Long Term Care Protection

1. Long Term Care Protection Does it make sense for you?

2. Odds of needing Nursing Home Care At age 55, there is a 1 out of 10 chance that you will spend time in a nursing home sometime in your lifetime

3. At Age 65.... 43% of all Americans aged 65 or greater will spend time in a nursing home during their lifetime

4. At Age 75... • Thereis a 6 in 10 chance that you will need nursing home care during your remaining lifetime. • Or, we can look at it in terms of couples... Source: National Nursing Home Survey National Center for Health Statistics, 1985

5. Long Term Care Need By Couples • Out of ten couples, how many do you suppose will have at least ONE member spend time in the nursing home?

6. The Fact is.... 7 out of 10 couples can expect at least one partner to use a nursing home after age 65 Source: Wall Street Journal, April 23, 1990

7. 80% of Long Term Care is received OUTSIDE OF NURSING HOMES Source: “Long Term Care: Diverse, Growing Population Includes Millions of Americans of All Ages”, Page 5, General Accounting Office, November 1994

8. Independence Assure Quality Care Choice of Services Leave Charitable Gifts Avoid Being a Burden Stay Off Welfare Spouse’s Lifestyle Protect Savings/Home Pass on Inheritance Not be Wiped Out Why Would You Want Coverage?

9. Doesn’t Medicare pay for Long Term Care?

10. Medicare’s Requirements • At least a 3 day hospital stay • Admitted to nursing home within 30 days of discharge from hospital • Admitted for treatment of the same condition for which you were hospitalized • Medicare approved nursing home • Skilled Care only

11. Medicare’s Benefits Days Medicare Pays • 1-20 All Costs • 21-100 All Costs over $89.50 per day • 100+ Nothing Based on Medicare Provisions for 1995

12. Medicare’s Payment History Sources of 1994 Nursing Home Care Payment • Only 11% of nursing care costs were paid by Medicare • 89% of nursing care costs were paid by other sources Source: “Health Care Financing Review” Volume 16, No.4-HCFA, 1995

13. Medicare Supplements • Designed only to supplementthe benefits paid by Medicare on approved charges. • Generally pays Medicare’s required co- payments and deductibles, and only if Medicare approves the charges. • Excludes Custodial Care.

14. Medicare Supplements’ Benefits • 1-20 All Costs Nothing • 21-100 All costs above $89.50 $89.50 per day per day Days Medicare Supplement

15. Medicare Supplements When Medicare ceases to approve the nursing home stay, the Medicare Supplement typically follows suit.

16. MediCARE Vs MedicAID • Medicare provides CARE for all Retired Americans • Medicaid provides medical assistance, or AID to impoverished Americans, whether retired or not. • In order to receive ANY benefits from Medicaid, you must first meet their POVERTYLEVEL.

17. Imagine that you knew you would one day need nursing home care, and you visited your local loan officer with a proposal... His bank would pay for your long term care, and at the time of your death, they would recover all of their money from any assets in your estate.

18. Would that be a good deal for you? • In 1993, the Federal Government issued a mandate requiring that all states recover all Medical Assistance payments made to a recipient from all assets in their estate, at the time of their death. • That mandate is called.....

19. Medicaid Estate Recovery

20. Have you thought about giving away your money so you could go on Medicaid? • Non- exempt assets must be transferred at least 3 years prior to entering the nursing home in order to not be considered an asset.

21. What if you transferred your money and... • ...The person you transferred it to decided not to give it back when you needed it? • ...They filed bankruptcy due to bad business dealings or other problems? • ...They were sued and lost the money? • ...What would the gift taxes cost them (how much of your assets would the taxes eat up)?

22. Four Major Financial Risks Risk Odds Cost Insured? • Home Fire 1 in 1200 $0-$250 Yes • Auto 1 in 100 $100-500 Yes • Medical 1 in 15 $0- 700 Yes • LTC 1 in 2.5 $100,000+ not yet Source: New England Journal of Medicine “Lifetime Use of Nursing Home Care” Kemper and Murtaugh, p. 595

23. Three Possible Strategies • Strategy #1 - Self Insure- The (your name) Insurance Company is reponsible for this risk.

24. When one of you needs long term care, can you pay for an average length of time... about $100,000 to $150,000...without selling your home or affecting your lifestyle? For most people, “self insurance” is ruled out.

25. Strategy #2- Go On Welfare • ...This is what most people end up doing-- not because they planned to, but because they didn’t plan.

26. Go on Welfare • In order to qualify for Welfare, you must first meet Medicaid’s level of poverty. • That means you’ll have to spend any excess assets on your own care first.

27. Example of “Spending Down”,Assuming a $100,000 of “excess assets”. • At an average cost of $40,000 per year, your $100,000 would last only 2 1/2 years. • Remember, if you had additional assets in excess of what Medicaid allows, you will have to spend those down as well.

28. Once all your excess assets are gone, you could receive AID... How do you feel about that? Let’s consider your alternative...

29. Strategy #3-Transfer the Risk • Assuming the $100,000 is in some sort of interest bearing investment, part of the interest could be used to fund the premiums of a quality plan of protection. • Your protection could pay for your care for both of you for an unlimited period of time.

30. Your money would remain completely intact.... • ...and if the premiums were less than the total amount of interest earned, you could continue to invest the difference, and your investment would continue to grow.

31. Would you have to “spend down” your additional assets? That’s right, you would be in a position to retain all of them.

32. Welfare Aid? Would you need it? You would remain completely independent!

33. Welfare or Independence? If you had your choice, which would you prefer....AID or COMPLETE INDEPENDENCE?

34. Spending Down or Retention? If you had your choice between spending down your assets or keeping them, which would you prefer?

35. Liquidate your assets or keep them? Would you rather use your $100,000 to pay for your care....or instead, keep your $100,000...perhaps even seeing it continue to grow?

36. Using your $100,000, which would you rather be able to pay for? Short Term Care or Long Term Care?

37. “The Lesser of Two Evils” Either choice costs money, but if you had your choice, would you rather spend all your money on your care.... or instead keep your principal and spend some of the interest on the solution to your problem?

38. The only real question that remains is... how do we best design a plan that will fit your specific needs and budget... isn’t that right?

39. First, here are the things you should be looking at in a long term care plan...

40. Plan of Protection • Sound, highly rated company behind the policy. • Financially strong. • Commited to Long Term Care protection • Will be there when you need them.

41. The Experts Recommendations • Must pay benefits in a variety of settings, including your own home. • Full benefits for custodial care. • Guaranteed Renewable. • “Activities of Daily Living” benefit trigger. • Inflation factor very important under age 70