Long Term Care: Avoid the Pike Syndrome, Look the Problem in the Face and Make a Plan

No one wants to think about needing long term care. And, figuring out how you are going to pay for it (if you are among the potentially 70% who will require it) isn’t fun.  Of course you hope you’ll be in the 30%!

Darol Tuttle is an accomplished attorney with over 23 years experience in estate planning and elder law. He writes below about how he has seen too many people look away from the problem of long term care and likens that practice to an obscure, but interesting experiment called the Pike Syndrome.




The Pike Syndrome

Ever hear of the “Pike Syndrome”? It comes from an experiment in which a pike, (a big, very ugly, predator fish) was placed in a tank. The researchers dumped goldfish or some other lame, tasty looking fish into the tank with the pike.

Next the researchers divided the tank into two compartments, separated by a transparent acrylic wall. Then, they dumped a second set of goldfish in the compartment that did not house the pike but they made sure the pike could see its new neighbors.

The pike beat itself bloody trying to get a second meal. Finally, bruised and embarrassed, it gave up. You know what happened next?

Researchers are twisted. They then lifted the partition out of the tank and the dumb goldfish swam around the entire tank without a care in the world.

The pike did nothing. It had learned helplessness from the pain of past failures.

Don’t Be a Pike:  Identify the Key Defects in Your Financial Planning Decision Making

I am of the opinion that any type of planning should identify defects in decision-making.

I spent the early parts of my career drafting estate planning documents. I also litigated. Over time, I saw the problem. I actually think I suffered a bit of PTSD. Respectfully, retirees can be kinda mean.

However, the main thing that bothered me was the extent to which my clients suffered.

I could tell you stories. In most cases, my clients suffered intentionally. They took deliberate steps or refusal to take steps that led to financial devastation. I mean that quite literally.

With regards to long term care, clients are somehow conditioned that they won’t need it. This is a clear defect in decision making.

There is a high probability you’ll need long term care

I recently saw statistics that minimized the probability of financial loss due to long-term care. I do NOT believe the probability is as high as insurance guys suggest. BUT, there is a very high probability that you will need care.
I just googled for the number of Assisted Living Facilities (ALFs) in the U.S. There are 28,000 such facilities. I did not google group homes or nursing homes. But, 28,000! That’s a lot. Plus, I know from observation that marketing people at ALFs freak out if their census falls below 90%. Census refers to occupancy rate.
Furthermore, there are currently about 1 million retirees currently living in Assisted Living Facilities.


Long term care is not covered by MediCARE

A lot of people get confused by what is covered by MediCARE vs. MediCAID.
I can tell you categorically, Medicare does NOT pay for home care, Assisted Living, Memory Care, or Adult Family Homes.
Medicare does pay for nursing home care IF the patient spent three days in a Hospital on a non-observation basis and was then released to an Skilled Nursing Facility (SNF). And, then, Medicare only pays for some of SNF care and for NOT MORE than 100 days.
How do I know this? Because people come to my office on day 101.
There was and probably still is a sentence on Medicare.gov that says “Medicare does not pay for long-term care.” Makes sense. If Medicare did pay for all the elderly and disabled in-home care in America, it would go broke.

Long term care is covered by MediCAID, BUT…

Long term care is covered by Medicaid, but you are only eligible for Medicaid AFTER you  have run through ALL OF YOUR ASSETS.
Medicaid is not Medicare and it only kicks in when all of your other resources are exhausted. It is also important to note that it can be very difficult to find a bed in a decent facility with only Medicaid coverage.
If I could go back in time to 1964 when Congress was considering the Amendment to the Social Security Act as part of the LBJ’s great society and sit in the meeting in which they decided to call the program that pays for long term care “Medicaid”, I’d slap them.  Ever since that time, there has been confusion about Medicare and Medicaid.

Long term care is very expensive

Home care is the most expensive form of care. Twenty four hour care in my state tops out at $240,000.
Assisted Living Facilities are much more affordable but many states do not have a Medicaid program to pay for ALFs. Medicaid is a federal law and pays for care for nursing home care only. States can apply to waive this requirement if they pitch in their own money.
Otherwise, private pay is the only option unless you have insurance.

The costs of long term care can compound and add up quickly

The prices are very high, higher than you think.
Consider this recent example, the husband was 84, with a wife who was 12 years younger. Husband’s dementia got bad, he has to go to an Assisted Living Facility. The wife stayed at home.
Husband’s dementia came with behavioral problems that led him to require a memory care unit. Wife was still at home. His care cost $7,500 per month — exceeding their total income of $5,800 per month — not even including household expenses. (They have a $500,000 home and a $500,000 CD.)
One year later, wife had a mild stroke and she went to an Assisted Living Facility. Her care cost $5,000 per month while husband was still at $7500 per month.  This is a fairly typical case where they were spending $12,500 a month on top of whatever costs they had associated with their home.
My law firm record for the most paid is $30,000 PER MONTH.
And, I have so many cases at $18k per month it is sickening.

So, What to Do? How to Plan for Long Term Care

If I could lay out some easy first steps, it would be this:

1) Get a health care power of attorney

Revise your health care power of attorney and include these words, “I prefer to age at home and, if I must transition to a care community, I want to return home if possible.”
Believe it or not, if you do not have a statement like that, Medicaid can foreclose against your home while you are still alive. There is a bit more to it than that, but just make sure you have that statement written down while you still have your marbles.
The best place to put this statement is in your medical  power of attorney because it is less likely to be lost and it carries the weight of the law itself.

2) Educate yourself and make some preliminary decisions

Make some preliminary decisions about long term medical care.  Learn the 9 levels of care (some have more). Also learn about the three business models communities use.
These are directly related to monthly expenses and higher expenses than monthly income is NOT good. Right?!
So, in your health care power of attorney, say something like “I direct my Agent to make sound financial decisions about my care that balance my comfort but also that of my spouse if they are well even when I am ill. I prefer to transfer to an ALF if I [then describe your vision].”
If you don’t do this, your kids decide because they will likely be the Agent.  Guess how your kids decide? Yup. Mr. Google. A search algorithm will literally decide where you live when you are the most vulnerable.

3) Draft a limited power of attorney

Draft a limited power of attorney.

This power should preserve the right to create one of five different trusts and transfer the assets you want to protect at the trigger event you determine in advance. Follow me?

The horror stories you hear are called “crisis cases” in legal services. They drain a big chunk of the estate and the attorney’s fees are super high. BUT, crisis cases are easy to close. Why? Because the kids are making the decisions, they are stressed, they have their own families, and are younger. As such, they are more prone to see the benefit of a plan, especially if it leverages federal law.

4) Model the financial impact of your decisions

You can use the NewRetirement Planner to model the financial impact of your long term care planning decisions.

5) Married? Create a Trust.

If you are married, make sure you have a spousal Protection Trust in your Will. If you are in your mid 70s and have a nest egg and have kids you trust, consider a transfer to an asset protection trust.

Tips and Resources

Need an attorney? Try searching at Findlaw or Eldercounsel.com  (Don’t pay more than $8k.)
Be sure to set up a medical power of attorney. You can do it yourself with the American Bar Association or for a fee with some of the online legal resources like Legal Zoom.

Model the impact of your long term care decisions using the NewRetirement Planner.

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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