ElderLawAnswers Blog

Long-Term Care Insurance Companies Criticized for Denying Claims

An article in the March 27, 2007, issue of The New York Times describes the practice of some insurance companies setting up bureaucratic barriers to the filing of claims for coverage in order to save money.  The article focused on three companies, Conseco, Penn Treaty, and Banker's Life and Casualty, which appear to purposely create roadblocks to coverage claims.  Complaints about Conseco number one for every 383 of its policies, which is a whopping 32 times the rate of complaints received by the largest long-term care insurance provider, Genworth Financial.  Penn Treaty receives complaints at a rate 10 times that of Genworth.

We recently had a client with a related issue, the practice of insurance companies to terminate policies if the premium payment arrives late.  Our client had been hospitalized when the premium was due and her niece had the bill paid after collecting mail from the client's home.  The client received a check back from the insurance company saying that payment had arrived late and that therefore the company could not reinstate the policy.

A review of the policy itself indicated that this form letter misstated its terms.  In fact, the insurance company had discretion to reinstate the policy despite late payment.  I explained this to the person I reached at the company, who was unmoved by my arguments.  So I asked to speak to his supervisor.

She was quite pleasant and said she would look into the matter and get back to me, which she did.  Her investigation revealed that the company had in fact received the client's premium check on the last day of the grace period, which happened to be a holiday, so the check was deposited the following day, which was the reason the policy was terminated.  She reinstated the policy.

The good news in this story is that our client still has long-term care insurance coverage and the company responded reasonably after not too much trouble -- unlike the stories described in the Times article at other companies.  However, the insurance company made a mistake, then sent a misleading letter, and did not respond to the first call for reconsideration.  A frail, elderly policy holder may not have persisted and had the results we achieved.

The morals of this story?  Be persistent.  Get help.  Don't by a policy from Conseco, Penn Treaty or Banker's Life.

Can We Stop Aging? Unlikely!

The eternally young baby boomers are now solidly in middle age, and some will soon be eligible for Social Security.    Among the consequences is the marketing of many elixirs to keep us young, or at least appearing young.  Whether it's vitamin supplements, body and brain exercise, proper nutrition, creams and ointments, or plastic surgery, the market is answering our wish for eternal youth.

But will any of these cures work?  Or are the effects of age a challenge we baby boomers cannot surmount? 

The answer appears to be that we can have some effect on what happens to our bodies and minds as we age, but most is determined by genetics and luck.  We can, however, have a large effect on how we enjoy our later years.

In terms of maintaining our ability to think, the worst scourges are Alzheimer's disease and the effects of poor circulatory systems, whether actual strokes or mini-strokes or TIAs.  There still is no cure for Alzheimer's disease. 

But according Paul D. Nussbaum, Ph.D., an associate professor at the University of Pittsburgh School of Medicine who spoke after me at a recent event, there is evidence that those with brain "reserve" can delay the effects of Alzheimer's disease.  He counsels actively using your brain through games, social activities, travel and even learning a foreign language.  Also, exercise and healthy eating may stave off the effects of a poor circulatory system on the brain.

More recently, Dr. Muriel Gillick, a gerontologist and author of The Denial of Aging: Perpetual Youth, Eternal Life, and Other Dangerous Fantasies spoke at our firm.  Dr. Gillick is a critique of our current system of caring for frail seniors which offers a choice between aggressive hospital care and hospice care, and nothing in between.  But she feels that "intermediate" care that meets the true needs of patients and the likely outcomes of treatment would be both more economical and better for most seniors.

In terms of whether we can stave off the effects of aging, Dr. Gillick also recommends exercise and healthy eating, but does not see these as the fountain of youth.  She strongly recommends that everyone find a purpose to their lives.  This can make one's days meaningful and fulfilling no matter one's frailty.

This is also consistent with another speaker sponsored by our firm who advises retirees in finding a new purpose to their lives.  David D. Corbett, the co-author of Portfolio Life: The New Path to Work, Purpose, and Passion After 50 relates the story of an executive who retired from a high-powered corporate job to playing golf in Hilton Head.  Within a couple of months, he was completely bored. No longer climbing the corporate ladder, he needed to find a new purpose to his life. 

