LONG TERM CARE

(I wrote this commentary starting several years ago and updated most of it in late 1996. Appreciation is offered to Mary Kaufmann, Master in Gerontology and Program Services Administrator with the Alameda Area of Aging, 510 567-8048, for providing some recent statistics and some of the best analysis anywhere on long term care policies. )

This is over 50 pages long and few of you will read it. But I caution you, a lot of homework is required if a loved one needs long term care. If you don't/won't read it, hire someone that will. Somebody's future well being- maybe yours- will depend on it.

If you are an agency that has pertinent or updated information that I should include, please contact me directly by Email.

2000 NOTE: Some will wonder why I have not updated this material since I have changed so much else. Part of it is for this reason- past policies. New policies are changing every year, but for those people who have purchased a policy, the restrictions and definitions below may apply to what they own and may restrict coverage.

Overview

By the year 2000, 13.1% of Americans will be over 65. Six and one half percent will be over 75. The 75 to 85 age group will increase from 7.7 to 12.2 million while the 85 and over population will more than double from 2.2 million to 5.1 million. And though the percentage of the disabled is declining- apparently due to education about exercise and taking more preventative measures- the Census bureau still notes that the disabled grew at 9.62% increase during the 1980's.

Projected Distribution of the Elderly by Age (1985- 2050)

Bureau of Census, 1984

Age	1985	2010	2035	2050
65- 69	32.2	29.9	24.0	24.6
70- 74	26.2	21.8	24.3	20.0
75- 79	29.6	17.4	21.0	17.1
80 -84	12.2	14.0	14.8	14.5
85+	9.4	16.9	16.0	32.7

Here are some more figures of the number over age 65 also from Mary's 1996 work

	1990	1994	2050	California
All Races	31.1 million	32.2 (13% below poverty line)	68.5 (20% below poverty line)	3.3 (10.6% below poverty line)
Caucasian	28.0		53.9	7.67% below poverty line
Black	2.5		9.6
Hispanic	1.1		7.9
All others	0.6		5.0

Number Female/Male over age 65 in 1994------19.7/13.5M

Age 65- 74-----------------------------18.7M

75- 84 ----------------------------------10.9M

85+ ---------------------------------------3.5M

Seniors over age 65 as a % of the population since 1900

1900	4.2%
1920	5.2
1940	7.3
1960	9.5
1980	11.0
2000	13.0
2020	16.0
2040	21.0

Regardless of the date of the figures, it is clear that the elderly represent an increasing percentage of our population- particularly those over the age of 85 where a lot of ailments invariably arise.

Here are further statistics showing the number that are limited in their activities.

Year	# Activity Limited	# Limited in Major Activities	# unable to go to school or work or live independently
1995	41 Million	28 Million	12 Million
2000	44	30	13
2005	47	32	14
2010	50	35	15
2020	57	39	17
2030	63	42	18
2040	68	45	19
2050	72	47	20

In 1987, 46% of people with health problems reported one or more chronic conditions and accounted for 76% of direct medical care costs (total costs were $659 billion, covering direct medical treatment and lost productivity).

Obviously, the reason for the greater number of the elderly and the greater number of health problems is due to the continuing increase of life expectancy. Life expectancy at birth has been raised to 75.5 years (it was 47.5 years in 1900). Figures from an actuary in 1996 indicate a male age 65 can expect to live to 80.3 years of age; a woman to 83.8. The death rate per 1 million people in 1992 is 8,603- down from 8,638 in 1990. Women are expected to outlive men by 6.9 years and whites will outlive blacks by about 7 years. 5,600 turn age 65 each day. An even more interesting number was projected for women born in 1996. Girls born today who miss the diseases of breast cancer and heart disease (the two major issues affecting women) could actually have an actuarial lifetime to age 92. That is a long lifetime to plan for. Below are the statistics from an article in 1996 showing the lifetime expectancy in various areas of the world. While such figures may be limited in applicability to extensive overall planning, they are included for two reasons. The first being that a person may have a relative in another country and could therefore plan accordingly to the average lifetime anticipated. Secondly, if one lives in America, long term care is almost a "privilege" in that if most of you reading this material were born in Zambia, you'd all be dead by now. It's better to be treated for a malady at age 75 then to have been deceased for 20, 30 or 40 years.

Life Expectancy at birth in 1996

Asia and Middle East

	Men	Women
Cambodia	48	51
China	68	71
India	59	60
Iraq	66	68
Israel	76	81
Japan	76	83
Philippines	63	69
South Korea	70	77

Africa

Egypt	60	63
Kenya	56	56
Morocco	68	72
Nigeria	53	56
South Africa	57	62
Zambia	36	36

North and South America

	Men	Women
Argentina	68	75
Brazil	57	67
Canada	76	83
Cuba	75	80
Haiti	47	51
Mexico	70	77
United States	73	79

Eastern Europe

	Men	Women
Czech Republic	70	78
Poland	68	76
Russia	57	70

Western Europe

	Men	Women
Britain	74	79
France	74	82
Germany	73	79
Greece	76	81
Italy	75	81
Netherlands	75	81
Norway	74	81
Spain	74	81
Sweden	76	82
Switzerland	75	82

Pacific

Australia	76	83
New Zealand	74	80

The lengthened lifetimes are due, in large part, to rapid medical improvements. The elderly are no longer dying early of communicable diseases such as pneumonia and tuberculosis. (Pneumonia used to be called the old person's friend. They died of this before getting anything else.) However, medical advances also keep the sick alive longer. Dozens of studies confirm what you knew anyway- reducing the death rate through better medical care has the unintended effect of extending the period of life when most people are frail and subject to chronic and debilitating diseases. The Journal of Aging and Health says, "we appear to be trading longer life for worsening health" and concludes by stating that "because many more people are expected to live into their 70's, 80's or 90's, when they are prey to ailments like arthritis and Alzheimers, the overall health of the population will worsen."

This results in more chronic diseases to plague the elderly. It is estimated that 20% of those over 65 suffer the ravages of Alzheimers, arthritis, senile dementia and the like. The figures are about 50% for those over 85. In the San Francisco bay area, it is estimated that here are 100,000 current cases of Alzheimer's and about 600,000 in all of California.

Mary noted that in 1935, 22% of the population had a chronic disease or impairment. In 1995, it went to 46%; 60% are ages 18- 64

	# activity limited	# limitations in major activities	# unable to go to school or work or live independently
1995	41M	28M	12M
2000	44	30	13
2005	47	32	14
2010	50	35	15
2020	57	39	17
2030	63	42	18
2040	68	45	19
2050	72	47	20

In 1987, 46% of people with health problems reported one or more chronic conditions and accounted for 76% of the direct medical care costs (total costs was $659 Billion, covering direct medical treatment and lost productivity)

	Acute Care	Chronic Care
% who received	54%	46%
Share of Total Cost	24%	75%
Per Capita Cost	$817 each	$1,829 with 1 chronic condition $4,672 with more than 1 condition

Source- Journal of AMA, cited San Jose Mercury News 11/13/96; Report of the Institute of Health and Aging Studies, UCSF.

Another report for the U.S. Senate Special Committee on "Aging America" stated "it is likely that the nursing home populations will continue to grow more rapidly, partly because of the growth in the size of the very old population and partly because of the increasing gap in life expectancy..." The report further stated that by the year 2040, nursing home population will more than double. Currently nursing home utilization for ages 65-74 is relatively small, only 2 percent. However it escalates rapidly as one grows older. For the ages 75-85, the rate is 6 percent; for ages over 85, the rate is 23 percent. A 1991 report in the New England Journal of Medicine projects that 43% of all Americans reaching age 65 will spend some time in a nursing home. A 1996 study by Wake Forest University stated that the demand for Adult Day Care facilities, mentioned later, would triple to 10,000 by the year 2000.

In 1993, 2.2 million people over age 65 were in nursing homes accounting for $55 billion in expenditures. The Brookings Institute expects that to increase to 3.6 million in the next 25 years.

Further statistics elaborate on the problem. Nursing home population rose 24% in the 80's with 3/4 of the increase from elderly 85 and older- an increase of 35%. They accounted for 42% of the beds in 1990. Most of the nearly 1.8 million in nursing homes are women- outnumbering men nearly three to 1. About 1 in 7 were married and 61% were widowed. Nationwide about 181,269 were under 65 including 4,231 under age 25. Fewer than 2% between 65 to 74 were in nursing homes; 6% between 75 to 84; 19% between 85 to 89; 33% between 90 and 94 and 47% for those over 95. The increase is not as high as in the past since the elderly are taking better care of themselves and there has also been an expansion of services that allow older Americans to stay out of nursing homes. But budget cuts throughout the economy slows down these alternatives (meals on wheels for example) and will make it more difficult to maintain such needed services.

Costs of Care

Obviously the issue of care is the cost- which has been rising the same as other health care has. Mary noted that depending on the area of the country, a one year stay costs between $26,750 and $80,200 (CNA 1992). Average costs in California, according to the Office of Statewide Health Planning and Development, 1995 is $44,000 per year or $120 per day. A 2 year stay would cost $110,000.This clearly is not affordable to 95% of Americans. But it is also not affordable to the U.S. Government.

General Wealth and Statistics

The National Center for Health Statistics did a review for 1986 of about 95% of the 2,000,000 Americans over the age 24 that died that year. About 30% were under age 65; 20% were age 65 to 74; 30% were 75 to 84 and 20% were over age 85. 31% of those who died smoked 25 or more cigarettes per day. 42% of those who died under age 65 had been heavy drinkers in their lives versus only 22% that were abstainers. Only 17% engaged in any regular exercise. Three quarters who died were had been in a hospital in their last year and about one quarter had been in a nursing home. One in eight had no visits from a doctor; one third saw a doctor about nine times and one in six saw a doctor 25 times or more.

Income and assets: Family income was about $5,000 for 17.2% in the full year before death; between $5,000 and $14,999 for 33.7%: between $15,000 and $24,999 for 14.1% and $25,000 or more for 14.8%. 16.3% of families had no assets; 25.9% had between $1 and $24,999; 33% had between $25,000 and $249,999 and 4.5% had over $250,000. No information was available for the other percentages. Further:

1. Most do not have much money or property

2. Many smoke, drink and get no exercise (obesity rate in the United States has risen dramatically for both adults and juveniles.)

3. Nearly half are disabled and most need assistance with daily living- particularly bathing. Many spend time in a hospital or nursing home, but about one quarter were living alone when they died.

4. About 1 in 7 were still working but more than half were retired or out of the work force for over 10 years.

Overview of related issues.

Unfortunately most people fail to plan for the eventualities of growing old, not only in the area of long term care, but also for such issues as medical care, estate planning and the continuing maintenance and management of their assets. The following topics address many of the economic concerns the elderly MUST consider. All are part of long term care since simply addressing nursing home issues only covers the "tip of the iceberg". Some of these topics are highlighted in other areas- such as estate planning- and you may wish to view those as well. There certainly is a lot more info on trusts.

