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Long Term Care Insurance
White Papers

by Ronald J. Iverson

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"It Only Happens To…
The Other Person…"  Right?  Hmmm…
A registry of American facts compiled by
Ronald J. Iverson, September, 2003

My friend:
It Only Happens to… "The Other Person"…    Right?    Hmmmm…

Maybe…   Maybe not…   But let's take a look at the real numbers…

1)  "The National Institutes of Health estimate costs of cancer…in the year 2002…at $15.5 billion for indirect costs of lost productivity due to illness."  The National Cancer Institute estimates that nearly 8.9 million Americans with a history of cancer were alive in January, 1999.  The five year relative survival rate for all cancers combined is 62%.  Source:  "Cancer Facts and Figures 2003," American Cancer Society

2)  "Death rates from cancer are declining…"  Source:  USA Today, Sept. 3, 2003

3) "Anyone can get cancer at any age; however, about 77% of all cancers are diagnosed in people of age 55 and older."  Source:  Cancer Reference Information, 2003, American Cancer Society, Inc.

Comment:  Americans are surviving cancer and death rates are declining, but the indirect costs for survivors (other than medical) are in the billions.  The facts also indicate that at age 45 or so, "the other person" should be aware that cancer, its survival, and its care costs, are serious possibilities.

4)  "About 700,000 Americans each year suffer a new or recurrent stroke.  Stroke kills nearly 168,000 people a year."  Source:  "Stroke Facts 2003:  All Americans,"  American Stroke Association, via CDC/NCHS

5) "Stroke is a leading cause of serious, long-term disability in the United States. In 1999 more than 1,100,000 American adults reported difficulty with functional limitations, activities of daily living, etc. resulting from stroke.  The length of time to recover from a stroke depends on its severity.  50 to 70 percent of stroke survivors regain functional independence, but 15 to 30 percent are permanently disabled.  20 percent require institutional care at three months after onset."  Source:  "Heart Disease and Stroke Statistics—2003 Update, American Heart Association 

Comment:  Again, Americans are surviving stroke, in fact, over 500,000 people per year.  But 15 to 30 percent of surviving stroke victims are permanently disabled, and 20 percent require institutional care within three months.    "The other person" needs to know that it is no secret that stroke victims can linger for months, even years, with rehabilitative and home care needs.

6)  The number of prevalent (existing living cases) of Coronary Heart Disease is 12,900,000, of which over 7,600,000 are myocardial infarctions (heart attacks.)  This year an estimated 650,000 Americans will have a new coronary attack and about 450,000 will have a recurrent attack.  About two-thirds of heart attack patients don't make a complete recovery, but 88 percent of those under age 65 are able to return to work.
Source:  "Heart Disease and Stroke Statistics—2003 Update," American Heart Association

7)  The Indirect costs of Lost productivity/Morbidity for heart disease, stroke, and hypertensive disease amount to $32.4 billion.  In addition, the expenditures for Nursing Home Care were $36 billion, and for Home Health Care were $10.8 billion.  These three figures represent nearly $80 billion of non-medical costs associated with heart problems.  "Heart Disease and Stroke Statistics—2003 Update," American Heart Association

Comment:  Notice that about two-thirds of heart attack patients don't make a complete recovery, but just as importantly, 12 percent of those under age 65 are apparently not able to return to work.  $80 billion of nursing home, home health care and lost productivity costs are significant to "the other person."

8)  "The medical costs of Vehicle crashes alone (in 2000) totaled nearly $33 billion, while lost job productivity carried the highest price tag, at $61 billion."  "The number of injured dropped from 3.03 million in 2001 to 2.92 million in 2002…  Highway crashes cost society $230.6 billion a year, about $820 per person."  Source:  USDOT National Highway Traffic Safety Administration reports (July 17, 2003), for 2002.

Comment:  This information would indicate that "the other person" is involved about 3 million times a year in traffic accident injuries.  Not only that, but lost job productivity is nearly twice that of the actual medical expenses.  This would reflect a need for care for those who are impervious to the other relative information regarding diseases.

