2007 Long Term Care Insurance Summary

1. 2007 Long Term Care Insurance Summary Matthew L Goldwasser, LUTCF, CLTC Goldwasser-Appel Insurance Advisors, LLC One Gateway Center Suite 901 Newton, MA. 02458 (617) 332-6600

2. What is Long Term Care Insurance? • Long Term Care Insurance is best defined as a broad range of medical, custodial and other care services provided over an extended period of time in various care settings due to chronic illness, physical disability, or cognitive impairment. • It is estimated that in 2007 there will be more than 9 Million Americans over the age of 65 that require some form of Long Term Care.

3. Activities of Daily LivingMust be unable to perform 2 out of the 6 without requiring substantial help • Bathing- Washing by sponge in a bath or shower, also includes task of getting into or out of tub or shower • Maintaining Continence- Ability to control bladder and bowel functions • Dressing- Ability to put on and take of articles of clothing • Eating- Feeding yourself by getting food into the body from a plate or cup, feeding tube or intravenously. Does not include preparing a meal • Toileting- Getting to and from the toilet and performing associated hygiene • Transferring- Moving into or out of a bed, chair or wheelchair. Does not include getting into or out of the shower or tub How many of these things did you do this morning? Most likely, all of them

4. Cognitive Impairment • The other trigger for benefit eligibility. • If due to a severe cognitive impairment, you are incapable of caring for yourself, or you put yourself or those around you at risk to due your cognitive incapacities then this too can trigger Long Term Care Insurance eligibility.

5. Policy Components

6. Benefit Payment Eligibility • Certification from a licensed health care practitioner that the insured is unable to perform at least 2 out of the 6 ADL’s for a period expected to last 90 days or • Certification that substantial supervision is needed to protect the health and safety of the insured due to a cognitive impairment • Cognitive Impairment is defined as a deficiency in short or long term memory, orientation as to person, place or time, and/or abstract judgment pertaining to personal safety

7. Type of Benefit Payments • Reimbursement: The most common, reimburses expenses associated with long term care up to the maximum daily or monthly benefit • Indemnity: Pays the maximum daily benefit, no matter what the actual costs are on a daily basis

8. Average Nursing Home Annual Costs in Massachusetts • Statistically, Americans age 65 or older have a 40% chance of entering a nursing home, and a 70% chance of needing some form of Long Term Care services in their lifetime* • In 2004, the average annual expenses for a nursing home in Massachusetts were $84,716 and the average length of stay was about 3 years • Where will that money come from? • *- U.S. Department of Health

9. 4 Funding Alternatives for Long Term Care • Medicaid • Medicare • Self Insuring • Long Term Care Insurance

10. Won’t Medicare Take Care of Me? • This is an all too common misperception. In order to qualify for Medicare coverage in a certified skilled-nursing facility, all of the following must be true: • The person’s attending physician must prescribe a stay in a Medicare certified skilled-nursing facility for a condition that (1) was treated in a hospital within the past 30 days or (2) started while Medicare-covered services were being received in a skilled-nursing facility for another reason • Additionally, the person must have been in a hospital for 3 consecutive days (not including the day of discharge) before being transferred to a skilled-nursing facility • If these qualifications have been met, a person pays nothing for the first 20 days (aside form non-covered Medicare expenses such as incidentals). For the next 80 days, the person must make a daily coinsurance payment ($114.00 in 2005). No Medicare benefits are paid after receiving 100 days of care in a benefit period. A benefit period begins the first time a Medicare recipient is hospitalized and ends only after the recipient has been out of the hospital or skilled-nursing facility for 60 consecutive days. A subsequent hospitalization begins a new benefit period

11. Individual Tax Information • Premiums are treated as a medical expense, subject to limits: Amount of premium paid by an individual may be deducted to the extent that total medical expenses for an individual exceed 7.5% of adjusted gross income Attained Age Before Close of Tax Year 2007Premium Age 40 or Less- $290 Age 41-50 $550 Age 51-60 $1,110 Age 61-70 $2,950 Age 71 & Older $3,680 These figures represent the maximum annual deductible amount of long term care premium for each covered person Benefits paid will be excluded from an insured’s income * Consult a tax advisor for specific tax advantages

12. Self Employed Tax Information(purchased on an after tax basis) • Under Section 7702B(a)(3), a self-employed person may deduct 100% of premium paid for the individual, as well as the individual’s spouse and dependents, up to the maximum eligible allowed as indicated below, without regard to the 7.5% limitation Attained Age Before Close of Tax Year 2007Premium Age 40 or Less- $290 Age 41-50 $550 Age 51-60 $1,110 Age 61-70 $2,950 Age 71 & Older $3,680 * Consult a tax advisor for specific tax advantages

13. 2% + S- Corp Shareholders, LLC Members and Partners of a Partnership • These entity business owners are treated as Partners. Long term care insurance premiums have been classified as health insurance under Section 7702B(a)(3) and when the business pays the premium, it is 100% tax deductible by the business entity. The long term care insurance premium becomes taxable to the business owner as “guaranteed” income. * Consult a tax advisor for specific tax advantages

14. Deductibility by a Taxpaying Entity • C-Corporations 100% of the premiums paid for a tax qualified long term care insurance policy insuring an employee and/or tax dependent or spouse may be deducted as a fringe benefit. Coverage may be provided for select employees on a discriminatory basis. No ERISA compliance is involved. Neither premiums paid nor benefits received will be taxed to the employee. * Consult a tax advisor for specific tax advantages

15. Long Term Care Insurance Summary Goldwasser-Appel Insurance Advisors, LLC