"Elder Care” – A Primer

Many of our clients are already encountering issues encompassed by the term “elder care.” Many more will, either for their parents, or ultimately for themselves. Elder care is a very broad catch-all phrase used to describe a number of possible care alternatives for the elderly. It includes informal assistance by a friend or family member, paid attendant care to assist with bathing and dressing, home health care, hospice care, adult day care (therapy and/or care at a center) and institutional care at a residential care facility, skilled nursing facility or board and care facility. In short, there is a dizzying array of possible care alternatives depending on a person’s needs.

Where do you start?

Hospital Discharge Planner. For care following a hospital stay, talk to the hospital’s discharge planner or social services department. They can help identify the type of follow-on care needed and identify available local resources, such as home care agencies or nursing homes.

Geriatric Care Manager. Outside of a hospital setting, you might notice that your aging parents are frail, they don’t appear to be taking care of themselves, they seem withdrawn, or you are concerned about their continued safety either taking medication or ambulating. In these cases, consider consulting with a Geriatric Care Manager (GCM).

What does a GCM do? A GCM can evaluate your parents’ current living situation, their needs, including physical and mental health, family and community resources, and financial resources. Once the care plan has been recommended, it is up to the individual’s family or friends to determine next steps. GCMs can coordinate implementation of the plan, from having grab bars installed in the bathrooms and other safety measures to screening, arranging and monitoring in-home help, to identifying institutional care facilities. Once services have been established, GCMs can monitor and coordinate them, or leave that up to the family. GCMs can be used on a one-time basis, or they can serve in an on-going role, depending on the situation. At the very least, it’s recommended that the GCM be brought in periodically to reevaluate the individual’s needs and revise the care plan if necessary.

Unless your parents suffer from a severe cognitive disability, they should play a significant part in the evaluation and follow-on care. Remember, the GCM works for your parents and if they don’t adopt the process and recommendations, nothing is going to change.

You can start your search at the website for the National Association of Professional Geriatric Care Manager, Inc. www.caremanager.org. You can also ask your physician, a local Visiting Nurse Association, hospital or senior center for a referral.

How do you find the most qualified GCM? Here are some things to look for:

• Length of time as a Geriatric Care Manager
• Degree in a field related to nursing, counseling, mental health, social work, psychology or gerontology
• Previous occupation as an RN, social worker or geriatric nurse practitioner
• Independent from any service providers (no conflict of interest)
• Experience using community based resources
• Available for emergencies
• Member of the National Association of Professional Geriatric Care Managers (GCM)

What does it cost? GCMs bill by the hour for their services and their fees can range from $100 - $200 per hour depending on your parents’ location and their needs. The initial evaluation could take two to three hours and a written care plan a bit more, but the total initial cost is likely to be less than $1,000, a small price for our clients to pay for an objective, competent plan for dealing with such a critical issue.

Care at Home

For someone who wants to remain at home, and if it’s safe for them to do so, there are a wide array of agencies and services that can be utilized to provide care at home, including home health care, personal care, and respite care.

When hiring help at home, you have three alternatives: use a licensed home care agency, use a referral agency or hire someone yourself.

• Licensed Home Health Agency. A fully licensed home care agency screens, employs, trains, and supervises its staff of care givers. The agency takes care of payroll taxes and liability insurance and they’re regulated by the State’s Department of Health Services. They’re also more expensive than hiring someone yourself or hiring through a referral agency.  An attendant for personal care costs approximately $20-25 per hour. You can find a licensed home care agency via a referral from a case manager, physician or hospital discharge planner.

• Referral Agency. A referral agency will help you find someone from a screened pool of people to provide appropriate support. You pay the agency a referral fee and pay the care provider directly, about $10-15 per hour. This puts you in the position of “employer”, responsible for withholding social security taxes. You need to make sure your insurance covers the person you hire in case they get hurt working for you. Check with your homeowner’s insurer to determine whether they cover domestic employees and whether there are any job restrictions. Some insurance providers might preclude your employee from transferring or bathing anyone, eliminating the primary reason you hired them, because it involves lifting, which could lead to injury.