Corbett counsels his clients to find their passion, no matter what it may be.  It might be something they enjoyed as a child but had to give up to earn a living.   Find it and pursue it, he advises.

Coming back to the question of what you should eat to stay healthy, forget the fads.  According to Michael Pollan writing in the January 28th edition of The New York Times Magazine, Americans have been following the advice of nutritionists for the last quarter century and we're fatter than ever.  The problem with nutritional science is that it tries to break down food into its components and figure out how each piece affects our health.  But so far, this has been impossible to do, which is why the advice keeps changing: don't eat saturated fat, don't eat carbohydrates, do eat oat bran, do eat antioxidants.

Pollan's advice?  Eat food, not nutrients.  Don't eat too much meat.  Do eat fruits and vegetables.  It's as simple as that.

So, to stay healthy and alert and live a long life?  Exercise your body and your brain, eat well, and do what you love with other people.  Oh yes, and pick your parents well so that you have the right genes for a long life.

Case Reflects the Need for Communication in Estate Planning, Especially in the Case of Second Marriages

A recent Massachusetts case unfortunately, for the family involved, shows the need for complete transparency in estate planning especially where two families are involved.

In this case, Giles Nicholas (Nick) Dawson got married a second time to Freya.  The each had two children from a prior marriage and then had a son together, Wolfgang.

When Mr. Dawson died, his estate consisted primarily of two pieces of real estate.  They were held in a revocable trust which provided that it would be for Freya's benefit during her life and then at her death would be divided into six shares, two for Wolfgang and one share for each of Nick and Freya's older children.

Unfortunately, this is not what Nick older children -- Jane and Luke -- had expected.  They understood that the family home would be distributed as directed in the revocable trust, but that the other piece of real estate would come directly to them.

So, they sued.  And they lost.  The Court finds that “Nick’s estate plan evolved after he married Freya and they had Wolfgang." 

Unfortunately, Nick never told Jane and Luke.  One can imagine their surprise and disappointment and the rancor resulting from their lawsuit against Freya.

The moral or morals of this story?

First,  beware of second marriages. Jane and Luke undoubtedly wanted everything to stay the same, be it their first family or their father’s first estate plan. Bringing more people into the picture meant huge changes for them on all fronts. It’s unfortunate that those changes culminated in this lawsuit.

Third, communication is vital. While Jane and Luke might have been unhappy, this litigation might have been avoided if Nick had explained his estate plan and his reasoning to them.

New Perspectives on Long-Term Care Financing

Speaking at Margolis & Associates'  First-Thursday breakfast in January, Andrea Cohen, CEO of Houseworks, the Boston area’s largest private home care agency, explained that the cost of care for a frail senior depends on a combination of the care needed and whether the senior lives at home, in assisted living or in a nursing home.

The common perception that home is cheapest, then comes assisted living, and finally nursing homes is not accurate. The following chart based on typical costs of care in the Boston area for a range of care from just a few hours of assistance a day to around-the-clock attention, shows that the home starts out being the most cost-effective place to live, but that ultimately the lowest-cost provider is likely to be a skilled nursing facility.

Costs of Care (Annual)

	Home	Assisted Living	Skilled Nursing Facility
Intermittent Care (16 hrs/wk)	$18,500 plus household expenses	$60,500	$114,000
Daily Care (40 hrs/wk)	$46,000 plus household expenses	$88,000	$114,000
Continuous Care (24hrs x 7days/wk)	$192,000 plus household expenses	$234,500	$114,000

One reason that assisted living becomes more expensive than home care or nursing home care in some instances is that most assisted living facilities provide little personal care as part of the basic fee. Instead, they require that such care be purchased from them or an outside provider at an extra charge. In addition, anyone budgeting the cost of care will need to factor in the cost of maintaining one’s home.

