities if they face these responsibilities now or in the future. This sort of question goes beyond what we have gotten used to, that if you have children you should be prepared to provide for them. This is not the sort of responsibility that one “chooses”. Moralizing about it in socially conservative fashion is likely to lead to apparent contradictions and send mixed messages about having children. It could become as important later in life to have had children as it is early in adulthood to wait until one is “ready.” Ideas about gender parity can be compromised. Notions about freedom of expression can be made contingent on family responsibility and “blood loyalty”, whether chosen or not. The LGBT community obviously has a stake in this, and this relates to the same-sex marriage and adoption (and even surrogate parenting) issues. These ideas have been expressed by certain areas of the right wing (the “demographic winter” and “empty cradle” arguments about low birth rates in certain communities, as articulated by Philip Longman and others) but they really do need to be taken seriously. We're running into basic biology and mathematics.
Thursday, August 07, 2008
The Wall Street Journal this morning (Aug. 7) is reporting that some “custodial care” nursing homes, especially those with Medicaid patients, are beginning to evict these patients, and convert their facilities to “skilled nursing” which pays more. According to the story, severely disabled patients, especially those with dementia or Alzheimer’s, are more likely to be kicked out. Family members, especially those living in distant cities, could be faced with caring for them again.
The story, on p D1, “Personal Journal,” is by Theo Francis and is titled “To Be Old, Frail And Evicted: Patients at Risk: as nursing homes shift focus to short-term care, families must look elsewhere,” link here. The article contains a bar graph of discharge disputes.
There are five legally acceptable reasons for a nursing home eviction. (1) closure of institution (2) failure to pay (3) need specialized care not available there (4) well enough to go home (a controversial possibility for other family members – who might be compelled to take care of them personally, it would seem) (5) endanger health or safetly of others (again, potentially controversial).
Residents of assisted living facilities have fewer protections. Florida requires a facility to give 45 days notice of an eviction, but does not require giving a reason. However, an eviction cannot occur for an illegal reason (like race). This sounds like “employment at will.” The WSJ article covers assisted living facilities with a shaded sidebar on p. D4.
This story is a certainly alarming report.
Friday, August 01, 2008
Kiplinger has an important article “The Crackdown on Medicaid Planning” link here. The article is authored by Mary Beth Franklin, Senior Editor, and has the additional byline subtitle: "New government rules require creative strategies to protect your assets."
The article explains more wrinkles in the Medicaid “look-back rules” which took effect February 2006.
Let’s say you give away $140000 to children, and nursing home costs are $7000 a month in your area. The new rules would divide the $140000 by $7000 to get 20 months. (Yup, you have to do some grade school arithmetic, with dimensions like in physics problems! It’s back to school, folks, in August.)
Now, you can’t apply for Medicaid until you’ve spent down your assets. So from the day you apply, you have 20 months to apply, which means family members have to pay the bills. But the federal law is set up to make the time approximately equal mathematically to the amount that the family members took out. Essentially, it makes the earlier "gift" behave like a “loan.”
It used to be that this "start of care" lookback period applied from the day the elder transferred the assets. Now, it’s the day that the elder applies, and is almost without assets. Apparently, there is also a five year time from the time of Medicaid admission to the time a gift was actually given to the relatives (that used to be 36 months).
There is also a device of setting up a trust, where the elder person receives income from the trust and continues to live at home and age in place. Beneficiaries of the trust can use the principal and sell the residence to raise cash for nursing home expenses, and this would seem to apply if the beneficiaries names were not already on the accounts (often they are not). At the end of five years (from the time of setting up the trust), inheritance is protected from federal reimbursement rules. This is fairly complicated, and the Kiplinger article goes into some detail.
It’s also possible to set up an agreement defining caregiving as a “job” for one or more of the adult children or relatives. That spends down some of the money. It’s tricky, because then the caregiver income is taxable according to normal rules (including social security earnings limits if the caregiver herself or himself is a premature retiree – a situation that may become more common with demographics). This may be advisable for some but not all families. Caregivers may find themselves under more scrutiny in such situations.
Visitors should study the Kiplinger article carefully, as it is one of the clearest explanations of Federal lookback rules yet to appear.
None of this precludes the possibility that a state could apply its own filial responsibility laws in a situation where an elder parent is actually impoverished (never had any wealth to pass on to begin with) and uses Medicaid. This could become more common in the future with demographics.
See also the July 5, 2007 entry on this blog for links to S 1932 (109th Congress), the new law upon which the look-back is based.
Please check the "BillsMovieReviews" blog (see profiles) for review today on a Kiplinger video on long-term care.