What's In the Durable POA?

We've been talking about the durable Power of Attorney, one of the most important documents that you'll need as a caregiver.

Different laws exist in each state regulating such documents so your parent’s attorney (at least an attorney in the state in which your parent resides) can draft a basic document. From experience I learned that there are some things that must be included:

1. The POA should be DURABLE. This means that it goes into effect when your parent is considered incapacitated, and your role will last until your parent’s death or until he regains competency. "Competency" has a legal definition in each state and criteria for passing control to you. For my mother, her personal physician and her attorney had to verify that she could not take care of her affairs.

2. The POA should include specific financial items. Every POA includes standard language that describes the types of finances for which you will be responsible. In addition, whether you know your parent’s financial holdings or not, be sure that every type of asset or investment is covered.
• Add wording for investments such as stocks, bonds, REITS and mutual funds. Without wording that gives you access, most investment houses and brokerage firms will not permit you to work with your parent’s investment accounts.
• Also insure that you have access to the safe deposit box (especially if your name is not on the box with your parents). Additionally, find the box keys and have them available. There are two keys for each box.

3. The POA should cover Health Care. States are adopting standard language for this. What you want is the right to admit your parent to a hospital (no, it’s not automatic) and to make decisions on all care. In this document can be included a statement of Advance Medical Directives (we'll get to this in a future post) although most health care facilities will also want the Medical Directives in a separate document to attach to your parent’s chart.

Even with specific wording in place, be prepared to obtain a notarized attorney’s statement for some brokerage houses and investment firms. If your parent is receiving Social Security checks and you‘ll handle that money, you will need to apply with the Social Security Administration to be the “designated payee”. But the DURABLE POA will smooth the path with these organizations and clearly state your parent’s intent in the matter.

Some Important Tips

• Once you have the signed Durable POA, keep the original safe and make plenty of clean copies. You will need to file a copy of it with each organization when you are representing your parent.
• Find a Notary Public near to your work or home. You may need to send notarized copies of the POA. The Notary will also be used for other documents as you manage your parent's affairs.
• DO NOT give the original POA to any of the various organizations that will need a copy (such as banks, the hospital, etc.), even if they plead and threaten. Explain your limitations. Send a copy. A copy is acceptable if you are firm about it; suggest a notarized copy.
  
  I had only one original in my possession, signed with great emotion. In only one instance did I agree to hand over the original--to an investment firm who would not budge—but we agreed that I would send it registered mail with a return envelope to be mailed immediately back.

I'll finish next time with some final suggestions for the POA and talking with your parents about this important planning tool.

Until then, blessings on your caregiving day!

LTC Insurance: Tips & Suggestions

Long-term care (LTC) insurance can be a good investment and is worth serious consideration. Over that last few posts, we've been discussing the financial and coverage issues surrounding the decision you make for your parent and for you. Today, let's take a look at some other, general, things to consider. I use "you" here to refer to you personally or your parent.

In addition to details about the payout benefits, check that the LTC policy you are reviewing covers the following:

• How will this policy interact with others, such as Medicare, Medicaid or retirement policies? You may need to use other policies first before this one can be used.
• "Take-it-with-you." If you are purchasing the policy through your employer, can you take the policy with you and is there an increase in premiums for doing so? Premiums do not always increase when you leave your company.
• Out-of-state or out-of-country coverage. If you travel a great deal or spend part of the year in a second residence, this coverage might be of interest.
• Suspension of premiums while receiving benefits. While you are receiving benefits from the policy, you should not be paying premiums. What documentation is needed to inform the insurance company of a change in status?
• Reserved LTC comunity bed during a hospital stay. During an assisted living residence or a nursing home stay, there may be times when you need to be admitted to the hospital for treatment. Make sure that the LTC policy reserves the bed in your residence community or nursing home until your return.
• For insurance premiums and benefits to be tax deductible, the policy needs to be "qualified" under the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

As I've mentioned before, saving for long-term care should have as much priority in your financial planning as does saving for your child's education or for your retirement. Given its importance, here are a few final suggestions for planning.