9)  Diabetes is becoming more common in the United States.  Improper diet and exercise seem to be the leading contributors to this condition.  The National Diabetes fact sheet states:  "Prevalence of diabetes—Total: 17 million people—6.2% of the population—have diabetes.  Diagnosed: 11.1 million people.  Undiagnosed: 5.9 million people.  The cost of diabetes in the United States—Total: (direct and indirect): $132 billion.   Direct medical costs: $92 billion.  Indirect costs: $40 billion."  Source:  U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, 2002

Comment:  Again, the indirect costs of $40 billion are related to care and lost income sources.  The problem of the 17 million diabetes cases is associated with the complications of the disease; such as heart disease, stroke, blindness, kidney disease, nervous system disease, and amputations, which become "care" items, in addition to medical items, for "the other person."

10)  "An estimated 4.5 million Americans have Alzheimer's disease...  One in 10 persons over 65 and nearly half of those over 85 have Alzheimer's...  A small percentage of people as young as their 30's and 40's get the disease...  U.S. society spends at least $100 billion a year on Alzheimer's disease....  Neither Medicare nor most private health insurance covers the long-term care most patients need...  Alzheimer's disease is costing American business $61 billion a year; $36.5 billion is the cost to business of caregiving (lost productivity from absenteeism of employees who care for family members with Alzheimer's); the rest is the business share of the costs of health and long-term care...  More than 7 of 10 people with Alzheimer's disease live at home.  Almost 75% of the home care is provided by family and friends--the remainder is "paid" care costing an average of $12,500 per year.  Families pay almost all of that out-of-pocket.." Source:  "Statistics about Alzheimer's Disease"  Alzheimer's Association

Comment:  What more is there to say?  Hmmm…  "The Other Person."  Right.

11)  50% of Bankruptcies in the US are related to a medical reason and 79.1% of those people had Medical Insurance!  Norton Bankruptcy Law Advisor, 2000

Comment:  Why did this happen?  Because Medical insurance seldom covers the indirect expense associated with 1) the need for Home Care, 2) Assisted Living, and if need be, 3) Nursing Home Care and Alzheimer's, or "memory care" units.  When you add up the number of "other people" listed above, add a rather old, but standard statistic developed by the U.S. Accounting Office in 1995—the fact that 43% of people under age 65 have a need for Long Term Care utilization at some stage of their life.  "Scary" isn't it?  Especially if you have something to protect, and in case you become "The Other Person."


An Abstract of the New Medicare Act--

By Ronald J. Iverson, December, 2003

Medicare is a huge issue in America—not just for those who currently utilize Medicare, or intend to in the near or distant future, but for every worker and taxpayer.  The program, developed as an entitlement program nearly four decades ago, has worked—for both the recipient and the taxpayer.  In a phrase, Medicare insures our older citizens that they can receive necessary health care at a time in their lives when medical costs are increasing at unprecedented rates, and when most elderly people do not have the resources to cope with those costs.

However, over the years, Medicare has become the second largest social insurance contract between the federal government and the American people—the first being Social Security.  As a result of "turn of the century" runaway medical costs, which are becoming increasingly significant, both taxpayers and recipients are in a precarious position.  Higher Part B premiums are eating away at any "COLA" increases Social Security recipients receive.  In addition, the general rise in the cost of hospital care, and the increasing number of recipients receiving Medicare has also strained the Part A (hospital benefits) portion of the program.

The Part A trust fund, established at the outset of Medicare—a "pay ahead" proposition—has been under continuous assault for the last ten years, and is in peril of running out of money.   This will result in a "pay as you go" circumstance, which then falls entirely on the backs of the American taxpayer—since the Part A benefit of the entitlement program of Medicare is totally supported by payroll taxes.  Hopefully, these and other similar fiscal issues would have been addressed in the 2003 Medicare Modernization Act, but I see no evidence that they were.  Unfortunately, we shall have to wait and see.  But, for the moment, let's take a brief look at the "accomplishments" of the 2003 Medicare Modernization Act.

What started out as a "Medicare Prescription Drug" bill became everything but that , as the bill passed by the Senate in July of 2003, grew to an eleven-hundred-page document by the time it was passed in the House of Representatives in November, approved with much rancor by the Senate in November, and signed by the President in December.  There is a great deal of reservation by many in the American public about the legislation, and the law will likely see some modification during the ensuing decade.  The problem, as many see it, is that the law had little to do with the basic problems of Medicare, and a lot to do with outside influences, to the extent that Medicare reform was not really achieved.