Power of Attorney

If you need someone to help you run your affairs while sick or disabled, you need formal written instructions so that others can rely on that person's requests. The first type of instruction is the basic Power of Attorney. But note that this has severe limitations as identified later.

A regular Power of Attorney is a formal written document which allows an individual (the grantor) to choose someone else to act as an attorney in fact to conduct their personal and/or business affairs of the grantor, per the issues and terms indicated. For example, if an individual went on a trip and needed help to keep the business going, he/she could give someone the powers to carry out activities with banks, suppliers, etc. The power of attorney simply transfers authority to act to the individual selected. It also specifies what powers have granted. The attorney in fact cannot do anything more than what the document dictates. He/she cannot, for example, sell or mortgage a home or business unless these specific powers were granted. Interpretations of these powers by different entities varies greatly and careful drafting by an attorney is advised/mandatory.

Unfortunately, should a grantor of the power of attorney become incapacitated or mentally incompetent, the authority granted under a regular Power of Attorney CEASES- just at the time when it is needed most. This is a restriction imposed by law. Unless a Durable Power of Attorney (discussed below) had already been established, a conservator or guardian would need to be appointed to act in the disabled's stead. This is to be avoided at all costs. The establishment of conservatorship is a long grueling process through the court system- essentially a living probate- which will PUBLICLY review the condition of the disabled, what should be done, who should do it and so on. It will also require constant reports about the activities of the conservator which will only add to the economic frustrations. By the time everything gets done, the business or affairs may have suffered irreparably.

Durable Power of Attorney

Almost all of the above frustration can be avoided through the use of the Durable Power of Attorney. The term "DURABLE" allows the power of attorney to continue even though the grantor may become incapacitated. It is absolutely invaluable in almost all estate planning. The document may be obtained at a stationary store but unless one knows exactly how to fill it out and what to say, it may not be accepted by many of the entities it is given to- hence the same frustrations indicated above with the regular Power of Attorney. For example, some banks, title companies and other institutions may not/won't accept Durable Powers of Attorney. (While this might be the same with a regular Power of Attorney, the institution might be able to call the grantor and get verbal acceptance of the rights since there is no incapacity. But if the institution has to call/is making a call after the grantors incapacity, they might be unable to get the grantor's verbal O.K. So now your business or other endeavor can/will be seriously impacted and a guardianship may be required)

You may still have a problem with a power of attorney in any case because of the institution's lack of understanding of the instrument, excessive caution and the fact that the institutions may demand excessive detail on how far the authority extends, on what properties, etc. (That's not necessarily wrong, however.) A statement that the attorney in fact could sell real estate may be useless since they may judge it "incomplete". Therefore the Durable Power of Attorney should probably include the type of property, address, legal description etc. as well as the specific powers of the attorney in fact- mortgage, sell, buy and so on.

Again, a reason why a competent party needs to fill these out. It is suggested, in fact it is probably essential, that an attorney draw up the document and that it include the detail necessary for the particular institutions in your area of the country. However, this is not/should not be a massive document and it should normally cost about $150 or less. Caution advised- ask the fee beforehand. One wealthy couple was charged $2,000 for a regular power of attorney, $2,000 for a will and the attorney was going to charge an additional $7,000 for a trust. This particular situation did not require special documentation- it was simply a ripoff.

Springing Durable Power of Attorney

There are some potential problems- perceived or otherwise- with Regular and Durable Powers of Attorney. Even though a Durable Power of Attorney is normally given to the attorney in fact, it usually is not the intent that it be used now, but that the grantor continues to transact business as usual. But since the attorney in fact COULD currently transact business under the grantor's name that might cause a problem, some grantors do not want the attorney in fact to have any power UNLESS and UNTIL the grantor becomes incapacitated. One way to avoid any problem is to use a SPRINGING Durable Power of Attorney. This means it becomes effective ONLY upon incapacity or incompetency, not before.

This document could be held by your regular attorney, spouse, etc. for "safe keeping" and not given to your attorney in fact UNTIL the grantor has been declared incompetent. It is NOT effective until then. But the problem here is that it could take an extended amount of time to have two or three physicians examine the grantor to declare the incompetency. Too much time tends to elapse and too many questions may arise- all causing a loss of activity on the issues the grantor wanted to avoid. Another consideration is that the grantor may not totally trust the attorney-in-fact to do anything while the grantor is still cognizant. But, quite realistically, if one does not trust the attorney in fact prior to incompetency, there certainly is even MORE hesitancy to doubt his or her ability and trustworthiness AFTER incompetency. If there are any concerns about the individual, don't use them at all. Select competent parties (that does not necessarily include children) initially and hopefully any problems will be avoided at any age or situation.

CAUTION: If for some reason the grantor wishes to cancel a Power of Attorney, a demand for the return of the document should be made. If the individual refuses or no longer can be found, then the banks, lenders, title companies, suppliers, creditors, and all other parties affected by such powers must be notified that the power is canceled. The communication must be in writing and might best be sent by an attorney at law. You may need to record a document in each county where the attorney in fact may want to transact business. This, therefore is a major drawback to these powers- though, in fairness, it's not the document that is bad but the person selected.

Durable Power of Attorney for Health Care

The Powers of Attorney mentioned above do not grant the authority to an agent to make decisions on health care should the grantor should become incapacitated. The Durable Power of Attorney allows an individual to select a health care agent who will carry out the wishes of the grantor- including a desire to not receive treatment that merely prolongs a terminal illness. There are other documents that have been used to relay such wishes- most notably the Living will and the Directive to Physicians. However, certain states, California included, do not recognize these documents and they therefore may provide little assurance that the stated instructions will be carried out. The agent selected should be fully informed of the desires of the grantor and capable of performing such desires during a time of emotional stress. The grantor should also discuss the document with his/her personal physician to be sure there are no religious or personal beliefs that would not allow the physician to perform the desires stated.

Durable Power of Attorney for Health Care forms are available from Choice in Dying, 250 W. 57th St. NY, NY 10107 (self addressed stamped envelope) and the American Bar Associations's "Health Care Powers of Attorney" by a postcard to AARP fulfillment, No. D13895, PO Box 21100, Long Beach, CA 90801-2400. As mentioned, be sure the documents are valid in the particular state of use. Some advisers may feel that this is not a mandatory matter since essentially all hospitals must now ask new patients what they wish to have done in case of an irreversible condition. Statistics have also shown that many hospitals did not ask at all. Regardless, entrance into a hospital is NOT the time for this review. Prior written acknowledgment is necessary.

Special addendum

Click above for a special form that is not yet included in any power of attorney, directive or otherwise. It is a suggested addendum spelling out in greater detail the treatment desired when life support may be needed. The extra level of detail will be beneficial in helping both the physician and family- and it should reduce some of the legal wrangling that might occur. It was created by the Veteran's Hospital of San Francisco and may carry some weight in its acceptance.

Will

Everyone MUST HAVE A minimum OF A WILL DRAWN NOW!. Although a conservator or an attorney in fact has the right to do almost anything the ward or grantor could do (state laws vary), he/she does NOT have power to execute testamentary instruments (a will, trust, charitable gift, etc.). And if an individual has not done any estate planning prior to incompetency, nothing can be done since a will or other instrument requires "soundness of mind" of the grantor. A will will also be included as part of a living trust since not all properties may be included in the trust. Additionally, a will is the place where the guardian of any children must be named. It cannot be done in the trust.

Trusts

By definition, a trust is a vehicle established to provide management of assets when an individual is either incapacitated or deceased or does not want to bother with the management him/herself. In small estates, the Durable Power of Attorney reviewed above is probably adequate and is also relatively inexpensive. In larger estates and where there are sophisticated assets, the trust is the better option- although the Durable Power of Attorney is still usually necessary in order to get unfunded property into the trust. Furthermore, trusts are more apt to be accepted by banks and other institutions- though there still may be some apprehension due to ignorance. But in most metropolitan areas, there should be little problem since trusts are used quite extensively. Additionally, trusts may be utilized by married couples having over $600,000 of assets in a way that can reduce estate taxes- up to $235,000 in federal estate taxes if properly structured.

One of the major positives of a trust is the ability to also avoid many of the cumbersome and costly issues of probate. In small estates (below $60,000 in California) formal probate is not necessary. In other situations, perhaps where creditors are involved, probate is actually beneficial. But absent a relatively few exceptions, probate is a long, drawn out and potentially expensive process of a public review of assets and desires through the court system. Strangers in a court system can cause undue- though unintentional- grief for beneficiaries. If something is going to go wrong, it's apt to go wrong here. Trusts help to restrict the use of probate on most estates. This occurs because the assets are not actually owned by the individual upon death, but by the trust itself (assuming previously funded). Therefore the trustees have immediate control over the assets and can step in and administer the trust per the previous written wishes of the grantor. Any administrative issues can usually be accomplished in , perhaps, a couple of months versus one, two or three years or more with probate. (NOTE: As addressed with incompetent agents under a power of attorney, an incompetent trustee is NO better. See Who Can You Trust and Selection of a Trustee. Be forewarned, it's a lot of reading. But if you won't do this, plan on either you or your beneficiaries encountering lots and lots of unnecessary problems.

There is one issue about probate that has not been previously acknowledged in all other articles I have seen. It is true that probate can take a long time and that could be the use for a trust. But an even more compelling argument is the fact that the surviving spouse will be repeatedly bombarded with reminders (and BILLS) from the probate attorney and the court system about the untimely death of the spouse (or other loved one). A grieving widow(er) does not need to be continually reminded over the next year, two or three years about a loved one's death. The living trust can shorten the time frame for closing an estate to a much shorter period of time- in almost all cases in less time than probate. This emotional consideration is a material item which most texts have failed to acknowledge and is at least as great a concern in the elimination of probate as any other.

NOTE: This is far from a complete treatise on wills and trusts. In very large estates, it may even be preferable to use a will instead of a trust(s) . Further, trustees are not released from liability in the same manner as a court supervised administrator through probate. Seek a knowledgeable adviser or attorney for proper advice.

Joint Tenancy

When property is titled as joint tenancy, either as spouses or with anyone else, upon the death of one, the property immediately goes to the remaining joint tenant. The property WILL bypass probate. However, bear in mind that the property does NOT escape estate taxes. Many people have used this titling since it is cheaper to do than a trust and it (supposedly) gets the asset to the person intended. However, joint tenancy is NOT a preferred method of distribution for many reasons. First, should the other joint tenant predecease, another must be established. Many people simply fail to follow up and therefore the asset is left probated. Secondly, and probably far more important, is the fact that creditors of the other joint tenant may attach their part ownership of the asset thereby denying any ability to make future changes- such as the sale of the property. Also a spouse of the joint tenant may have rights against the property in case of divorce. The list goes on- consider this. If you gave an interest to your son who ends up causing an automobile accident and a subsequent million dollar liability judgement, guess where the plaintiffs will look for money? Your property that you simply had titled for estate tax purposes but needed to live with during retirement. Basically, individuals should not use joint tenancy haphazardly. Formal delineations of assets through a will or trust is preferred.

