helping families pay for long-term care. “ we want to have a program separate from medicaid with...

Helping Families Pay For

Long-Term Care

“ We want to have a program separate from Medicaid with flexibility so that individuals can decide what services to buy,

whether it is paying for home health, an adult day care program, transportation services, or nursing home, and I

look forward to working ... to capture the features of that kind of flexible plan. ”

What we all know today’s challenge to be &

What we strive to accomplish

- Senator Hillary Rodham Clinton

Copyright ElderLife Financial LLC - Family Elder Care Loan Presentation 05-07-2004 to State of Minnesota 3

• Past challenge: Analogy to a college education 4 - 9

• “Family Elder Care Loan” explained. 10 - 12

• How the Family Elder Care Loan can be used - Senior

• Needs care today, owns a home; 13 - 18

• Spent down all savings; 19 - 22

• Has some, but not all, money needed for care. 23 - 26

• Philosophy, mechanics & required expertise 27 - 34

• Final thoughts – Solving the Affordability Challenge 35 - 38

Table of Contents


• With the high annual cost of a college education

• Wealthier families could send their children to college

• The poorest families obtained state grants.

• And the vast middle-class of families

• were left out because they did not have the cash to pay for education up front.

Our society faced a similar challenge in 1964 with education


So in 1965 our society came up with a solution

1. Year: 1965; Problem: High cost of college education

2. Only wealthier families could afford to pay for child’s education

3. Solution: Student loans - funding a noble purpose

4. Brought education to middle-class

5. Parents usually make payments/ guarantee loan on behalf of child

6. Spreading high cost through small, affordable payments over a period of time.

Student Loans


39%

As state budgets face fiscal challenges, States’ Aid to Higher Education is Pressured

Downward

• According to Sallie Mae, over the past ten years the trend was:

• 19% Increase in College Costs• 9% Decrease in State Aid• 28% Net Negative Effect

= More students using loans to pay for education;

• 6 million middle-income families use $40 billion in student loans annually;


Student Loans are popular and widely-used because...

• They are promoted heavily by states as a truly viable and necessary option;

• They are easily available - directly through universities at time of need;

• Financial Aid Counselors help students decide exactly:

• How much the education will cost;• What the family can pay together out of pocket;• What grants may be available;• If necessary, a loan to fill-in remaining financial gap;

• The application is fast and easy, with a quick approval;

• Money for college is available up front;

• Students and their parents pay back the loan over time;


The Middle-Class Family Today...

Is faced with virtually no affordable elder care choices;

Often makes decisions with a void of information;

Has limited time to search, and find ways to pay for the right elder care choices;

ElderLife has an additional option as a solution

A similar trend is beginning in elder care:

• Increase in long-term care costs;

• More seniors needing care;

• State budgets under pressure;

A similar trend is beginning in elder care:

• Increase in long-term care costs;

• More seniors needing care;

• State budgets under pressure;


Student Loans Family Elder Care Loans1. Year: 1965; Problem: High cost of college education

2. Only wealthier families could afford to pay for child’s education

3. Solution: Student loans - funding a noble purpose

4. Brought education to middle-class

5. Parents usually make payments/ guarantee loan on behalf of child

6. Spreading high cost through small, affordable payments over time.

1. Year: 2004; Problem: High cost of elder care

2. Only wealthier families can afford to pay for parents’ care up front.

3. Solution: Elder Care loans - funding a noble purpose

4. Bringing elder care to middle-class

5. Children to make payments/ guarantee loan on behalf of parent

6. Spreading high cost through small, affordable payments over time.

History Repeating Itself


What exactly is a

“Family Elder Care Loan”?

And how can it help families privately pay for

their seniors’ long-term care?


• ElderLife helps middle-income families pay for care

by providing the adult children/family caregivers of a senior

with an affordable Family Elder Care Loan at the time of need.

• The senior pays what she/he can out of pocket each month

the Family Elder Care Loan administrator pays the rest to the care provider

the children make smaller, affordable monthly payments overtime in repayment of the amount borrowed.

Simply Stated…


In What Instances Can the “Family Elder Care Loan”

Help?

And How Does it Work?


Meet Anna Woods.

•Anna Woods is a school teacher in Fredericksburg, VA. She is in her late 50s.

•Her aging mother, Edna, needs more care than Anna can give her, as Edna’s health is failing. Edna is on a tight fixed income but has a valuable home she can not sell yet.

Scenario A


Ready For Care -Can Not Sell Home Just Yet

Anna says her mother is not safe at home any longer and is concerned that her mother might fall. Anna needs to find a way to move her mom, Edna, into a more secure setting soon.

