© Copyright 2004                               Getting the Message: Long-Term Care NOW! by William L. Willard, CLU, President, Market Planning-Plus I think it was Hemingway who said we all owe God a death (doesn't matter who said it first; it's demonstrably true). It's also true that before we check out about half of us (a coin toss) are going to pull a hitch in a nursing home. If people need help with life insurance, annuities and investments, they're even more lost when it comes to the costs and life-altering implications of chronic, long-term illness. So it shouldn't come as much of a surprise that Long-Term Care insurance (LTC, for short) is arguably one of the hottest corners of the financial services industry. LTC can be a tad confusing, but the reasons for buying it are simple enough. The Underwriter's LTC Council says the chance of eventually needing some sort of long-term care is 1 in 2 (that coin toss I alluded to), while the cost of long-term care services--$50,000 to $100,000 a year (depending on where you are)ñis expected to triple by 2020. That's not self-insurance territory for most people. And Medicare, HMO's, major medical and Medigap insurance don't cover these costs; Medicaid only pays if you're poor. LTC ain't cheap. but it beats the alternatives The government never promised us free care in our old age; people who can pay their way should pay for it: Ironically, a lot of people become eligible for Medicaid only after footing the bill for long-term care with all the money they'd saved for retirement--underestimating the costs of long-term care or failing to plan for it, or both. With 401ks and other retirement savings vehicles now mere shadows of their former robust selves, that point may come sooner than expected for some folks. Spending-down to qualify for Medicaid. Legal loopholes inevitably led to asset protection strategies to help people qualify on paper for Medicaid reimbursement. But this can be risky: The Feds crack down on people who impoverish themselves by transferring assets to nonqualified individuals (other than a spouse of disabled children). At the same time, people who have "spent-down" assets may find two things: The very best facilities won't accept Medicaid reimbursement, and the places that do are usually pretty hideous. So the message is: Be careful what you wish for. Opportunities Unlimited Over the next few decades billions of dollars are going to be moved at the discretion of people who will be increasingly aware of the risks they face, yet unsure of their options and looking for help. As Leonard Wiener wrote in U.S. News & World Report: "Long-Term Care insurance can reduce the incentive to manipulate finances and provide peace of mind about getting care. Insurance can also increase a family's leverage to choose the care it wants." Long-term care protection is not confined to nursing homes. It can be provided at home, in community settings or residential care facilities. Policies that reimburse only for home health care cost less than comprehensive plans reimbursing for both nursing home and home health care. Still, the trend is to provide coverage from the lowest level of required care, typically... Custodial care for people who need help with the activities of daily living. Intermediate nursing care for people requiring daily but not full-time nursing supervision. Skilled medical care for those needing 24/7 hands-on services from registered nurses or professional therapists. If you're going to work in the long-term care market, you'll need to know the costs of these services in your area (find out by visiting local nursing homes and check in at the office for the aging or similar agencies; it's an eye-opener in more ways than one). Also get to know people who've had family members self-insure long-term care with their life savings, as well as those who've already done some long-term care planning. Their stories will help you create compelling word pictures for other prospects, and could spin off some referrals. Long-term care planning should be coordinated with other insurance, financial and estate plans. So consider getting prospects' adult children and other advisers into the act. The kids may want to help with the premiums, and you'll want to avoid working at cross-purposes with other advisers who may have their own views of long-term care costs and funding options (including spending down assets to qualify for Medicaid). At the same time, accountants can help assess a prospect's suitability for LTC protection, especially older people who may have trouble assembling the necessary financial information. A Matter of Suitability While nearly everyone will eventually need some form of long-term care, not everyone can buy this insurance. Whether LTC can or should be purchased now, later, or ever depends on the prospect's age, health, income, retirement goals and other financial obligations. Some carriers won't even accept applications from people earning less than $35,000 per year or with fewer than $75,000 in assets. For those who qualify, these are not one-size-fits-all products, and developing suitable coverage is more art than science. At one level, long-term care planning is about helping people understand their options and determining the best possible solutions. But it's seldom that simple. Family relationships, cultural attitudes, lack of foresight, even stubbornness come into play. A person's LTC needs can be complicated by physical condition and circumstances: marital status, availability of family and supportive friends, the design, adequacy and safety of housing, and financial resources. While it's axiomatic that fact-finding is where sales are discovered, with long-term care coverage, fact-finding is often a process of mutual discovery. People are buying LTC well into their 70s and 80s, but prospects in their 40s and early 50s may want to lock in lower premium rates. It can be unpleasant for them, but by getting younger customers to plan ahead now you can save them a lot of grief down the road. Irrespective of the prospect's age, however, it's usually best to run two or three proposals from different carriers, with increasingly comprehensive coverage. Try This: A planner I know asks people if they know anyone whose house burned down. Then he asks if they know anyone who had to go in a nursing home. Then he asks which risk they've protected themselves against? That really hammers the point home. The market for Long-Term Care insurance scarcely existed 10 years ago, but there's no getting around it: LTC is now firmly part of asset protection, retirement security arrangements and estate planning. Without it, people can be stuck with insurmountable expenses that quickly deplete their life savings and severely disappoint their heirs. Bottom Line: Like their homeowners and auto coverage, smart people buy long-term care insurance and hope like hell they never need it. LTC Cold Calling LTC is just the ticket for cold calls. It's new enough and few enough people own it that the right approach and some gumption can pay big dividends. If you have some time on your hands, grab a phone and start punching numbers. Cold calling isn't for everyone, but some people love it. Always a numbers game, many agents and advisors consistently make 150 or more calls a week and only slow down when they have too many open accounts to keep up with. Try This: "Hi, this is __________ with _____________. The reason for my call is to let you know about asset protection planning with long-term care insurance. Is that of interest to you?" That may not be the right approach for you; so do whatever you're comfort-able with and whatever works in your markets and with your prospects. If one idea fails to catch on, try another! You'll be surprised at the number of interesting conversations you can get into, even with stone-cold contacts. You'll even be more pleased with the activity that can result from these conversations. A former insurance agent, Bill Willard is one of the developers of Market Planning-Plus and the author of Guidebook Online. Market Planning-Plus is a one-stop resource for financial services professionals and organizations who want to mount a serious marketing effort. Market Planning Online, our flagship program, will help you develop, write and implement a marketing plan. Market Planning Online will walk you step-by-step through the market planning process--from initial concept to implementation--helping you develop workable strategies that can energize your marketing and boost your productivity, while avoiding costly marketing mistakes. Click here for more information on Market Planning Online. It is a joint effort of Pelican Island Publishing, The Diversified Group and Freedomarketing. Each of us has contributed our knowledge, expertise, and experience in the financial services industry.