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The ABCs of Limited Pay Long Term Care. Statistical Review 0.

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Presentation on theme: "The ABCs of Limited Pay Long Term Care. Statistical Review 0."— Presentation transcript:

1 The ABCs of Limited Pay Long Term Care

2 Statistical Review 0

3 The Growing Need for LTC Source: 65+ in the United States Special study by Frank Hobbs and Bonnie Damon in 8 was age in 5 will be age 65+

4 The Growing Need for LTC Source: 65+ in the United States Special study by Frank Hobbs and Bonnie Damon Of people age 85 and over, one out of four live in a nursing home.

5 Facts at a Glance 4 In 2003, the national average daily rate for a private room in a nursing facility was $_______________. 4 In 2003, the national average hourly rate for a Home Health Aide was $__________. Source: MetLife Mature Market Institute 2003 Survey

6 Facts at a Glance 4 In Minneapolis, the average cost of an assisted living facility is $__________ a month. 4 In St. Paul, the average cost is _______ than the average cost in Minneapolis. Source: MetLife Mature Market Institute 2003 Survey

7 % of Americas Population Over 65 Source: Will America Grow Up Before It Grows Old?, Pete Peterson 24.0% 19.9% 12.5% 4.1% 6.9% Demographic Trends

8 Population Age 85 and Older In millions Source: U.S. Bureau of Census, 1995

9 Major Causes of Disability Leading to LTC Benefits Source:U NUM s Total Claim Block as of 10/23/98 All Others 34% Dementia 12% Neoplasm 12% Trauma not Hip 10% Neuro not CVA 7% CVA 10% Cardiovascular 8% Hip Fx 6%

10 What is Meant by a Loss? 4 Activities of Daily Living –Bathing–Dressing –Eating–Toileting –Transferring–Continence and/or 4 Cognitive Impairment NS

11 u u Medical community has long used six standard ADLs. Further, they have found that 93% of the time, ADLs are lost (and regained) according to a specific hierarchy * 1.Bathing4.Transferring 2.Dressing5. Continence 3.Toileting6. Feeding * Activities of Daily Living: Tools to Measure Functional Loss by Paul R. Bell; Journal of Insurance Medicine, Volume 24, No. 4 Activities of Daily Living

12 Cognitive Impairment Loss of: ushort or long term memory uorientation to: person (where you are) place (your location) time (day, date, year) udeductive or abstract reasoning NS

13 Employer Provided Plans 0

14 Tax Treatment of Insurance Premiums 4 Treated as health insurance after Allows individuals to deduct premiums as itemized medical expenses. 4 Self Employed deductions available. 4 Fully deductible for C-Corps and non- owner employees of other business forms. 4 All of above must be Tax Qualified Plans. 1

15 Eligible Premiums Are... 6 For an individual with an attained age before the close of a taxable year Age 40 or Less Age Age Age Older than Age 70 In 2004, amount that counts as an allowable medical expense deduction. $ 260 $ 490 $ 980 $ 2,600 $ 3,250

16 Minnesota State Tax Credits 4 A credit is allowed for long-term care insurance premiums during the taxable year equal to the lesser of (1) 25% of premiums paid to the extent not deducted in determining federal taxable income; or (2) $100.

17 What Deductions are Available for Personal Income Tax? 4 Premiums paid by the insured are deductible as a medical expense deduction on Federal Income Tax Return => Expense deduction subject to dollars over 7.5% of adjusted gross income => Subject to premium limits established by law 8

18 Deductions for Self Employed 4 Fully deductible with no discrimination testing (subject to eligible premium limits and maximum indemnity amount of $230 a day in 2004). 4 Benefits tax free to recipients.

19 Deductions for C-Corps 4 Fully deductible with no discrimination testing (subject to daily indemnity benefit maximum indemnity amount of $230 a day in 2004). 4 Benefits tax free to recipients. 4 Establishment of a formal plan suggested.

20 Limited Payment Plans 0

21 Reasons for Limited Payment Plans 4 Take Advantage of Employer or Self Employed Deductions While They Are Available. 4 Plan for Premiums While You Are Working and Can Better Control Income and Expenses.

22 Reasons for Limited Payment Plans 4 Insulate The Plan From Future Rate Increases. 4 Transfer of Money From Business to Personal Use and Leverage Return of Premium Options. 4 Avoid Lifetime Premium Commitment.

23 Types of Limited Payment Plans 4 Double Pay First Premium. 4 Reduced Pay at Age Paid Up at Age or 20 Pay. 4 Single Pay.

24 Double Pay First Year 4 Notes

25 Reduced Pay at Age 65 4 Notes

26 Paid Up At Age 65 4 Notes

27 10 or 20 Pay 4 Notes

28 10 or 20 Pay – Premium Example Plan Design: MetLife Ideal Plan $180 a Day 100 Day EP Unlimited Duration 5% Compound Inflation Return of Premium Option Home Care Plus Option Age 55 Insured and Spouse Life Pay Premium 10 Pay Premium Preferred Rating $5,297.22$12, Total Premiums over Life Expectancy* (28 Years) $148,322$129,252 Source: Life Expectancy of All Races and All Genders – Table 27 National Center for Health Statistics

29 10 or 20 Pay – Corporate Plan Tax Effect cost to implement a 10 Pay LTCI plan. 10 Pay Premium After Tax 10 Pay Premium 10 Pay Premium Before Tax $21,542$12,925$7,755 $215,420$129,925$77,550 Assumption of 40% Combined Federal and State

30 Single Pay 4 Notes


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