We were told at the outset, that the original version of the prescription drug legislation would cost somewhere around $400 billion over the next ten years.  Forget that.  With the final version, It will be more.  Much more. There are so many additional financial "incentives," and an embarrassing absence of any cost containment efforts, that a $400 billion cost will not even be close to reality.  In short, the gigantic piece of legislation led proponents and opponents to view the legislation as being divided into two camps—winners and losers.  However, there is another camp—those who gained very little.  Let's identify some of each.

The apparent current "winners" of the law would include:

Medicare HMO's (now referred to as Medicare Advantage)—As the Medicare prescription bill proceeded from July to November, it became a full blown Medicare revision bill, with HMO's, (the "private sector") gaining in several ways, including $12 billion in subsidies to compete with traditional Medicare, as well as incentives to develop "regional" operations.

Drug Companies and the drug lobby achieved nearly everything they requested in the bill.  The new law prohibits the government (Medicare and Medicaid) from forcing price controls or price reductions in prescription drug prices.  In other words, Medicare, Medicaid, etc, cannot collectively approach drug companies for price reductions in their products, no matter what inflationary factors are involved.  This would be acceptable if recent drug costs were not increasing at a 13% inflationary rate, or half a dozen times more than Social Security COLA increases.  In addition, the bill continues the prohibition of "importation," or "reimportation" of drugs from other countries, such as Canada and Mexico—a practice which has enabled millions of Americans to save as much as 50% on prescription drug items.  Some in the Administration immediately began to reassess that stance, and future revision in prescription drug availability and pricing, as envisioned in the new law, will be challenged.

Rural hospitals and doctors gained equitable Medicare payments after being underpaid by Medicare forever.  The point is that a piece of medical equipment or the services of physicians are no cheaper in rural areas than they are in urban areas.  The new law will allow for an increase in Medicare payments to health care providers in rural areas.

Medicare beneficiaries whose prescription drug costs are over $5,000 per year .  The mathematics for the drug benefits, which will be made available in 2006, are definitely in the favor of those who have large prescription needs. This is a positive factor, given the fact that many elderly currently spend more than $400 per month on prescription drugs.   According to the current formula, Medicare beneficiaries will be paid 95% of drug costs after reaching a plateau of $5,100 in a year.

The apparent current "losers" of the law would include:

Medicaid recipients and state governments, for a variety of reasons.  First the states cannot collectively bargain (through Medicaid or themselves) for lower prescription drug prices.  That, then, filters down to Medicaid recipients, since they are subject to the limitations of what states can afford when it comes to Medicaid.  Recent state budgets in nearly every state in America have had to wrestle with demand and inflation problems in the Medicaid area.  "Bare bones" Medicaid support has become the norm, since states are strapped for tax money needed to provide all the services, which the public has come to expect.  In addition, more than six million elderly persons on Medicaid will lose that drug coverage because they will now be shifted to the new program.  Low income seniors will, however, get some help with premiums, deductibles and coinsurance portions of the program, and in 2004 and 2005, they are able to purchase a drug discount card with a built-in $600 free drug provision.

Millions of retirees who currently have stayed on their previous employer's group health insurance program, are now vulnerable to the employer eliminating them from the plan due to the heavy "adverse selection" components of elderly health care costs.  The law provided, however, a $28 billion incentive for employers to keep their elderly retirees on their plans.  This factor will have to wait and play itself out, because some companies may not see the value of using this incentive in light of the fact that about 33% of them had said that they would begin to drop retirees if the Medicare Prescription bill became law.

Older, Poorer and More frail beneficiaries of Medicare will see their traditional Part B costs rise, as the new Medicare Advantage plans try to attract the newer, younger Medicare enrollees into their plans.  That leaves traditional Medicare with a more expensive demographic group.  An example of this has already occurred in 2004, when the COLA adjustments of 2.1% balanced against the 13.5% raise in Medicare Part B premiums, caused the increase in a $745 Social Security check to net out only $11.00 more than in 2003.  This situation will worsen, even without the new law, but the "private sector" Medicare Advantage of 2006 will create even further imbalances.

