While Shakespeare saw those nearing the end of life as mere players who, having strut and fret their hour upon the stage, exit and then are heard no more (Shakespeare, Macbeth, Act V, v, 17) and Dylan Thomas urged us to rage and not to go gentle into that good night, (Dylan Thomas, Do Not Go Gentle Into That Good Night (1952) few are so lucky. The reality is that the advances in medical science during the Twentieth Century have resulted in the moment of death being pushed further and further back without retaining the ability to maintain an independent existence. Studies abound with statistics showing that 40-60% of us can expect to spend time in a long term care facility such as a nursing home, (United States Department of Health and Human Services (1991), with an average monthly fee in a semi-private room of $5,000 per month. Unbeknownst to most consumers, this care is not covered by Medicare or standard health insurance policies which are designed to provide insurance for acute care needs, not chronic disabling illnesses.Compounding the problem, or perhaps merely putting the issue into an even sharper focus, is the inescapable fact that the first wave of Baby Boomers is reaching early retirement age, an age cohort, which, at their peak, will present the country with the largest percentage of senior citizens ever in our national history. The impact of this large population of senior citizens on the delivery system for long term care will be staggering. Seniors will be living longer, with greater numbers becoming sick and/or disabled. There will be an increased demand for age related health care delivery and appropriate housing.
Failure to plan for the possibility of a long term disabling illness can be disastrous for individuals and their families. The sudden onset of disability as a result of a stroke or disabling accident or finally facing the harsh reality of the existence of a mind robbing illness such as Alzheimer's disease often highlights the consequences of a failure to plan. Provisions need to be made in advance to address issues such as asset management, medical decision making, and paying for long term care. At a bare minimum, planning for long term care in the late 1990's starts with executing durable financial powers of attorney and advance directives as well as a Last Will & Testament
POWERS OF ATTORNEYA financial Power of Attorney allows the grantor to appoint an individual or individuals to take over the financial decision making in the event that the grantor becomes disabled. Current law presumes that the Power of Attorney ceases upon the disability of the grantor unless the document provides to the contrary. Md. Est. & Trusts Code Ann. §13-601(a) (1991). The presumption of non-durability is due to change for financial powers of attorney in January 2000. Id. §13-601, Amendment effective January 1, 2000. The powers enumerated will control the attorney-in-fact's authority and as such require detailed drafting. For example, pursuant to Maryland case law, the attorney-in-fact may not gift the grantor's assets without the document specifically granting such authority. King v. Bankerd, 303 Md. 98, 492 A.2d 608 (1985).
ADVANCE DIRECTIVESThe ability and desirability of citizens to exercise their rights to make an informed consent as to their medical care starts with a recognition of the legality and binding authority of an Advance Directive executed by a competent individual. Md. Health-Gen. Code Ann. §5-601 to 5-618 (1994 and Supp. 1997). Maryland law allows such an individual to identify health care agents, to give them the authority to make medical decisions, and to give the agents instructions as to how those decisions are to be made, particularly and especially, in instances of withholding or withdrawing life sustaining treatment. Id. §5-602. This is the document that allows everyone to specify their intentions regarding their medical care based upon their particular ethical or religious beliefs and it should be accorded the importance and thought that such decisions merit. In the absence of an advance directive, Maryland law provides for extensive surrogate decision making authority. Id. §5-605. A strict hierarchy of family members and significant others are granted medical decision making authority based upon their relationship to the now disabled individual (doctor certification required) and they are charged with first trying to make the decision that the disabled person would have made him/herself (substituted judgment) or to determine what is in the best interests of the disabled individual. The surrogate's authority extends to terminating life sustaining treatment when 2 doctors can certify the presence of one of three conditions, terminal condition, persistent vegetative state, or end stage condition. Id. §5-606 (b).
