Newsletter: August 2008
Newsletter 24: August 2008
Summer is almost over but we still have some good weather left to enjoy. Read the newsletter outside and enjoy the nice weather. . . .
Should You Sign a Nursing Home Contract?
Admitting a loved one to a nursing home can be very stressful. In addition to dealing with a sick family member and managing all the details involved with the move, you must decide whether to sign all the papers the nursing home is giving you. Nursing home admission agreements can be complicated and confusing, so what do you do?
It is important not to rush, but rather to read. Read the agreement carefully because it could contain illegal or misleading provisions. If possible, try not to sign the agreement until after the resident has moved into the facility. Once a resident has moved in, you will have much more leverage. But even if you have to sign the agreement before the resident moves in, you should still request that the nursing home delete any illegal or unfair terms.
Two items commonly found in these agreements that you need to pay close attention to are a requirement that you be liable for the resident’s expenses and a binding arbitration agreement.
Responsible party: A nursing home may try to get you to sign the agreement as the “responsible party.” It is very important that you do not agree to this. Nursing homes are prohibited from requiring third parties to guarantee payment of nursing home bills, but many try to get family members to voluntarily agree to pay the bills.
If possible, the resident should sign the agreement him or herself. If the resident is incapacitated, you may sign the agreement, but be clear you are signing as the resident’s agent. Signing the agreement as a responsible party may obligate you to pay the nursing home if the nursing resident is unable to. Look over the agreement for the term “responsible party,” “guarantor,” “financial agent,” or anything similar. Before signing, cross out any terms that indicate you will be responsible for payment and clearly indicate that you are only agreeing to use the resident’s income and resources to pay.
Arbitration provision: Many nursing home admission agreements contain a provision stating that all disputes regarding the resident’s care will be decided through arbitration. An arbitration provision is not illegal, but by signing it, you are giving up your right to go to court to resolve a dispute with the facility. The nursing home cannot require you to sign an arbitration provision, and you should cross out the arbitration language before signing.
The following are some other provisions to look out for in a nursing home admission agreement.
Private pay requirement: It is illegal for the nursing home to require a Medicare or Medicaid recipient to pay the private rate for a period of time. The nursing home also cannot require a resident to affirm that he or she is not eligible for Medicare or Medicaid.
Eviction procedures: It is illegal for the nursing home to authorize eviction for any reason other than the following: the nursing home cannot meet the resident’s needs, the resident’s heath has improved, the resident’s presence is endangering other residents, the resident has not paid, or the nursing home is ceasing operations.
Waiver of rights: Any provision that waives the nursing home’s liability for lost or stolen personal items is illegal. It is also illegal for the nursing home to waive liability for the resident’s health.
Fancy Names do Not Equal Qualifications for so-called Senior Advisors
“Certified senior advisor” may sound like a trustworthy person to provide investment advice to the elderly, but beware! While the title has an impressive ring to it, it doesn’t take much to earn it. According to an article in the New York Times, many insurance companies are using sales agents with fancy‑sounding credentials, but few actual qualifications, to sell annuities to seniors.
Thousands of financial advisors market themselves as trained to provide advice to seniors, using authoritative titles like “certified senior advisor” or “certified retirement counselor.” Unlike a “certified financial planner,” which requires years of rigorous study, becoming a “certified senior advisor” involves attending a three‑and‑a‑half‑day seminar and then passing an easy multiple choice test. “Certified senior advisors” are not even required to have a high school or college diploma.
Insurance companies often use graduates of these programs to sell insurance contracts to seniors-in particular deferred annuity contracts, which may not be in the best interest of the senior. Unlike an immediate annuity, which begins paying money right away, a deferred annuity does not begin paying for a set number of years. While deferred annuities can be a good way for some wealthy seniors to pass money to their heirs, it is not a good product for seniors living off their savings because they may die before they receive the money. However, insurance sales agents often push deferred annuities because the products pay higher commissions.
According to the New York Times, the following credentials sound impressive, but actually take only a few days to earn:
certified senior adviser
certified retirement counselor
registered financial gerontologist
certified retirement financial adviser
If you are looking for qualified financial advice, look for a “certified financial planner,” “chartered financial consultant, or a “master of science in financial services (MSFS).” These programs actually involve years of study and require a college degree. Other ways to make sure you are getting good advice is to ask for references.