Those who gained very little in the new law:

 The bill does not provide a great deal of relief for most Medicare beneficiaries.  The real prescription drug portion of the bill (as currently written) does not take effect until 2006.  In the meantime, Medicare recipients are able to purchase a Medicare drug discount card with a built in 15-25% discount.  Many Medicare Supplement purchasers already have such cards through their Med Supp companies, with discounts often times larger than the Medicare card allows.  The biggest problem for most Medicare recipients occurs when the actual plan activates in 2006, and that's where they gained very little.  Most Medicare recipients do not have an annual drug bill of more than $5,100.  (At least they won't until an uncontrolled inflationary trend aided by the "protectionism" measures of this law get costs to that point.)  Let's discuss how the plan works.

The reason that the act does little to help most people, is found in the expense of the "benefit."  First of all, there will be an "approximate" $35 per month charge for the feature.  That adds up to $420 annually .  Then there is a $250 deductible.  That adds up to $670.  Then, the benefit will pay 75% of the next (after the deductible) $2,000 of allowable covered prescription drugs, In other words, $1,500.  So now the drug benefit purchaser has added another $500 which, when added to the premium and deductible adds up to $1,170.  At this point, the benefit has paid $1,500 and the expense has been $1,170.  Not too bad.  About a 55-45 ratio—benefit over expense.   But—and this is the big lament—next, there is a $2,850 vacuum, or "black hole," or coverage gap, where nothing is paid under the plan.  So at this point, the enrollee has now used $4,020 of his, or her, own money for the "features" of the new Medicare Drug bill.  Into this "less than $5,100 per year" category, is where most recipients fall—discounting the fact that any amount of inflation has been protected.  $4,020 in expense against a $5,100 "benefit,"—now the ratio becomes a 20-80 proposition—with the enrollee paying the 80%. Double this experience for married couples, and it is clear, that many people look with disfavor on this portion of a bill, which should have been designed to help most Medicare beneficiaries.  In addition, it would appear that the recipient who has over $400 in monthly drug charges would be satisfied with this formula, but in reality, they must remind themselves that they paid nearly $350 per month of the drug bill themselves.  After the $5,100 plateau, purchasers gain a 95% benefit to a 5% expense ratio, this is good and thankful news for people with needs at this level—but as stated before—that is not an accurate scenario for most Medicare recipients.

Time will tell, and so, undoubtedly, will Congress.  A bill that contains 1100 pages obviously deals with much more than we have discussed, and alterations to some of the law will come about.  Which ones are addressed first, and which ones are modified the most, will definitely play out over the next decade.  In the meantime, the Medicare prescription drug bill had become a political football, and a "catch all" for American politics, by the time of its enactment in December of 2003.  The problem is that a program, which is so valuable to so many in the American public, and to those which it serves, has seen little in this legislation, to correct and overcome the real needs, or genuine reform, of the existing Medicare program.


With today's policies--
you don't have to go to a nursing home!

By Ronald J. Iverson, December, 2003

"I'm never going to a nursing home!"  This common statement is often made by people in discussions of the retirement years, and of how to keep them "Golden."  Well, guess what, while you may have been talking about this probable circumstance, America's Long Term Care insurance companies have been doing something about it.

The LTC insurance industry has matured over the last ten years, and is finally offering the American public what it wants--benefits for staying at home and receiving long term care.   This was not an easy battle.  Companies had guarded their policies with language known as "gatekeepers" in order to keep from paying claims, except for those who definitely needed nursing home admittance.  That has changed.

The idea is simple.  If a person needs help with activities of daily living, or for cognitive reasons, what difference does it make where the care is received?  In defense of the companies, a complete actuarial body of knowledge did not exist previous to the great increases in need for long term care--in any fashion.  Demographics, care facilities, types of care received, and many other reasons were question marks, and had an effect on rates and the ability to construct policies which would keep a company solvent with this relatively new product.

So, the majority of today's comprehensive Long Term Care policies allow benefits to be paid in a variety of settings.  How then, do we identify the differences in where to receive care?  Let's make a blanket statement, then take the time to break down the variety of policies so that as an educated consumer, you can have first-hand knowledge of which policies will fit your needs.