• Consider an LTC policy when you or your parent is young. Age 40 is not too young, and you will be able to purchase a higher daily benefit for a much lower price. The high-end premiums quoted in the example above are for a policy purchased at age 50, but would be higher at an older age.
• Buy an LTC policy when you or your parent is healthy. A fairly clean medical exam permits you to buy a higher daily benefit at a lower rate. Even if you decide to increase the daily benefit later (and the premium), most companies leave the basic premium where it is and base the premium increase only on the increased part of the daily benefit.
• If you wait too long in terms of age or health, insurance companies will refuse to cover you or the rate will be prohibitive.
• Buy a policy even if it covers only half the cost. You and your family may be able to fund the rest of the cost from savings or investments.
• If you have an LTC policy in place, do not cancel it when you or your parent becomes eligible for Medicare/Medicaid. Each state has varying rules for qualifying for Medicare/Medicaid assistance, so have an eldercare attorney review the policy and then decide.
• Before purchasing a policy, get an opinion on its value from an objective source, one not interested in selling you insurance. An eldercare attorney, a financial planner or a knowledgable friend are all good choices. Some states also have an insurance counseling program from which you can request an objective opinion.

To Read More:
Abromovitz, Les. Long-Term Care Insurance Made Simple. Practice Management Information Corporation, November 1999.

Lipson, Ben. JK Lasser’s Choosing the Right Long-Term Care Insurance, Wiley, 2002.

Rowley, Stephen F. The Consumer’s Guide to Long-Term Care Insurance. 1st Books Library, 2004.

For easy purchase, go to the Amazon.com Parentcare 101 Bookstore.

Blessings on your caregiving day!

The LTC Policy by the Numbers

Buying long-term care insurance is not the only way to pay for the care and assistance you and others might need as you age. Another way is to have a savings and/or investment plan in which you put so much money away a month until you have saved enough money to cover several years of care.

Only about 8% of all elderly reside in a nursing home, so you may choose to play the odds and not plan for nursing home care. It's a gamble, but you may be willing to accept the risk if money is tight. But recent statistics show that from 60-75% of the US population will require extra care in the family home or will live in some type of assisted living community. Three out of four people. Those are odds I'm not willing to play.

Saving or planning for long-term care is as important as saving for college, for retirement, or for the big vacation. You use the same priniciples. You have a timeline; you can estimate how much you may need (see the post on Costs of Care); you can estimate how much you'll need to put away each month and how much interest the funds need to earn to meet the total cost. Long-term care insurance can augment or take the place of the savings plan.

So the question is: is an LTC policy really cost-effective? This is something that you will need to judge for your own and for your parent’s situation. Let's look at an example.

As we learned last time, LTC insurance can be used for both in-home care and nursing home care. But nursing home care is the larger burden, so we'll start with that. I'm talking to you or this is you, talking to your parent.

Let’s assume that you’ve purchased the insurance at age 50 and when you're 70, you develop a condition that requires nursing home care. You’ve been paying premiums for 20 years. You can expect to be in the nursing home 3 years (a number from the statistics experts).

Cost of insurance premiums
• High end, high coverage options = $250/mo X 12 mo/yr X 20 yrs = $60,000. Benefit = $120/day
Your Benefit from the policy
• 365 days X 3 yrs = 1095 days X $120/day = $131,400
Nursing home cost
• Average $176/day X 365 days/yr. = $64,240/yr X 3yrs = $192,720

You’ve paid $60,000 in premiums, but the benefit you will receive is $131,400. You’ve certainly gotten your money back in this scenario. The benefit does not cover all the cost of the nursing home, but without the policy, depending on your assets, you could be responsible for most of the $192,720.

You can do the same calculation for in-home care. Remember, the LTC insurance benefit for in-home care may be only a fraction of the $131,400 we calculated above.

Since costs vary widely, it pays to check out nursing home and assisted living costs in your (or your parent’s) area and shop around for insurance to find the best plan for you.

What about Medicare/Medicaid, you ask. You will need to factor the government insurance in, but here are the facts. What will Medicare/Medicaid pay for?
• For a retirement community which may provide meals and some transportation: Nothing.
• For help with activities of daily living (ADL), such as bathing, dressing, eating, medication: Nothing, except for some medication expenses. No professional training is needed to help with these activities, so these are not eligible under the government insurance plans.
• For medical care provided in the home: A large portion of the cost for a limited amount of time.
• For skilled nursing care: A large portion of the cost for a limited amount of time. Professional nursing training and skill are needed for the care.

Consider the LTC policy benefit as a pool of money on which you can draw if you need it. And statistics show that you will need money for long-term care. Consider LTC insurance as a savings plan much like your retirement plan.

