The Unbearable Cost of Retirement

Unfortunately, many of the elderly population, for one reason or another, do not have family to look after them during their "twilight" years.  This may also be an interesting predicament for many grown children, being to busy to provide the needed care for their aging mother or father; while at the same time, encouraging their parents to find the most affordable care possible.  (Hidden meaning, we don't want you to spend our entire inheritance on your assisted living needs during your last years.)

One of my pharmacist/internet friends recently wrote an excellent review of the cost of assisted retirement care.  The numbers are mind numbing and, quite frankly, require two or three complete readings of the article to understand the depth of the situation.  Please take the time to understand what he is saying and pass it on to anyone you know who may retire some day!

You may follow and connect with Jonathan Shores through LinkedIn at http://www.linkedin.com/in/jrs6254

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“The woods are lovely, dark and deep, But I have promises to keep, And miles to go before I sleep, And miles to go before I sleep.” Robert Frost, 
Stopping by Woods on a Snowy Evening


“You don't get to choose how you're going to die, or when. You can only decide how you're going to live.” Joan Baez

The annual Medicaid tab for long-term nursing care in the United States is nearly one hundred and twenty three billion dollars. Medicaid spends over one half of its total yearly federal budget providing for the unfunded healthcare costs of citizens receiving extended nursing care; primarily in lower cost, state funded, county nursing homes. Because the federal Medicare program does not pay for routine extended care, a figurative hole where the rain gets in; over two thirds of all seniors in need of costly extended healthcare at home or in a facility, will have no reliable way to pay for all of the care needed. Medicare’s baby sister,

Medicaid, eventually ends up holding that bag. What’s the buzz?
Seventy percent of all Americans will need some form of extended nursing care during their lifetime; forty percent of these patients will be under the age of sixty five. This form of care is not just for the elderly; many accidents, illnesses, and disabilities affect younger individuals. The average length of extended care required for this entire population is three years. To put this reality into perspective consider the following insurable lifetime events comparisons for this group of folks:

Filing a claim for an automobile accident: 3.7%
• Filing a claim for homeowners’ damages: 6.5%
• Requiring extended healthcare services: 70%

Because Americans are generally living longer, and because the baby-boomers represent such a bumper crop of individuals; the number of patients who will need extended healthcare services during the next twenty years will be very large indeed. The estimated annual tab for these services, which varies depending upon the setting in which they are provided, runs roughly as follows:

• Assisted Living Facility: $40,000.00 per year
• Home Healthcare: $60,000.00 per year
• Nursing Care Facility: $90,000.00 per year

Remembering that the average length of need for these services is three years; tripling these annual amounts would yield a good estimate of the total per-capita bill that might be expected.

How on earth do folks pay for an average three year stint at a nursing home that costs a whopping two hundred and seventy thousand dollars? Answer: they don’t. Because of lack of finances; three quarters of all extended healthcare services provided in this country each year are provided free-of-charge by untrained friends and family members in a family home setting. The other twenty five percent of patients pay the bill by exhausting personal assets, by utilizing funds from purchased extended healthcare insurance policies, or by some combination of both.

The typical scenario for an uninsured individual who is too ill to be cared for at home by loved ones, and who must be placed in a nursing care facility… is Dickensian. Upon admission to the facility the patient must sign a waiver transferring rights to all personal liquid assets to that facility. When all personal assets are digested down to an amount of about two thousand dollars, the individual becomes eligible for Medicaid in most states. This two thousand dollar threshold is called the spendown trigger. The newly eligible patient is then transferred to the nearest, lower cost, state funded, county nursing home; and Medicaid picks up all bills from that point onward.

Commercially available insurance policies that provide coverage for extended nursing care services are one sensible answer to the risk described above. They typically offer coverage in the form of: x numbers of dollars of benefit per day, for y numbers of months. Premiums are based on the extent, and benefit value of the coverage that is chosen. For example, if the average daily cost of care at a local nursing home was three hundred dollars per day; a policy might be purchased that provided a benefit of three hundred dollars per day for a total period of thirty six months. The pot of money benefit created by this coverage would roughly total three hundred and twenty four thousand dollars.

Although premiums might, on the face of things, seem steep for such forms of protection; that expense must be sensibly weighed against the seventy percent likelihood that these services will be needed, and the certainty of the consequences that the need will wreak upon personal assets. However, patients who would never think of living without automobile insurance and homeowners’ insurance; routinely dismiss the thought of insurance for extended healthcare.

An additional benefit to owning long-term care insurance, that exists in most states, is the state partnership agreement. Under this formal insurance agreement a participating state resets the Medicaid spendown trigger to an amount equal to the extent and benefit value of the insurance coverage that is purchased. In the policy example provided above, the spendown trigger amount would rise from two thousand dollars, up to three hundred and twenty four thousand dollars. In other words, Medicaid coverage would kick in when personal assets were digested down to an amount of three hundred and twenty four thousand dollars; offering a generous measure of protection for the legacy value of personal assets. States benefit from these arrangements by relieving some of the financial pressures placed on their Medicaid programs by unfunded extended care patients.

A map of states that offer partnership programs can be viewed by visiting: http://www.partnershipforlongtermcare.com.

The burden of paying for the cost of extended nursing care comes as an unpleasant surprise to most elderly Americans. Most Medicare recipients mistakenly assume that they are covered by Medicare for nursing home costs. The dilemma is made all the more threatening and prevalent by the fact that it is so generally unrecognized, so shrouded by ignorance of the facts. For this reason, the cost of extended nursing care is a leading cause of personal bankruptcy for persons over the age of sixty five, and places a crippling burden on state Medicaid programs. An emotional burden to provide care is often placed on family and friends.

Pharmacists could play an important role in generally educating their patients, their friends and their loved ones about the problem of paying for extended nursing care. As with most problems, awareness and planning are the keys to solutions. This form of documented pharmacist counseling could also potentially save state Medicaid programs millions of dollars of costs, adding to the deserved reputation that pharmacist-consultants already enjoy for sparing state and federal governments from needless spending of precious healthcare dollars.

Just as it is true that we don’t get to choose how, and when we die; it is often equally true that we don’t get to choose where, or how long we go about doing it. What is certain, however, is that we will die. We can, by the grace of our own good sense and actions, control how we prepare and budget for that eventuality. It is comfortingly fair to know that we can, at very least, command the reins as we travel the miles to go… before we sleep.

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