In 2021, The 8th U.S. Circuit Court of Appeals gave the green light to a federal regulation that allows nursing homes to use arbitration agreements with residents, but prevents them from making the agreements a prerequisite for admission. Several nursing homes had filed a lawsuit against the Centers for Medicare & Medicaid Services (CMS) challenging the new regulation. However, the court upheld the regulation, stating in its opinion that,
“In our view, it is reasonable for CMS to conclude that regulating the use of arbitration agreements in LTC facilities furthers the health, safety, and well-being of residents, particularly during the critical stage when a resident is first admitted to a facility,”
A recent case in Pennsylvania ruled that a nursing home’s arbitration agreement requiring a resident, “Fay V.” to pay half the costs of arbitration was “unconscionable.” Kohlman v. Grane Healthcare Company (Pa. Super 118, J-A25034-21, July 5, 2022). The ruling arose after the estate for Ms. V., who died three months after admission, filed a wrongful death lawsuit against the nursing home and other defendants.
According to the court transcripts, at the time of her admission, Fay V. was 67 years old and was suffering from a number of conditions, including congestive heart failure, diabetes, and pressure ulcers. The nursing home’s assessment of her condition at the time of her admission reported that “she was alert and oriented and had no memory problems or dementia, but that she was also suffering from anxiety and sometimes had trouble concentrating.”
It’s assessment also reported that ‘Fay’s vision was impaired to the point that even with glasses, she was ‘not able to see newspaper headlines but can identify objects.’ Yet upon her admission to Highland Park, she signed a number of documents, including a seven-page Nursing Services Agreement, a two-page Agreement to Arbitrate Disputes (the Arbitration Agreement), and a Resident Representative Agreement concerning the handling of her finances, in which Decedent designated herself as her representative.
In trial court, the court ruled the Arbitration Agreement as unconscionable (excessively unreasonable) because Decedent was in pain and was medicated at the time that she signed the Arbitration Agreement, Decedent was alone when she was asked to sign the Arbitration Agreement, had no opportunity to read the Arbitration Agreement and was not given a copy to review, and the provisions of the Arbitration Agreement were not fully read or explained to Decedent.
HGC, an Aging-In-Place research and product development company based in Connecticut partnered with non-profit Arctos Foundation to survey Americans’ preparedness for long term care.
Most respondents have not spoken with a family member or loved one about wishes for Long Term Care.
Those with a spouse or partner are more likely to expect a need for long-term care services and supports, but are no more likely to have long-term care insurance in place.
Debt lawsuits — a byproduct of America’s medical debt crisis — can ensnare not only patients but also those who help sick and older people be admitted to nursing homes, a KHN-NPR investigation finds.
Has COVID affected how you feel about nursing homes? Even if a loved one hasn’t become ill, many families have been unable to even visit their elderly relatives, which was especially difficult over the holiday season. This Wall Street Journal article discusses how COVID is causing many to consider other options.
The pandemic is reshaping the way Americans care for their elderly, leading more families to decide to avoid professionally run facilities as services expand to support in-home care.
As the pandemic wreaks havoc on our mental and physical health, it is also quietly reshaping how Americans will face retirement and old age in the years to come.The virus is bringing sweeping change, mainly by “accelerating developments already under way,” says physician and entrepreneur Bill Thomas. For example, “isolation of older people has long been a problem, but Covid is focusing attention on the issue and adding urgency” to address it.
In this Wall Street Journal Article, writer Anne Tergesen reports on some of the effects that the COVID virus could have on aging and society. Among her findings:
More will age at home.
Older people will benefit from a technology boom.
Lifespans will decline. (Though perhaps only for the short term)
We will have a better handle on what we want to do with our time.
We will plan for death.
We will embrace healthier lifestyles.
We need to save more to retire.
The 401(k) will morph into a multipurpose account.
According to research from the AARP[1], a clear majority of people would like to stay in their own home as they age – even if they require day-to-day assistance with activities of daily living. With a rapidly increasing senior population, demand for quality in-home care is beginning to skyrocket.
Most at home care has traditionally been provided by care agencies that provide basic custodial care to individuals needing assistance with activities of daily living (ADL) or who have cognitive impairment. However, recent regulations are changing the cost structure for home care agencies, especially for certain types of cases where care is needed full-time such as with Alzheimer’s disease and other conditions involving cognitive decline.
