"Inside The Inflation Factors"

When purchasing Long Term Care insurance make sure that you look ahead to avoid being blindsided.  Good agents and planners realize that inflation is not going to stay within 5% compounded per annum over the next 10 to 50 years. The indicators are there, you just have to take some time to study them.  And if we can't assume 5% compounded, simple or CPI indexes are going to help keep the benefit close enough to maintain the needed value of the insurance, we need to consider using a value added concept called "The Boost" to give you a better hedge on inflation.  You raise your daily benefit by 20% - for ages 18-64, 10% for 65-72, and 5% for 73-75 at the time of purchase then add the inflation rider to help curve the unknowns of inflation. Ages 75+ may want to consider adding 10% to the daily benefit if they choose not to use an inflation option.  Use our "Future Needs Calculator" to help you determine your daily benefit amount.  As you may know most of our current long-term care services are paid for by Medicaid, a small amount by Medicare and a tiny but growing amount from private insurance sources.  The care provider industry (facility and community-based services) receives the majority of all reimbursement from Medicaid.  This government reimbursement has been extremely low for many years.  The providers don’t have choices, nor do the patients who rely on this source of payment.  The care providers are pretty much at the mercy of this government payer – no big increases!  As a matter of fact, many care providers have gone out of business or decertified from Medicaid and evicted those patients because they could not afford to provide good, quality care at early 70’s reimbursement levels.

Here's a little industry secret; the average Certified Nursing Assistant (CNA) who provides most of the hands-on custodial care for our parents and grandparents, are paid only $7.33 per hour[1], based on a current national average! Imagine, we pay more than that per hour to have our cars washed! Furthermore, the overall reimbursement from Medicaid has averaged around $90.00 per day for a nursing facility stay. That’s less than the cost of a hotel room in a metropolitan city – without meals, a nurse, medications, someone to bath you, and a whole spectrum of personal care services 24 hours a day. Think about it, what should it cost? Even private pay for these services is only about $120.00+ per day.

As private / insurance sources of reimbursement steadily become a bigger player in financing long-term care, the cost of these services will rise rapidly at double digit inflation rates (like medical care did in the mid 70’s), because the real costs of these services has been held down artificially for many years. We are also demanding a much better quality of care and improved staffing levels, which can only be solved with more dollars. Now lets think about the growing population of those needing care (ages 75-85) in the future. The numbers are staggering. Investment capital will only flow at expanding services and buildings if the reimbursement levels are adequate and profitable.

ITF1100
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[1] Kelly Assistance 1999