A Country in Crises

Last Updated on Monday, 21 September 2009 07:55 Written by Michael L. Banner Tuesday, 07 April 2009 10:24

None of us can pick up a newspaper, turn on the television or go online without being reminded that we are surrounded by crises…

The Mid East crisis, the energy crisis, the Wall Street crisis and of course the one most talked about…the Main Street crisis. Each one of these crises have something in common, they are
going to take a long time to fix.

However, there truly is a crisis that no one speaks about. It’s the crisis that is affecting the seniors of our nation everyday. It is a crisis that is as serious as the ones mentioned above. Except this crisis hits even closer to home, it affects our parents, our grandparents and our
favorite aunts & uncles. 

Can the Reverse Mortgage possibly be one of the best solutions to this crisis?

Let’s see…

Barbara Stucki is one of the nation’s leading researchers in the field of private sector financing for long-term care.  With over 12 years of work in finding ways to pay for long-term care, Dr. Stucki has been quoted or her work cited by USA Today, Money Magazine, Bloomberg News, Kiplinger’s Personal Finance Magazine, and Reader’s Digest New Choices Magazine among others. 

Currently, Dr. Stucki is the Project Manager for the National Council on the Aging, where she heads a national initiative that is identifying ways to increase the use of reverse mortgages to pay for long-term care services and insurance. Prior to her work at NCOA, Barbara was a policy analyst for the American Council of Life Insurers, with publications including Passing the Trust to Private Long-Term Care Insurance and Making the Retirement Connection: The Growing Importance of Long-Term Care Insurance in Retirement Planning. She has also worked for six years on consumer issues for seniors as a policy analyst at AARP. Dr. Stucki is currently Section Editor for the CSA Journal. She also chairs the Editorial Board for the American Society on Aging’s Business Forum on Aging, serves on the board of the American Association of LTC Insurance, and is a member of the National Academy of Social Insurance.  She has testified on long-term care financing issues before Congress, as well as addressing state legislators, aging organizations, and service providers on the looming long-term care crisis. 

Dr. Stucki is President and Founder of the Kenning Group, a consulting company that provides independent research on long-term care financing and mature consumers. Barbara’s training is in anthropology and gerontology and she has a doctorate degree from Northwestern University.

I have never had the pleasure of meeting Dr. Stucki and hope that I get the honor one day very soon, but can we all agree her level of expertise in the problems today’s seniors face is second to none?

In 2005 Dr. Stucki created a 104 page comprehensive plan entitled Use Your Home to Stay at Home – Expanding the Use of Reverse Mortgages for Long-Term Care- A Blue Print for Action.

Let’s take a look;

In 2000, the nation spent $123 billion a year on long-term care for those ages 65 and older, with the amount likely to double in the next 30 years. Nearly half of those expenses are paid out of pocket by individuals and only 3 percent are paid for by private insurance; government health programs pay the rest.

According to the study, of the 13.2 million who are candidates for reverse mortgages, about 5.2 million are either already receiving Medicaid or are at financial risk of needing Medicaid if they were faced with paying the high cost of long-term care at home. This economically vulnerable segment of the nation’s older population would be able to get $309 billion in total from reverse mortgages that could help pay for long-term care. These results are based on data from the 2000 University of Michigan Health and Retirement Study.

“There’s been a lot of speculation whether reverse mortgages could be part of the solution to the nation’s long-term care financing dilemma,” said NCOA President and CEO James Firman. “It’s clear that reverse mortgages have significant potential to help many seniors to pay for long term care services at home.”

According to the study, out of the nearly 28 million households age 62 and older, some 13.2 million are good candidates for reverse mortgages.

“We’ve found that seniors who are good candidates for a reverse mortgage could get on average $72,128.  These funds could be used to pay for a wide range of direct services to help seniors age in place, including home care, respite care or for retrofitting their homes,” said Project Manager Barbara Stucki, Ph.D. “Using reverse mortgages for many can mean the difference between staying at home or going to a nursing home.”

