Paying for Long Term Care with Kelly Augspurger

george grombacher 0:02
Well, blood. This is Georgie and the time is right welcome today’s guest struggle powerful Kelly Augsburger. Kelly, are you ready to do this?

Kelly Augspurger 0:08
Let’s go George,

george grombacher 0:09
let’s go. Kelly is a long term care insurance specialist and the co founder of steadfast insurance where she helps financial advisors, estate planning attorneys, CPAs, and other professional advisors effectively help their clients to plan for long term care. Kelly excited to have you back on the show. Tell us a little about your personal life more about your work, and why you do what you do.

Kelly Augspurger 0:30
Yeah, George, thanks for having me back on. So glad to be here. My husband and I own steadfast insurance. We are an independent insurance agency, just outside of Columbus, Ohio, in Westerville. We help people plan for the unexpected. And so what I do is I help people put plans in place to protect their family and their finances from future extended care. Outside of our business, we have two busy kids. George and I were just talking about that off off camera there. But yeah, so they keep us busy. We do a lot in our community, and really glad to be here.

george grombacher 1:08
Awesome. When people start thinking about long term care, and we start talking about the costs, how does that usually go over?

Kelly Augspurger 1:18
Right? Yeah, no, people tend to know that if you need care, it can be very expensive. So people need to have a way to not just pay for care, George, but plan for care. That’s really my, what I want people to really take away from this conversation today is yes, we need a way to pay for care. But we need a way to plan for care to what is your plan. And then if you have a way to pay for care, that will help cover your whole plan, right. So there’s a variety of ways to pay for care, because I am a long term care insurance specialist. You know, that is my expertise. But we are going to be talking about a variety of different ways to pay for care. I think the number one, the default plan for people is self funding. Right? We are going to just use our income and our assets to pay for care out of pocket. That’s typically what most people do, because they don’t have a plan outside of just using their resources. So what does that mean? George, it means that, you know, if you end up with an extra, let’s say, five to $10,000 expense, right? Maybe you’re bringing in home care, or you move to assisted living, or somewhere else, and you’ve got this new five to $10,000 expense, where’s that going to come from? Well, most people are just going to, you know, take that out of their assets take take that out of their income. But what happens with that when people do use their assets and income? Well, it’s going to obviously reduce that principle, if you’ve got investments, you’re reducing that principle. So you’re not able to make as much on that principle. So you’re not getting that interest. But it’s also changing the lifestyle of probably your loved one. So if you’re married, you have a spouse or a partner or even adult kids, it may be adult kids are living with you. If you’re receiving care, and you’re paying for that out of pocket George, is that changing the lifestyle of those around you because now you have less to live on, because you’re using your income to pay for care. So it’s really a reallocation of income, which is a big problem. If you end up going into a facility or community, which most people actually start receiving care at home, George, but, you know, if you’re going into a facility, those lifestyle expenses have changed, right? Because you’re probably not spending as much, you know, maybe no longer have a mortgage, you don’t have utilities, all that stuff. But if you’re staying at home, how are you paying for care? And how are you paying for your lifestyle? That can be a big problem. If you’re self funding, you know, you don’t have insurance to pay to pay for care. Well, you’re not paying premium. So you’re saving money there. Right? I mean, that is a pro. But what about the cons? If you’re self funding? What about taxes? If you’re pulling money out of your investments out of your, you know, retirement accounts, what tax implications are there? You’re probably going to have to be paying some taxes. What if you have to pull money out and the market is down? That’s an awful time to be liquidating, right? Because now you’ve lost money that you had in the market. And so Mark, you can’t time that right. If you need care, you need care, and you need money now. And so you can’t predict those market conditions when you need care. liquidity. Obviously, that’s a big factor too. If you do have to pull money out of those accounts. How quickly can you get it? You know, do you have money in a CD or a money market something that you can access quickly? You need liquidity? If you’re also going to sell fun another another thing to consider George is a legacy. If you have money that you are wanting to dedicate to your loved ones, to your, to your adult kids to your grandkids, and now all of a sudden you have to use that to pay for care. Well, there goes that legacy that you had intended. So self funding the default plan, in my opinion, not the best plan, right, because of these things that we just talked about. So that’s the first the first way to pay for care. The second way to pay for care, and this is my my specialty, is long term care insurance. What is long term care insurance? Well, think of your home or auto insurance, life insurance, disability income insurance, it’s transferring risk, it’s transferring consequences, really, you put $1 in, you get a multiple multiple of dollars back, it provides leverage, that’s what insurance does, and it provides guarantees. So in addition to that, with long term care insurance, a benefit, you have tax free benefits. So unlike the self funding, where you probably are going to have to pay taxes on money. These are tax free benefits. And there’s potential tax deductibility, particularly if you’re a business owner. So those are some