• Hire Someone Yourself. Hiring someone yourself to provide attendant care, let alone health care, could be problematic. You might only pay $10/hr for attendant care, but you could be considered an employer with its corresponding responsibilities and, of course, the same insurance issues apply.

We highly recommend conducting a thorough background check on any individual before hiring them to work in your home. Ask your insurance carrier whether they provide this service; alternatively, we can provide names of firms that can perform these background checks.

Institutional Care

When home care is no longer an alternative, there are various forms of institutional care depending on a person’s needs.

Assisted Living. Assisted living facilities are designed for people without severe medical problems who are able to care for themselves but who also need additional help such as meal services. Medical services aren’t provided, but they may arrange transportation to the doctor. There are many variations in the services that are provided by assisted living facilities including group exercise, group travel and other social activities. There are no state regulations governing the operation of assisted living facilities. Costs can range from $12,000 to more than $50,000 a year, depending on location and amenities offered. Attendant care costs extra.

Board and Care Facility. A board and care facility is a no frills assisted living facility. It is for people who are fairly independent, but getting frail. Medical services are not provided on site, but transportation to doctors is provided. Here, state regulations do standardize the services that are provided. Costs can range from $12,000 to $50,000 per year.

Nursing Home. Nursing homes, or “Skilled Nursing Facilities,” provide 24-hour medical care, including rehabilitation, in addition to custodial care. Nursing homes are designed to care for frail elderly and the disabled who are unable to care for themselves and who have numerous nursing and health care needs. They are available for short-term rehabilitation as well as long-term care for people with chronic conditions. The national average annual cost of a private room in a nursing home is about $74,000 per year. A “semi-private” room costs about $64,000. Costs in the more expensive locales where our clients tend to live can be a good deal more. A private room in San Francisco would probably cost $100,000.

Continuing Care Retirement Communities (CCRCs). Unlike the alternatives above, CCRC’s allow seniors to have an equity stake in the living facility. CCRCs are a “hybrid” version of elder care, encompassing all stages of institutional care in one place. These communities are designed to meet individuals’ needs as they shift from needing no care, to assisted living and, eventually, skilled nursing care. Individuals sign a long-term contract prior to entering a CCRC, often while they are still healthy and active, and pay a deposit. Costs begin in the low six digits and the attractive facilities have waiting lists.

Planning for your eventual elder care needs

It will be very helpful to your family and friends to spell out your health care wishes in advance so no one has to guess. You have three alternatives: The Advance Health Care Directive is the most recent form, but the Living Will and post 1992 Durable Powers of Attorney for Health Care remain valid. As we work with you and your attorney in developing and updating your estate plan, we look for one of these as a crucial component of a well-developed plan. Among the three, we think the Advance Health Directive gives you the most flexibility.

• Advance Health Care Directive. An Advance Health Care Directive is the standard for healthcare decision making in the United States today. You specify whether you want or do not want “heroic” medical intervention to prolong your life instead of leaving the decision to your physician or family members. They are state specific and you can obtain a copy of the California Advance Health Care Directive here: http://www.ag.ca.gov/consumers/general/adv_hc_dir.htm.

• Living Will. A Living Will gives your doctor permission to withhold medical treatment under two very limited scenarios. You must be either terminally ill or be diagnosed as being in a persistent vegetative state. If two doctors diagnose one of these conditions, your doctor may withhold or discontinue extraordinary medical treatment, artificial nutrition or hydration.

• Durable Power of Attorney for Health Care. The Durable Power of Attorney for Health Care appoints another person to be your health care “attorney in fact”. A durable power of attorney for health care executed before 1993 (pre 1993 powers had an automatic 7 year expiration date), however, should be replaced by an advance health care directive.

Durable Power of Attorney for Financial Affairs. This document goes by a variety of names, but it is simply an important way to arrange for someone to handle your financial affairs in the event that you become unable to do so yourself. If you become incapacitated without this document in effect, your relatives will likely need to petition a court for authority over your financial affairs. By executing this document, you avoid a court proceeding and exert control, in advance, over who handles your finances.

When preparing a Durable Power of Attorney for Financial Affairs, you are able to give your agent as much or as little power as you wish. However, most people give their agent broad power to handle all of their finances because the agent is required to act in your best interests. It is important to note that a durable power of attorney automatically ends at death. At that point, your will or a trust arrangement takes over.

