Help On The Way! by LCXLife

HELP ON THE WAY The Big Insurance Secret seniors aren’t supposed to know…. Life Insurance can pay for Assisted Living and Home Care “Many people who need Assisted Living or Home Care can’t afford it, so they drop life insurance policies they’ve been carrying for years in order to qualify for Medicaid. A system that encourages people to abandon their policies to go onto public assistance is broken and has to change. Seniors and their families lose out from the fact that they have made premium payments for years on a policy that they will end up abandoning. The problem is they don’t know it can be converted into a Long Term Care Benefit Plan. It’s a secret that’s been kept from seniors for decades: Your life insurance policy can be used to pay for all forms of senior care such as Home Care, Assisted Living and Nursing Home expenses. But here’s the good news-- it isn’t a secret anymore.” -Chris Orestis, CEO of Life Care Funding, Senior Care Advocate and former insurance industry lobbyist The costs of long term care are increasing every year, but most families do not understand what they will be confronting when it is their time to start paying for care. Too many people wait until they are in the midst of a crisis situation before they start trying to figure out how the world of long term care works. Long term care is a very expensive proposition. Families can go broke trying to provide for a loved one, and the shame is that if there is a life insurance policy it can be easily converted to help cover these costs. There are literally millions of seniors that are struggling with the costs of long term care who will abandon a life insurance policy without realizing they could be holding the solution to their problem in their hands. Do you know the differences between Medicare and Medicaid, and what you must do to qualify? Do you know the differences between Home Care, Assisted Living and Nursing Home care? Do you know what is and is not covered? Also, did you know that a life insurance policy can be converted to pay for Assisted Living, Home Care and all other forms of long term care? In this book you will learn exactly what a Long Term Care Benefit Plan is and how it works; gain helpful information about Medicare and Medicaid; receive some guidance on the various forms of senior care; explain more about the legal rights of owning life insurance; learn more about laws in the states that have been introduced to make sure life policy owners are being informed about their options before going onto Medicaid; and delve into the “Silver Tsunami” generation and how they are impacting the future of our country.

Table of Contents Foreword ...................................................................................................................................................... 5 Introduction .................................................................................................................................................. 7 Chapter 1: No More Secrets .......................................................................................................................... 9 Chapter 2: It’s your right: Use a Life Insurance Policy to Stay in Control of your Care ................................... 12 Chapter 3: Why would I convert my life insurance policy into a Long Term Care Benefit Plan? ..................... 14 Chapter 4: Wasted dollars that could be funding Long Term Care ................................................................ 15 Chapter 5: Dangerous Liabilities Lurk for Families and Advisors in Long Term Care Planning ........................ 17 Chapter 6: Political Support and Media Attention ........................................................................................ 21 Chapter 7: Long Term Care Benefit Plan Conversion Success Stories ............................................................. 26 Chapter 8-‐ Press interviews about the Silver Tsunami and the long term care funding crisis ........................ 32 Chapter 9: Frequently Asked Questions-‐-‐ What is a Long Term Care Benefit Plan? ....................................... 38 Chapter 10: Did you Know? .......................................................................................................................... 41 Chapter 10-‐ Conclusion ................................................................................................................................ 48 Appendix ..................................................................................................................................................... 51 1-‐ Forms of Long Term Care .................................................................................................................................... 51 2-‐ Legal Rights of Policy Owners ............................................................................................................................. 53 3-‐ Medicaid Eligibility: Life Insurance is a Disqualifying Asset .................................................................................. 56 4-‐ A Roundtable Discussion: Converting Life Insurance to Pay for Long Term Care .................................................. 66 5-‐ Press Quotes ...................................................................................................................................................... 70 6-‐ What are political leaders and consumer advocates saying about using a life insurance policy to pay for Long Term Care? ............................................................................................................................................................. 76 7-‐ Elder Law Articles published in 2013 ................................................................................................................... 78 8-‐ The Silver Tsunami .............................................................................................................................................. 82 9-‐ Lifecare Funding ................................................................................................................................................. 90 10-‐ Blog Posts ......................................................................................................................................................... 92 What Will You Find When You Visit Your Parents this Holiday Season? ..................................................................... 92 Do you have the Treasure Map to Survive Your Golden Years? .................................................................................. 94 Will a Nursing Home be the Financial Death of you? .................................................................................................. 96 ‘Gravity’ and the Long-‐Term Care Crisis ...................................................................................................................... 98 Are you providing long term care support to a loved one without even realizing it? ............................................... 100 The Congressional Commission on Long Term Care: Deadline September 12th ....................................................... 101 Long Term Care Insurance ......................................................................................................................................... 104 Long Term Care Commission takes on the Long Term Care Funding Crisis ............................................................... 106 Avoid Life Insurance Loans and Credit Programs ....................................................................................................... 108 New York Medicaid Life Settlements ......................................................................................................................... 110 Searching for Private Pay Solutions as the Long Term Care Funding Crisis Worsens ................................................ 113 Policy Conversion Report Released by Florida Medicaid Department ...................................................................... 116 What is Long Term Care? ........................................................................................................................................... 117

