Help for Long Term Care Givers

(2/23/15)- A recent report from the American Association for Long Term Care Insurance, a trade group, concluded that rates for long-term care rose an average of 9% in 2014. The association compares top-selling policies offered by 10 major insurers, using policies sold in Tennessee, a “representative” state.

According to the report, insurers paid out $7.8 billion in claims in 2014, which was an increase of nearly 5% from the prior year.

A healthy 55-year old male’s average premium for $164,000 in insurance was $2,075 per year, whereas a female of the same age would pay an average premium of $2,411, since women have longer life expectancies than do men.

A married couple, both aged 60, would now pay a premium of $3030 per year, combined.

The numbers assume a “three year” policy that uses a daily benefit of $150 to compute a maximum payout, and includes inflation protection of 3% compound annual increase in benefits.

(10/26/10) John Hancock Financial Services announced that it would ask state regulators for an average 40% increase for about 850,000 of it 1.1. million long term care policy holders. The insurer, a unit of Manulife Financial Corp also suspended sales of new long-term-care policies to employer-benefit plans.

Recently, American International Group Inc., MetLife Inc., and Lincoln National Corp have applied for or received approval in one or more states for rate increases ranging from 10% to 40%.

Insurers claim the raises are needed because policyholders are living longer lives, generating higher claims and canceling fewer policies than they had projected. Insurance companies are suffering because they are earning less on their cash held as reserves because of the low interest rate environment that exists today. Long-term care facilities are increasing their rates at a much higher percentage level than the rise in the rate in inflation.

(11/14/09)- "Caregiver contracts' which are also known as "personal service" or "personal care" contracts help reward the significant amount of time, effort and expense that family members spend in caring for an elderly relative. They can also help reduce the size of that relative's estate, while at the same time help to compensate the caregiver for his or her efforts.

According to a study funded by AARP and the National Alliance for Caregiving, these caregivers provide more than 20 hours of care a week. The same study showed that the average length of time spent providing the care was 4.3 years.

The contract should specifically state what duties the caregiver is expected to perform and the rate of compensation should be the rate that home-care givers get in that area. You can determine that rate by contacting a local home-care agency or geriatric-care manager in that area.

(1/23/09)- With the recession taking its toll, and with more people being laid off from their jobs there has been a substantial increase in formal "caregiver contracts" being drawn up between family members and an elderly relative. The contract sets forth the terms of a formal employment agreement, so that instead of providing care "for free" for a beloved relative, the caregiver can receive compensation for the services rendered.

Financial transfers made under a "caregiver contract" are not considered gifts, so they are not subject to the "five-year look-back" provision for Medicaid examination. Strict adherence to the law is necessary for this exception, so it would be wise to consult an attorney who will draw up the agreement.

Payments under these agreements are compensation in return for a service. The agreement must be arms length, written contract that is completed in advance and the compensation must be deemed "reasonable" for the area where the care is given.

The contract should specifically state what the services to be rendered include, and the hourly rate should be in line with the rate charged by either a "professional caregiver", and may include geriatric-care management services.

It may be an up-front lump amount depending on the senior's life expectancy, or in regular installments, such as a paycheck. The applicable social security, Medicare payments, and federal and local withholding taxes should also be deducted from the payments received by the caregiver.

(5/1/07)- A federal law that was passed last year is intended to help alleviate the costly expense of long-term care, whether it be in a nursing home, assisted living facility of for care at home. The law is intended to moderate the cost that arises when an individual's long-term care policy's coverage is used up.

Under the law, if you buy a policy and then use up the benefits, you may have additional coverage so that not all of your lifetime savings will have to be spent down before Medicaid picks up any coverage. The program is called the Partnership for Long-Term Care, a public-private long-term care insurance program now being used in five states-California, Connecticut, Idaho, Indiana and New York.

All states have leeway to start the program, and there are presently 25 additional states working on starting such a program.

Under the program you must buy a long-term care policy that has been approved by your state. If those insurance benefits run out, you can apply for Medicaid help to cover any additional costs up to the amount of the insurance originally purchased.

Here's an example of how the program works. Let's say you bought a $100,000 long-term care policy. If you use up the total amount of coverage, which in our example is $100,000, you could keep $100,000 in personal assets and still qualify for Medicaid coverage up to $100,000.

To find out if your state plans to offer the partnership program, go to the American Health Care Association's Web site at or call the organization at 1-202-842 4444.

(9/29/02)- Governor Gray Davis (Dem.) signed a bill in California that established a paid family leave for a worker to care for a new child or an ailing relative. Similar legislation is now pending in 27 states. Under the California law a worker will be paid up to 6 weeks for the leave he/she must take to care for a family member.

The bill requires that the worker use up to two weeks vacation time for family emergencies first. and also caps the benefit at $728 a week. The benefit is paid solely out of employee contributions. This type of bill is one of the highest priorities of the A.F.L.-C.I.O., but was opposed by business interests, which felt that it would drive many businesses out of the state, especially in these difficult economic times.

The Congressional Budget Office has projected that the nursing home population will increase by over 50% between 1990 and 2010 and double by 2030. The cost for a " private pay" average annual stay in a nursing home has gone up from about $37,000 in 1993 to above $62,000 in 2001.

Medicaid finances the care, at least in part, of over 60% of nursing home residents. In the last 10 years Medicare and Medicaid outlays for long term care of older people has increased by 225% for nursing homes and by over 600% for home care. These are staggering percentage increase numbers, and it makes us realize help is needed to deal with this burden. There is much talk these days on how to save Medicare from becoming insolvent.

There are two areas that stand out like "sore thumbs" in regards to effectuating meaningful savings and at the same time to deal with this problem. We would like to discuss these two areas in this article, and at the same time point out to you where Congress and the President may be doing something to bring about some tax relief to help alleviate the problem.

In addition to the emotional stress of caring for an elderly relative at home there is a tremendous financial cost involved as well. Just ask anybody who is dealing with such a situation and they can be quite specific about the costs. Yes it is true that Medicare or Medicaid, etc may pay for some of the costs, but they do not fully bear all the costs.

As expensive as it may be to raise a child, it may be just as costly for the child to care for the parent in the parent's later years. In spite of this fact, there is no personal income tax exemption to help mitigate the costs borne for caring for an elderly relative.

Rep.Bill Archer (Rep-Tex) chairman of the House Ways and Means Committee announced he would support legislation to give an exemption to taxpayers in such a situation. This would add another inducement for people receiving the tax break to help justify their caring for the relative especially when cost might be an important consideration. The then President Bill Clinton indicated at that time that he supports such a provision being added to the tax code. We also believe that such a provision is sorely needed. Under the Republican plan the exemption would be for $2,750 this year, and change annually adjusted for inflation.

A few states such as New York do allow a tax deduction for the cost of long term care insurance policies. See our article on Preserving Assets and Long Term Care. The logic behind allowing the deduction is the fact that the government actually saves a lot of money when the insurance carrier rather than the government has to pay the cost associated with residing in a nursing home.

The income lost to the government by allowing a deduction may cost income on the short run, but ultimately it saves a lot of money that may be spent on the long haul. Former President Clinton proposed a $1,000 tax credit for long term care, but it would be phased out for married couples with adjusted gross incomes above $110,000 and $75,000 for singles.

Under the proposals in the Republican plan there would be no income limits whatsoever. We support the idea of the deduction and will accept whatever income limits are or aren't accepted by Congress so long as the legislation gets passed.



By Allan Rubin
updated February 23, 2015

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