Archive for October, 2011

What Happened to The CLASS Act?

October 31, 2011

The CLASS Act (Community Living Assistance Services and Supports) was signed into law as part of health care reform by President Obama on March 23, 2010.  It was fatally flawed from the beginning.  The idea was to provide a cash benefit ($50-$75 per day) to people who needed long term care services.  Anyone, regardless of degree of disability could participate provided they were employed at the time of enrollment (and for at least 3 years during the first 60 months) .  Sound good so far?  Workers would have to pay into the program for at least five years before they could receive any benefits.   Now for what doomed the CLASS Act: The law required that no taxpayer money could be used to fund benefits…the program was required to be “actuarially sound” (demonstrated to be self-sustaining) for at least 75 years.  In other words, the premiums were required to be high enough to fully fund the program.

To use an overworked cliché, Congress created a perfect storm.  On the one hand, the program had to accept all risks.  This was analogous to an insurance company being forced to issue a policy on a home that was already on fire.  With many already disabled people in the program, the cost of claims would be driven through the roof.  On the other hand, premiums had to be set high enough to cover all of the costs.  This would inevitably have led to premiums being so high that only unhealthy people would enroll.  As healthy people could easily buy commercial long term care insurance with better benefits and at lower cost, a higher and higher proportion of unhealthy people would migrate to the plan.  Premiums would quickly have to become so expensive that even disabled people would leave the plan.

At a long term care insurance conference in April of this year, I heard Robert Yee (then Chief Actuary for the CLASS Office) try to defend the program.  Bob could not do so and admitted as much.  In his words “I have been given an impossible task.”

So how did it end?  On October 14, 2011, the Obama Administration terminated further work on CLASS.  The CLASS Act implementation team has all been either fired or reassigned.  If you believe the role of government is to provide for everyone regardless of cost, then the CLASS Act would have been a good thing.  If you believe that ever-increasing deficits are a  greater danger to our country, then you would not have supported the program if you had known the details.

Here is the take-away as I see it: Medicare (medical insurance for people age 65 and older) is in trouble.  Medicaid (primary provider of nursing home care for the poor) as we know it, is not sustainable.  Medicaid eligibility requirements will inevitably be tightened.  Our Nation cannot afford the cost of covering everyone’s long term care risk.  Each of us will be left with only three choices: 1) Apply for quality long term care insurance from good companies while you are still insurable.  2) Plan on spending your own accumulated assets (including equity in your home by way of a reverse mortgage).  3) Don’t do any planning and instead rely on increasingly overtaxed public welfare programs for your care.  

This is my newsletter so I get to say what I believe.  As always, I welcome your reactions, pro or con.   However I do ask that you respond in a mutually respectful manner.  Let’s leave extreme views of the Left and the Right out of our discussion.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.


© Raymond Smith, The Long Term Care Specialist, 2011

How I Almost Lost My Best (four-footed) Friend

October 31, 2011

A lesson for all of us who love dogs.  What has this got to do with planning for long term care?  Well, nothing that I can think of…except everyone should know that chocolate can be deadly for dogs.

Muffin is the mischievous Australian Terrier who has wagged her tail deeply into our hearts.  She keeps us laughing at her antics…most of the time.

This past August, my wife and I had gone out for a few hours.  We came home to find the pantry door open and two newly emptied half-pound bags of Hershey Kisses on the floor.  These were the dark chocolate kisses wrapped in purple foil.  Muffin only weighted 19 pounds before this.  Now she weighed twenty.

A mad dash to the 24/7 emergency veterinarian followed (Yes, I may have even exceeded the speed limit.)  We did not know if my best friend was going to live.  I won’t go into all the treatment details.  Suffice it to say that Muffin, and we, had a rough night.

I was able to bring her home the next day.  She is doing well now with no apparent residual effects.  Here is what I learned: Chocolate has theobromine, which comes from the cocoa bean.  Humans can handle theobromine.  Dogs cannot.  Theobromine affects a dog’s central nervous system.  Heart rates increase dangerously.  Seizures, coma and death can result.  The type of chocolate matters.  Milk chocolate contains about 44 mg. of theobromine per ounce.  Semi-sweet contains about 150 mg. per ounce and Baker’s chocolate about 390 mg. per ounce.  The toxic dosage works out to about 6.3 ounces of dark chocolate Hershey Kisses for our 19 lb. terrier.  She ate 16 ounces of chocolate, foil wrappers and all!

Fortunately we got Muffin to the emergency veterinarian within three hours of her eating the chocolate.  I was told that, depending upon the dog, there is about a two to four hour window in which there is a chance of survival.  We were very lucky that evening.

Please, please, please: if you have a dog in your home treat chocolate as the poison that it is (except for humans).  Don’t leave any lying around.  Keep all chocolate securely out of reach of our four-footed friends.

Disclaimer: I am not a veterinarian any more than I am qualified to give tax advice (not that either).    


© Raymond Smith, The Long Term Care Specialist, 2011

When Is The Right Time To Buy Long Term Care Insurance?

October 31, 2011

I don’t know.   But I do know the wrong time to buy: When you just felt chest pains for the third time, and rushed to the emergency room only to be told the reason for the pains could not be found.  When you just had your annual exam and questionable lab results were discovered.  When you have just been told that surgery will be needed within the next few years.  When you have been prescribed medication to help slow down memory loss.  When that strange disease you had never heard of is now in your daily thoughts.  When that last ski run of the day resulted in broken bones that may never heal correctly.  When your diabetes is no longer under good control.

Any of these events could happen to you in your twenties, or thirties, or forties,…or seventies.  These and numerous other bad things make you uninsurable.  So even if you want to buy protection against the high cost  ($81,000 per year in Metro-Denver) of needing long term care services, you cannot.  No insurance company will accept you.  Not at any price.

When is the right time to buy?  I cannot see around corners, so I don’t know when that runaway freight train called long term care is going to hit you.  The best answer I can offer is: Apply for (and hope you can still buy) long term care insurance when you first come to understand the enormous financial risk you and your family have been exposed to.  By the way, it is not only financial risk.  Family relationships always suffer when someone has to put their life on hold to take care of you because you haven’t done any planning.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.


© Raymond Smith, The Long Term Care Specialist, 2011