These are just a few of the issues for review and they must be adequately addressed as part of the concern on getting older. AT LEAST HAVE A WILL .  

Costs for Long Term Care

As stated a one year stay in a nursing home varies across America from around $27,000 to $80,000 (CNA, 1992). Further, costs for nursing home stays on a national basis have risen dramatically over the past few years.

Year	Nursing Home Costs	Costs to Medicaid	Cost to Medicare
1985	$36 Billion
1987	41.6	$17.3 Billion	$592 Million
1993	67.0
1994	72.3	$34.0	$5.9 billion

Costs for Home Health care have risen in the same manner. Medicare paid $9 billion in 1985 but it had risen to $13 billion in 1995. Of this, $3.5 billion was paid for by Medicaid and $9.5 billion was paid for by Medicare. Annual costs for a nurse for home health care runs from $5,000- $14,000 (Broker World, 1991).

The consumer is then left with the quandary of trying to determine how to buy for long term care. Many believe that the government (erroneously) actually covers such contingencies through Medicare. Those of limited means may have no other choice but to rely on the government through Medicaid. The wealthy may have sufficient assets to pay for care themselves though some may still attempt to use the state coffers for Medicaid. "Middle class" consumers are the ones caught in a bind. They can also opt for Medicaid, but only if substantial assets are used up beforehand. Some may rely on a spouse or other family members for long term care, but the extended current lifetimes almost invariably brings upon the onset of chronic illnesses- including Alzheimers- that are not easily treated by family members. Further, many caregivers end up in emotional and financial destitution in the attempt. As a result of this perceived need, many companies started offering long term nursing home policies in the (primarily) 1980's. The consumer therefore has the opportunity of purchasing various types of policies for this contingency. The various elements are explored below.

Health Insurance

No review of long term care would be adequate without addressing the basic need for health care since it is one of the most difficult areas that individuals now have to face during their retirement (as well as working) years. Admittedly, health care plans do not pay for long term nursing home costs, but good medical care may help you avoid a long stay- or perhaps the need altogether. However, people may not really recognize the various types of products offered and I have offered some that are used in my teachings.

If you have to buy health insurance on your own, here are some definitions you need to know. If you are interested in an HMO, you absolutely must click the link to HMO and the questions identified in an article by Kate Kincaid.

Capitation: You need to know this. Where do HMO's make their money? From the fees that are paid each month to the HMO (of which the doctor gets a share) as well as a piece of the fee each time a patient visits. The HMO monthly fee is in contrast to the money paid a "fee for service" doctor for individual procedures performed.

Co-Pay- the per visit charge by an HMO. It can be $0 to $25 and, as stated above, the doctor usually gets a piece of this fee.

Fee for Service: This represents the "traditional" plan where a patient pays a doctor, hospital, lab, etc. for each service provided. Also known as an indemnity plan, the patient then requests reimbursement of fees per the type of plan. The normal feature is a deductible where you pay 20% and the insurer pays 80% of the approved charges. You can increase your deductible, but you must be sure you can pay the deductible. Obviously, your premiums are lower for a policy with high deductibles than for a policy where the insurer pays the standard 80%. Look for limits however- say $5,000 or so. Above that, the insurer pays 100%. Otherwise you leave yourself open for massive $$$ for a long/complicated health problem. Also note maximum limits: Policies may cover up to $1,000,000 in total benefits. While that may seem more than adequate, recognize that some extensive illnesses- such as cancer- can exceed that amount.

GateKeeper/Primary Care Physician: This is your primary care physician responsible for overseeing all procedures and authorizing requests to a specialist. Most HMO's will let you change primary care physicians if you do no like the one you rae given.

Health Maintenance Organization: HMO's can provide complete comprehensive medical coverage regardless of age for a set fee. You usually do not get to choose any physician in the community but are able to select only among the doctors within the HMO. These managed care plan's intent is to reduce unnecessary procedures (many of the procedures now done in the American society are excessive. The World Health Organization stated that there should be no more than 10%- 15% Caesarean sections- but the U.S. rates is over 25%. Also overused are tonsillectomies, hysterectomies, and bypass surgeries.) through screening, second opinions and peer review. They utilize a "gatekeeper" type of medicine where one doctor as the primary care physician has the unilateral authority to prescribe care and authorize other specialists to treat a condition. The problems that many patients face is that utilization varies within an organization and across different organizations- particularly between profit and non profit organizations.

The group practice plans- such as Kaiser Permanente- provide salaried physicians as employees who are primarily involved only with the HMO membership. Each patient may choose a primary care physician who is the "overseer" for all care received by the patient. HMO's are paid a set amount for each patient. If the price of care to a patient is less than the per capita amount allocated, then the HMO has made a "profit". If the costs exceed this amount, then the HMO and the doctor lose money on that patient. Additionally, in most cases, a patient must receive permission from their primary physician to see other specialists.

These plans encourage the primary physician to either take care of the problem directly or refer the patient to the most cost effective provider. While a member may seek a physician outside of the system, they are not normally reimbursed for any of these costs. An important advantage to HMO's is that they may monitor utilization, control expenses and ensure that the system dictates where the medical care will be received rather than the patient. They foster efficient delivery and present strong incentives to efficient care.

On the other hand, the incentive could be to undertreat rather than overtreat. "They may encourage the provider to stint on the quality of care." (Federal Reserve Bank of Boston, 1991).

Still, "MANAGED CARE COULD HELP REDUCE AN IMPORTANT SOURCE OF MARKET FAILURE THAT DISCOURAGES EFFICIENT MEDICAL CARE- THE DEARTH OF WELL-INFORMED AND RATIONAL CONSUMERS." (Federal Reserve Bank of Boston, 1991). Within this context is the key to getting good medical care whether by a fee for service or under an HMO and is provided by C. Everett Koop, former Surgeon General.

"THE BEST PRESCRIPTION IS KNOWLEDGE"

You can check the accreditation on an HMO by calling the National Committee for Quality Assurance (NCQA) at 202 628-5788. Certain questions suggested  to ask before engaging an HMO are CLICK HERE FOR ONE OF THE BEST HMO QUESTIONNAIRES YOU WILL FIND ANYPLACE. AUTHORED BY KATE KINCAID, lightly paraphrased.

IPA: Independent Practice Association: This is a type of HMO where the HMO contracts with a physician group which then engages individual physicians. These physicians maintain their own offices and continue to see the HMO patients as well as their "own" fee for service patients. More independent physicians are joining IPA's in order to stay competitive in the marketplace.

Open Enrollment: A period of time when a member of a Group health plan can enroll or change plans.

Point of Service: This is a hybrid form of an HMO in that the patient normally utilizes the HMO gatekeeper concept in an attempt to keep costs low. However, the patient can opt for a nonnetwork physician and must pay a deductible and copayments similar to the standard fee for service.

Preferred Provider Organization: The PPO use physicians who also have their own individual practice but who have agreed to render service for a discount fee. Any member who chooses to use the facilities, physicians and services from its predetermined list, is able to receive care at a lower cost than what the usual and customary charges would normally be from outside "vendors". The member physicians are reimbursed for the services provided. The attractive nature of PPO's is that members usually have a much greater choice in the selection of physicians- one of the major drawbacks to the HMO's narrow selection of in-house doctors. This makes the PPO very attractive to potential members since they enjoy what the HMO takes away- freedom of choice. Being told what to do and who to do it with- particularly when it comes to how and from whom to receive medical care- is anathema to many people. However the cost containment aspect may fall short. Doctors may make up the discount to members by charging for "extra" services- an extra blood test, x-ray, etc. that may not really be necessary. Or the physician may order treatment in a less expensive outpatient setting, but the overutilization and increased technology may make the outpatient treatment more expensive.

It would appear that in order to more rigidly control costs, PPO's may have to institute the "primary physician" technique used by HMO's. With all medical care for a patient requiring approval through one "gatekeeper", extra and unnecessary costs could theoretically be kept to a minimum.

Below is a comparison of costs of three plans- the traditional fee for service being, as expected, the most costly. Family of four with total of five hospital visits to doctors, one emergency room care and one overnight hospitalization. Each will visit the dentist once.

Source- US News & World Report, November 4, 1991

	Fee For Service	HMO	Point of Service
Annual Premium
Medical	$1,416	$1,380	$1,536
Dental	150	113	Not covered
Total	1,566	1,493	1,536
Outlays
Doctor Visits	280	25	25- 280
Lab Tests	50	0	0- 50
Medications	80	12- 20	12- 80
Dentist Visits	495	0 -100	0- 495
Optometrists	120	10	10 -120
Glasses/Contacts	320	320	320
Hospital Stay	1,000	0- 115	0- 200
Emergency Room	200	0- 200	0- 200
Subtotal	2,545	367- 790	367- 2,545
Insurance Reimbursement	836	0	460
Total All Costs	3,275	1,860- 2,283	1,903- 2,401

Sure, prices have changed since 1991, but I believe you would find the allocations in the same ball park. Add in the fact of higher Medigap policies and the HMO's and similar managed care plans will increase their percentage of the market almost exponentially in the years to come.

Medigap Policies

I will first preface this area by stating that Medigap plans- separate plans purchased by consumers that can pay for the deductibles and other costs not covered by Medicare Part A and B- do not provide long term care. Never have. But they are an issue for proper health care and are addressed below.

Medicare coverage was has become more restrictive in the amounts it covers for any particular medical procedure. And while there are more and more physicians that accept Medicare payment in full, there are still miscellaneous costs that are not covered by Medicare- drugs, care while overseas, and a host of other out patient costs. In the past, the elderly were inundated by policy after policy to the point where additional sales were clearly unethical. At one point, over 250 policies were offered in the marketplace. Congressional changes now allow just 10 different policy types to be offered. While this reduces the confusion tremendously, the costs for the same type policy can vary greatly from company to company.