Seniors Don’t Want to Surrender Life Insurance and go on Medicaid ...................................................................... 118 Converting Life Insurance into Long Term Care Plan Protects Consumers ................................................................ 119 Theft by Family Members Most Common Form of Financial Elder Abuse ................................................................ 121

Author’s Curriculum Vitae .......................................................................................................................... 122 Published Papers ................................................................................................................................................... 122 Public Presentations .............................................................................................................................................. 125 Radio Interviews .................................................................................................................................................... 127 National Webinars ................................................................................................................................................. 129

Foreword America is aging right before our eyes. This isn’t a great surprise to any of us. The Greatest Generation went off to World War II and later fought in Korea to protect our freedoms. After those wars, they came home to settle down and raise their families. The Baby Boomer generation followed. Now, 10,000 Baby Boomers reach retirement age each and every single day. As the Greatest Generation raised their families, they usually saw the need to make plans to care for their families after they were gone. Death was a constant companion to the Greatest Generation, so they wrote their Last Will and Testament and they bought life insurance to protect their families. I’m an elder law attorney, and attorneys before me helped write their Last Wills and Testaments so the assets of these hard-‐working men and women would go where they wanted them to, once they were gone. Back then, however, no one was really thinking about what would happen if they didn’t die, but instead got sick along the way. So they worked hard, took care of their families, and passed on their legacies. But society was aging and with that, the need increased to take care of this generation as they got older. To help meet the need, the first long term care policies were sold in the late 1970s. But long term care insurance didn’t really catch on until much later. So, while it was easy for Americans to understand the need for life insurance, they shied away from buying long term care insurance. As we age and the kids leave home, often our need for life insurance declines. But as we get older, and in many cases, sicker, our need for long term care insurance increases. Unfortunately, what many don’t understand is that, at this point, until they’re already too ill to get long term care coverage. So in the meantime, many of us have life insurance. It comes in all different forms, from term, to group term, to whole life and others. Yet as we get sick and pass through our own personal elder care journey, we often need coverage to help us stay at home or in assisted living, something life insurance simply wasn’t designed to do. So policy holders often find themselves in a cash crunch with no good way to access the true value in their life insurance policies, at a time when money is needed now for care. Fortunately, in recent years, this has begun to change. Now, if you have a life insurance policy with a death benefit of least $50,000, you may be able to sell the policy and turn it into a source of funds that can be used to keep you at home or to help pay the cost of home based care or in an assisted living facility or even in a nursing home. I have been an elder law attorney for nearly two decades, helping families find ways to pay for the cost of their care as they age. As I think back on the families I could have helped, had long-‐term care funding through life insurance been available, I’m a bit saddened. There are many families who have come to see me over the years where using life insurance to help pay the cost of care would have been a great answer to the problems they were facing. Unfortunately, I can’t turn the clock back to help those families. But I am hopeful that, going forward, more families will understand the opportunity that they now have. You have in front of you a book written by Chris Orestis, one of the pioneers in life care funding. Chris has painstakingly researched the topic and, as a thought leader in Washington, he has worked tirelessly in state capitols across the country to educate political leaders and consumers on the benefits of life care funding.