The problem: • Edna needs the care today but she doesn’t have that in cash and she can’t sell the house;

• Cost of Care is $ 48,000 year ($4,000/mo.)

• Edna can pay: ($ 18,000) ($1,500/mo.)

• Anna needs: $ 30,000 ($2,500/mo.)


• ElderLife Family Loan Counselors...Listen to Anna’s situation• Provide information on elder care resources • Provide Loan Program Information• Take down Anna’s Application over the phone (Operate family call-center, process over phone);• Mail Applications, Receive Signed Applications; Mail monthly statements. • Application over the phone. Same Day Decisioning. Money available in as fast as 3 Days

Senior Care Providers

Customer (Anna): Children of Senior

ElderLife Processesmonthly disbursements

to care providers – fundswired directly to provider. ElderLife bills family for

minimum monthly payment.

Monthly Disbursement of Cash

Family Elder Care Loan Program - The Process

2

3

4

Anna decides mom needs to

move to an assisted living

community

Anna makes aToll-free Call to

ElderLife Financial

Staff give Loan Program education material to

Anna

1


Reducing $30,000 toJust a few hundred dollars a month

for Anna... Amount Borrowed & Wired

Directly to Care Provider on Outstanding Anna’s monthly

Month Behalf of Anna Loan Balance Loan Payment

1 $ 2,500 $ 2,500 $ 100.00 (starting min. pmt.)

2 $ 2,500 $ 5,000 $ 100.00 (starting min. pmt.)

3 $ 2,500 $ 7,500 $ 150.00

4 $ 2,500 $10,000 $ 200.00

5 $ 2,500 $12,500 $ 250.00

6 $ 2,500 $15,000 $ 300.00

12 $ 2,500 $ 30,000 $ 600.00 ...

Anna’s mom, Edna, passed away after that one year.Anna sold her mom’s house and used the proceeds to

Pay off her elder care loan.

Total for Year: $30,000 $ 30,000 $3,950 (total of all 12payments madeduring year ...)

16


• Enabled Anna and her mother, Edna, to spend down her assets without having to immediately dispose of her assets;

• Because Anna had taken out a “Loan” it did not occur to her to seek to avoid paying it back – she simply sold mom’s home and paid off the loan, just as she pays off every other loan she may take out (such as a car loan, or other);

• Fast, Easy, Simple Family Process – 15 Minute Application, Decision within two hours, money available within three days, all family members, children and senior, can participate on the loan program;

• State did not have to go through “Estate Recovery”... it was accomplished on its own, without state effort, when Anna sold the house to pay off the loan;

So what has the Family Elder Care Loan Just Accomplished?


• Gave Anna and her Mother, newfound private choice and purchasing power;

• Enabled Anna to “segment” her debt (i.e., “car loan”, “student loan”, “mortgage”, “mom’s elder care loan”);

• Dedicated “Loan” to separate Family’s cost to this Family Life Event;

• Helps not to interrupt regular cash flow of Family;

• Edna/Senior Parent - does not have to immediately liquidate residence/assets;

• Anna/Adult Children - No need to quit job to care for parent;

What more has the Family Elder Care Loan Just Accomplished?


Meet Joyce, Andy and Noah.

• Joyce and Andy’s dad, Noah, lives in an assisted living community in Salisbury, Maryland.

• Noah has run out of savings and is facing a possible move to a Medicaid funded bed in a nursing home.

• Joyce and Andy do not want to move their dad to the nursing home, even though he qualifies for Medicaid.

Scenario B


Dad Ran Out of all his Savings But Needs Continued Care...

• Neither dad, nor his two children, want him moved to a nursing home despite the fact Medicaid can pick up the care tab.

• Because dad is happy where he is and receiving care the family feels is appropriate – so Joyce & Andy ask,“Why upset the situation and force dad to move?”


Dad has $2,000 a month to pay for care...Joyce & Andy need $1,000 more a month.

Total Cost of Care: $3,000 a month.

The problem:

• Noah needs continued care for an estimated 2 years:

• Cost of Care is $ 72,000 2 years ($3,000/mo.)

• Noah can pay: ($ 48,000) ($2,000/mo.)

• Joyce & Andy

need over 2 years: $ 24,000 ($1,000/mo.)


Reducing $24,000 toJust a few hundred dollars a month for Joyce & Andy... And they get to split the monthly payment, making it

even more affordable! Amount Borrowed & Wired

Directly to Care Provider Joyce & Andy’s on Outstanding Combined

Month Behalf of Joyce/Andy Loan Balance Loan Payment

1 $ 1,000 $ 1,000 $ 100.00 (starting min. pmt.)