things to consider with those tax free benefits, George, you’re not having to worry about paying taxes on that income that you’re receiving. If it’s a reimbursement policy, if it’s a cash policy, meaning they’re just writing you a check, regardless of your care expenses. Benefits are tax free up to $420 per day as of 2023. If it’s over 420, those benefits are only taxable to the extent that the benefits are greater than your actual expenses. Now, that would have to be a large amount of care in order to to pay tax on that. But just know that most often, benefits are going to be tax free. Again, as far as to tax deductibility. If you’re a business owner, there are definitely some great benefits there, particularly if you’re a C Corp. So that’s something to consider with long term care insurance. Three things that I like to tell my clients with long term care insurance, it provides us three P’s. The first is protection. That’s what the insurance does, it gives us leverage, it protects our family, it protects our finances, we can hire professionals, so that our family doesn’t have to be caregivers. It protects our finances, because we have a bucket of money to pay for care, right? The second P it provides us peace of mind, knowing that we have this amount of money to pay for care when we need it. And then it also provides predictability, again, we know we have X amount of dollars to be able to pay for care. So it really frees up our other money that we have to be able to invest in ways that maybe we wouldn’t have been able to if we didn’t have insurance. Now, we could talk for hours, George about different types of long term care insurance. But there’s really two main types with a couple of other that are that are less popular. The first type is traditional long term care insurance, George. And this is just pure insurance. Think of it like your home or auto insurance. If you need care, it’s going to pay your expenses. If you don’t, there’s no added benefit, it’s the most cost effective way to get coverage, the least premium for the most amount of coverage. The second type is what we call hybrid might also be called asset based or combination. And what this does, this has an extension of benefits beyond like if there’s a death benefit and life insurance or cash value in an annuity. So you’ve got that death benefit, but then you also have an extra bucket of money to be able to pay for care. Okay, that is the preferred, that extension of benefits is really preferred. Now, there’s also and I know your financial guy, George, there’s also Life policies with a long term care writer, or even a chronic illness writer, these are actually different from the two I’ve just discussed, okay? The life policy for long term care writer, or chronic illness writer allows you to access the death benefit, there’s no extra extension of benefits there. It’s just simply that death benefit that you’re able to access. Now the long term care writer, you can access the full death benefit. The Chronic Illness rider you may or may not be able to access the full death benefit. It just depends on what type of chronic illness rider it is. So there’s a variety of different long term care insurance options available, what type is right for you? It’s gonna it’s gonna vary it’s gonna depend on your your situation, your finances, your family, your health, a lot of different things, but there are lots of different options available. Okay, so that’s the second way to pay for care, long term care insurance. The third type is short term care insurance. So this is going to be similar to Long Term Care Insurance George but it only provides care averaged for a year in a community, like a facility and a year at home. So think of it, it’s going to be the same triggers, you need help with two out of six activities of daily living like the long term care insurance policy, or you have a cognitive impairment and you need supervision, okay, that it’s going to be the same, but it’s limited coverage. Now, these policies will typically pay cash benefits. So you don’t have to worry about getting reimbursed and submitting receipts, it’s just they’re going to pay you a flat amount of money. Now, these don’t have inflation protection, it’s not going to allow your benefits to grow over time, like a long term care insurance policy well, but it’s easier to help qualify for because there’s limited underwriting. And so this is going to be good for people that are not as healthy. Okay, so that’s the third type of way to pay for care. The fourth type a life settlement. Okay, I think these are less known than the others that we’ve talked about. But what you can do with a life settlement is you can sell an existing permanent life insurance policy, and even sometimes a term life policy, if they have conversion on it to a third party, and you get a lump sum, payment, okay? Then you can use those proceeds for anything you want, including long term care expenses, and these are called Life Settlements, you could get more money than surrendering the policy for cash value itself, which is why some people consider these, how much can you get, it’s going to depend on a variety of factors. But typically, you can get 20 to 25% of the death benefit paid out, it could be less, it could be more. And who qualifies for life settlement storage, it’s going to be people typically over age of over the age of 65, could possibly be younger, if they have something like ALS. But the health, there has to be a pretty significant health impairment, and a life expectancy less than 10 years, that’s going to be pretty typical with a life settlement. Okay. And there are people that specialize specifically in life settlements. And I would highly recommend, you know, talking with someone that does that a third party, they’re going to be very qualified to help you I am not one of those individuals, I just, you know, I’m familiar with them. And I know it’s a way to pay for care. The fifth way to pay for care, a health savings account. Okay, HSA, also known as HSA. These are savings and investment accounts that complement a high deductible health insurance plan.

