Archive for February, 2012

What would persuade Minnesota’s baby boomers to start saving for long-term care in their senior years?

Minnesota isn’t going to wait for the boomer tsunami to hit. The state is trying to think outside of the box to solve the crisis in health care costs that every knows is coming.

Some of the ideas that are being considered include insurance that covers long-term care but doubles as investment savings, tax incentives to save money in specialized savings accounts and a state-sponsored insurance plan. There’s even a proposal that would offer prizes to those who save.

“If we don’t figure this out pretty soon, in 20 years Minnesota won’t have money for schools, highways, even for other social services,” Human Services Commissioner Lucinda Jesson warned as she outlined a two-year campaign called “Own Your Own Future” that soon will start looking for answers.

Even starting to trim rising health costs won’t be enough to counteract the rising pressure on the state Medicaid budget as the number of Minnesotans 85 and older, currently 110,000, doubles by 2035 and triples by 2050, she said.

Jesson proposed that the campaign start with two pilot education projects that could go statewide later this year, perhaps with help from employers. The effort is likely to lead to specific tools and incentives the Legislature may be asked to approve to encourage saving. It may include seeking federal permission to redesign Medicaid — which pays for two-thirds of nursing home residents after they exhaust savings — perhaps offering middle-income Minnesotans sliding-scale coverage.

Among reasons coming up with new ideas to pay for long term care is so critical:

• Baby boomers may be earning more than any previous generation, but they are saving less. That comes at a time when more employers are dropping retiree health plans and stopping pensions in favor of cheaper 401(k) retirement savings plans.

• Changing families — more divorces, more blended families and fewer children — means there will be fewer family members caring for aged parents in the future. Now, about 91 percent of long-term care comes from families and friends, down from 97 percent 20 years ago. In another 20 years, it will drop significantly.

• Long-term care costs to state government are projected to quadruple in the next 25 years, from $1.1 billion to $5 billion. Over the next four years, the total state Medicaid budget is projected to soar 80 percent, from $3.2 billion to $5.6 billion.

• After age 85, most people will need some sort of long-term care — nursing homes for a few, but home health care for many more. Others can use savings to buy other services.

You can read more about this at the Star Tribune’s website here:

This is a guest article by Tobe Gerard who is an expert on the ins and outs of long-term care insurance and has taught many continuing education courses on the subject.

Tobe’s skill is in working with people to help them decide if long-term care insurance is right for them. She focuses the conversation in three distinct areas, which then allows her to suggest a course of action.

People have different reasons for considering long-term care insurance. For some, it’s the recommendation of their financial adviser or attorney. For others, it’s because they have been the caregiver for an aging parent or a terminally ill spouse.

Every person has a different financial profile. For those on a tight budget, a bare-bones policy may be suitable. For others who are affluent, a generous policy with lots of bells and whistles may be appropriate.

In addition, it is important to take health status into consideration. People in good health will have no trouble securing long-term care insurance while those with health problems may find their options to be limited.

• What is long-term care?

Long-term care is the daily care a person requires because of chronic illness or disability. It is an ever-changing array of services aimed at helping people to compensate for limitations in their ability to live independently. It can range from needing assistance with household chores to requiring highly skilled nursing care. It can be delivered in one’s home, in an assisted living facility, in an adult day care center, or in a nursing home.

• What is long-term care insurance?

Long-term care insurance is a form of insurance that transfers the risk from you to the insurance company. As with other forms of insurance, a premium is paid. Many levels of care are funded should you become unable to care for yourself.

• Is long-term care insurance necessary? Why is it so important?

Consider the following facts:

• Currently, the cost of nursing home care in New England can be upwards of $300/day.
• Medicare does not pay for long-term care.
• People are living longer today than at any other time in our history. The fastest growing segment of our population is over age 65.
• Many women, once the primary caregivers to family members, are now in the work force because families depend upon two incomes.
• Seventy-six million baby boomers are aging fast.

• Is long-term care insurance right for everyone?

Not everyone is a good candidate for long-term care insurance. If you have limited assets, Medicaid and community-based programs may be better suited to meet your needs. On the other hand, if you have assets to protect, long-term care insurance is probably the best option for you to pursue. My rule of thumb is that you should be able to comfortably fit this item into your budget. However, if purchasing long-term care insurance is going to impact your lifestyle (e.g., take away your only vacation for the year), this purchase may not be right for you.

Long-term care insurance can keep many families from being financially devastated if confronted by a long-term illness that requires assistance with daily care. Long-term care insurance allows you freedom of choice so that you will not have to rely upon the government for help with long-term care. Long-term care insurance is a sensible and cost-effective way for many people to protect themselves so that they can remain independent and not feel like a burden to their family members. Long-term care insurance is one of the most nurturing gifts that parents can give to each other while also sharing a loving gift with their children.

• At what age should I purchase long-term care insurance?

The majority of people who purchase long-term care insurance are between the ages of 55 and 64, although the premiums are less expensive for younger people in good health status. Oftentimes, people in their 40’s are motivated to purchase long-term care insurance if they have a parent who has had a diagnosis of cognitive impairment.

Read more here.