The "blanket statement" is simply to look for a policy which is regarded as a "pool of money" product, or a comprehensive LTCI policy—either one will do—and may be purchased in combination.  "Pool of money" means that you have selected a long term care policy, which will pay benefits for home care/home health care/community care, and for assisted living, as well as nursing home care.  The Long Term Care Insurance industry found out early that people wanted to receive benefits in a pretty simple order.  1) Stay at home for care for as long as possible.  2) Utilize the amenities of an assisted living facility, as a second choice.  3) Then, if need be, when these choices have been exhausted, look to the nursing home as a final alternative, when, perhaps, 24 hour care, or cognitive care, has become necessary.  The term "simple as one, two, three" is the order of preference.

Since terminology and definitions can "get away from" normally astute retired people and create confusion, let's take a look at the wide variety of products in descending order, or, in other words, from most to least desirable.

1)  As described above, the most significant and complete coverage is the "Comprehensive" Long Term Care policy, which offers the client the "pool of money" concept.  This is easily the most beneficial product in terms of accessibility of benefits for the policyholder.  True , it also the most expensive, but if you've assets to protect, and want some freedom in where you will be allowed to reside and receive benefits, premiums become secondary.

2)  Simple "nursing home" policies are available, which will pay for all levels of care in a skilled nursing facility, but in that facility only.  If a client has need for around-the-clock care, and would need such in either a skilled, intermediate, or custodial fashion, this policy will pay, but remember, only in what is called a "licensed, skilled care facility." Because the client would forego benefits at home, or in an assisted living facility, the premium should be less for comparative benefit periods (number of years, amount of daily coverage, and deductible periods.)

3)  "Facility Care Only" policies are also available, which combine the features of receiving benefits in a Skilled Nursing Facility, or in an Assisted Living (or similarly named and licensed) facility .  Since Assisted Living facilities are defined by about 75 different names, depending on the laws of the state in which you live, you should enquire with your state department of insurance to make sure of "facility" definitions.

4)  "Short Term Care" policies are also available, and run for periods of less than a year.  These can be obtained for nursing facilities alone, but some companies are now beginning to add the "at-home" and "community care" features to short term policies.  The short term policy can be obtained in 80 day, 90 day, 180 day, or 360 day increments, and has a very valuable place in the market for the client who does not have a great amount of assets to protect, or, in addition, probably does not have the resources to pay a larger premium.  The reason this product plays an important role in America's retired scene is that no matter what people have, they would like to protect it.  Given that even a six month stay in a nursing home, or at home, can wipe out a $25,000 savings account, the product has a use.  After all, $20,000 in the bank means as much to that person as $200,000 in assets means to the person with the larger amount.

5)  Finally, stand alone "Home Care/Home Health Care ("stay at home")/ Community Care" policies are available which will provide for coverage in the "home health/home health care/ community care" arena and possibly for assisted living.

In referring to our opening quote, "I'm never going to a nursing home," we now have completed the cycle of available products in the LTCI market.  The client should remember however, that the quote is probably what 100% of people in nursing homes said at one time or another.  Nobody ever intended to make payments to a nursing home, and unfortunately, the time may come when the individual doesn't get the luxury of making the choice, and others have to make the choice, as unpleasant as it may be.

In conclusion, the American public now has many choices available to insure against the problems of asset preservation, and the freedom of where to receive care of a lengthy nature.  But the most important item to remember is—that truly—in this day and age of tremendously increased longevity, you don't have to go to a nursing home to receive quality care, because a Comprehensive LTCI policy is available.  Prepare for tomorrow's problems today.  Insure against the possibilities of any need for long term care—and where you would like to receive the benefits of a Long Term Care Insurance policy.


Some Myths About
Long Term Care Insurance

By Ronald J. Iverson, December, 2003

1) Long Term Care insurance is just for nursing home care.
2)  Long Term Care insurance is just for old people.
3)  Long Term Care insurance is just too expensive.

The answers to the myths are No, No, and No.  Let's see why

1)  Myth No. 1--  Not anymore! The beauty of today's policy is that the insurance will cover you at home , or in an assisted living facility, and yes, if need be, in a nursing home.  So, you can receive care at home for the same help you would need in a nursing home.