Take some time to consider the financial options. Long-term care insurance may be just the thing to give you long-term peace of mind.

Blessings on your caregiving day!

Long Term Care (LTC) Insurance

We've been talking about finances and in my last post, I shared some cost estimates for providing care. It's a hefty price tag no matter how you look at it--you and your parent will pay this in money, emotional stress and/or personal effort, no doubt in all three. I'd like to share some options for the money side. One of the most important financial aids to consider is Long Term Care Insurance.

In the 1980's, the company for which I was working offered LTC policies to me as an employee, to my spouse and to my parents or in-laws at a reasonable group rate. I found out that any policy would remain in force at the same premiums if I left the company. I immediately signed up and arranged for a policy for my father-in-law. Three years ago, as Dad's health declined, the family made plans to care for him at home and later in an assisted living facility. Three years ago, that 25-year-old policy kicked in a chunk of change to help pay for Dad's expenses and supplemented his income to allow for him to live in comfort with good care. It was one of the best investment decisions my husband and I ever made.

Care Tip: Talk to your parent about purchasing a policy, certainly, but consider a policy for yourself, especially if you're over 50. The earlier you purchase, the lower the premiums will be and the lower the overall cost.

Let's talk about the basics of LTC coverage. I'm using "you" to mean you and/or your parent; I'm assuming you're considering your own policy.

What Might an LTC Policy Cover?
An LTC insurance policy is designed to cover a variety of care options that you may need if you are chronically ill or have become mentally incapacitated and need continuous care over an extended period of time. A basic policy will pay:
• A daily sum to cover the cost of a nursing home stay.
• A daily sum to cover the costs of supportive services provided in your home, such as 24-hour nursing care, a health aide, meal service, or housecleaning.
• A daily sum to cover the expenses of living in an assisted living community.

Activities of Daily Living (ADL)
Most LTC policies judge a person’s physical competence in terms of how many Activities of Daily Living the person can perform on his own. These activities include such things as bathing, dressing, preparing and eating a meal, and taking medication. Each policy will state what it considers to be “full function”. If a person cannot perform 3 or 4 of the ADLs described (depending on the policy), then the person may begin to claim benefits from the policy. Usually a doctor’s statement is needed to verify eligibility.

Make sure that the policy clearly states when and under what conditions benefits are triggered. Make sure that you understand how the policy is defining each ADL and share that information with your doctor who will be writing the report to send to the insurance company.

Some Benefits of an LTC Policy
When looking for a policy, pay attention to the following:
• The daily benefit for the nursing home. Most insurance companies will give you a choice of the benefit you want from as low as $60.00/day to $200.00/day. Each increased amount also increases the premium cost of the insurance. To choose a benefit level, visit or call several nursing homes in the local area to determine the average price. Even choosing the lowest benefit translates into money you or your parent will not have to pay from current income sources.
• The daily benefit for in-home care and what is covered. The in-home care is usually stated as a percentage of the nursing home benefit. Again check some local sources such as the Volunteer Nursing Association to estimate local costs for such services.
• The assisted living benefit. Some policies include a benefit if the person lives in an assisted-living facility as a result of a decrease in the number of ADLs the person can perform.
• The criteria for invoking the policy. In how many of the ADLs must the person be deficient and what documentation is necessary to gain benefits?
• When do benefits begin? Many policies specify that benefit payments begin 90 days after the patient has met the criteria (qualified) for benefits. Until that time, you are still responsible for paying the premiums.
• Increasing benefit provision. What provision is made to increase the daily benefit (from $60/day to $90/day, for instance)? Most policies allow you to increase with a medical affidavit and an increase in the premium, but some companies only allow changes to the policy once per year during an “open enrollment” period.
• Cost-of-Living increase. Costs are sure to rise and some policies provide an automatic adjustment of the daily benefit based on the current cost-of-living indexes. Some companies charge an extra premium for this adjustment.
• The lifetime limits for the policy. The higher the limit, the better, but higher limits mean higher premiums also.

So, the best LTC policy can provide benefits for home care, assisted living communities and nursing home care. In my next post, I'll share some other things that you need to consider when looking for a policy and a way to decide how cost-effective a policy might be for you and your family.

Until then, blessings on your caregiving day!