About 3/4 of all seniors have a Medigap plan Unfortunately, the costs for patient care- which Medigap polices can cover- has escalated to the point where the elderly may not be capable of buying them. The reason is as follows: under Medicare Part B, the patient is responsible for a $100 a year deductible and 20% co payment of charges. But through a quirk of the law, it's 20% of what the hospital CHARGES, not of what Medicare approves. As a result, patients have been paying about 37% of the total payments to hospitals for outpatient services, not the 20%. And it's projected to get worse, according to Dr. Shalala, Secretary of Health and Human Resources, to about 68% by 2000. And apparently nobody is going to fix it (Clinton has already said it is legal) because they say that if hospitals can only charge what Medicare approves, then the Federal government will have to come in and pick up the extra cost. So Medigap policies have been going up to cover for the ever increasing outpatient costs. AARP's policy increased 25% in 1996 just to cover this contingency and are scheduled to go another 13% in 1997. Costs for all Medigap policies may quickly exceed the ability of the elderly to pay for them. Many will soon have no alternative but to seek managed care since it will be the only thing they can afford.

Actually the problem has been around for awhile since outpatient costs have been rising at a 15.7% rate since 1980 to $86.7 billion in 1994 while inpatient costs have risen only 7.8% to $212.43 billion. These increases may be the forthcoming largest reason for the change to HMO's. They are simply cheaper and, under most plans, no Medigap plans are necessary.

The U.S. Department of Health and Human Services has a booklet titled "Guide to Health Insurance for People with Medicare" and explains many items you should be aware of- and has comments about unethical sales practices. Write to Health Care Financing Administration, Baltimore, Maryland, 21207.

This is a chart of the 10 plans. There may be slight variations within a particular state.

Core Benefits	A	B	C	D	E	F	G	H	I	J
Part A Hospital (Days 61-90)	X	X	X	X	X	X	X	X	X	X
Lifetime Reserve (Days 91-150)	X	X	X	X	X	X	X	X	X	X
365 Life Hospital Days- 100%	X	X	X	X	X	X	X	X	X	X
Part A and B Blood	X	X	X	X	X	X	X	X	X	X
Part B Coinsurance- 20%	X	X	X	X	X	X	X	X	X	X
Additional Benefits	A	B	C	D	E	F	G	H	I	J
Skilled Nursing Facility Insurance (Days 21- 100)			X	X	X	X	X	X	X	X
Part A Deductible		X	X	X	X	X	X	X	X	X
Part B Deductible			X		X					X
Part B Excess Charges						100%	80%		100%	100%
Foreign Travel Emergency			X	X	X	X	X	X	X	X
At Home Recovery				X			X		X	X
Prescription Drugs								1	1	2
Preventative Medical Care					X					X

Remember that prices for policies may vary tremendously, so you will need to shop around. Nonetheless, the use of just 10 plans was made for consumer protection and intended to

1. simplify Medigap policies

2. prohibit the sale of duplicate policies

3. increase the ratio of the amount of money paid out in claims

4. guarantee the renewability of a policy

5. limit the effect of preexisting conditions and

6. prohibit denial of coverage to new Medicare beneficiaries due to health status.

As of fall 1991, policies sold must pay out at least 65 cents for every dollar in premiums received, or provide rebates or premium credits to policyholders. Pre-existing condition clauses will not be enforced for policyholders replacing a policy for which an exclusion period has been met. For six months after a person is eligible for Medicare, the person cannot be denied a Medigap policy because of health status or medical history.

The next table refers to coverage under a Health Maintenance Organization (HMO- explained more fully below) and the use of a Medigap plan as of 11/96. The figures speak for themselves and clearly show why more people may simply have to use an HMO. They can't afford other types of care.

Medicare HMO versus Medigap

Benefit	HMO	AARP Medigap Plan F
Monthly premium	$0	$94.25
Physician Visit	$0 to $10.00	$0
Inpatient Hospitalization	$0	$0 with prior authorization by Medicare
Mental Health	$35 copay for outpatient care; 45 additional days over the 190 lifetime Medicare limit for inpatient care.	$0 copay for outpatient care; $0 copay for up to 190 days of inpatient care
Emergency care	$0; reimbursable if out of area	$0
Prescription Care	$3 copay for a generic drug; $10 copay if a brand name. Plan pays up to $375 per quarter for prescription costs above copay.	Consumer pays all costs
Dental Benefits	$20 for prophylaxis' $30 for X-rays	Consumer pays all costs
Eyeglasses and Contact Lenses	$20 to $85 copay for lenses; $19.50 to $29.50 for frames; $90 to $200 for contact lenses	Consumer pays full costs

Another article in the Associated Press showed increases of 20% to 40% in 1995. Though the AARP plan above is about $1,140 a year, Prudential, in 1996, said that its most popular plan was now $1,614 a year, up from $1,161 in 1995.

Medicare Overview

Current law does not provide any extensive long term health care at all. Never did. And while many voters would like a national health policy, no one has even come close to finding the money. In view of our huge budget deficit, the fact that Social Security will run out of money about 2050 and the fact that nil money is spent on the young as compared to the elderly, there is considerable skepticism for a comprehensive health policy. In fact, it may not be surprising if, in the next decade or two, medical procedures might be limited or denied to certain individuals- perhaps to those individuals over 75 years of age for example.

Within that context, let's look at the statistical evidence of medical costs for the elderly.

Per the Wall Street Journal 1993, one in every every seven dollars spent on health care is spent during the last six months of life. Most Americans say every person deserves life prolonging care.

28% OF THE MEDICARE BUDGET IS SPENT IN REIMBURSEMENTS TO PEOPLE OVER AGE 65 65 IN THEIR LAST YEAR OF LIFE.

THE BULK IS SPENT IN THE LAST 30 DAYS.

That's about $30 billion. That amount could account for about 2/3 of the cost of providing health care for the 37 million uninsured Americans. About 70% of all who die annually are elderly. And as the average age of Americans get older- currently 12.5% are over age 65- the cost for care will rise dramatically. The ever increasing use of new diagnostic and life prolonging technologies adds another 25%."

This enormous costs can easily bankrupt an individual or family and it is therefore imperative that the individual fund for long term health care and non Medicare coverage personally.

Medicare Benefit Coverage for Long Term Care

Unfortunately, many elderly are unaware that Medicare will effectively pay for NO long term nursing home care. According to a 1996 survey by the Boettner Center of Financial Gerontology, "less that half (47%) of the American public knows that Medicare does not pay for nursing home care of Alzheimer's patients.... This amazingly poor statistic still persists after years of public education about what Medicare does and does not cover and how much people need to save for retirement". (Older Americans Report, 1996) The media has not effectively dispelled that myth since even recent articles have not properly understood what Medicare provides or does not provide. One of the most recent egregious and erroneous articles was offered by the San Francisco Chronicle, August 4, 1996, by the nationally known Financial writer, Eric Tyson. He quoted that Medicare would also pay for the bulk of the first 100 day's cost (of nursing home). But that is only true for skilled care- which hardly any get (less than 2% of the elderly)- and then only for 20 days. (Custodial and intermediate care- representing at least 98% of all those in nursing homes- is NOT COVERED AT ALL.) After that, seniors pay for the next 80 days at $92 per day (total = $7,360) and everything after that. Tyson further commented that Medicare will also pay if the nursing home admission follows, within 30 days of a hospitalization. But that's ONLY for skilled (acute) care and one must have been in a hospital for three days. Tyson further stated that "once discharged from a nursing home, you can qualify for an additional 100 days benefit period if you have not been hospitalized or in a nursing home during the prior 60 days." That's categorically incorrect. The misinformation continues. Both Mary Kaufmann and I requested a retraction and clarification of the misinformation from Mr. Tyson and the San Francisco Examiner. Neither even replied, nevermind informed the readers. As a result, hundreds, if not thousands, who read that article will now rely on erroneous advice and subsequently arrive at emotional and financial devastation. (Remember, it's not only the elderly that would rely on such bad advice, but equally their children who might have read it and then "advise" their parents or grandparents.)

So why all this commentary? Simply this as an added caution to the other material contained herein. NEVER rely on an adviser, national prominence or otherwise (and this includes all insurance agents, financial planners, stock brokers, etc.) without doing a lot of your own homework. IT is mandatory to call your local/county Area Agency on Aging. The experts there can tell you what you need to know. A relatively complete understanding of the limitations of Medicare coverage coupled with a review long term care policies is mandatory.

DON'T LET ANYONE TELL YOU THAT MEDICARE WILL PROVIDE ANY SUBSTANTIAL LONG TERM CARE AT ALL. MEDICARE ONLY FUNDS ABOUT 5% OF ALL LONG TERM HEALTH CARE.

On average, Medicare pays for only 27 days of skilled nursing home costs (Congressional Research Services Brief, 3/22/95)

Also note that Medicare does not cover for travel out of the country and an individual Medigap policy may not either. The best suggestion is to purchase a temporary policy when traveling abroad.

Medicare Home Health Benefit

As addressed above, long term nursing care coverage is about nil. But what has been changing in many locales is that Medicare is covering for a lot of home health care it was never intended to pay for. According to a 1996 Rutger's University Institute for Health said that Medicare paid $14.9 billion in home health care in 1995 versus just $3.66 billion in 1990. Medicaid also has seen substantial increases. Home health care funding tripled to $10.33 billion from $3.40 billion in 1990.

The basic rules are that Medicare beneficiaries who are homebound are entitled to up to 35 hours per week of free skilled nursing and home health where they require skilled nursing services on an intermittent basis or skilled therapy services. The skilled care of a registered nurse must be reasonable and necessary to the diagnosis and treatment of illness or injury. Intermittent basis means fewer than five days per week or as little as once every 60 to 90 days. But once one has met eligibility criteria, it can cover for up to 35 hours per week. Skilled nursing services must be needed on a part time or intermittent basis. Part time is less than eight hours per day. Intermittent is less than seven days per week. Your physician must certify care. A CHHA (Certified Home Health Agency) must draw up a plan of care specifying the nature, frequency and duration of care needed. While the level and extent of care is considerable, few in the past had been able to qualify for the skilled care. It is obvious however that variations in the rules have been made and far more home health care is being offered. It would appear that that might reduce the need/costs for Medicare nursing home care for the very sick, but no supporting numbers are yet available as of early 1997.

Working Past 65

There are other issues pertaining to those people eligible for Medicare at age 65 but have continued working. If an employer (ER) has 20 or more employees (EE), it must offer those EE's over 65 the same medical plan as the rest of the company. If the EE's accept the plan, then Medicare will become the secondary payee. That is, Medicare will only pay if the primary insurer doesn't pay and ONLY IF the procedure still meets Medicare requirements. If the EE's reject the ER's medical coverage plan, Medicare will become the primary source insurer. Once retired, the EE will be able to go directly into Medicare. However, the same is not true of those that retired at age 65 but did NOT elect to pay for Medicare coverage at that time. They must meet an open enrollment period and pay an EXTRA 10% of premiums for every year that they did not join after 65.

Medicare Claims/Appeal

For those that have submitted claims, payment should take place without undue problem- but that assumes all paperwork was completely properly. Unfortunately, many bills are returned with 0000's under the "Approved" amount and this invariably means that the proper coding was incorrect, the doctor's name was wrong, or any number of reasons. Call Medicare to determine the exact problem and then call the doctor or other supplier to fix the error and resubmit.