2)  Myth No. 2--  Simply not true.  Suppose you are "T-boned" at an intersection, can't work, and are laid up for a year or so at home recovering from a broken back.  Comprehensive LTC coverage will PAY for someone to come into your home and help you with the normal daily activities of living until you no longer need them.

Same thing for a stroke, or heart attack, or Alzheimer's, among thousands of other reasons.  Would you believe—according to a study by the U.S. Accounting Office done in 1995, 43% of the people needing LTC are under the age of 65!

3)  Myth No. 3--  Wrong!  Working age people have a great chance to protect the assets they are building, at a very affordable rate!

Waiting to purchase at an older age is what creates high premiums, as  well as other problems; such as inflation in the cost of the care, dealing with older attained ages, and pre-existing conditions which could lead to a turn down of policy issue.

Let me show you an inexpensive way…
…to solve the problem and make it go away!

Dear Working American:

I realize that you are in the building years of your life and haven't had a great deal of time to think about financing the distant future.  But… These are critical times, and I would like to alert you about something that could cost you more than stock market crash, or severe drought, both of which we seem to have experienced.

Before you think, "They're just trying to sell me some more insurance, and I'm not interested," humor me a moment.

Allow me to ask one simple question.  Why are you working?

    There are two simple answers…

    • To pay the bills.
    • To prepare for a retirement… a comfortable retirement.

That pretty much covers it.  Work today… build for tomorrow.

Build what?  Assets… Your Assets.    …And hope that nothing comes along that interferes with your work, your plans, and your building…

You feel great, so I'll bet it hasn't occurred to you that your health AND your wealth go hand in hand…but…what happens if you outlive your good health? Or your money! So far…so good.

Know of any celebrities who could do anything at age 30, but were struck down before age 40?  OK, how about friends or family members?

I don't mean to alarm you, but did you know that 50% of bankruptcies in the US are related to a medical reason, and nearly 80% of those people had medical insurance!  Why did this happen?  Because medical insurance seldom covers the indirect expenses associated with:  1) Home Health Care,  2) Assisted Living, and if need be,  3) Nursing Home Care.

Let's see how we can solve this problem inexpensively, and explode some myths about Long Term Care Insurance!


Personal Asset

As Recommended By
Ronald J. Iverson, author
"Guarding Your Gold II"

A complete inventory of all your assets is of great importance when evaluating asset preservation, inheritance considerations, and Long Term Care Insurance.  If your assets are even of a "modest" nature, you are a likely candidate for LTC Insurance.  Please take care to complete the inventory by including and combining all of your assets, whether you are tabulating them as a couple or as an individual.  Remember, we're talking about a lot of money here--yours--and ways to keep it yours.





1)  Principal Residence



2)  Personal belongings, household furnishings



3)  Jewelry, (wedding rings, personal, etc.)



4)  Fine arts, antiques, collections, etc.



5)  Autos, RV's, boats, etc.



6)  Secondary Residences



7)  Other real estate or land



8)  Marketable securities--stocks



9)  Marketable bonds



10)  Notes or money owed to you



11)  Expected Inheritances



12)  Checking Accounts



13)  Saving Accounts



14)  Certificates of Deposit



15)  Cash Value Life Insurance



16)  Annuities, IRA's, Retirement Accounts



17)  Final Expense Life Insurance, burial plots



18)  Trusts or trust funds in your name



19)  Agricultural land



20)  Business interests/ownership



21)  Agricultural or business equipment



22)  Agricultural or business inventory



23)  Other









1)  If you have an accountant or professional tax advisor: 



They will need certain information to see that you obtain proper federal deductions. There may also be state income tax deductions or credits available.  Notify them now, and remind them again, before tax time.


2) If you do not have an accountant or professional tax advisor:

You should carefully evaluate your itemizations, and investigate the value of deductibility of Tax-Qualified Long Term Care Insurance premiums.  This may have federal and/or state advantages for you.  But, you must remember this at tax time.

Notify your accountant with this copy, and a copy of the "Declarations Page" of the policy, and place a copy of this notice with your Long Term Care policy.

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