About this Episode
Segment 2 of interview
Announcer: And now, back to "Aging Info Radio" for boomers and seniors, aging but not growing old.
Sue: Matt McCann is recognized as a leading long-term health care insurance specialist. And we are talking about that today, long-term care insurance and why you really do need it. Matt, what does Medicaid and, actually, the government, which is part of who runs Medicaid, what do they say about all this, or do they take any responsibility or cover any of it?
Matt: Well, I think the first question is, do you understand the difference between Medicare and Medicaid? Many people don't. I know you do, Sue, but most people really don't understand. And the easy way to understand the difference is the last few letters of each word. We have "care" in Medicare and we have "aid" in Medicaid. Medicare is the health insurance program for those 65 and older. There are certain situations where you can get Medicare under 65, but the majority is going to be 65-plus. Medicaid is the medical welfare program. It was originally intended for regular health care for the poor. It's become, in large part, very cheap nursing home care for what we call the new poor, people that had money and lost it all in a long-term care situation. Now, Medicaid will pay for long-term health care and they will pay for custodial care, which is what most people end up needing, but only, basically, after you exhaust assets, or you're assuming maybe you didn't have any to begin with. It is a welfare program. And I know when I say that, sometimes I offend people, and I do no offence. But the program, it's an entitlement program intended as a safety net for the American poor.
What's happened, as the advances in medical science have occurred, more and more people end up needing care, spend down all their assets because they've failed to plan, and they end up on a program that they never wanted to program, which limits their independence and their control, and everything they worked hard for their entire life is gone. And it doesn't have to be. So, the government back in 1996, President Clinton and, then, the Republican Congress at the time, they actually agreed on some things. They always talk about the differences, you hear that on this radio station a lot, but at that time they agreed on something. And part of the first HIPAA act set minimum standards for long-term care policies and they provided tax incentives to, obviously, encourage people to buy policies. That led us to something that President Bush did and signed in 2005, which was the Deficit Reduction Act. Part of that legislation covered long-term health care. And what that did is extend what we call the Partnership Program from four test states, which was California, Indiana, Connecticut and New York, to the remaining states. And what partnership does is provide dollar-for-dollar asset protection.
Now, obviously, a lot of the listeners are in Illinois. Illinois, while we're too busy putting governors in jail, we haven't yet completed the Partnership Program yet. We've done half of what we're supposed to do. We will get it completed in the next year or so. But when Illinois becomes a partnership state...and Indiana is, Wisconson is, Iowa is, most of the country is. Illinois will get there. If you have a qualified partnership long-term care policy, you're able to legally shelter part of your policy, based on the value of the benefits paid out, and still access Medicaid. So, in the event you spend through all the money in your policy, you won't lose everything because you'll be able to legally shelter part of your estate. That's huge, because, in a more catastrophic long-term care situation, you won't have to worry about it. And it's one of those weird things that the government's actually...it's almost too logical for government.
Sue: Now, let's not go there, Matt. Now, another thing, too, is with Illinois not being a partnership state, kinda tells me a little bit of why. I mean, I'm sure there's some perks to the person that gets to shelter this. How does it affect the state?
Matt: Well, the reason, the benefit for partnership is is it's gonna save the state money because less people will access Medicaid. That is the whole purpose of the Deficit Reduction Act. What the government is saying is, "If you plan, we will stand behind you, we will partner with you. So, if you exhaust all the benefits of your policy, you know you won't lose everything." So, we expect Illinois to grandfather all policies that meet the federal guidelines, based on when the Deficit Reduction Act was passed and signed into law, which was January 2006, it passed in 2005, to become partnership certified. And to be partnership certified has to do with the inflation benefit in the policy. It has to have compound inflation, depending on your age. Most people who buy long-term care insurance are in their 40s and 50s, early 60s. You would want inflation protection as part of your policy, anyhow, and it gives people an extra level of peace of mind knowing that they will not lose everything.
