Business Innovators Radio - Interview With Gary Scofield Founder Of Mansfield Financial Strategies Discussing Long-term Care Insurance

Episode Date: September 5, 2023

Gary is an accomplished financial advisor who has spent over four decades dedicated to guiding clients toward financial prosperity in retirement. With impressive credentials, including a lifetime membership in MDRT (Million Dollar Round Table), Gary’s expertise shines. His certifications as a Certified Senior Advisor (CSA) and Certified Long-Term Care (CLTC) specialist demonstrate his proficiency in navigating the complexities of senior financial planning and long-term care. Pursuing additional designations in ChFC and CLU, Gary remains at the forefront of industry knowledge.We take a personalized approach to helping individuals by understanding their unique circumstances, goals, and concerns. As independent advisors, we have access to diverse products and solutions to create comprehensive plans that provide secure and predictable lifetime income. Our mission is to guide people toward a worry-free retirement, building lasting relationships along the way.Learn More:https://mansfieldfs.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-gary-scofield-founder-of-mansfield-financial-strategies-discussing-long-term-care-insurance

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us Gary Schofield, who's the founder of Mansfield Financial Strategies and will be talking about long-term care insurance. Gary, welcome back to the program. Hi, Mike. Thanks for having me today. I'm looking forward to having this discussion.

Yeah, I am as well. And I know that long-term care insurance, just like with any word that's related to insurance, has a lot of misconception. So let's first just start with defining what is long-term care. Well, long-term care as it relates to insurance is a policy that's issued through an insurance company that will pay or help to offset the benefits are the costs of continuing care, whether it's in a nursing home or whether it's home care or whether it's an assisted living facility. But it pretty much affects everyone in our population.

And I say that because people that are baby boomers and those of us who were born between 1946 and 1964, there are 10,000 baby boomers will turn 60,000. each and every day until 2030. And seven out of those 10 people will require long-term care at some point in their lifetime. Now, long-term care, does that mean I need care for dozens of years or does it mean dozens of days or weeks? What is the actual time frame that, because I think that a lot of times people hear the word insurance and they think when I die, insurance benefits kick in. But long-term care is while you're still living. That's correct. Long-term care is while you're still living. And, you know, 7% of U.S. adults over the age of 50 have a long-term care insurance policy.

But here's an interesting statistic. Back in 2002, there were 750,000 policies sold for long-term care insurance in that year. In 2021, there were 75,162 policies. sold. So you can see the trend here. And in 2000, 125 insurers companies were offering a standalone long-term care policy. In 2019, we were down to 15. Wow. Now, the average annual premium, insurance premium, for a 55-year-old male with an initial pool of benefits, that means how much they're actually going to be able to pay out over that period was $2,2,220 per year. And the average long-term care insurance for a 55-year-old female with that same pool of benefits is $3,700 per year. And the reason for that is women live longer and have a greater potential risk for needing long-term care.

So the risk factors is generally increases, obviously, as people get older. And, you know, women are at the higher risk than men, primarily because they often live longer. Single people are more likely than married people to need care from a paid provider. And, you know, lifestyle, poor diet and exercise habits can really increase a person's risk. And it also health and family history take into consideration if someone will need a long-term care product. Yeah, that lifespan difference between men and women, that's really telling because if you are going to need potentially long-term care, like you said, 70% of baby boomers will need long-term care. Boy, how long do you need it? It could be longer for women than men.

That's a huge point. What do you think is the age that someone should start thinking about purchasing a long-term care plan? Well, obviously, like anything else, the sooner the better. For two reasons. Premiums are lower for younger individuals. And also there's a health consideration. A lot of times people who would like to buy long-term care insurance are unable to because of a health history. Things like stroke or heart attack or things of that nature can keep people from being able

to purchase a long-term care insurance policy. And then, you know, paying for the long-term care insurance policy is another thing offered. But one of the things that's happening lately, and, well, it's happened for a while, is there are long-term care insurance products that can be offered through an employer. So it's a group insurance type of a plan that people can get involved with if their company is offering such. Now, another way to pay for long-term care is, by self-insuring, that means your personal funds are going to be used for long-term care. An additional way would be a reverse mortgage. Now, there's a lot of talk out there on reverse mortgages.

Sometimes they fit. Sometimes they may not. Also, life insurance now, there are policies that are considered like a hybrid, where you can accelerate the death benefit prior to, you know, while you're still living, in order to pre-up some cash to pay for the long-term care cost. Now, if you do that, let's say that you have a million dollar policy and you use the accelerated benefit on that, well, that's going to reduce the death benefit when you ultimately die. Also, you can sell.