2 $ 1,000 $ 2,000 $ 100.00 (starting min. pmt.)

3 $ 1,000 $ 3,000 $ 100.00

4 $ 1,000 $ 4,000 $ 100.00

5 $ 1,000 $ 5,000 $ 100.00

6 $ 1,000 $ 6,000 $ 120.00

24 $ 1,000 $ 24,000 $ 480.00 ...

Noah moved to a nursing home Medicaid Bed after the two years....Joyce & Andy continue to make a total combined monthly payment of roughly

$340 (just $170 each!) on their dad’s Family Elder Care Loan for up to the next 5 years.Should they like to pay off the loan early, they can do so at any time without penalty.

Total for 2 Years: $24,000 $ 24,000 $6,180 (total of all 24payments madeduring 2 years)


Meet Aunt Mae.

•Aunt Mae is 92 and was in great health.

•Her loving niece, Janet, is her guardian and caretaker.

•Aunt Mae needs long-term care which costs $2,000 a month...but she has only $1,200 a month she can pay out of her own pocket.

Scenario C


Aunt Mae Needs Another $800 a month to pay for care

. . .

She only needs care at home for about a year, but $800 in cash every month is too much for her niece,

Janet, to afford

and Janet can not afford to quit her job – a home health aide is desperately needed...


Aunt May has $1,200 a month to pay for care.Janet and Aunt Mae need another $800 a month

Total Cost of Care: $2,000 a month.

The problem:

• Aunt Mae needs home health care but she can not sell her house (because she is living in it!) and Janet can not quit her job.

• Cost of Care is: $24,000 year ($2,000/mo.)

• Aunt May pays: ($14,400) ($1,200/mo.)

• Janet Needs: $ 9,600 ($800/mo.)


Reducing $9,600 to

Just a few hundred dollars a month for Janet

Amount Borrowed & Wired Directly to Home Care

Provider on Outstanding Janet’sMonth Behalf of Janet Loan Balance Loan Payment

1 $ 800 $ 800 $ 100.00 (starting min. pmt.)

2 $ 800 $ 1,600 $ 100.00 (starting min. pmt.)

3 $ 800 $ 2,400 $ 100.00

4 $ 800 $ 3,200 $ 100.00

5 $ 800 $ 4,000 $ 100.00

6 $ 800 $ 4,800 $ 100.00

12 $ 800 $ 9,600 $ 192.00 ...

Janet continues to make a combined monthly payment of roughly$180 on her mom’s Family Elder Care Loan for the next 5 years.

Should she like to pay off the loan early, she can do so at any time without penalty.

Total for 1Year: $ 9,600 $ 9,600 $1,512 (total of all 12payments madeduring that year)


A. Can Not Sell Home Yet – Mom Needs Care Now;

B. Ran out of all savings, adult children do not want to move dad to Medicaid-funded care;

C. Has some of the monthly cost needed to pay for care, but is $800 a month short;

The “Family Elder Care Loan”Can help in these, and many other care-need

situations.


Today, Families in VA, MD, MO, and TN, (all states where ElderLife recently opened and is active)

Have sought the help of a “Family Elder Care Loan”

In addition, families in CA, FL, NJ, PA, and MA,

all states where the “Family Elder Care Loan” has been discussed through simple word-of-mouth and ElderLife’s internet presence,

have called ElderLife asking if they couldapply for an elder care loan to help pay for their senior parents’ care;

ElderLife BankingPartner

• Provides Liquidity

ElderLife BankingPartner

• Provides Liquidity

Industry Associations

Industry Associations

Government Agencies at state and federal levels.

Government Agencies at state and federal levels.

• Design Family Elder Care Loan Programs;

• Market to families and providers;

• Originate Loans through Care Providers;

• Operate family call-center

(The Heart and Soul of the Operation);

• Process Applications over Phone;

• Manage Relationships with Providers’ Staff

through regional representatives and

outbound telephone support from ElderLife

counselors;

• Initiate Monthly Disbursements &

Monitor Repayment; Perform Collections;

Senior Housing and Home CareProviders

Senior Housing and Home CareProviders

ElderLife Understands & Can Service a Demanding Market

Consumer Forums & Publications

Consumer Forums & Publications

29


From a Banking Standpoint

What are the specifics

Of the loan?

The Loan is not any different in structure than many of the

“Personal Loans” already out there.

What is different is the fact it is required to be used for long-term care, and it is serviced by an organization guiding families through the long-term care maze.


