LTC Funding Crisis Driving a Search for Alternatives

Chris Orestis  SMA April 2011

On Feb. 4th, 2011, Federal Reserve Chairman Ben Bernanke gave a dire warning in a speech before a gathering of top financial policy reporters at the National Press Club in Washington, D.C.

“The two most important driving forces for the federal budget are the aging of the U.S. population and rapidly rising health care costs,” Bernanke says.

There you have it, folks, from the top.

The costs of caring for the rapidly growing population of seniors in America will be an unsustainable burden for the budget and a constant impediment to economic recovery. The big three entitlement programs, Social Security, Medicare and Medicaid, are all in the red and creating havoc for government budgets at the federal and state levels, just as 10,000 baby boomers a day turn 65. This has become the No. 1 concern of the Federal Reserve about the immediate and long-term future of the American economy.

Medicaid in particular has become a serious problem for the states. It is the primary payor for long-term care services and will shell out approximately $200 billion to cover those costs for seniors in 2011. Unlike Social Security and Medicare, seniors do not automatically qualify for Medicaid at age 65 and instead must qualify based on income and assets at indigent levels. Many seniors follow a “spend-down” path to get rid of money and assets so that they can qualify.

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What to Do Now to Feel Better at 100

Jane Brody, New York Times

Many changes take place in physical abilities as we age. Try as I may, I simply can’t swim as fast at 69 as I did at 39, 49 or even 59. Nor am I as steady on my feet. I can only assume my strength has waned as well — I’m finding bottles and jars harder to open and heavy packages harder to lift and carry.

But in August, I hiked in the Grand Canyon, prompting my 10-year-old grandson Stefan to ask, “Grandma, how many 69-year-olds do you think could do this?”

The answer, of course, is “a lot.” And the reason is that we work at it. For my part, I exercise daily, walking three miles or biking 10, then swimming three-quarters of a mile. In spring and summer, heavy-duty gardening strengthens my entire body.

But now that my physically stronger spouse is gone, I see that I need to make some improvements. With no one handy to open those jars or lift those heavy objects, I’ve begun strength training so I can remain as independent as possible as long as possible.

In a newly published book, “Treat Me, Not My Age”(Viking), Dr. Mark Lachs, director of geriatrics at the NewYork-Presbyterian Healthcare System, discusses two major influences (among others) on how well older people are able to function.

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Are Your Drugs Safe?--Glaxo Agrees to $750 Million Fine for Sale of Bad Products

GlaxoSmithKline, the British drug giant, has agreed to pay $750 million to settle criminal and civil complaints that the company for years knowingly sold contaminated baby ointment and an ineffective antidepressant — the latest in a growing number of whistle-blower lawsuits that drug makers have settled with multimillion dollar fines.

Altogether, GlaxoSmithKline sold 20 drugs with questionable safety that were made at a huge plant in Puerto Rico that for years was rife with contamination. Cheryl Eckard, the company’s quality manager, asserts in her whistle-blower suit that she warned Glaxo of the problems but the company fired her instead of addressing the issues. Among the drugs affected were Avandia, Bactroban, Coreg, Paxil and Tagamet. No patients are known to have been sickened by the quality problems although such cases would be difficult to trace.

Eckard asserts that she warned Glaxo of the problems but the company fired her instead of addressing the issues.  Sources:New York Times

We speak with Tax Payers Against Fraud spokesman Patrick Burns about the settlement.

Q&A: Annuities With LTC

Source: Life and Health Insurance News

Question: How have baby boomers responded to the need to prepare for long term care expenses?

O’Brien: By and large, it seems that consumers—including baby boomers—are rejecting standalone LTC insurance due to the expense, especially considering that they hope never to need to use the coverage.

Consider the numbers from LIMRA: Standalone LTC insurance sales fell 23% in 2009; those sales have fallen in six out of the last seven years; and only 5 million people are estimated to have individual LTC insurance in force. This suggests that only a small portion of the 39 million baby boomers, who are rapidly approaching retirement, are insured for LTC.

Question: Is there a solution to LTC expenses that baby boomers will find more palatable?

O’Brien: The income opportunities provided by the income riders and withdrawal benefits of fixed and fixed indexed annuities solve multiple problems for consumers, including the need to prepare for LTC expenses. An annuity with an income rider solves the need for a reliable income that lasts as long as you do.

In addition, some annuities—called combination or hybrid annuities—will boost the guaranteed lifetime income payment by as much as 50% to 100% when certain LTC qualifications are met. In these products, even if the annuity value is ultimately exhausted, the owner will still receive continuing LTC payments from the carrier. These annuities require no out-of-pocket expense, and clients benefit whether or not they ultimately use the LTC benefit.

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Planning for Long Term Care

Patti Singer Democrat and Chronicle

Carl McDonough hadn’t thought much about long-term care until he received a call from his mother’s doctor in July.

The doctor reported that the 89-year-old Mary Bishop woman was showing some signs of dementia. Widowed for several years, she’s still living on her own in the family home in Glens Falls. Never having driven a car, she still walks to do all her errands.
“She’s very independent,” said McDonough, retired from Eastman Kodak and living in Chili. “That’s what’s making it difficult.”
McDonough said he didn’t feel rushed into taking action and that he and his brother, who lives in Poughkeepsie, will meet soon with their mother to talk about options.
“People don’t plan,” McDonough said. “I might be in that category right now.”

Elder care experts — lawyers, advocates and physicians — said that many people don’t think about long-term care until the need is upon them. “Life is hectic,” said Alan Illig, a planning coordinator at Lifespan, which provides information, guidance and services for older adults and also provides community and professional education. “They have higher priorities. There is some degree of denial.”

But lack of planning can lead to hurried decisions driven by emotion rather than information.

Read the entire series “Aging at Home”