There are companies that will buy a life insurance policy on an individual. Sometimes that's a good thing. Other times, that's not such a good thing. but, you know, it does work in some circumstances and others. It doesn't. Annuities, there's another way that you can pay for long-term care insurance. A lot of people are really concerned or confused about what Medicare and Medicaid will pay. And we'll get into that in a little bit.

But also the Veterans Administration for some veterans will help pay for long-term care. And, of course, there are family and informal caregivers, and that allows people to really age in place to be at home instead of being perhaps in an assisted living facility or even in a nursing home. You know, a few of those that you mentioned made me think of something, which is kind of like when you have car insurance or homeowners insurance and you pay your premiums every month. And at the end of the year, you didn't make a claim. So can you go back to them insurance company and go give me my premiums back?

Of course not because it was there in case you needed it. So the traditional long-term care policy is similar. You pay your premiums, and if you need it, they cover whatever the coverages are. But if you never used it, the premiums don't come back to you. Whereas some of those other things like annuities and life insurance options could be helpful because if you never use the long-term care portion, the feature of that, well, then the money still stays in that kind of financial instrument and is working for you in those other ways. So I think there's no one easy solution, but I thought that that was an interesting observation, right?

Absolutely. Absolutely. And you know, the problem is the costs of paying for long-term care, you know, the median monthly cost for a skilled nursing home in a private room at a nursing home is $108,000 per year versus just over $94,000 for a semi-private room. But, you know, prices vary across the country. And they're really regulated, I think, by state. And Alaska, Connecticut, and New York have the highest cost for. private nursing homes, which now is over $378,000 per year. Wow. So, you know, 7.8 percentage of long-term care services and supports that were provided through insurance back in 2020, and only 13.5 percentage of long-term care services and support were paid out-of-pocket by consumers in 2020. And where does it come from out-of-pocket? your cash reserves, your retirement accounts, and then that throws another domino effect moving

in the wrong direction, I would suspect. Yeah, absolutely. You know, that's... You know, you touched on a few of the factors that impact the cost of a policy, like your health or your age. You know, the younger you are, the lower the premiums are. What are some of the other factors that influence the cost of a long-term care policy, things like maybe even does inflation impact long-term care?

It does, however, a lot of the policies have an inflation rider that will increase the benefit, and that's an option on most of the policies. And, you know, the premium costs for a long-term care policy may exceed the monthly or annual budget of some older adults. And some plans only pay for long-term care provided in a facility, a nursing home, not at-home options. And some providers may deny coverage for those with a pre-existing condition or an illness like I touched on before. And some plans have an elimination period, which means before the benefits actually start,

the policyholder is still responsible for the total cost of their care during that waiting period time. And there are lifetime benefit limits on a lot of the contracts that are out there today. So, you know, you mentioned like 100,000 for average cost and they're different in different parts of the country. And I'm sure that in three years, that same facility will be 109,000. And in three more years, it'll be 129,000. So costs do go up. If someone gets a long-term care policy, do the premium stay the same? Is that locked in over time?

Absolutely not. In fact, when this all began, long-term care companies, the insurance companies that were offering long-term care insurance policies, I truly believe they underpriced the contracts to get people to purchase them. Thinking, and I think the thinking was, you know, the company will have, will, the insured will pay the premium for two or three or four years, and then figure that, you know, we don't have to pay this high cost anymore, and they discontinue the payment, which is like with your homeowner's insurance. You know, you don't use it unless you need it. But what happened there was the cost of care has skyrocketed.

And so the insurance companies are caught in a situation where people didn't give up their policies. They, in fact, kept them. And they kept continuing to pay those premiums. What happened was when the claims started to come in, the insurance companies were having a real tough time trying to keep up with paying out those claims. So the only thing they could do was to increase premiums on all of the policies that were currently enforced. Now, it was thought at the initial outset that the insurance companies would not raise premiums.