Estimating What Your Parent Can Afford

In my last post, I shared with you some average costs of eldercare, but the most important figure you need to know is what your parent and your family can afford on a monthly basis for caregiving. No matter whether your parent will remain in his home or move, the calculation is an easy one:

For home care, remember that home, food and clothing expenses must be paid in addition to the new expenses of caregiving.

(Parent’s Current Income) - (Parent's Current Expenses) = Funds Available for Care

In other words, the difference between your parent's income and his current expenses is what you have available for care. If you and other members of the family are willing to pitch in, that can be added to the "Income" side. If your parent can economize household or vehicle expenses, then that can be subtracted from the "Expense" side. Be as accurate as you can when making the calculations; this will help when you begin to research available services.

The "Income" side of the financial picture is probably stable at this stage of your parent's life. However, you have room to maneuver with the "Expenses".

Moving to a long-term care (LTC) community, for example, replaces many of the expenses your parent already has. To determine what's available for a new living situation, add up:

• Your parent's current income
• House payments or rent
• Utility expenses (electricity, gas, propane, sewer, water)
• Telephone
• Food
• Transportation (car insurance, gas)
• Property Taxes
• Cable fees
• Home Insurance
• Home maintenance (gas for the lawn mower or snow blower, light bulbs, carpet cleaning, for example)

Whatever your parent pays for these basics and all her income will now be shifted toward payment for a retirement or LTC community or for living with you. If there are any LTC insurance benefits available or financial help from the family, this allows for more options.

I was speaking with one caregiver at the Caregivers Conference last week who said that her mother resisted moving into a community because she was sure that it would cost her less to stay in her home. When her daughter did the math, she showed her mother that, in fact, moving to the community they'd chosen would cost exactly the same or a little less. And her mother would no longer have to do laundry, cook every meal, or clean. She could join in activities and would have time to explore some hobbies and visit friends. Her mother made plans to move that day.

Take the time to do the math. Keep the figures handy when you start deciding on care and housing options. Open up conversations with your parent about finances and try to work as a partner with your parent to find financial solutions that work for him and for the family. You'll be glad you did.

Blessings on your caregiving today!

How Much Will Your Parent's Care Cost?

Who pays for your parent's care? The short answer--your parent does and you do. Sometimes, insurance or the Government does.

So, one of the most important types of information you need to gather as a caregiver is financial--you need to know something of your parent's finances and your own. Let's start today with some basic cost figures so you can begin to estimate.

There are several ways that the financial aspects of your situation may play out.
Your Parent May Stay in His Own Home
This means that any care expenses are added to the day-to-day home maintenance, transportation, food and clothing costs your parent currently has.

In 2006, the average cost for a home-health aide was $20 per hour.

In the 2008 PBS television special, "Caring for Your Parents", one family reported that they spent $200,000 per year on 24-hr, comprehensive home care.

If your parent remains in her home, you, the caregiver, will also spend money from your own pocket to support her.

A recent study published by the National Alliance for Caregivers states that the average amount that caregivers who live nearby spend on home care for their parents is $8,496 per year. This includes food, transportation, and medical care and supplies.

When the caregiver lives at a distance (over an hour away), the costs will average close to $14,064 per year. As a long-distance caregiver, you must consider that your household may have to support an extra expense of up to $1172 per month in expenses to help care for your parent in her own home.

Your Parent May Move in With You
This means that you are adding another member of the family to your own expenses. Since your parent no longer needs his own home, monies previously spent on his house and its upkeep can now be dedicated to pay for his care. You will need to work out with your parent how the finances in the new, blended family will be handled. The care expenses are similar to those stated above, but you might be offering your own time and effort to offset some of the cost.

Your Parent Might Move to an LTC Community
Expenses for a long-term care facility, whether an assisted living facility or skilled nursing home, can run from $3,000 to $7,000 per month, depending on the quality of care, the level of care that your parent needs, and the region of the country in which you live. Costs for comparable care in Delaware, for example, are $1500 more than in North Carolina (based on personal research, December 2007). If your elder needs to move into an LTC facility, that’s $36,000 to $84,000 per year.

In 2005, the cost for a semi-private room in a nursing home was $176 per day. Annually, this adds up to $64,240. Fortunately, some of this cost will be covered by Medicare or Medicaid if your parent is eligible. Note that the average stay in a skilled nursing home is 2.4 years.

Whatever your situation, there will be money involved. In the next few posts, I'll look at how the financial end of care might be solved.