At this point I will offer one of the best pieces of advice found anywhere- appeal, appeal, appeal. Statistics have proven that you should appeal at least three times (assuming there are grounds to begin with of course) since there is a considerable number of claims that are accepted at each appeal. Further, I would call AARP and get their manual on Medicare appeals since they provide the actual appeal letters you can use.

Medicare Handbook

A more detailed explanation of Medicare is found in "The Medicare Handbook" available from a Social Security office of by writing Medicare Publications, Health Care Financing Administration, 6325 Security Blvd. Baltimore, MD 21207

Medicaid and California Medicaid (MediCal)

The government will provide care for those that are medically indigent. If you do have assets, the state will require that you spend them down in order to meet the federal poverty limits (varies between states). A 1987 study by the US House Select Committee on Aging found that after only 13 weeks (91 days), 7 in 10 elderly living alone spent down their income to federal poverty levels. Even those with assets were vulnerable with 50% of them spending down to the limits in 13 weeks. Two thirds of those living alone were at risk within one year.

The commentary below is based on California requirements for public assistant recipients and other low income individuals. Each state has its own requirements and figures, but the overview should be similar.

SSI Recipients: If one is age 65, blind disabled and meets the low income and resource limits, Supplemental Security Income is possible. The INCOME limits are $ for a single persons and $ for a couple in 1997. The RESOURCE limits are $2,000 for a single person and $3,000 for a couple.

Medically Needy: A person can qualify if the payment of medical bills would leave one with less than the allowable MAINTENANCE NEED LEVEL (MNL) for all other living expenses. The person must pay the a share of cost which is the difference between the net income and the MNL. The MNL for a single or disabled person is $ /month (1997) and for an aged or disabled couple is $ /month. The Department of Social Services determines what share of cost will be. Payment for Medicare Part B is counted toward that share.

MediCal pays for health care service which meet its definition of medically necessary. Such services include physicians visits, hospitalization, X-ray and laboratory, nursing home care, adult day health care, some dental care, some ambulance services, prosthetic and orthopedic devices, eyeglasses, hearing aids and some medical equipment and hospice are.

Nursing Homes- patients are admitted on a doctor's orders and the stay must be medically necessary. Residents with incomes are allowed to keep only $ per month for personal needs. Residents with no incomes receive $ of their SSI for personal needs allowance.

MediCal recipients in nursing homes who own their own homes remain eligible for MediCal as long as:

1. they intend to return to their home or

2. the residence is used by a spouse and or dependent child or

3. the residence is used by a sibling or adult child who lived here one year before the owner entered the nursing home or

4. as long as they make a good faith effort to sell. The State has a right to place a claim for MediCal expenses on the home, to be paid on the sale of the home.

In Home Supportive Services (IHSS) is a non-medical program of housework as well as personal care up to a maximum of 283 hours per month. Persons over 65 or disabled, who are eligible for MediCal are also eligible for IHSS if, without these services, they cannot remain safely at home.

Spousal Impoverishment Protection- as stated above and part of all state requirements, a couple (more usually defined as the at home spouse) does not have to spend all of their resources in order for ONE spouse to be eligible for MediCal coverage in a nursing home facility.

Effective 1/1/92, if one spouse must enter a facility, the spouse at home may keep all of the combined assets up to $ (indexed), The spouse in the nursing home may keep $2,000, the MediCal resource limit for one person. In addition, the spouse at home will be able to keep all of the couple's income up to $

However, if the spouse at HOME receives a higher income IN HIS OR HER NAME ONLY, he/she will be able to keep it.

If other assets are transferred for full market value more than 36 months prior to date of application, the assets will not be part of test for Medicaid acceptance. A little understood aspect of the Medicaid law used to allow some gifting of assets without the full 36 month look back rule. It involved the monthly cost of nursing home care in the area of the state where the individual resides. For our example, assume an individual had to go into a nursing home and had $60,000 in assets. If he gave all $60,000 away, he must wait 36 months before entering a nursing home or Medicaid would look back the full period. But should he give $30,000 away and the average cost of nursing care is $3,000, the look back period is reduced on those assets to 10 months. The figure is arrived at by dividing the $30,000 gift by $3,000 nursing home cost. And as long as the individual was able to delay nursing home care- or provide for it himself- the $30,000 would not be attached. Supposedly, in the second month, an additional $27,000 could be gifted away and the wait period for that would be 9 months. The wait periods run consecutively. Therefore it was possible to literally gift away all assets and still be covered by Medicaid. New rules have apparently voided this in its entirety BUT commentary in late 1996 by an elder care attorney indicates that this may STILL be legal in California and that California uses only a 30 month lookback. That's because California never enacted the Federal provisions.

Do not attempt any transfers without substantial review with a competent adviser.

Regardless of the rule changes, some practitioners suggest transferring all assets anyway and simply purchase a minimum 2 or 3 year nursing home policy. But this is a difficult task because it means people will readily/easily give all their assets away NOW under assumption that long term care MIGHT be needed. Highly unlikely- though the facts must be presented.

One must again consider the gift tax consequences. Anything over $600,000 will incur gift taxes starting at 37%.

And if assets are transferred to a son or daughter for "safe keeping" with the intent of a transfer back to the patient upon recovery, what happens if the individual should spend those funds haphazardly? Also funds could be attached by creditors, an ex-spouse, bankruptcy, liability due an accident, etc. These are complicated issues that require extensive forethought.

NOTE: If a Medicaid facility is utilized, it may not be close to home where spouse still resides. There are a lot more private pay facilities that are apt to be closer to home. And one must remember that the more often you visit a loved one, the better they are and the better they are cared for.

For a more definitive work on Medicaid planning, see Avoiding the Medicaid Trap, Armond Budish, Avon Books, 1995. Medicaid or How to Avoid Paying for Nursing Home Care

If an individual has not purchased long term nursing home insurance and wants Medicaid to pick up the tab, what happens if there are assets above the state limits? The assets may be "moved around" in some fashion as identified below. However, caution advised since some measures you may have been aware of- Medicaid Qualifying Trusts- have been severely limited in use and scope. I'll mention some of the past "windows of opportunity" below with the changes. But I want to preface some of these windows with some caustic commentary to elder care attorneys and children who attempted to transfer assets to get Medicaid to pay for the care. While transfers were legal, there is one element that, almost undoubtedly, was never addressed. And, in its absence, the transfer became unethical. Assume that a widow had $1,000,000 and her attorney/children wanted to maximize retention of the inheritance by transferring assets prior to a long term care nursing home stay and let the state pay instead. What their failure was was this admission to their mother (father)...."Mom, we want you to die in a Medicaid ward with a bunch of other screaming Alzheimer's patients". Anyone thinking that a Medicaid ward is the same as a semi private room is an idiot or a liar. If anyone thinks there is no stigma attached to a Medicaid patient lives in a dream world. The list goes on. Only people with substantial sums could afford an elder care attorney and the appropriate trusts. But, as such, there was also sufficient sums to pay for a nursing home policy that would have, almost assuredly, provided a better environment and care than a large ward. So, while the process of a trust transfer was entirely legal it was, without the corresponding statement to the "loved one", clearly unethical.

In any case, here are some methods to retain some assets.

1. Convert liquid savings into equity in house by paying down mortgage, adding improvements to existing home or even buying a larger house. Recognize that this is not necessarily to be construed as an obvious attempt to maintain assets per se. The existing house may be run down, in a bad neighborhood, an so on. Recognize as well that there is only going to be one person (probably also elderly) running the household, so more convenient appliances may be suggested.

2. Gifting a house or other assets to spouse who ultimately transfers to intended beneficiaries through gift or devise may NOT work. Congress has tightened this loophole and basically anything transferred to a spouse may still be considered retained by grantor. So a subsequent transfer may be brought back in for Medicaid purposes. Nonetheless, even at this writing in late 1996, I am not sure how many states actually enforce this measure. However, due to the budget constraints nationally, it will have to be enforced unilaterally by all. Also remember that if assets need to be transferred back to anyone besides the spouse, there may be considerable gift taxes to pay since anything beyond $10,000 per person per year is subject to gift tax or giftor must use a portion of their lifetime exemption. (See 36 month rule described below for further restrictions.)

3. Some of the problems addressed could POSSIBLY have been avoided in the past through the use of a Medicaid Qualifying Trust as stated above. Again, the idea was to save the assets of the parent (normally) from being used up in paying nursing home expenses, thereby allowing these assets to pass to subsequent beneficiaries. The trustee (not the grantor) would have total discretion in making distributions to grantor but NOT for costs that could be paid by Medicaid. This irrevocable trust (once assets are put into this trust, they cannot be changed) needed to be written by an attorney with extensive experience in Medicaid (where many elder care attorneys professed competence). Medicaid laws changed effectively requiring assets to have been passed out of the hands of the grantor for at least FIVE years. Beyond that, and another issue for discussion is the fact that considerable gift taxes might have to be paid on transfers (anything over $10,000 per person per year and a one time election of $600,000).

Medicaid qualifying trusts were suggested considerations for those with $50,000 to $400,000 (amounts will vary- author Alexander Bove of "The Medicaid Planning Handbook" used a range of $250,000 to $750,000). In such instances, the grantor puts funds into a trust that, say, is paying 10%. The payment is made on a continuing basis but should the individual go into a nursing home, the principal cannot (supposedly) be attached by Medicaid. In the case of a married couple, the trust lets each spouse keep their own income. It can therefore direct the income to either or both spouses. In some cases the trust can shift income from one spouse to another upon certain events- such as one going into a nursing home. In a separate form called a convertible trust, the principal remained revocable until the grantor went into a nursing home. This did not work in every jurisdiction since it may be against "public policy". Additionally, when the funds are transferred to the irrevocable trust, Medicaid looked back 60 months. Medicaid would therefore not pay any funds for nursing home care for that period of time and it would be necessary for the grantor to take out to pay for this care. The trust might be structured so that either spouse could get principal payments through the end of the waiting period. If the income generated by the trust was greater than that allowed by Medicaid, the trust might have a self adjusting feature to keep the income under Medicaid limits. And lastly, it was indicated that the trusts can allow termination under certain conditions thus allowing the assets to be distributed to beneficiaries.

Yes, these trusts can still work, but are extremely limited in scope- and possibly in ethics.