Of course, money is only one factor in choosing where to receive care. Many, if not most, seniors would like to stay home if at all possible. Other factors include the ability to access quality care whether at home or in an assisted living or skilled nursing facility, proximity to family members, the regimentation of many institutions, and even the quality of food they provide.

Click here to link to the HouseWorks web site . . .

Will Inheritances Save the Baby Boomers? Unlikely

In my last blog I talked about the difficulty in planning for retirement given the number of unknowns, primarily future health, inflation and lifespan.  On a personal basis, we each must balance using our time and resources to enjoy life now with working and saving to make sure we have adequate resources when we are no longer working, whether due to retirement or ill health.

As a generation, however, baby boomers are notoriously poor savers.  Many will not have enough funds socked away for a comfortable retirement.  For those who remain healthy, continued work, whether full-time or part-time, may fill the gap.  Another possible way to fill the gap is inheritances from the baby boomers' more frugal parents.

Some economists have predicted a windfall of inheritances coming to baby boomers of as much as $10 trillion (in 1990 dollars).  A more recent report, published by the AARP Public Policy Institute, estimates that to date boomers have received total inheritances of approximately $2.8 trillion (in 2005 dollars).  While more is on its way, the report concludes "that inheritances, despite wishful thinking and optimistic projections, are not likely to bail out the boomers."

One of the reasons that what inheritances there are will do little to help the boomers most in need is that they are skewed towards those who already have money.  About 20 percent of boomers have received inheritances to date with a median value of $64,000, meaning that about 10 percent of boomers have received inheritances larger than this amount and 10 percent smaller than this amount -- not enough to secure their retirements.

Of those boomers who have received inheritances, 5 percent went to those in the lowest 20 percent (quintile) of net worth and almost 40 percent went to those in the highest quintile.  If we look at the dollar amount the inheritances, they are even more skewed towards those who are already comfortable.  Of those inheritances to boomers exceeding $100,000, 1 percent went to the lowest quintile and 64 percent went to the group of boomers in the highest quintile.

As the report states, "It does seem fair to say that the rich got richer in the sense that the wealthiest received the largest inheritances."

While we can debate what this means for public policy questions such as the estate tax, in terms of individual planning, it means that most boomers will have to save for their own retirements.  It's never too late to start.

To Retire or Not to Retire, the Looming Question

One of the most difficult questions for the tens of millions of baby boomers beginning to reach 60 years of age is when and whether to retire.  My uncle is in this camp.  He's 81 and still working full-time teaching psychiatry.  My aunt threw him a big surprise 80th birthday party last year because she never had a chance to throw him a retirement party.

Many won't retire, or at least not completely, because they like what they're doing.  Many won't retire because they can't afford to.  I had lunch with a friend the other day who told me about a friend of his who never saved for retirement and, unfortunately, had a major illness last year that wiped out what little he did have in home equity.  He's now trying to get back on his feet, but it could be another year before he's making ends meet.  He's 60 now with no retirement in sight.

But most people fall in the middle.  They would like to retire sometime, but they're not sure when they can afford to do so.  They don't want to outlive their savings, but they want to enjoy as meaning good years of leisure as possible.  There's living too long and there's working too long.

So many variables are involved and they are so unpredictable, that this is an extremely difficult calculation to make.

• How long will you live?
• Will you be healthy and independent or need care?
• Will you want to continue working part-time after retirement from full-time work?
• What rate of return will you receive on your investments?
• What will your cost of living be?  How will it be affected by inflation?  Will you spend more after you retire because you'll be traveling or maintaining two homes?  Or will you be spending less because you will move to a less expensive part of the country?

If you had definitive answers to all of these questions, you could figure out exactly when to retire.  But no one has such answers.  So its a question of best guess.

For myself and my wife, I recently did a relatively simple spreadsheet to see how much longer we will have to work.  Of course, it depends on the same variables described above.  But I assumed that our lifestyle would remain pretty much the same in retirement, simply increasing by the rate of inflation.

