Sell Customers Nursing-Home Insurance to Protect (and Keep) Seniors' Deposits

By Thomas, Vicki | American Banker, May 19, 1993 | Go to article overview

Sell Customers Nursing-Home Insurance to Protect (and Keep) Seniors' Deposits


Thomas, Vicki, American Banker


As a result of declining interest rates on certificates of deposit. many of your valued customers have closed their accounts in search of instruments that pay a higher yield. If you have alternative investment products available, then your customers are likely to remain with the bank.

Deposit erosion is also caused by older customers who spend huge sums for long-term care, such as extensive stays in a nursing home. Such costs can range from $30,000 to $80,000 per year. In 1992, costs for nursing home care reached $50 billion dollars; costs for home care of the elderly reached $ 1 0 billion.

It is easy to see what will happen to those costs when the baby boom generation becomes the elder boom: We could be spending $500 billion a year for long-term care.

Do you know what impact the cost of long-term care has had on the erosion of savings deposits? How about valued customers who use trust services? According to government statistics, there is a one-in-two chance that someone in your family will spend time in a nursing home.

The average nursing home stay is two-and-a-half years. How long would your customer's savings last if faced with those kinds of costs?

Managed care appears to be the direction that Hillary Rodham Clinton's task force on health care reform will take. Long-term care will not be a part of President Clinton's health care reform program.

Costs are the primary reason for failing to include long-term care. This places greater emphasis on including long-term care planning as part of the financial planning process. It also places a greater emphasis on long-term care insurance.

Changes in Medicaid

President Clinton provided more flexibility on running Medicaid programs to the states. That means that the Health and Human Services Department will streamline its process for granting waivers from federal rules.

Medicaid is the fastest-growing expense for most state budgets. Last year alone, a quarter of the state Medicaid funds went to nursing homes. Medicaid supports two-thirds of all nursing home residents.

Each state is in the process of seeking relief by making it more difficult for people to qualify for Medicaid. For example, in Maine, according to the Maine Sunday Telegram, Gov. John R. McKernan "wants children to take financial responsibility for their aging parents.

"He has proposed tightening laws on asset transfers to prevent well-off retirees from making themselves paper poor so that the state picks up their health care costs."

The governor "also wants to give the state power to attach a family home or other assets after the individual dies, so the state can be reimbursed for the cost of care. He wants adult children who can afford it to care for parents in their homes, pay for their nursing-home care or buy long-term care insurance."

In Wisconsin, the state can already attach the family home and freeze assets until it has been reimbursed for any outstanding long-term care debts.

Outlining Options

Medicaid was a program developed to help the poor. Yet, the rising cost of long-term care has forced many middle-income American families to become dependent on the system to pay for the cost of catastrophic care.

Long-term care costs, in addition to causing bank deposits to erode, confuse and frustrate customers. There are several things banks can do to help customers understand what their options are to protect themselves from the tremendous cost of long-term care.

No matter how the Medicaid laws change in your state, now more than ever, older bank customers should be aware of the various types of trust agreements that can help protect the estate from the cost of long-term care.

Develop a Seminar

These trust agreements include the living trust, the Medicaid trust, a revocable trust, and an irrevocable trust, Several professionals in the trust department should be familiar with these agreements.

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