4. Under current law, the at home spouse may retain certain assets. The following are for California- check your own states for specifics.

a. Principal residence may be retained by the at-home spouse. The residence may also remain exempt by a single individual if the beneficiary expresses an intent to return home.

b. Proceeds from sale of real property is exempt for up to six months if used for purchase of or repair to a principal residence.

c. Other real estate is exempt if ownership interest is $6,000 or less and must be producing 6% income based on net asset value (can use assessor's valuation) or produces goods or services for one's daily activities- in other words, it must be essential for support

d. Household goods and personal effects have no limits

e. Jewelry such as wedding, engagement and heirlooms have no limits on exemption.

f. One auto is exempt if its value is under $4,500 or

1. It is used to drive to work or

2. It is used as transportation to and from medical care or

3. It has been adapted for a handicapped person.

g. A pension or an IRA is fully exempt IF it is in the name of the non Medicaid beneficiary.

h. The principal of a annuity is exempt if the annuity is making payments AND the principal is not available. However the payments will be considered includable income.

i. Life Insurance cash values are exempt but only under $1,500

j. Burial Plots, Vaults and Crypts are exempt if for use of a family member.

k. Burial Trusts and Prepaid Burial Contracts are exempt if not greater than $1,800 in an IRREVOCABLE trust and up to $1,500 in a designated burial fund. All other assets are included.

Nursing Home Care Overview

The bulk of the costs for long term care has been paid by individuals and family members.

	Nursing Home Care	Home Health Care
Families	51.0%	56.8%
Medicaid	41.6	9.5
Medicare	1.4	15.4
Insurance	0.9	0.5
Other*	5.1	17.8

*- VA, church and similar organizations, lifecare communities, etc

In view of the obstacles (or the complete lack) of receiving long term nursing care either through Medicare or your state's Medicaid, and the fact that self insuring can leave one destitute, it is worthwhile to consider alternatives. An additional comment about self insuring is needed since, while it is possible to do so, the timing of the need is critical. This example, presented wrongly in Money Magazine, shows the fallacy of self insuring. The article, which was against the use of long term health care policies, stated that if a 70 year old man simply took the amount he would pay for long term health care policy and invested it for ten years, he would have enough to pay for two years of long term health care at age 80. The statement is unquestionably technically true- but completely worthless in real life and borders on "malpractice" (if a magazine could be held accountable for such advice). The idea of insurance is to protect an individual when they cannot afford the costs of the accident or care and when they might least expect it. In the above example, what would happen should the man need long term care only two years after his attempt at self insuring? A quick depletion of assets and probable Medicaid. The article also stated the money paid into the policy might never be recovered through use of the policy. Agreed, but what's the point? Consumers do not get their money back on their current car, fire, disability, life, liability or the other types of insurance they have held for years (some limited exceptions). Recovery of premium could be based on the actual use of the policy, but most consumers would prefer never using much of the protective insurance they purchase (why hope to be sick?). But lobbying by AARP to state insurance departments has forced many insurers to offer a type of refund if the insured should die or terminate the coverage prior to an actual claim. The policy might be required to be in force for at least five years. A 10% refund would be available- increasing 5% per year thereafter. If the policy had been in force 20+ years, 100% of premiums, minus benefits paid, would be returned. The refund varies by companies and is not available in all states. It also does not come free. Additional premiums of 15% to 30% are not uncommon which may make it cost prohibitive in most cases. In fact, when I asked one company how many they had sold in over a year, they said "one".

Secondly, if a claim has been filed, no rebate may be offered at all. Effectively, we have a politically driven product that is so expensive that the elderly can't afford it. Frankly, I have told clients purchasing long term care policies that I hope they are "just throwing their money away".

From my vantage point, I feel that a long term nursing care policy provides emotional and financial peace of mind that is extremely beneficial, irrespective of any refund. Any professional adviser in the business should at least consider the presentation of a policy to a client. If they decline, so be it. But litigation is evident now by survivors who claim that had a policy be initiated, most the assets of the deceased would have been available to the beneficiaries. That said however, and in view of the teaching I do, I submit that few planners or insurance agents really have a good handle on long term care. This commentary encompasses some of the so called heavy hitters in the business. Caution advised. Remember, don't use referrals to plan your lifetime- particularly your retirement.

In order to put the comments in focus, let's address the cost of a policy first since the monetary angle is ever present. From a 1996 Life Insurance Selling article and per a HIAA study- after adjusting for the inflation protection costs- consumers paid an average of $919 for ages 55 to 64; $1,177 between ages 65 to 69; $1,528 between ages 70 to 74 and $2,146 age 75 and above.

In order to focus on the inherent risks, it is necessary to review some statistics. First and foremost, nursing home care is not a supplement to Medicare since Medicare covers only a short period of SKILLED care, not intermediate or custodial. Most people go into a facility for custodial care. By definition, the classes are:

Skilled Care: Medically necessary care provided continuously, 24 hours per day, by licensed medical practitioners such as physicians, nurses, and therapists who are under the direct supervision of a physician. (Now called in some polices as level 2)

Intermediate Care: Medically necessary but provided on an intermittent rather than continuous basis. Supervision by a physician still required, but LPN's and nurses aids can provide some intermediate care.

Custodial Care: This represents "assistance" care for people who need help meeting daily living requirements such as getting in and out of bed, dressing, personal hygiene and maintaining their current health condition. Licensed medical personnel are not required. (Current policies may now lump custodial and intermediate care into a category called Level 1.)

NOTE: Most care is for custodial, not intermediate or skilled and this represents the most expensive aspect of long term care. Of those patients residing in a long term health care facility:(AMEX- 1993)

95% receive Custodial Care

4.5% receive Intermediate Care

0.5% Receive Skilled Care (the only type Medicare pays for)

Other statistics need to be reviewed.

Of the elderly over 65,

75% are well and living at home

20% are in the community but are at risk to go into a facility

5% are in nursing homes. Of those 75 and older, 5.3% have living spouses.

Median Length of Stay by Age (several studies are included, but they don't all address the same age or time span. They are all included since, regardless of any conflict in exact numbers, the essence of the need for care is obvious).

65-74 stay 53 days. 2% of the elderly need long term care

75-84 stay 71 days. 6% of the elderly need long term care

85-89 stay 99 days. 23% of the elderly need long term care

90-94 stay 169 days

95+ stay 379 days

71% of those needing care between ages 65 to 89 are women

More statistics

1. Life expectancy by year 2000 will be 81 for men and 86 for women.

2. 1 out of 4 over 65 will require nursing home care- though comments in a recent federal study by the Long Term Care Task Force indicates as high as 43%.

3. 34% stay 30 days or less

4. 12% stay between 30 to 60 days

5. 6% stay between 60 to 90 days

6. 16% stay between 120 days and one year

7. 9% stay between 1 and 2 years- though statistics by the Long Term Care Task Force now show that up to 25% will stay at least one year.

8. 4% stay between 2 and 3 years

9. 7% stay between 3 and 5 years

10. 7% stay 5 years or longer

11. Alzheimers accounts for 60% of all nursing home admission and can require care for up to 15 years.

12. Average cost is $65-$120 per day depending on area (this range of costs is HUGE and requires careful and thorough analysis as to where the car may be required. Will they move to another state/location upon retiring and what are the costs in that area and how fast have they been rising.). A Life Insurance Selling article in 1996 noted an average national rate of $85.00 per day.

13. About one fourth of those now 85 or over are now in nursing homes.

14. Average length of stay is 456 days.

Women and Aging

1. 63% of all elderly are female U.S. Census, 1988

2. 82% live alone (6.5M females vs. 2.0M males)

3. 80% are widowed- 3 times more likely than men

4. 21% of all widows are below Federal Poverty Level ($5,500/yr.) U.S. Census, 1987

5. 55% care for a spouse; only 18% are cared for by a spouse

6. Women spend 11.5 years out of labor force, on average, because of caregiving activities vs. 1.3 years for men

Women are the caregivers 75% of the time (must also consider the care they give to children and elderly parents. A study of 13,000 people by the University of Wisconsin in 1987 and 1988 noted the following. About 15% of women and 10% of men between the ages of 19 to 34 had cared for a chronically ill or disabled relative or friend. Between 35 to 49, the average increased to 1 in 5 for women.

For ages over 50, the average was 1:5 for both sexes. Only 1:14 overall was providing in house care and it usually was for a spouse or child. 1:10 gave "out of house" care- usually to aged parents. The heaviest burden was on middle aged women- about 15% between the ages of 35 and 64 care for a parent or other person living outside their home. In 1989, nearly 80% of the caregivers were women (California Broker) and nearly 1/3 had regular jobs in addition to their daily caregiving responsibilities. About 65% of the women reported conflicts between their caregiving and their jobs such as being late to work, losing hours or income or giving up vacation time to provide care for an aging relative or friend.

A UNUM study in 1992 said that providing long term care for family members hurt their job productivity- as might be expected- but that an awareness of long term care was fairly low. 40% had never heard of long term care.

Recognize however the tremendous physical and emotional burden they may encounter. They need help if

a. they feel exhausted or resentful

b. are angry at the person they are caring for or other family members

c. feel overwhelmed by the responsibilities

d. experience a change in appetite and lose interest in usual activities

e. they become irritable and sleepy.

7. (WSJ) A survey of 7,600 elderly in 1986 noted that elderly women have a less healthy last year of life as compared to elderly men. It showed that 14% of all who died after 65 were fully functional and 10% were severely restricted. As age progressed, the statistics obviously got worse. 20% between ages of 65 to 74 were fully functional while only 3% were severely restricted. At age 85, only 6% were fully functional while 22% were severely restricted. Of particular note is that women were 40% less likely than men to be fully functional in the last year of life and 70% more likely to be severely restricted.

8. median income for single white female is $8,000: for single black female, $5,000 and for single male, $12,471

9. Social security is two times more likely to be sole income source for females than for males; 80% of females aren't eligible for pensions

10. In 1984, females received an average of $440/mo. from Social Security vs. $521 for males.

11. 75% of all SSI recipients were females living alone (average $182/mo.) U.S. Department of Health and Human Services, 1988

12. 40.2% of all black females are below FPL; 12.5% of all white females vs. 12.2% of all elderly and 13.5% of entire population.

13. 75% of nursing home residents are females; 75% are over age 80; 84% are unmarried and 93% are white.

As may be clear at this point, long term care is far more necessary for the women than the men. Further, their length of stay is longer than men.

Solutions to Care

The possible solutions to care are:

1. Spend available assets

2. Live with a friends or relatives (60% from one poll) But the elderly must consider the following since it may not always be the best decision since:

a. Do you really want to live with your son or daughter. Do they really want you to live with them.

b. Can your family afford to have you live with them

c. How easily can you adapt to your family's lifestyle and they to yours.

d. Will you feel like a visitor in their home.

e. What are the strengths and weaknesses of your relationship with your children. Comfortable. Compromising? Emotionally strained?

f. Can you continue to pursue hobbies you enjoy.

g. Can you keep in touch with your friends.

h. How much time do you expect your family to spend with you.