Sue: Now, what about the Affordable Care Act? How has that come into play with long-term care insurance? Have they dealt with that at all?
Matt: No. It has to do with health insurance. Health insurance obviously doesn't cover long-term health care, but the Obama administration has supported the partnership program across the country, and they have maintained the tax incentives put in by Clinton and Bush.
Sue: Just not Illinois yet.
Matt: Well, there's tax incentives in Illinois, sure.
Sue: Oh, there is?
Matt: Oh, yeah. The only thing that's not there is the partnership, but long-term care insurance has dual tax advantages. Number one, proceeds come to you tax-free, so there's not a tax event in receiving benefits from the policy, and premiums can be tax deductible as allowed by law. At the moment, you can deduct premiums if you itemize and have enough medical-related deductions, or you have some sort of self-employment income. Whether you own a business, an LLC, S-Corp, C-Corp, what have you, and you can legally discriminate in long-term care insurance. So, for instance, if I own a business and I wanna just get myself a policy, I can do that. I don't have to offer it to anyone else. Or I can have key employees, you know, my sales manager, my key foreman over here, my secretary, whatever. I can legally do that.
Sue: And it helps with taxes?
Matt: Absolutely, because it's a tax deductible expense.
Sue: Now, back to someone needing long-term care. You hear this...you know, I have a family history of really healthy family, although I've learned that 25% of illness are genetic, and that 75% are lifestyle, but do you hear this in writing policies, that, "I really just don't need a policy?"
Matt: Yeah. Well, family history has very little to do with your risk of needing care. It may have something to do with your risk of having a longer than average long-term care stay. Here's the thing to think about. What's changed from 1970 to today?
Matt: Well, no. You look just like you did in 1970, other than you probably don't have the bandana anymore. Medical science has changed.
Matt: So, think of it, when we were growing up, someone in our age group was considered old. They looked old, they acted old. Today...I know you're really young, you're 32 or something, but today someone in their 50s are young.
Sue: We just keep pushing the envelope. I mean, when you see Mick Jagger on the stage at 60-something, we're still pushing the envelope, the Boomers.
Matt: Yeah, right. And they just announced another North American tour, God bless them. You know, they got the oxygen tanks backstage. I'm sure. But the point is we are living longer. We survive health events more than ever before. You know, if your grandmother died at 62 because of, "fill in the blank," today, most likely, that's a treatable illness. We're all living longer.
Sue: Well, if we are living...we all absolutely are living longer. I mean, I think the group of centenarians turning 100 is the fastest growing segment of the population today.
Sue: Why somebody in their forties? I mean, if they're going to live to be over 100 that's a long time to own a policy. Why?
Matt: First off, 42% of all the people currently receiving long-term health care in the United States are under the age of 65. That is a direct result that it's difficult to die. The advances in medical science make it difficult, so long-term health care does happen at any age. So, secondly, and this is an important point, your ability to get a policy has to do with your health. It's not about money. And by the way, we haven't talked about it, these things are extremely affordable. Extremely affordable. But it's your good health today that gives you the opportunity to plan. Premiums are based on the age and health you are at the time of the application. Premiums are intended to remain level, so when I got my policy at age 38, I'm at the age 38 rate forever, and it was based on my health at age 38 which, you know, was a little bit better.
Sue: The premiums are lower if you're healthier.
Matt: Absolutely. You can't get a policy after the fire starts. That's key.
Sue: I mean, it is very important. And once again, we're talking about long-term care insurance. Matt McCann is your long-term care insurance man. And that's been since 1998, right, Matt?
Matt: Yeah, a long time ago.
Sue: Well, I mean, if you think about 1998, long-term care insurance was not a conversation that people talked about at all.
Matt: No, no. People thought that I was talking about lawn-care, not long-term care.
Sue: Oh, that's funny. We are talking about long-term care insurance right here on Aging Info Radio. Coming up next we're gonna talk about the policies that are sometimes offered by employers and the distinctions about that, all right here with Matt McCann, your long-term care insurance man.