But now the reality is because of economics, the cost of shares gone up. Yeah, and they had to. In fact, there are a couple of companies out there that have completely gone out of the business. And there are other companies that have had raised. increases as high as 200%. Wow. And so, you know, people are in really a quandary right now of how to provide care and what the costs will be. You know, if people think about Medicaid, you know, those amounts can really vary by state. But if you're going to rely on Medicaid, first, you know, you have to spend down. All of your assets have to be spent down. And with Medicaid, the maximum

amount of monthly income that a single person can receive to be eligible for long-term care benefits provided by Medicaid in 2023 was $2,742. That's the maximum amount of monthly income. Now, for a, it's $3,750, that's the maximum amount of monthly income that a healthy spouse can receive for the other spouse to be eligible for long-term care benefits provided again through Medicaid. And again, those amounts vary by state. Yeah, those are pretty low numbers. If you have to liquidate all your assets and only make that much money just to get the benefits, that's going to be a very limited amount of people that can be helped with that. Exactly. Now, there are a few states that have what we call a partnership insurance available through the state. And New York State

has that, what they say is that if you have a long-term care policy and you're through the New York, and it's one issued through the New York State Partnership by the insurance company, then your benefits will be paid for however long you have. Let's say it's three years and you use up your benefits in the nursing home. Well, then Medicaid would come in and pay the balance, but it's only for that period of time, you know, that you'll be able to get those those, payments. And the maximum amount of home equity, well, wait a minute I'm getting off track here, the maximum amount of accountable assets for married couples who are applying together for long-term care provided by Medicaid is $4,000. That's the assets that are allowable. So you talked about

spend down. Well, it's pretty much spending down everything you have. And then you might be eligible. And then you're hopefully eligible. But another big thing is dementia and Alzheimer's. Now, it's important to plan for long-term care before it's needed. Now, the statistics tell me that there's a 145% increase in the number of people who died from Alzheimer's dementia between 2000 and 2019. So you can see the rise there. And 5.8 years is the average life expectancy following an Alzheimer's diagnosis.

You know, 57.6 percentage of long-term stay in a nursing home residents who have a diagnosed Alzheimer's disease or another form of dementia. So in those areas, it's very, very important that, you know, people know about these things prior to purchasing the policy. Yeah. You know, it makes me think about like the term life policies that you can buy for a specific term, like 10 years, 20 years, that kind of thing. Do long term care policies work the same way where you buy it for a set period of time? Yes. You can buy benefits for a year, two years, three years, or you can buy lifetime benefits. Again, the drawbacks there are the premium cost of a long term care insurance policy is really tough for a lot of older adults. And some of the plans, only paid for a long-term care provided in a facility. And I think I already said not at home. And a lot of the policy providers,

the insurance companies who are left that are still writing these policies will deny any preexisting condition or illness that someone may have. So there are a lot of different factors that really come into play here. You know, I think that's the big piece that I'm hearing from you in this conversation today, which is there are a lot of factors and the number 70% stuck in my mind where, you know, 70% of baby boomers will need long-term care in their lifetime. That's a big number. And there's a lot of things to consider.

And it's not just one decision, you know, by this type of policy check. There's a lot of things that go into it. And like you've mentioned, you can have variations and employee plans of Medicare, Medicaid, and all of that. And it just really sounds to me like it's very confusing unless they get with a financial professional to help them show the way. And that is absolutely true. And a lot of their, a lot of financial advisors today have received the certification of long-term care

or CLTC. I'm one of those that have that designation. And if you're working with an advisor who is not familiar with long-term care, I would say you might want to find someone who is because there are so many things that, as you say, Mike, that could be a real differentiating point between contracts and policies. And the alternative policies are alternative ways to pay for long-term care are becoming much more advantageous when you consider the cost of the premiums for long-term care policies. And as you get the point before, If you use a hybrid life insurance policy or if you take money from an annuity or one of those things,

then you don't have to worry about losing the money because if you're using a life insurance policy, the death benefit is still going to be available. Yeah. Even if you have taken out a portion of those debt, death benefits, you know, prior to your demise. Yeah, that's important to think about it. I think anyone wondering when should I, how should I, how should, would this look for me, needs to just get with someone like yourself, a certified long-term care advisor. And I think that's spectacular.

So, Gary, thank you for coming back on today. What's the best way someone can learn more and also reach out and connect with you? Well, you can go to my website. My website is mansfieldfess.com. Or they can email to get information to Gary at Mansfieldfess. on my website, you can see a link to a calendar. So what happens there, if someone wants to find out more information, they could simply go into the calendar link on my site and we could book a 30-minute phone call where I can, you

know, certainly help someone if they're looking to find out more or even get some cost, you know, some prices to consider. Awesome. Well, Gary, thank you so much. It's been a real pleasure speaking with you again. today. Thanks, Mike. Have a great rest of your day. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.

www.Influential EntrepreneursRadio.com.