If you are home alone during the day, will you feel bored, isolated or depressed.

i. Will you have your own room. How much personal space do you need.

j. Can you bring along a favorite chair. Are there stairs to climb.

k. Can you keep your car and driver's license. Are you willing or able to ride a bus. Do you have to depend on your family for transportation needs.

l. Can you help with the cooking and cleaning. Do you want to. Will your family let you.

m. Will you help with your personal care. If you will, can your family accommodate your needs.

n. Can you help with the household expenses.

o. If you can't manage your own personal affairs, who will assume this responsibility.

If there are any reservations, consider a trial period.

Elderly Care

(Parade) 57% of 2503 respondents in a recent poll would rather go into a retirement home than move in with children or other family members. Overall 37% (44% women and 28% men) worry that their children will one day have to take care of them. Nearly 47% said they think they might have to take care of elderly parents with many more women than men (52% vs. 41%) feeling that way. Asked if they would take in elderly parents, 48% of children would do what the parents preferred. Considerably more Blacks and Hispanics than Whites (37% vs. 19%) felt that way.

3. Qualify for Medicaid (MediCal in California)

4. Continuing Care Retirement Community, Group Home and Assisted Living facility

5. Purchase long-term and or home health care insurance

Who Provides the Care

About 15% of Americans are caring for ill relatives- about half for aging parent or parent in laws; 2% for a spouse and 5% for friends. Most were seriously ill or disabled. Many caretakers had children at home and most felt lonely and sad and had trouble sleeping. Caring for a spouse was particularly stressful. But one in four elderly get inadequate care by relatives after being released from a hospital (WSJ).

Women provide most of the care. (See previous section on women and aging)

The following 1990 survey indicates why people purchased a long term health care policy:

1. To avoid dependency on others (75%)

2. To enable care choices (74%)

3. To protect assets from spend down (72%)

4. To guarantee affordability (70%)

5. Because the government will not pay (64%)

6. To avoid Medicaid and welfare (60%)

a. 70% of singles entering a nursing home are impoverished within a year and 50% of all couples are impoverished within a year of either spouse entering a nursing home. 42% have total assets in excess of $100,000. 86% did not want to rely on children.

Long Term Health Care Policy Checklist

There were only about 16 companies selling long term care insurance in 1984, 109 by 1989 and 121 in 1994. Policies are continually changing but, surprisingly, rates have remained relatively constant.

About 400,000 to 500,000 polices a year have been sold since 1987 for a total of about 3.8 million (1996). Twelve companies represent about 80% of ALL individual and group policies sold in 1994. The average age of the buyers was 66.7 years. In California, 4-6% of all persons over age 65 purchased a policy in 1994.

In California, three types of policies may be sold. 1- Nursing home only, 2- home care only (minimal 6 areas must be covered) or 3- comprehensive long term care (must pay for care at home, community based and nursing home care).

Since January 1993, any California policy that provides coverage for home health care (stand alone or comprehensive) must cover 6 mandated services. The are 1- home health care, 2- adult day care, 3- personal care, skilled or unskilled, 4- homemaker services, skilled or unskilled and 5- hospice, skilled or unskilled and respite care.

The following is an older review of the type of company to do business with. But I can make it shorter than reviewing 120 to 140 different companies. There are perhaps 6 companies that have been in the business of underwriting long term around 20 years. They have the expertise that I look for. See #14 below.

1. Does company have an A or A+ AM Best rating?

a. One of Consumer's Reports old articles had their best rated company with only a "C" rating. The company was subsequently taken over by the Georgia Department of Insurance in mid 1990. Health care should never be put at risk. The A and A+ ratings are absolutely essential. Further, consumers would be well advised to use advisers who know what they are talking about. Reporters neither have the licenses nor expertise for this involved analysis.

2. Does policy have guaranteed renewability?

a. Again essential. A policy should not be able to be canceled at the whim of the company. It doesn't mean that the prices will stay the same- just that you cannot be terminated unilaterally.

3. Policy should cover for any level of care without requiring higher level of care first.

a. Most good companies- some are even required by state law- allow custodial care even though one never received skilled or intermediate care.

CAUTION: Review old policies. They may requires skilled care first and are essentially useless.

4. Does policy allow any state licensed facility or just Medicare approved facility.

a. If only Medicare approved, the number of facilities, particularly near the patients current home, may be severely restricted. Do not solely feel that a non Medicare facility is bad.

5. Policy should have a waiver of premium for period when benefits are being received.

a. Most good polices have this

6. Is underwriting done at issue or at claim?

a. A MOST IMPORTANT issue. Underwriting at issue means that the company will review a patient's entire medical history prior to accepting application. This will include, as necessary, an APS (Attending Physicians Statement) from the Doctor. Once the patient is cleared, and barring fraud or non-coverage for a pre-existing condition, they company "should" automatically provide the benefits contracted for without any undue delay.

b. A company reviewing any claim at the time of occurrence is potentially a setup for disaster. With such companies, the applicant merely fills out a simple application designating any prior conditions, medical history, etc. Based on that information, the company may accept the application with NO other review being made. Once a claim is filed however, they then may request the APS and anything else they desire to see if a "fraud" has been committed. Unfortunately, the applicant might have checked off the application incorrectly or honestly forgot to provide information they deem important. The company may therefore declare the policy null and void and offer no coverage at all. Do not do business with this type of company. Have everything researched up front so there are no problems later on. An issuance of a "policy" one or two weeks after submission is an indication that limited, if any, review was done on the individual's past medical history.

Most major companies do not write policies this way and perhaps are even not allowed to do so by state law. So why the issue here? Because someone may already have purchased one of these policies and may never be able to get benefits. So, if your mother, grandmother, etc. says they are covered for nursing home care, you may need to check further.

c. A separate issue to underwriting involves the health of the insured at the time of issue. Some companies have a preferred rate for the healthiest and a substandard rate for others- at premiums of 60% or more. Or preferred rates may be used but other benefits may be substituted- four year coverage instead of lifetime, 100 day elimination versus 20 days.

Here is a further comment. Don't take an individual and submit them to a company that accepts only the highest rated. Once denied, you have raised a red flag to subsequent companies that might have accepted the patient. If in doubt, call the underwriter to discuss. That's what I do and it can save a lot of time and headaches.

7. Will policy cover any patients pre- existing conditions? If covered, is there a time period before coverage? Under California law, a replacement policy may not contain new pre-existing conditions or probationary periods. Most policies do NOT have a waiting period, but back in 8/93, and most unusual for their perceived interest in the elderly, the AARP policy had a 6 month wait for pre-existing conditions (it was actually a PRU policy where AARP got a 5% override).

a. If there was a history of arthritis, they may accept the policy but not provide coverage for this problem. Or perhaps no coverage for two years. Companies vary tremendously in coverage.

8. Does the policy have any exclusions?

9. Can one be admitted without having been in a hospital beforehand?

a. All good companies will NOT require any prior stay in a hospital in order to receive coverage. Some of this was forced by state laws that found prior policies so restrictive as to be useless.

Again, it is rare- perhaps impossible- to find new policies sold with this caveat in any state. But the reason it is mentioned is that perhaps a loved one already owns a policy like this. And on which they will probably collect nothing.

10. Are Alzheimer's, dementia and other senility covered? Is Parkinson's covered?

a. All good companies should cover. Check old policies.

11. Will the policy pay in addition to other coverage?

a. Some policies do not duplicate with Medicare and a few will not duplicate with any other policy. They are attempting to maintain rate integrity and keep premiums to a minimum.

12. Is there a right to review time period?

a. State laws may allow the applicant 30 days to review the policy and decline without reason. All funds should be returned in full.

13. Is home health care available as a separate policy?

a. Some elderly would like to be taken care of at home for as long as possible. A few companies write home health care policies that stand on their own (applicant does not have to buy a long term care policy from them). The amount of coverage is less- since there is usually less care involved- and the cost of the policy is also cheaper.

A real key to the use of home health care is whether there are family or friends in the community that can provide assistance to a home bound person. Remember, Medicare can provide some home health care benefits, but they are all limited primarily to skilled/acute care. And home health care is not full time. Further, once home care is started, it generally means that the patient will ultimately go into a nursing home and the only thing that really forestalls that is the direct care by family and friends. Therefore, absent this support group and level of intervention, it probably does NOT make sense to buy the extra home health care coverage.

14. How long has company been underwriting policies?

a. Another important item and one where the consumer can make some terrible mistakes. Just a few years ago there were hardly any companies underwriting long term care. By 1993, there were about 120- 140 and, quite obviously, few have any long term experience. AMEX, CNA and Traveler's come to mind that have extensive experience, though there are a few more. They do not necessarily have the best prices and you certainly need to read each policy completely, but agents would be well advised to weigh new company offerings against the underwriting experience of at least 15 years. As a personal item, I ONLY use companies that have been in business a long time. The risk is too high, in my opinion, to use new untested companies.

As an example of what can go wrong, one major, nationally known company did not underwrite their own long term health care policies. They contracted with a smaller NEW company that had only recently started long term health care offerings. As is obvious with many new ventures, they needed to be time tested to determine if they would be financially successful. This one wasn't. After three years, they informed the national company they were pulling out of the market, but would maintain any prior policies in force. Undoubtedly, the clients felt very uncomfortable- and rightfully so.

1996 statistics state that the 15 "leading" companies control about 85% of the business and most of those have been around for awhile. Though being in business a long time is not a panacea for success, it does give some credence for continued longevity. Do your homework.

15. Does the policy pay the amount you purchased or only up to actual charges. This is especially important if the individual moves from a high cost area to a low cost area.

16. What is the waiting period for coverage for a pre-existing condition.

a. Preference to as short a time as possible and certainly not longer than six months.

b. But if a patient enters a home PRIOR to the waiting period, benefits will never cover.

17. Does the coverage allow Christian Science Sanitariums and recognize Christian Science Practitioners

Benefit Options:

1. Daily benefits range from $20 to $250 per day. Check local area for costs anticipated. Some new policies are designed to pay "usual and customary"- U&C. These products may pay 100% of the usual and customary charge up to a defined pool of money ($75,000, $100,000, or $300,000). These policies may be worth review if one might move to another locale where prices are much higher than originally anticipated or purchased.

2. Length of benefit period can range from one year to lifetime. 40% stay an average of 2 years. Four years is considered adequate for most of the population since the numbers of staying longer than five years is 10%. That number applies to the general population over 65 years of age. If one is in the 43% of the population who has a nursing home admission after age 65, there is a 21% chance of needing total lifetime care longer than five years. (New England Journal of Medicine, 2/91).

IMPORTANT: Recognize there is a fundamental difference between men and women in a nursing home. Men tend to go in, get better or die. Therefore a shorter period of coverage (2 years) may be considered if the budget is limited. On the other hand, women tend to stay alive in a nursing home and a 4 year or lifetime coverage is more acceptable. If a couple is budgeting money for long term care, separate out the actuarial lifetimes accordingly.