The Family Elder Care Loan Products Today

Secured & Unsecured Opportunities

Unsecured:

• Interest Rate: Monthly, variable, with “Effective” APR of: 4% - 7% over

prime;

• Transaction Fee to Care Provider of: ....................... 2%

for training of staff; While providers incur this “cost”, the offsetting benefit is increased occupancy or increased use of their services; Example: Why do merchants accept/pay Visa and transaction

fees?

•Secured Options Opportunities: HELOCS (Home Equity Lines of Credit);


•Credit approval and credit rate will be based on FICO scores, Debt to Income ratios, comparison of most recent behavior to historical behavior, loan amount needed, and value of collateral if any.

•Families want, and pay for, convenience & speed in this instance. ElderLife’s research and experience to date demonstrates consumers’ willingness to pay for a simple, convenient, easy program.

•Just as Sallie Mae has dozens of different loans to cater to a variety of education needs and costs, the “Family Elder Care Loan” can be molded dozens of ways to administer to the numerous care needs families face throughout the long-term care continuum.

Loan Product Details


ElderLife Loans

Credit Card Loans

Sallie Mae Alternative

Student Loan

Offer up to $50,000 (Sallie offers up to $100,000) ✔ ✔ ✔

Disbursements made directly to facilities /college ✔ - -

Month to month disbursements ✔ - -

Ability to halt subsequent committed disbursements ✔ - -

Disbursements made all at once - ✔ ✔

Family Affair - Up to 5 Co-Guarantors ✔ - -

Estate or Assets available as "collateral"? (If Senior is also a Signatory, loan is automatically a part of Senior's estate once he/she dies). ✔ - -

"Noble Purpose" Loan - (impacts repayment behavior) ✔ - ✔

Repayments Begin Immediately ✔ ✔ -

Home Equity Consolidation Ability ✔ ✔ ✔

Loan Product Comparison

ElderLife Designed for Minimal Defaults

(Note: The Sallie Mae “Alternative Student Loan” is Not guaranteed or subsidized by the Government.)


• Nationally recognized and experienced elder care professionals;

• Established visibility in vastly fragmented market place;

• Respected reputation in extremely sensitive environment;

• Extensive training of family loan counselors:

• Customized software for online and expedited access to elder care options and resources;

1. Elder care corporate provider operations;

2. Elder psychology, demographics and care preferences;

3. Family caregiver demographics, psychology & support needs;

4. Matching customers with the care alternatives they can afford;

Family Education, Training & Service…To Administer the Program

an Organization Must Possess an Inherent Understanding of Both Elder Care and Consumer Finance

Similar to the Dual Expertise of a “Sallie Mae”


The philosophy behind the

“Family Elder Care Loan”

Our parents nurtured us, loved us, raised us, helped us obtain a college education

Now That Our Parents Need Us

We want to show them we…

• Love them, care for them, will support them and

• Can help them pay for the long-term care they need and deserve


What Can a State Do

To Encourage Adoption

of the

“Family Elder Care Loan”?

A range of possibilities exist

For guidance, it is useful to examine what incentives the Federal and State Governments offer to encourage the use of

Student Loans for Education

And Why...


• Promotion of Concept to its network of care offices and providers;

• Consumer education campaign coupled with private-sector financial companies’ roll-out of program, to assist in faster citizen adoption of a new program;

• Deduction of Loan Interest borne by Seniors and their Children;

• Guarantees of loans made to applicants that would have been declined the option of a Family Elder Care Loan due to border-line credit quality;

State Promotion Options

Why should the state consider getting involved? How would it benefit?


• Student loans have a 6.9% default rate as of today...

• Thus families privately shoulder 93.1% of the additional education costs states can not subsidize on their own - Government, through its guarantees and programs, leveraged 6.9% of its capital to encourage 93.1% of private citizen moneys to be used for education. A similar model can be created for, and can help us solve, our long-term care dilemmas.

Reasons to Become Involved

1. Savings Plans

2. State Grants

3. Out of Pocket

4. Student Loans

1. Savings Plans

2. State Grants

3. Out of Pocket

4. Student Loans

1. LTC Insurance / Annuity Options

2. Medicaid

3. Out of Pocket

4. Family Elder Care Loans & Reverse Mortgages

1. LTC Insurance / Annuity Options

2. Medicaid

3. Out of Pocket

4. Family Elder Care Loans & Reverse Mortgages

Higher Education OptionLong-Term Care Option

Equivalent

helping families pay for long-term care. “ we want to have a program separate from medicaid with...

Documents

high cost of elder care

care state budgets

longterm care slide

affordable elder care

longterm care costs

seniors longterm care

education slide

state of minnesota