You can pay for qualified medical expenses, like co pays deductibles and services not covered by insurance. You can even pay for long term care insurance premiums with an HSA. So when I have clients, one of the questions I asked them is do you have an HSA If so, hey, we can we can use your your extra HSA to cover long term care insurance premiums, it’s a great way to do that. How this works is the HSA balance actually rolls over from year to year, which is very advantageous. contributions are made with pre tax dollars, the earnings grow tax free, and then you can use that money and withdraw it tax free to pay for qualified medical expenses. So it can be a great way to pay to pay for care in the future in just medical expenses in general. Okay, so that’s another way to pay for care. A sixth way to pay for care, reverse mortgages. There are reverse mortgage mortgage specialists out there highly recommend talking to one that specializes in reverse mortgages that can help seniors who own their homes and want to stay in their homes. That’s really key here, George, what people can do is they can access the equity in their home through a loan. And you can use that money however you want. There are no restrictions so you can pay for care. You can use it to just help to provide income in retirement, okay, you can even help pay for long term care insurance premiums using reverse mortgages. This money is going to be tax free. Since it’s the equity in your home, you have that equity, you own it, you don’t pay tax on it. And you don’t have to pay back that loan until the last borrower passes away or moves from the home for over a year. Okay, typically the home is then sold and the lenders paid back for that full loan plus interest. That’s that’s that’s how it works. And homeowners can never owe more than their home’s value and lenders can’t force seniors out of their home. So I think that’s really important to know, I think there’s a lot of misconceptions about reverse mortgages. Right. I think people tend to hear reverse mortgages and like who I’ve heard really poor stories about reverse mortgages. But do you know that there’s a lot of restrictions and regulations around reverse mortgages, especially now? And so you know, there are highly, highly regulated, and can be a very good tool to access equity. And I don’t know if you probably know this, George, but most seniors, a lot of their assets is tied up in their home. And so if you don’t have a lot of investments, you don’t have good income in retirement, that might be a good way to not just pay for care, but pay pay, you know, provide income in retirement. So that’s another thing to consider. Another way to pay for care, VA benefits, veteran assistance, Veteran Affairs. So if you are a veteran, or you know, a veteran, this could be possibly a way to pay for care. Now, there are going to be limits here, it is limited, it could be limited to custodial care, vets with highly rated service connected disabilities have priority here. So there’s going to be a waitlist, and there’s certainly lots of paperwork to fill out to fill out here. And it will be subject to means testing, meaning they’re going to look at your finances. So the lower assets, the lower income, you have the better chance that you have of qualifying for VA assistance. Okay, I wouldn’t solely rely on this to provide complete extended care for vets. If you’re healthy enough and wealthy enough to qualify, you probably should look into something like long term care insurance. But you know, if you have very limited assets and limited income, VA, it could be something to consider home care with VA could be available, but this is probably going to be limited to complex disabling conditions. Okay, and so the VA is going to turn determine whether or not you qualify for that home care versus being in some type of a facility. The data that I have says that there’s only about 12,000 people enrolled out of 9 million ish in the VA health system. So again, it’s very limited to home care, but it could possibly be something to consider. I think, have you heard a VA aid and attendance, George? Not? Okay. So I think this tends to get a lot of press and attention. It’s not a direct care benefit, rather, it’s a pension. And this is going to be based on service. And it’s also going to be means tested. I believe the max benefit now is about $2,600 per month, if you’re married, if you’re widowed, it’s closer to like 14 $1,500. And this is support for older vets who need care today. So really think of crisis planning, okay. But the max benefits, if qualified is going to be low. So something to consider if you are a vet, or you know, a vet. And then lastly, which I tend to think of this as a last resort is Medicaid, not Medicare, Medicaid with a D, okay. This is a safety net for people who are in crisis. It’s a viable solution for people who don’t have money. It primarily pays for care. In the one place most people who don’t want to be in that nursing home, can it pay for home care? Yes, there’s typically a long long waitlist for that, but it can pay for home care. There’s, there’s a passport program here in Ohio. But the problem with qualifying for Medicaid is it can be a very expensive proposition, because you have to spend down your assets, assets and have low income. Okay, in Ohio, that asset limit is $2,000. For an individual, you do get to have a home, I believe it’s up to like $688,000 in Ohio for equity in a home. You can keep a car, personal belongings, those types of things. But you do need to spend your other assets down. Now if you’re married in Ohio, the healthy spouse can keep no more than about $148,000 in assets. Okay? So a very expensive proposition. If you have money, if you have a million dollars, you’re having to spend down to those limits. Right? It could take a lot of care in order to do that. Now, there’s also a five year look back period. What does this mean? It means they’re going to look back the last five years to see if you’ve transferred assets cash made title changes. And if you have there’s going to be a penalty period or disqualification period if you’ve done so. Okay, meaning you have to wait longer until you receive Medicaid because you have made those asset or title changes. Okay. Something else to consider with Medicaid is they have a state recovery. Your home is not exempt from the recovery program. What this means is if they if Medicaid has paid for care, George, they want to get reimbursed as much as possible. So what they’re going to do is after you know that person’s dead If they will want to recoup money and so, you know, after if both spouses are passed away that that home is sold, they want reimburse for care costs through the sale of that home. Okay, so it’s, it seems like it’s a free Medicaid is free, but they’re gonna do whatever they can to recoup the money. Make sense, right? Yeah, they’re going to try to do that. And then lastly, now, this really is not a way to pay for care. A lot of people think it is Medicare, this is health insurance. This does not pay for custodial non medical care, which is what most people need an extended care. Now, I think, why this gets there’s misunderstanding here is, it can pay for limited care for up to 100 days, typically in a skilled nursing facility. But that is if you’ve if you really need medical care, and oh, by the way, you need some custodial, non medical care to, okay, the first 20 days are going to be paid for completely by Medicare. And then after that, there’s a there’s a copay. If you’re receiving, you know, rehab, you’re in a skilled nursing facility, they’ll pay up to 100 days, but that’s not long term. That’s short term, right? Anything really beyond 90 days, is what we consider long term. So there you go, George, those are different ways to pay to pay for care and things that need to be considered.