3. Waiting (elimination) period is the time before benefits will commence after entrance to facility. The choices may range from 0, 20 to 100 days. 50% of patients stay for less than 90 days and are usually the result of a discharge under Medicare where the patient simply has to recuperate at some place other than hospital or at home. Cost of the various policies versus the cost of an individual paying for $90 per day of care for 70 days (20 day wait period and 90 day nursing home stay) may be the determining factor on what elimination period to select. ($90/day x 70 days = $6,300. If the 20 day elimination period is $300 a year more than the 100 day elimination period, that equals 20 years before you break even. A nursing home stay before then means it was beneficial.)

4. Home Health Care should be available WITHOUT conditioned upon leaving a nursing home.

5. Inflation Riders to offset increasing costs in future.

a. Most experts feel it is definitely worthwhile for younger policyholders - say under 70- to take an inflation rider since costs are escalating all the time. But note that the cost of living amount may NOT be compounded. If you buy an $80 a day policy with a 5% inflation rider, the payment for health care will rise an even $4.00 each year. Many current policies are using a compounded inflation rate and this would certainly be preferable everything else being equal. There are a few policies that offer the policyholder the option of purchasing extra coverage every three years based on a COLA. Increments are priced at the attained age and not offered to anyone who has had a claim in the prior two year period. It would appear preferable to use the compounded increases for younger clients. However, for older purchasers, it is better to simply buy a larger benefit amount initially and forego the yearly increases.

6. Purchase options allowing additional benefits to be purchased without evidence of insurability.

a. For example, one may be allowed to purchase an inflation rider without additional medical work diagnoses required.

7. Third party acknowledgment is a relatively new "option" that provides that a third party get copies of all invoices. This is because some elderly forget to pay premiums (due to Alzheimer's, senile dementia, etc.) and the policy may have lapsed just when they need it. If the son or daughter gets notices of past due accounts, they can rectify the situation.

8. Non forfeiture benefits: If one has a life insurance policy with some cash value and decides to cancel it, the policyholder can receive shortened benefits- reduced whole life, term, etc. Apparently the powers to be wanted to provide the same features with long term polices. Unfortunately, as with regular insurance, the premiums must be increased to as much as 25% more. Most elderly cannot afford this extra charge.

9. Several states, have enacted a type of policy where the insured can buy a long term policy and also be eligible for Medicare. If the nursing home policy is used up and the individual must go on Medicare, he/she can still retain assets up to the amount purchased. For example, if one buys a $50,000 policy, uses it all up and then goes on Medicare, he/she can still hold onto the $50,000 in assets versus only about $1,700 under normal Medicare rules. In California, it's called the California Partnership. It is more costly, but it does serve a benefit for those wishing to pass assets to beneficiaries. Further, the costs and the complexity are far less than a trust.

Other Issues

Cost for the different levels of coverage from the various companies varies widely. Further, it is difficult to analyze one company's policy to another because of the both the real and perceived differences between them. Nonetheless policyholders are somewhat at the mercy of the company in any case since the company reserves the right to increase premiums as a class if and when it deems necessary to do so. As of 1994, only eight of 128 insurance companies have ever asked for an increase. Of those eight, the average was 14%.

The figures are misleading however since few insurers have been offering policies that long. Amex- probably the longest in the business so far- has never raised rates (to my knowledge), though they have made considerable policy changes from year to year. Other legislation might put specific caps on rate increases or prohibit rate increases past a certain age, etc. as well as standardize commissions and standardize benefits.

California bill 1943, which became effective January 1, 1993, sets a minimum daily benefit for home health care and eliminates the requirement that home health care had to be provided by a licensed home health care agency.

Activities of Daily Living

Most insurers are defining coverage of care through ADL's and they are excellent measures to determine an individual's need for nursing home, home health care or other type services. They include the following currently in use by major insurers as well as others noted at the end that were used (and may be in use) by other insurers. Most of these definitions have been revised to include Mary Kaufmann's material as of 12/96. These include commentary from the policies of UNUM, New York Life, GE/AMEX and the recent offering in California called PERS.

Note the wide ranges in definitions. Some are simple- others far more descriptive. Yet subtle differences may indicate whether or not an ADL has been breached and a care provided. From a 1996 article in Life Insurance Selling, the author noted the restrictions and interpretation in language can make a big difference in whether the ADL's will be met.

As regards functional impairment, there are two issues that needs to be reviewed. First is whether the definitions for the ADL's are open or closed. Closed terminology puts in qualifying terms what open terminology leaves out. But open terminology leaves greater opportunity for interpretation favorable to the policyholder. If there is ambiguity to the contract, the courts hold for the benefit of the policyholder since the insurance company was responsible for writing the contract in the first place. Anyway, consider these two statements from an actual contract.

"Policy A- The ability (without human assistance) to put on or take off garments one usually wears, as well as any medically necessary braces or artificial limbs and to fasten and unfasten

Policy B- The ability to put on and take off all garments, and medically necessary braces or artificial limbs usually worn, and to fasten or unfasten them without the standby assistance of another person. You will be considered able to dress yourself even if the above tasks can be performed only by using modified clothing or adaptive devices such as tape fasteners or zipper pulls.

It would appear to me that the shorter clause might be better since it can provide more potential opportunities for requirements of care. On the other hand, the loose interpretation can cause problems if the insurer does not agree.

The article further commented on the use of terminology of one on one assistance, standby assistance, regular human assistance, supervision or reminder assistance. There is no doubt that one on one assistance is a higher level of support than reminder assistance. Further that standby assistance is being within arm's length of the patient whereas supervision means as far away as across the room or within sight or hearing distance.

As stated, if there are ambiguities, the courts tend to favor the insured. But it does little good if it takes two to five years of a court battle to prove. As the insured or agent, it appears that a direct review of the insurance company's interpretation of this issue should be fully explored. There are tables below that continue to explore this problem.

Regardless, the most common impairments that effect seniors are, in order, bathing, dressing, getting out of bed, continence, toileting and eating. Obviously cognitive impairment is a material issue as well. In 1987, of the 1.35 million over 65 years of age that were in an institution, 780,000 were cognitively impaired (57.6%).

Bathing: This obviously relates to the loss of mobility. A company may review the individual's normal routine since taking a shower requires less movement and ability than getting in and out of a tub to take a bath. 10% of the elderly have problems with this and., as indicated above, is one of the first triggering ADL's. It therefore also used to be one of the first ADL's to be replaced by a company with something less stringent. However, California as well as many other states mandate that this be included.

Unum- the ability to wash yourself either in a tub or shower or by sponge bath, with or without equipment or adaptive devices without stand- by assistance or another person

NYL- your ability to wash yourself in the tub, shower or by sponge bath, with or without the aid of equipment and without continual one on one assistance.

GE/AMEX- your ability to wash yourself on a routine basis in the tub, shower, or by sponge bath.

CNA- washing oneself on a routine basis in the tub or shower or by sponge bath.

PERS- your ability to wash yourself. This includes drawing your own bath water or turning on the shower, then bathing or showering (of by sponge bath) and drying yourself.

Dressing: Ability to put on and take off clothing and medically necessary braces or artificial limbs and to fasten and unfasten. Again, this is impacted by the loss of mobility.

UNUM- the ability to put on and take off all garments, and medically necessary braces or artificial limbs usually worn, and to fasten and unfasten them without the stand by assistance of another person

NYL- you ability to put on and take off all garments and medically necessary braces or artificial limbs usually worn and to fasten or unfasten them with or without the aid of equipment and without continual one on one assistance.

GE/AMEX- your ability to put on and take off all garments and medically necessary braces or artificial limbs usually worn and to fasten and unfasten them.

CNA- putting on and taking off all necessary items of clothing, including medically necessary braces or artificial limbs.

PERS- your ability to put on and take off your clothes, including fastening and unfastening buttons and zippers, and applying or removing special medically necessary devices such as splints and braces.

Transferring: Ability to move in and out of furniture and a bed.

UNUM- the ability to move in and out of a chair or bed with or without equipment such as canes, quad chairs, walkers, crutches or grab bars or other support devices without the stand by assistance of another person.

NYL- your ability to move in and out of a chair or bed with or without the aid of equipment and without continual one on one assistance.

GE/AMEX- your ability to move in and out of a chair or bed

CNA- the ability to move in and out of a bed, chair or wheelchair. (If you are able, with the regular use of equipment, such as a cane, walker, crutches, grab bars or other support devices, to transfer in or out of a bed, chair, wheelchair, without personal assistance or supervision, we will not consider you to be impaired in this activity)

PERS- your ability to move in and out of a bed, chair, wheelchair, with or without equipment or other support devices.

Toileting: Ability to go to the toilet, get on and off the toilet, arranging clothes and cleaning one's self- "maintaining a reasonable amount of personal hygiene". Once assistance for toileting becomes necessary, major care is usually required. This activity cannot be scheduled- assistance is needed "on demand".

UNUM- the ability to get to and from and on and off the toilet, to maintain a reasonable level or personal hygiene and to care for clothing without the stand by assistance of another person

NYL- your ability to get to and from and on and off the toilet, to maintain a reasonable level of person hygiene and to adjust clothing with or without the aid of equipment and without the continual one on one assistance.

GE/AMEX- your ability to get to and from and on and off the toilet, to maintain a reasonable level of person hygiene. This includes getting on and off the toilet and caring for clothing

CNA- getting to and from the toilet, getting on and off the toilet, and maintaining a reasonable level or associated personal hygiene.

PERS- your ability to get to and from the toilet and performing basic personal hygiene and care for clothing.

Ambulating/Walking/Mobility: This indicator of physical impairment should be assessed by a company not only in relation to walking, but the individual's ability to use a quad cane, walker or wheelchair.

UNUM-The ability to walk from one location to another, indoors or outdoors, with or without the use of supportive equipment such as a walker, crutches or artificial limbs without the stand by assistance of another person.

NYL- your ability to walk, with or without the aid of equipment and without continual one on one assistance.

GE/AMEX- your ability to move about both inside and outside your residence.

CNA- the ability to walk. (If you are able, with the regular use of a mechanical device, such as a wheelchair, braces, walker, cane or other walking aid device, to walk without personal assistance or supervision, we will not consider you to be impaired in this activity.)

PERS- not included

Continence: Ability to control bowel and bladder function voluntarily and to maintain a reasonable level of personal hygiene. This control may be treated by the use of medication, diet or exercise. Note the distinction between this an toileting. In the early stages, continence may simply be an inconvenience and not sufficient for long term care.

UNUM- the ability to voluntarily control bowel and bladder function, or, in the event of incontinence, the ability to maintain a reasonable level of pers