Kevin's Corner

Increasing Costs of LTC

Many people I talk to are very concerned about the cost of long term care and rightfully so. How prepared are Americans to meet these costs and to what extent can they rely on the US Government to help. No question that living longer, improved health and advances in health care are blessings to living in the greatest country in the world, but are we as a society ready for financial requirements to assist our aging population. What will be the impact of the baby boomers reaching retirement age? What is going on?

The first reality is the government is not prepared to help everybody. In fact, as time goes forward they will be forced to limit benefits and increase the difficulty in receiving benefits. The US Census Bureau reports that government departments that administrate programs benefiting seniors, including Social Security, Medicare, Medicaid and Older Americans Act programs, consumed almost half of all federal spending in 2004.

 The Centers for Medicare and Medicaid Services, predicts that within a decade the total health care spending for Americans over 65 will double to $4 trillion a year! By 2015, one in every five dollars spent in the US will go toward medical costs. Spending most likely will be split between Government entitlement programs and consumers/insurers.

So, the Government contribution to this cost will increase from $1 trillion in 2004 to $4 trillion in 2015. This is based on the assumption that benefit programs will remain the same as today.

These numbers are what public policy makers are looking at and they do have to wonder where the money is going to come from. Many policy makers are beginning to believe that the notion that older Americans will be able to finance their own long term care and leave an inheritance to the next generation is seriously in doubt. Which is pushing them to force many Americans to use more of their available assets for their own care before being eligible for public assistance.

An example of this thinking has been included in the recent budget deficit reduction bill passed last February. For the first time in the history of Medicaid eligibility, home equity has now entered into the eligibility calculation. If a Medicaid applicant has home equity of $500,000 or more, the applicant is ineligible for Medicaid. The bill also allows States the option to increase this amount to $750,000. Home values have always been exempt for the calculation, but guess what, things are changing. If history has told us anything that once home values come into play, who knows where this goes from here. The same bill also increased the look back period for gifts from three years to five and makes the penalty for transferring assets more onerous.

Unless you are in complete denial, any retiree has to anticipate that government programs are not going to keep pace with the increasing cost of long term care. Using financial tools to prepare for retirement are going to be essential such as long term care insurance, health savings accounts and yes, reverse mortgages. In fact, if the Government wants you to spend your home equity before your eligible for certain programs, then reverse mortgages will be the perfect solution. Who wants to access their home equity and take on monthly payments. In a reverse mortgage, the repayment of the loan in not due until the last borrower permanently leaves the home, often times after they have passed away.

If you are interested in exploring whether a reverse mortgage is right for you, give us a call. We have the experience and interest to make sure you have the right information and tools to properly plan for the future. If experience, integrity and unparalleled service is what you looking for, then look no further and call me today for your free, no obligation appointment to discuss this important product. These loans are US Government insured so they are backed by the good faith and credit of the US Government. I look forward to hearing from you soon.