Myths About Healthcare Costs
The “Myths of the High Medical Cost of Old Age and Dying” identifies and dispels seven myths about caring for older people at the end of life.
Myth 1: The growing number of older people has been the primary factor driving the rise in America’s health care costs. Fact: Population aging is not the principal determinant of rising health care costs.
Myth 2: As the population ages, health care costs for older Americans will necessarily overwhelm and bankrupt the nation. Fact: Population aging need not impose a crushing economic burden, especially if we start now to conduct the necessary research and develop policies on health care at the end of life.
Myth 3: Putting limits on health care for the very old at the end of life would save Medicare significant amounts of money. Fact: Limiting acute care for the very old at the end of life would save only a small fraction of the nation’s total health care bill. The proportion of Medicare spending attributable to beneficiaries in the last year of life has remained stable over the past two decades.
Myth 4: Aggressive hospital care for the aged is futile; the money spent is wasted. Fact: Many older people who receive aggressive care survive and do well for an extended period.
Myth 5: It is common for older people to receive heroic, high‑tech treatments at the end of life. Fact: Only a fraction of people over age 65 receive aggressive care at the end of life. The older people are, the less likely they are to receive aggressive care when dying.
Myth 6: Medicare covers everything that older adults need in terms of their health care. Fact: Medicare does not cover several essential components of health care for older Americans. For example, Medicare pays for custodial services only in the setting of acute illness; it does not pay for long‑term care.
Myth 7: If all older patients had living wills or other kinds of advance directives, it would resolve dilemmas of how aggressively to provide care. Fact: Living wills and other forms of advance directives are not a panacea. They often have little impact on or relevance to end‑of‑life decision‑making. Physicians and health care professionals need to be trained in communicating and advising patients and families about their options, potential outcomes, and time‑limited trials, especially in the face of advancing medical technology.
To download the full report or purchase a hard copy visit www.ilcusa.org or email publications@ilcusa.org. The “Myths of the High Medical Cost of Old Age and Dying” is part of the ILC‑USA’s project on Ageism In America with generous support from the Open Society Institute.
Life Insurance Mistakes to Avoid
1. Not enough research: Understand the type of policy (term, permanent, cash value, etc.), what you need if for (short term need, permanent need, business, personal) and the financial solvency of the company issuing the policy (S and P rating, A.M. Best, Dun and Bradstreet, etc.)
2. Do not have the insured, owner and beneficiary be different people. Generally life insurance is income and gift tax-free to the beneficiary (although not always estate tax free depending upon the size of your taxable estate). If they are all different there is a possible gift tax due upon death. To avoid this make sure the owner and insured are the same or the owner and the beneficiary are the same person. You can also use a trust to own life insurance but this is unnecessarily complex unless the policy and/or your estate is large.
3. Failure to name a successor owner or beneficiary. In either case the proceeds may end up in your probate estate which may take more time to administer than if you simply had a successor owner or beneficiary named on the policy.
4. Gift of a policy subject to a loan. If you have taken a loan against the cash value of your life insurance and then transfer the policy, the IRS treats the transfer as a sale and any loan that was forgiven is considered taxable to the extent it exceeds the total of all premiums paid into the policy.
5. Taking policy cash withdrawals (as opposed to loans) within the first 15 years. If you take withdrawals of cash value (as opposed to a loan) during the first 15 years of the policy’s existence than a portion of it may be treated as a taxable withdrawal.
Journal Highlights Need for Special Needs Trusts
An article on the first page of The Wall Street Journal July 19, 2007, “Note to Medicaid Patients: The Doctor Won’t See You” highlights the need for families to leave funds in trust for children and other relatives with special needs. The article describes the plight of some Medicaid beneficiaries who cannot find necessary care because doctors have dropped out of the program due to low reimbursement rates.
Many parents of children with special needs do not provide for them in their estate plans because they see no need. The children are well taken care of under Medicaid, Supplemental Security Income and state programs, often funded through the state’s Departments of Mental Health or Retardation.
However, we cannot be certain of the future. Will these state programs still exist? Will doctors continue to accept Medicaid?
Insurance against such uncertainties can be created by leaving funds in a specially‑drafted trust for a child or grandchild with special needs. While it may be difficult to leave enough funds to pay for all of the needs of the beneficiary, any amount can fill in gaps in publicly‑funded programs or supplement the meager support they provide.