Paying for elder care

Medicare. Medicare pays for skilled care as prescribed by a physician on a short-term basis while the patient is either improving (requires care of a licensed nurse, physical therapist, speech therapist) or dying (hospice). When the patient plateaus, the care is no longer covered by Medicare and must be paid either out of pocket or from long-term care insurance.

Long-term care insurance. As we discuss in our book Wealth Management, Chapter 10, long-term care insurance is supposed to pay a certain daily dollar amount (you choose the amount when you purchase the policy) over a specified period of time. In order to qualify for long-term care insurance benefits, you must be unable to perform one or more activities of daily living (eating, bathing, dressing, toileting, and transferring) or suffer from a cognitive impairment, such as Alzheimers, that requires supervision when attempting to perform these activities. As with all forms of insurance, the question with long-term care insurance is whether you will need it, and will it cover the extent of your exposure.

Will you need long term care insurance? Statistically, if you need nursing home care, you won’t need it until at least age 85 and then for less than three years. Similarly, if you need home care, statistically you probably won’t need it before age 85. [SEE SIDEBAR ABOVE] Long-term care insurance companies encourage people to purchase coverage at a relatively young age (40-60) to ensure insurability, lock in lower premiums, and avoid the risk of failing underwriting. If you do purchase long-term care insurance at age 60, statistically, you probably won’t need to use it for at least 25 years.

Underpriced Policies. According to a Henry J. Kaiser Family Foundation study, purchasing long-term care insurance at a younger age might be a good idea, not because insurance is a superior investment over the intervening years between purchase and need, but because voluntary and involuntary lapses could help subsidize those who continue paying the long-term care insurance premiums. A “paradox of early purchase”, where almost everyone keeps their policy and there are few lapses, could eliminate the early purchase benefit. In that case, the financial advantage of early purchase goes away because long-term care insurance companies have to raise premiums for everyone in order to cover their potential liabilities.

In November 2006, CalPERS (CalPERS provides retirement and health benefits to employees of the state of California and their families and is the nation’s third largest purchaser of health benefits after the federal government and General Motors) notified its long-term care insurance customers that they will face an average premium increase of 33.6 percent as of July 2007. According to a press release, CalPERS is “re-focusing its efforts on increasing reserves for the future to ensure there is sufficient funding to pay promised benefits.”

Will Your Insurer Pay? There is no arguing that the long-term care insurance industry’s history of paying benefits is questionable, at best. A recent New York Times cover story detailed numerous examples of insurers balking at paying policyholders’ claims. Indeed, many insurers, finding themselves in financial trouble after having underestimated future claims, have made the claims experience very difficult for many policyholders. Even now, many companies underwriting long-term care insurance are still pricing the policies too low, leading many to expect that those companies will have difficulty paying claims and/or keeping premiums stable down the road.

Despite these problems, changes are occurring in the industry that will likely make it more stable and consumer-friendly going forward. Many of the weaker insurers have been driven out of the industry, and increased government scrutiny has led a number of states to adopt strict requirements that improve the quality of policies being sold. California is at the vanguard, recently establishing the “California Partnership for Long-Term Care.” Any company receiving the “California Partnership” label must have a demonstrated commitment to the long-term care market, must be very financially stable and, perhaps most important, prove that its underwriting assumptions are realistic. While premiums are not guaranteed to remain stable, Partnership companies must go through a much more difficult process to raise rates than non-Partnership companies. Moreover, if any Partnership company is found to have denied a rightful claim, California will levy a $500,000 fine per incident.

So far, only 5 insurers have been admitted to the Partnership program. Their policies are--no surprise-- generally more expensive than many others available on the market.

Self-Insurance. Most of our clients are in the enviable position of being able to “self-insure” their risk. Their ability to comfortably fund expensive lifestyles, in good health, in almost all cases means that they can afford to cover the costs of these potential care needs without the benefit of insurance. If you’d like an independent and thorough analysis of whether to purchase long-term care insurance, or if you need help with planning for your long-term care needs, or a loved one’s, please contact your Kochis Fitz client service team.

Brett Gookin and Andy Hamilton