Seniors can choose to take the cash from a reverse mortgage as a lump sum, in a line of credit or in monthly payments. If they choose a lump sum, for example, Stucki said that they could pay to retrofit their home to make kitchens and bathrooms safer and more accessible – especially important to those who are becoming frail and in danger of falling. If they choose a line of credit or monthly payments, an average reverse mortgage candidate could use the funds to pay for nearly three years of daily home health care, over six years of adult day care five days a week, or to help family caregivers with out-of-pocket expenses and weekly respite care for 14 years. They could also use it to purchase long-term care insurance if they qualify.

“Up until now, though, most of these seniors have not tapped the equity in their homes -- estimated at some $1.9 trillion -- to pay for either preventive maintenance or for services at home,” noted Peter Bell, executive director of the National Reverse Mortgage Lenders Association. Noting that the average income of men aged 65 and over is $28,000 and $15,000 for women, he added, “This study shows that unlocking these resources can help millions of  ‘house rich, cash poor’ seniors purchase the long-term care services they feel best suit their needs.” 

Just one year later, in March 2006 @ the Medicaid Commission Meeting, The National Council on the Aging presented; Promoting Aging in Place Through Greater Use of Reverse Mortgages.

This study showed the following:

Challenges of aging in place

• Fixed incomes and limited liquid assets may not be enough to pay for services and supports, along with everyday expenses.
• Hard to manage the family budget when unstable health makes the need for funds unpredictable.
• Seniors with impairment often have diverse needs, such as transportation, home modifications and repairs, and help with daily activities.
• Families cannot do it all. Nor can the government.

Home equity –A new financing option

• About 82 percent of seniors are homeowners. Among older homeowners, 74 percent have no mortgage.
• Over half the net worth of seniors is tied up in their home and other real estate (over $2 trillion).
• New Medicaid eligibility rules –home equity cannot exceed $500,000 (up to $750,000 at state discretion).
• Reverse mortgages can promote “aging in place” and reduce the risk of Medicaid spend-down and costly institutional care.

Ways to tap home equity

• Sell the house and move
• Conventional home equity loan or line of credit. A familiar product that may have lower closing costs. May not qualify- Banks look at income and debt. Risky – May lose house if cannot make monthly payments.
• Single purpose loans – State or local programs to help with home repairs or property tax deferral.
• Reverse Mortgage

Best for those who can stay at home for several years.
No income requirement. No monthly payments.
Borrowers have a right to continue to live in home as long as they pay their taxes, insurance and repairs.

New strategy to build resilience for elders at risk of needing Medicaid

• Strengthen family care giving.
  Pay for extra help to reduce physical and mental stress. Provide to unpaid caregivers.
• Pay for preventive measures.
• Keep the home livable.
  Fund home repairs and maintenance. Pay for adaptive devices, home modifications.
• Support Communities
  Strengthen ties of reciprocity and reduce isolation. Maintain or revitalize neighborhoods. Enable elders to stay active and involved.

The information quoted above is staggering. If it doesn’t tell you that the emerging reverse mortgage industry can be the one largest single contributor to relieving the crises that the seniors of this nation are going through every day, then you are in the wrong industry!

The “Senior Care Crisis” may not have the glamour or the emotion to ever be front-page news, or the lead story on your favorite cable TV news show, but it’s real and it touches all of us in a very personal way.

Wouldn’t it be incredible for organizations like the Financial Planning Association (FPA), the National Association of Health Underwriters (NAHU) and the National Association of Insurance and Financial Advisors (NAIFA), the Society of Certified Senior Advisors (CSA) were to educate their millions of associates on the reverse mortgage product?
Wouldn’t it be incredible if the mega giants of the long term care insurance world, who have already thrown their hats into the reverse mortgage industry, like Met Life and Genworth would mobilize their 100,000+ agents to bring this product to their senior book of business?

Wouldn’t it be incredible if you & I could play a large role in all of this?

Well, guess what? We are!

Have a very productive month.

Make a difference in as many seniors’ lives as you can…