Long Term Care Insurance: What Role?
Without major structural changes, long-term care insurance will never play more than a small role in financing long-term care, according to a new report. The report, from the Center for Retirement Research at Boston College, examined the long-term care insurance industry and found major benefits but also major problems.
According to the report, the benefits of long-term care insurance include a greater choice of care settings and providers than under Medicaid and the potential to reduce Medicaid spending by states. However, despite the benefits, long-term care insurance has not been popular and sales of long-term care policies have not been increasing in recent years.
The report identified several reasons for people’s reluctance to purchase long-term care insurance. The main reason could be that long-term care insurance is expensive–the average premium for a 65-year-old is $2,000 a year. According to the report, policies may be poorly priced. For a mid-range policy, a 65-year-old will receive about 80 cents in benefits for every dollar paid in premiums. Another reason policies aren’t more popular is the confusion over what Medicare covers. Many people incorrectly believe that Medicare will cover a stay in a nursing home.
In order to increase sales, long-term care insurers have tried improving benefits, but this has caused an increase in premiums, according to the report. Carriers may now try to reduce premiums by reducing inflation protection, but this means benefits will cover less nursing home costs. The report concludes that long-term care insurance has a role to play in financing long-term care, but without structural changes and an increase in the pool of buyers, it isn’t likely this insurance will ever have a big role in financing long-term care.
Full article at : http://crr.bc.edu/images/stories/Briefs/ib_7‑13.pdf
And. . . . . . . . . . Long Term Care Insurance Repricing
It’s no secret that long‑term care insurance companies can and often do raise premiums on policyholders. Still, a few companies have been able to truthfully say “we’ve never had a rate increase.”
Now, one of the biggest players in the industry, Genworth Financial, can no longer claim that. For the first time, Genworth has said it will raise premiums for existing policyholders. The company has filed in all 50 states for premium increases of 8 percent to 12 percent on most of the policies it sold before 1997.
According to the Dow Jones Newswires, Genworth’s move has raised fears that the long‑term care insurance industry may return to the dark days when many insurers raised premiums rapidly, and some sold off policies and exited the business altogether.
Pressure on insurers to keep premiums low and level has made the products unrealistically cheap, Cynthia Zalewsky, founder of Saratoga Investment Solutions, told Dow Jones.
“Clients might not think they’re cheap,” Zalewsky said, “but they’re cheap.”
The principal reason for Genworth’s rate rise is that its actuaries overestimated the percentage of policyholders who would let their policies lapse ‑‑ that is, stop paying for coverage, forfeiting all premiums paid to that point.
Genworth’s actuaries were counting on 5.5 percent of all consumers who bought policies before 1997 at some point voluntarily ceasing coverage. In fact, only 1.5 percent have dropped their coverage before claiming benefits.
According to Dow Jones, “financial advisors who know the products well are almost unanimous in predicting that more [insurer rate] increases lie ahead.”
Real Estate and Mortgages
Rates are up (upper 6% range for a 30 year refi no point loan for excellent credit). Given the inflation outlook, the Fed has essentially stopped cutting rates and may even raise them soon.
Inflation in July was the highest in many years but was largely due to oil which recently dropped. The economy seems fairly weak so it is not inconceivable that rates will drop modestly as the increased jobless claims and slower economic growth work their way through the system.
In addition to Elder Law, our firm practices real estate law and originates mortgages. Please call us at (610) 940-0650 with any questions or for rate quotes.
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Robert Slutsky, Esq. has been practicing Elder Law for 15 years. He helps families in Montgomery, Delaware, Philadelphia, Chester and Bucks Counties. Mr. Slutsky has represented local Area Agencies on Aging, long term care facilities and was a member and officer on the CAPS Board of Directors for over 10 years. Home visits are available. You may reach him at (610) 940-0650, robslutsky@comcast.net or the website at www.slutskyelderlaw.com.
DISCLAIMER: The content of this Newsletter is for general information only. It is not intended to be legal, tax, financial, medical or other advice. The reader should obtain legal, tax, medical or other advice from a competent professional to address his or her specific needs. We do not endorse any particular service provider. If a service provider is mentioned in an article it is simply because we may have come across them in our travels and cannot speak to their quality of service or integrity.