It is not unusual for care to be provided 24/7 to people with these conditions and the expenses can quickly become unmanageable, especially due to new regulations that can trigger overtime pay requirements for home care agencies who employ the same caregiver for more than 40 hours a week. At the end of 2015, the Department of Labor (DOL) repealed two Wage & Hour Law exemptions that had been in place since 1974 – the Companion Care exemption and the Live-In exemption. The repeals impacted only third-party employers of direct care workers (i.e. staffing agencies), no longer allowing them to pay workers less than minimum wage and forcing them to adhere to overtime standards.
As a result, many home care agencies now handle high-hour cases differently. They either get the family to accept a rotation of many different caregivers or pay for the associated overtime with a major increase in their hourly rate. In most states, families are exempt from overtime requirements if the caregiver is a live-in employee or qualifies as a companion. This allows care recipients to get the care continuity they need without the additional cost. For 24/7 type care, this overtime exemption can reduce the cost by as much as 50%, or tens of thousands of dollars per year.
Household Employment Basics
Hiring a senior caregiver privately means the worker is now a household employee. And just like any other employment situation, payroll, tax and labor laws must be followed. There are three primary wage reporting responsibilities families have for their caregiver:
Withhold payroll taxes from the caregiver each pay period. Normally, this includes Social Security & Medicare (FICA) taxes, as well as federal and state income taxes. Some states are different and you can consult this state-by-state guide for more information.
Remit household employment taxes. These generally consist of FICA taxes as well as federal and state unemployment insurance taxes. Again, some states have additional taxes, so it’s important to consult the state-by-state guide beforehand.
File federal and state employment tax returns. These are due throughout the year – rather than just at tax time – and go to the IRS and state tax agencies.
In addition, there are several employment law matters that need to be considered at the time of hire. Depending on the state, a family may be responsible for providing things like a written employment agreement/contract, detailed pay stubs, paid time off/paid sick leave, workers’ comp insurance, etc. Be sure to consult with an employment law attorney in your state to learn what your state requires.
Even after adding in payroll taxes, insurance and all other employer-related expenses, the savings can be staggering. The figure below compares the cost of Agency Care vs Private Employment. Hourly agency costs start at $20/hour for less than full time but increase to $22/hour for full-time and $25/hour for high-hour care (80 hours or more per week) due to the pass-through of overtime wage costs.
The good news is there are household employment specialists that take full accountability for all or most of the employer responsibilities so families are free of paperwork and risk – enabling them to focus on caring for their loved one. If funds for the care of a loved one are held in a trust, Argent can serve as trustee and handle these requirements as part of its role as trustee.
There is no one size fits all solution to caring for our older adult population. Home care agencies, assisted living facilities, independent living facilities and skilled nursing facilities all have a role to play. And, now with the recent regulatory changes, so does privately-employed in-home care – especially for those patients suffering from cognitive conditions who need many hours of consistent care.
Acknowledgment
Thanks to Tom Breedlove, Director of Care.com HomePay for this information. Tom brings more than 30 years of business experience, including more than a decade as Director at Breedlove & Associates – now known as Care.com HomePay – the nation’s leading household employment specialist. Co-author of The Household Employer’s Financial, Legal & HR Guide, Tom has led the firm’s education and outreach efforts on this complex topic. His work has helped HomePay become the featured expert on dozens of TV and radio shows as well as countless business, consumer and trade publications. Learn more at www.care.com/homepay.
With the new year, I’ve entered my 36th year in the financial services industry. Just writing this fact feels strange. I’ve never characterized myself as a veteran of the industry, feeling instead that I’ve just hit my stride. The years however tell me differently and it’s easy to understand how senior professionals can feel marginalized. I chose a doctor several years my junior so that as I aged, he’d still be in practice. Understandably now, clients want to know who my back up is “just in case.”
The financial planning industry has done an admiral job of preparing people for two pivotal moments: Retirement – that magic age when one stops earning a paycheck, travels the world, plays golf every day, and enjoys a life of leisure; and Death – the final moment beyond which our assets and legacy are left to our heirs. It has done a poor job of equipping advisors to address the financial planning issues of the period in between. Sure, advisors sell long term care insurance to forty and fifty-somethings for this period, and others sell annuities to seniors skittish about the financial markets, but these are product solutions aimed at the senior market, not financial planning discussions. In a similar way, a walker solves an issue with balance and prevents falls, but a walker is not a comprehensive plan for health and wellness throughout life.
While there are several common financial planning issues for every age demographic, there are also many unique financial planning needs of the senior market.
Common Financial Planning Issues
Ensuring adequate cash flow throughout life.
Evaluating and addressing risks to financial independence.
Determining the financial impact of major life events.
Minimizing income tax.
Allocating investment resources to accomplish current and future goals.