In terms of longevity, if you go by the Social Security Administration's tables, we can expect to live another 30 years.  Of course, that's only an average.  There's an interesting web site called www.RealAge.com which will adjust your age based on your medical history, your lifestyle, and the longevity of family members.  Based on that site, our real age is about seven years younger than our chronological age, giving us another six or so years in terms of longevity.

According to my simple spreadsheet, if we assume an average rate of inflation of 3 percent and an average rate of return of 5 percent, we will need to work another 14 years to make sure our savings will last us 22 years of retirement after that.  Of course, by then, who knows what any of the planning variables will look like?

Try this yourself.  Most investment firms have more sophisticated planning tools than my simple spreadsheet.  You can check some out at www.webcalcs.com, www.fidelity.com and www.vanguard.com.

Long-Term Care Insurance: To Buy or Not to Buy

While the decision whether to purchase long-term care insurance (LTCI) is not a new one, the passage and eventual implementation of the Deficit Reduction Act of 2005 (DRA) makes it more difficult to gain Medicaid coverage and more important than ever to consider LTCI. In fact, my colleague Harley Gordon would argue that for an estate planner not to recommend LTCI could be considered malpractice.

Whether or not Harley is correct or committing hyperbole, it’s a good idea to recommend that clients consider LTCI. The more difficult question is whether to go further and recommend that clients purchase policies.

Without getting into the choices among policies and carriers, which are far beyond my expertise, the challenging of determining who should purchase LTCI survives passage of the DRA. Here are some of the issues to consider.

Affordability

The client must be able to afford the policy now and for the rest of her life. But what does this mean? Must she be able to pay for the policy out of disposable income, or should she accept using savings and investments to pay the premiums?

On this issue, I defer to financial planners, who should be able to provide clients with projections of their future income and expenses, with and without the need for long-term care.

Insurance companies definitely hurt themselves in regard to the long-term affordability of LTCI premiums with their refusal to guarantee premiums, making it impossible to be certain about any projections of future costs.

Extent of Coverage

I’d argue that any policy purchased post-DRA should provide at least five years of coverage. But how large should the daily benefit be? I used to advise clients that the daily benefit, with their other income, should cover the full cost of a nursing home and that it should include an inflation rider given the increasing cost of nursing home care.

My friend, Ed Jette, however has taught me that LTCI may be thought of as "avoid nursing home" insurance. In that case, the policy, with other income, need only cover the cost of assisted living care to permit clients this more benevolent alternative to nursing home care. Such coverage is more affordable to more individuals.

Age

At what age should individuals purchase LTCI. On the one hand, the younger you purchase your policy, the lower your premiums will be. On the other hand, a 50-year-old today is unlikely to need long-term care for at least 30 years, and it’s impossible to know what long-term care options will be available then – or whether the medical profession will have found a cure to Alzheimer’s disease and other chronic ailments of the elderly.

Yet, an argument against delay is the risk of uninsurability due to physical condition increases with age. A fee-only financial planner I know has attempted to obtain the rates at which applications for LTCI are declined. He reports:

"...the figure I received from the Health Insurance Association showed an average 25% decline...unfortunately they did not break it out by decades, i.e. 50-60, 60-70 etc...in fact no one either had these figures or was willing to divulge them..."

I tend to think of this more in terms of functional age than of chronological age. If you are raising children or paying for their education, their support must be your primary concern and you should only consider purchasing LTCI if you have sufficient life and disability insurance, and can still afford to pay additional insurance premiums. But once your children are supporting themselves, or if you have no children, then it makes sense to divert some insurance premium dollars from life insurance to LTCI.

Family History

A final consideration is family history. Have your parents or grandparents suffered from Alzheimer’s or Parkinson’s disease or another chronic illness? Or have they lived into their 90s in perfect health with the faculties fully intact? Depending on your answer, it is more or less imperative that you purchase LTCI.

As you can see, everyone should consider purchasing LTCI, but the actual decision is far from easy.

