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Who's Been Paying For What?
The Value of The Reverse Mortgage

"Probably the greatest concern addressed in the hundreds of articles and booklets written during the past few years, regarding Nursing Home Costs and Long term Care, has been the financial concern.  "Who pays for What?" could be a single title of America's elderly studies."

"People who have spent their entire lives building a "Nest Egg for the Golden Years" have probably had little time to devote to the preservation of those assets.  Unless they were guided in this matter by a very astute long term care insurance agent, life insurance agent, financial advisor, accountant, or lawyer, the likelihood of addressing conservation of those assets has probably escaped them."

From The Book: (Excerpted from the eight page chapter)

"One important item—private insurance has paid very little in the past, because insurance as a solution was not asked to relieve these costs until very recently.  As I said in the "Q and A" chapter, the problem of rising Nursing Home costs is a somewhat new phenomenon created by a general national surge in health care costs.  Because a problem must exist, and be identified and defined, and before insurance companies can offer solutions, the historical payment information will reflect only small contributions from insurance payments towards data collected as few as five years in the past.  As private individuals are alerted to the needs for insurance solutions, either through the purchase of individual or group policies, we are seeing this part of the "pie" divide into a larger contribution from private insurance and, hopefully, a smaller portion for direct pay by individuals and families."

'Perhaps the biggest surprise is found where people incorrectly assumed that "Medicare will take care of it"!  As indicated above, this is not true. Early on, Medicare paid only about 2%-5%. That percentage has increased in recent years, to as much as 12-14%.

'Who pays the remaining 88-86% then?  The next "shocker" is that personal payment (the patient or patient's family) paid roughly 23% of the total picture.  But, what about Medicaid?  That issue is repeatedly addressed elsewhere, but at this point we should discuss the combination of the two, since totaled together, personal payment and Medicaid payments comprise around 88% of the payment structure."

"So, either you, or your family, or your Long Term Care Nursing Home policy, fit into the privately paid category.   That means, of the nation's total 2000 nursing home and home health care bill of $137 billion, over 23% was paid by people with the assets (means) to support that payment.  What percentage of those people who used their own money would have preferred to have insurance money pay the bill?  I would suspect a very high percentage.

"If Americans are to continue shouldering this bill, the structure of payment must continue to change with insurance eventually paying the largest portion of the private slice. That's what this book is all about.  Those who have no assets, or have accumulated very little by way of financial acumen in their lifetime, have little to worry about.  They will qualify for Medicaid with relative ease.  However, for those who have something to lose, or will have something to lose, the picture is quite different.  With rights come responsibility, and any sensible person has not only the right, but also the responsibility to protect what they have.   At least now, people can provide for themselves, transfer the risks to an insurance company, and make legal preparations to protect their future, without facing "spenddown" and impoverishment.  And the slice of "Who Pays For What?" will ultimately become a much larger "insurance pay" piece of the equation." 

"The reverse mortgage has literally become a solution for those who might face loss of a family home, as an inheritable item, through either personally paying for nursing home costs, or "borrowing" from Medicaid.  Your lending institution or your state housing program will deal in depth with the particulars of this concept."

"Another factor for your consideration is that most homes appreciate in value. So, while it is true that a line-of-credit mortgage is building up, so usually will the value of the residence, perhaps to a greater extent than the mortgage.  Since the amount of the insurance premium is dependent on such factors as age, length of benefits, amount of benefits, etc., care should be taken to keep the premium as low as possible, yet assure that the coverage will allow for high enough benefits (including an inflation rider) to make the transaction sensible.  The reverse mortgage has its place, and as with most banking and insurance solutions, when properly used, can be a very effective tool in protecting the home as an asset until normal transfer techniques can be put in place."


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