Defining a plan for the distribution of accumulated assets at death.
Financial Issues Unique to Seniors
Plan for downsizing or home modification
Relocation plan if distant from family
Plan for continued social engagement
Family business succession
Identity and fraud protection
Annual Medicare elections
Developing a dependency plan to include
Living arrangements
Persons in charge of financial decisions
Persons in charge of healthcare decisions
Transportation needs
It’s tempting to ask how a plan for continued social engagement is a financial planning issue. With social isolation a major contributor to poor health among seniors[1], and healthcare costs absorbing a significant portion of a senior’s resources, a plan for social engagement as we age should be an integral part of the financial planning conversation with seniors.
Annual Medicare elections are another example of an often-confusing labyrinth of decisions that can have significant financial impact for years.
Identity theft and elder financial fraud are estimated to cost seniors between $3 and $30 Billion a year[2], and nearly everyone I know over age 70 has been targeted. A plan that includes identity theft protection as well as vulnerabilities to undue influence inside of familial relationships needs to be included.
Plans for living arrangements, whether aging in place, or facility care, should be discussed long before the actual need arises. Just as saving for retirement doesn’t begin at age 65, neither should plans for where someone lives out the remainder of their life be delayed until the 11th hour.
Family meetings to discuss an aging client’s dependency plan should be also be held long before a dependency event occurs. It helps assure family members that a plan is in place, informs them as to who-does-what-when, and when done early enough and under the direction of the aging client, preserves his or her seat of honor at the head of the table.
Family Business Succession has been a central component of financial and estate planning for years and is the least neglected area of financial planning for seniors among those who own a multi-generational family enterprise. Still, nearly 60% of the small business owners surveyed by Wilmington Trust, do not have a succession plan in place[3].
In conclusion, financial planning does not end at retirement. As one client reminded me years ago, “retirement is just another word for thirty years of unemployment.” It doesn’t look the same for all seniors but when practiced with integrity, it can be extremely beneficial to the entire family, and rewarding for the financial planner who chooses to serve this market.
[1] National Institute on Aging. (2020). Social isolation, loneliness in older people pose health risks. [online] Available at: https://www.nia.nih.gov/news/social-isolation-loneliness-older-people-pose-health-risks [Accessed 7 Jan. 2020].
[2] Consumer Reports. (2020). Financial Elder Abuse Costs $3 Billion a Year. Or Is It $36 Billion?. [online] Available at: https://www.consumerreports.org/cro/consumer-protection/financial-elder-abuse-costs–3-billion—–or-is-it–30-billion- [Accessed 7 Jan. 2020].
At least 2 million older adults would benefit from home-based primary care, according to Health Affairs. Because these patients have difficulty getting to an office visit, they frequently end up in emergency rooms or hospitals.
Per-patient savings range from $1,000 to $4,000 annually through reduced hospital and nursing home stays, emergency room trips and specialist visits, according to research cited by the American Academy of Home Care Medicine.
According to the American Academy of Home Care Medicine, the CMS Independence at Home Demonstration, part of the Affordable Care Act, estimated that Medicare would save $10 to $15 billion total over a 10-year period if home-based primary care were extended nationally to those on Medicare who are homebound.
The emotional stress of dealing with
one’s impending death due to a terminal illness like cancer, AIDS, etc., is
further compounded by the customary increase in medical bills and a likely
reduction in earning capacity.
A person owning life insurance
policies may have several options for reducing some of his or her financial
concerns.
Methods of
Reducing Financial Concerns
Borrow against cash values: Permanent
type policies such as whole life, variable life, universal life, etc., build up
cash values over the years. The owner of the policy is usually able to borrow
money from the cash value, often at favorable interest rates. When death
occurs, the policy loans and any interest will be subtracted from the face amount
of the policy before payment is made to the beneficiary. If there is also a
“waiver of premium” provision the insured may be relieved of the monthly
premium payments, in certain circumstances.
Surrender the policy: Policies
with accumulated cash values can be surrendered to the life insurance company.
However, this would generally not be desirable, since the face amount of the
policy is usually much higher than the surrender value and the time of death is
close. There may also be income tax consequences.
Borrow funds from a third party: Other
friends, family members, and possibly the beneficiary of the policy may be
willing to lend money to the person who is terminally ill and then receive
repayment from the insurance proceeds.