GUARDIANSHIPSIf an individual, who has not executed a financial power of attorney or an advance directive, is determined incompetent, guardianship proceedings may have to be initiated in the relevant Circuit court, requesting that a guardian of the person and/or property be appointed. While the court is the ultimate guardian of the individual, the court appointed guardians have broad authority and specific duties. Mack v. Mack, 329 Md.188, 618 A.2d 744 (1993). With the appointment of a guardian, the disabled individual loses certain rights, and the rules require that the court requests assurance that a less restrictive option is not available. Md. Est. & Trusts Code Ann. §13-705 (b) (Supp. 1997). Less restrictive alternatives to guardianship proceedings (in the absence of a Power of Attorney) include joint ownership of bank accounts or the appointment of a Social Security Representative Payee. Guardian of the person proceedings are instituted when the alleged disabled has been determined to lack the capacity to make responsible decisions regarding their food, clothing, shelter, and health care, because of mental disability, disease, or habitual drug or alcohol use. Id. The existence of the Health Care Decision's Act's surrogate decision making powers has helped to significantly reduce the need for appointments of a Guardian of Person. Md. Health-Gen Code Ann. §5-605 (1994). Guardian of the property proceedings are necessary if the disabled is incapable of managing their property and no other individual has the authority to transact the disabled's affairs.
Paying For Long Term Care Planning for the payment of long term care costs will depend upon the individual's financial, health and living arrangements. The plan should permit flexibility for possible adjustments to the plan as the individual's finances and health changes. The options include private pay, long term care insurance, Medicare, Continuing Care at Home, and Medicaid. The various types of living arrangements available range from home care, to Assisted Living, to continuing care retirement communities, as well as nursing homes.
PRIVATE PAYCertainly, the ideal situation from which to address long term care issues is to possess sufficient assets and income to eliminate concerns regarding future cost of living expenses regardless of dramatic changes in one's health. Few families have the resources to be so unconcerned and thus they face the possibility that future events could devastate family finances. Realistically, any plan to finance long term care should include provisions for paying privately for a certain length of time and for "uncovered" medical care. The funds for private pay will initially originate from monthly income. The Sun, in an August 10, 1997 article, (Income 0ver 65: The Sun, August 10, 1997, at D,1) cited Commerce Department statistics for 1995 in identifying sources of income for persons 65 and older as follow:.Social Security: 42.8%Income from assets: 18.2%Pensions, annuities: 19%Earnings: 17.8%Other: 2.2%
PENSION PLANSPension plans are available in a variety of forms. Differences include the source of funding (employer and/or employee), tax ramifications (current and future), distributions requirements and availability of benefits for surviving beneficiaries. Qualified pension plans currently available are employer sponsored pension plans, Individual Retirement Accounts (IRA) and 401k plans. See generally ERISA, 29 U.S.C.§§1001-1461.A significant distinction exists between the various types of pension plans in their effect upon eligibility for public benefits. Unlike assets held by third parties in qualified employer sponsored pension plans, for Maryland for Medical Assistance Long Term Care eligibility purposes, IRAs and 401k plan assets are considered to be available to pay for care. COMAR 10.09.24.08 B, (1), (14), D. This rule has been challenged in other states and those cases are winding their way through state appellate courts.
SOCIAL SECURITYSocial Security benefits were never intended to provide the sole support of senior citizens and thus one should not rely exclusively on these benefits as the sole means of support in old age. Benefits are paid to eligible individuals based upon their employment record and their credits of coverage. 42 U.S.C.§§421-423. In 1997, the maximum monthly benefit a fully insured retiree can receive at age 65 is $1,326 per month. Social Security Administration Notices, 61 F.R. 55346, Oct. 25, 1996. The expected payments, however, should not be overlooked when planning for long term care.
ANNUITIESAnnuities are contractual investments with an insurance company in which the individual gives a lump sum of money in return for a periodic (fixed or variable) source of income. While annuities do not provide a high rate of return, they can be used as part of a Medical Assistance "spend-down" plan to boost the community spouse's monthly income by converting a countable resource into a fixed income stream. Dept. of Health and Mental Hygiene, Manual Release No. 67, Maryland Medical Assistance Manual 800-54 (1995).