Father's Day and Finding the Right Balance

Father's Day on Sunday had me thinking about the difficulty of finding the right balance among our many interests and the many demands on our time, whether they be family, work, recreation, community activities, church or synagogue, or simply relaxing with a good book.  In our busy lives and this busy era, there's never enough time to do everything we want or to take the time to do what we do with the type of care we would like. 

So, how should we divide our time among these various demands and desires?

This question may be more difficult and more pertinent for elder law attorneys, most of whom practice on their own or in small firms which are quite dependent on their productivity.  Being self-employed provides great freedom both to decide on one's own correct balance and to lose track of the right balance given the lack of guidelines set by employers or co-workers. 

These choices are compounded by the changing roles of fathers.  A generation or two ago, this was easy.  The father's main role was as breadwinner.  The mother's main role was to take care of the house and children.  This was not satisfactory for everyone (or perhaps for anyone), but the guidelines were clear.  Now they're not.  In many families, both parents share the breadwinning and the homemaking.  How the roles and responsibilities are divvied up must be negotiated in every family.  And it makes it harder than ever to fulfill any function at the level one desires.

These are difficult choices.  There's always more work to do at the office.  Do you stay late to get it done, or leave on time to have dinner with the family?  Does the answer depend on whether you will be able to get the work completed when promised to the client?  Are you taking on too many clients?   But if you take on fewer, will you make sufficient income to support your family and, ultimately, your own retirement?  And what is sufficient, since your standard of living is to some extent determined by your own decisions about how hard to work?  How many weeks of vacation should you take each year?   Should you work a five-day week, a four-day week, or a six-day week?

There's the old saw that on your deathbed you won't remember the late hours you put in at the office, but will regret the times you may have missed with your family.  No doubt, that's true.  But you and your family will also have a much more pleasant and fulfilling life if you can pay your bills and are not stressed by "cashflow" issues.

The bottom line, it would seem, is that each father (and mother) must find his own balance among his own conflicting demands and desires.  And each father must accept the limits of time and energy.  We can't meet all of our professional goals, our goals for community service and involvement, and our goals for fathering our children unless we set those goals in balance with one another.

Happy Father's Day.  Good luck on finding the right balance.

A Guide to Medicare Part D for Disabled Medicare Beneficiaries

The United Cerebral Palsy web site contains an excellent guide to getting prescription drugs for Medicare beneficiaries.  While its aimed at disabled Medicare beneficiaries, who are eligible for Medicare after receiving Social Security Disability Benefits for two years, it is equally useful to seniors who received Medicare after age 65.  Here's the link:  http://www.ucp.org/ucp_generaldoc.cfm/1/9/10020/10020-10020/6655

Wealthy Families First

I've finally done it -- started a blog.  This is my first post, and what a time to start.  The Senate leaders plan to bring up a vote any day on the elimination of the federal estate tax.  People accuse the current Congress of being for sale to the highest bidder.  It's not always true, but appears to be here.

Only those individuals with taxable estates in excess of $2 million and couples with taxable estates over $4 million (with a minimum of planning) pay any federal estate tax.  More than 99 percent of estates pay no tax at all.

So, why shouldn't these wealthy estates pay something in taxes?  There are a lot of specious excuses, but the main reason is that those lucky or talented enough to have such large estates just don't want to pay the tax and are willing to pay for the campaign to repeal the tax.  (See the following article: http://www.elderlawanswers.com/resources/article.asp?id=5374&section=4.)

No one wants to pay taxes.  But we do want the services and security provided by our government -- education, Social Security, Medicare, Medicaid, roads, the military, border protection, national parks, etc. They cost money.  If the revenue does not come from estate taxes, it will have to come from another source, either higher taxes on the income the other 99 percent is working so hard to generate or more borrowing to be paid off by future generations. 

Neither approach is fair public policy.  Equity requires the continuation of the estate tax.  While $2 million seems to me to be a more than fair threshhold, it may make sense to graduate the rate that beginning next year will be a flat 45 percent.

If you agree that we need the estate tax, call your senator today.

Don't worry, future postings on this blog will not be so political.  It's just that the travesty Senator Frist proposes to foist on the American public has got me going today.