Accelerated death benefits: Some
life policies provide for payment of a portion of the face amount if the
insured becomes terminally ill. This is generally called a “living benefit” or
an “accelerated death benefit.” Even if it is not mentioned in the policy the company
may have extended the right to the policy owner; the availability of such benefits
should be investigated. Some companies require the owner to have a life
expectancy of from six to nine months or less. Terminally ill persons
(diagnosed by a physician as expected to die within 24 months) may receive
accelerated death benefits free of federal income taxes. Chronically ill
individuals may also exclude from income accelerated death benefits which are
used to pay the actual costs of qualified, long-term care. See IRC Sec. 101(g) for
more detail.
Viatical settlements: Another
option is to sell one’s life policy to a third party[1] in
exchange for a percentage of the face amount. This is called a viatical
settlement. It comes from the Latin word “viaticum” which means “supplies for a
difficult journey.” These settlements may also be available with contracts that
have no cash value such as individual or group term life insurance policies.
Factors which will determine the amount of the settlement include:
The insured’s life expectancy is a factor. In
general, the shorter the period, the more a viatical settlement company will
pay. Some companies will accept up to a five year life expectancy, but many
prefer a shorter term of years.
The period in which the company can contest
the existence of a valid contract must have passed, as well as the “suicide
provision” (typically two years after issue). This period may begin again for
policies that have been reinstated after a lapse for nonpayment of premium.
The financial rating of the company that
issued the policy is important. A lower rating can result in a smaller
settlement.
The dollar amount of the premiums is a factor.
The buyer of the policy is likely to be required to continue making the
payments for the remainder of the insured’s lifetime.
The size of the policy is a factor. Most
settlement companies have upper and lower limits; for example, a top limit of
$1,000,000 down to a low-end limit of $10,000.
The current prime interest rate is important,
since the buyer will compare the settlement agreement to other types of
investments.
After
examining the above factors, a settlement company will generally offer the owner
of the policy between 25% and 85% of the policy’s face amount. The settlement
amount may be received free of federal income tax under conditions similar to
those described above under “accelerated death benefits.”
Other
Considerations
If the terminally ill person is presently
receiving benefits that are dependent upon his or her “means” (income or
assets), like Medicaid, food stamps, etc., he or she must weigh the effect of a
viatical settlement on these benefits. Benefits may be terminated or reduced
until the settlement amount is “spent down.”
If the policy also has an accidental death or
dismemberment rider, those rights should be specifically retained by the
insured in the viatical settlement agreement. The time between applying for a
viatical settlement and having the cash is generally three to eight weeks.
However, this will depend on how quickly the medical information and
beneficiary release forms are in the hands of the settlement company.
Most viatical settlement companies stress the
confidential nature of the transaction but they require the named beneficiary
to release any possible claim to the proceeds. If the insured does not want the
beneficiary to know of the illness, he or she may change beneficiaries just
prior to completing the settlement. If the estate were named as beneficiary,
the insured (owner) would be the only one who would need to sign the release
forms.
If death occurs before the viatical settlement
is completed, with the insured’s estate as the beneficiary, the life insurance
proceeds would be paid to the estate and may be subject to probate
administration.
Viatical settlement of group insurance
policies will usually require that one’s employer be notified.
Confidentiality may also be lost if the policy
is sold by the settlement company in the “secondary market” to individual
investors, since a new investor would want to know the health status of the
insured.
An escrow account is generally used to make certain
that the payment of the agreed upon amount is made to the insured shortly after
the insurance company notifies the escrow company that the ownership of the
policy has been transferred to the viatical settlement company.
Several viatical settlement companies should
be investigated in order to negotiate the best offer.
Typical Uses
for the Cash Received Include
Cover out of pocket medical expenses.
Finance alternative treatments not covered by
existing medical insurance.
Purchase of a new car or finance a dream
vacation.
To be able to personally distribute cash to
loved ones.
Ease financial stress to perhaps further
extend life expectancy.
Maintain one’s dignity by not dying destitute.
Pay off loans.
The
sale of one’s life insurance policies can have far reaching effects and should
be done only after consulting with one’s attorney, certified public accountant
or other advisors.
[1] Effective January 1, 2018, the Tax Cuts and Jobs Act of 2017 established a new requirement to report certain information when a life insurance policy is acquired in a “reportable policy sale.” A reportable policy sale refers to the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured, apart from the acquirer’s interest in the life insurance contract.
A recent New York Times article profiles the lives of women who have no other option than to drop out of the work-force to care for an aging parent, at significant cost to the economy.
The burden of care for aging relatives is reshaping the lives of millions of others. About 15 percent of women and 13 percent of men 25 to 54 years old spend time caring for an older relative, according to the Labor Department. Among those 55 to 64, the share rises to one in five Americans. And 20 percent of these caregivers also have children at home.