MEDICAREThe federal Medicare program has been and continues to be the most significant health care insurance program for the elderly. Coverage is provided for services under either Part A (hospitalization) or Part B (doctor bills). An individual is eligible for Medicare Part A benefits if he or she qualifies for Social Security retirement benefits, Social Security disability benefits (two years after onset of disability), or is a kidney dialysis patient. 42 U.S.C.A. §1395 (1992 and Supp. 1997. Part A coverage includes hospitalization, home care, hospice and a maximum of 100 days of skilled nursing care. 42 C.F.R. §409.20 (1996). It is rare that a patient, even one facing permanent institutionalization in a nursing home, will receive the full 100 days of skilled nursing home coverage. Medicare home care is only available to those confined to home and who require skilled care, with a maximum of 37 ½ hours of services per week. Id. §409.48(a),(b) (1996). Part B benefits require the payment of a monthly premium which is currently $43.80 and is deducted from the beneficiary's Social Security check. 42 U.S.C. §1395(a)(1)(A) (1995). Physician services, medical tests and certain medical equipment, subject to a 20% co-pay, are covered under Part B. 42 U.S.C. §1351(a)(1)(h). Beneficiaries may choose to purchase a Medicare Supplemental insurance policy (Medigap policy), to cover the co-pays and deductibles. Federal law mandates that benefits under all Medicare Supplemental policies fit into 10 standardized variations. 1996 Guide to Health Insurance for People with Medicare, Health Care Financing Administration, U.S. Dept. of Health and Human Services, Publication No. HCFA-02110 (1996). Provisions have been made to assure that beneficiaries are entitled to pick their own physicians. It is critical to realize that neither Medicare, nor the Medigap or Medicare HMOs provide coverage for long term care.
LONG TERM CARE INSURANCELong term care insurance provides coverage for costs that may result from care provided in a long term care facility such as a nursing home, assisted living facility, adult medical day care, respite care, or for an individual otherwise being cared for at home or for services provided in the patient's home. Md. Ann. Code art. 48A, §641- 649 (1994 and Supp. 1996). Expenses arising from hospitalization are, for the most part, paid by insurance carriers and/or Medicare. The Medicare coverage may cease immediately upon discharge from the hospital or may continue for a short time if the patient is admitted to a nursing home and their medical condition justifies skilled medical care. When the health insurance coverages ends, the patient must pay privately for continuing LTC. The premiums for a LTC policy are a significant expense. As the likelihood of requiring LTC increases with age, so do the premiums. The Health Insurance Portability and Accountability Act of 1996 (often known as Kennedy-Kassebaum), 26 U.S.C.A. §203 and 7702B (Supp. 1997) contained provisions for the favorable tax treatment of tax qualified long term care insurance policies. Qualified policies are those that provide services through a plan of care for chronically ill individuals. Chronic illness is defined as requiring assistance in at least two activities of daily living (policies must name at least 5 ADLs out of the following: 1) Eating; 2) Toileting; 3) Transferring (getting out of bed); 4) Bathing; 5) Dressing; and 6) Continence, for at least 90 days or requiring substantial supervision as a result of severe cognitive impairment. A plan of care prescribed by a licensed health professional (including registered nurses, licensed clinical social workers and doctors) is a predicate to coverage. Premiums are tax deductible medical expenses, with maximum deductible premiums based on age (under 40, $200 per year; 41-50, $375 per year; 51-60, $750 per year; 61-70, $2,000 per year; and 71-above $2,500 per year). Qualified policies also result in the exclusion of up to $175 per day in benefits as income for tax purposes.While the creation of tax qualified plans does not provide standardization of Long Term Care Insurance policies, they do provide a base from which to examine a prospective policy. A recent Wall Street Journal article illustrates the issues in attempting to evaluate the differences, benefits and detriments of tax qualified versus non tax qualified long term care insurance policies. Nancy Ann Jeffrey, Tax Rules on Long-Term Care Insurance Generate New Headaches for Consumers, The Wall Street Journal, November 7, 1997 at C1. Provisions to examine and compare during the policy evaluation period include; what requirements must be met for the benefits to begin; what care or services will be covered by the policy and in what setting(s) and where and when will care not be covered; how long is the benefit period of time; what is the maximum daily benefit in each covered care setting; and, whether there are monthly, yearly or life time maximum payout of benefits. The length and extent of benefit coverage may include inflation protection calculated on either a simple or compound interest cost of living escalator. National Academy of Elder Law Attorneys, 6th Annual Symposium Manual 4 (1994) (The Value of Long Term Care Ins. in Estate Planning Sess. 13). The benefit period may be defined by a time frame such as the maximum number of days benefits will be paid. The benefit may be paid on an established per diem basis, regardless of the actual daily cost of care and may set a limit of benefits paid to an individual in their life time. Some policies include a waiting or elimination period prior to the start of coverage. Pre-existing conditions may also affect how soon benefits begin.