george grombacher 21:27
The good news is there’s lots of options. The bad news is there’s lots of options, each one of those options have so many different moving parts and important considerations. So like you said at the beginning, it’s an important conversation talking about paying for care, but a better conversation and talking about how you actually plan for it. So

Kelly Augspurger 21:44
hi, George. And in that, George, I think it’s important to note that, okay, those are ways to pay for care. But what is my plan? Who is going to provide care for me? Where do I want to receive care? And then lastly, how am I going to pay for care? So the who’s going to provide care and supervised care and coordinate care? That’s a really big piece, and then the where, right? And then that pay for Pease fills in, fills in the plan of Okay, now that I’ve established these other things, okay, now, this is how I’m going to pay for care. And oftentimes, George has a combination, right? It’s probably not just one, it’s probably not like, Oh, I’m just gonna pay for all my care myself, maybe it’s a combination of maybe I’ve got long term care insurance, maybe I’m a vet, maybe I’m self funding, you know, maybe I am self funding, maybe I’ve got long term care, I use all of that up, and then I still need more care, well, then Medicaid would come in at that point if you’ve spent down to their limit. So it’s typically not a you know, this is my only solution. It’s typically okay, we’ve got a combination of of things that we’re considering to be able to pay for care. And so that’s where I come in George is, as a long term care insurance specialist and a certified senior advisor is obviously I’m looking at insurance, can we medically help qualify? Because that’s really important. We look at the health to see okay, is this a viable solution? If not, okay, these are some other things that you could consider.

george grombacher 23:12
Love it. Well, Kelly, thank you so much for coming back on where can people learn more about you? And how can they connect with you?

Kelly Augspurger 23:18
Yeah, great. Thanks, George. So you can find me on my website, steadfast agents with an s.com. Also on LinkedIn and pretty active on LinkedIn, Kelly Augspurger. With a P as in Paul, I share lots of information, lots of resources, I believe in educating and want people to be able to make informed decisions. So those are great places to find me also have a YouTube channel, set steadfast insurance, you can find me on YouTube. And then I have a podcast as well steadfast care planning. So I talk to people about how can we best plan for care and consider lots of different ways to do that.

george grombacher 23:57
Excellent. Well, if you enjoyed as much as I did, she’ll kill your appreciation and share today’s show with a friend who also appreciates good ideas go to steadfast agents.com and check out all the great resources that Kelly has on the site, find the YouTube channel, steadfast insurance, and listen to the podcast steadfast care planning, and find Kelly on LinkedIn. It’s Kelly Augspurger Aug s PURGR. And we’ll link all those in the notes of the show.

Kelly Augspurger 24:26
Thanks, Kelly. Awesome. Thanks, George. Take care.

george grombacher 24:29
Till next time, remember, do your part by doing your best

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