Read this book carefully. Discuss it with those you trust and see if you don’t come to the same conclusion I have, namely that life care funding can be a great way to help families who have a loved one with an insurance policy to pay the cost of their long term care. Proper use of life insurance through life care funding can allow you to stay in the community longer and, frankly, that’s something we all want to do. William G. Hammond, JD The Elder & Disability Law Firm, PA Overland Park, Kansas and Lee’s Summit, Missouri

Introduction https://www.youtube.com/watch?v=h35Powhwkp8 The costs of long term care are increasing every year, but most families do not understand what they will be confronting when it is their time to start paying for care. Too many people wait until they are in the midst of a crisis situation before they start trying to figure out how the world of long term care works. Do you know the differences between Medicare and Medicaid, and what you must do to qualify? Do you know the differences between Home Care, Assisted Living and Nursing Home care? Do you know what is and is not covered? Are you aware of the problems with policy loans? Do you know how long term care insurance works and if you qualify? Also, did you know that a life insurance policy can be converted to pay for Assisted Living, Home Care and all other forms of long term care? Instead of allowing a policy to lapse or be surrendered, the owner has the legal right to convert the policy into a Long Term Care Benefit Plan. The only problem is—despite that fact that millions of people own life insurance, too few people understand their rights as the owner. Life insurance policies are assets. Think of them just like a house. The owner of a house wouldn’t just move out without selling their property. Why should the owner of a policy “move out” without first finding out what they real value of their policy is? Long term care is a very expensive proposition. The costs of Home Care and Assisted Living can easily hit $5,000 every month and that has to be paid out-of-pocket. Families can go broke trying to provide for a loved one, and the shame is that if there is a life insurance policy it can be easily converted to help cover these costs. There are literally millions of seniors that are struggling with the costs of long term care who will abandon a life insurance policy without realizing they could be holding the solution to their problem in their hands. In this book it is my pleasure to share with you the stories of families that overcame financial crisis in their lives using this option (enjoy the videos from families telling their stories in their own words); discuss exactly what a Long Term Care Benefit Plan is and how it works; provide helpful information about Medicare and Medicaid; give some guidance on the various forms of senior care; explain more about the legal rights of owning life insurance; provide news clips from the press and about what consumer advocates have been saying; detail laws in the states that have been introduced to make sure policy owners are being informed about this option before they abandon a policy to go onto Medicaid; present a collection of Blog posts; and delve into the “Silver Tsunami” generation and how they are impacting the future of our country. Questions you will be able to answer after reading this book: • • • • •

What is a Long Term Care Benefit Plan and how does it differ from Long Term Care Insurance or a policy loan? What types of life insurance can be converted and what forms of senior care are covered? How does a policy owner qualify to enroll in a Long Term Care Benefit Plan? How does the process work and how long does it take? What are the legal rights of the owner of a life insurance policy?

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What kind of political support has emerged for this method of funding senior care? How does life insurance impact Medicaid eligibility and is this a Medicaid qualified spend-down?

I thank you for taking the time to read this book and encourage you to share it with others. It is my hope that as we continue to spread the word about the options people have to pay for senior care services, they will discover that they can remain financially independent and in control of where they will receive the form of care that they want and deserve.

Chapter 1: No More Secrets Seniors and their families are already struggling with the costs of everyday living, if you add the costs of long term care to the picture it is a back breaking scenario for most Americans. Statistics show that the majority of people do not understand the various forms of long term care, the different means to pay for it, and most do not plan for long term care until they are hit by a health care crisis. Adding to the crisis is the fact that Baby Boomers are now reaching Social Security and Medicare age 65 at a rate of over 10,000 people a day, and 70% of them will need long term care services before they pass away. In fact, over 10 million people require long term care of some form every year. In the midst of growing demand and dwindling resources, it is now all too clear that the long term care funding crisis has arrived. The problem for America is the most basic of economic principles-- Supply and Demand: “Demand” of seniors that need (or will need) long term care is growing at a much faster rate than the “Supply” of resources (dollars) to pay for their care. This demographic-economic reality has forced the government to reduce benefit levels and raise barriers to entry for the three primary entitlement programs: Social Security, Medicare and Medicaid. According to the Kaiser Family Foundation, Medicaid spent $427 billion in 2011, paying for 43% of all long term care services. The harsh reality is that more of the responsibility to fund retirement and long term care is being pushed back on the individual (and their family). Owners of life insurance owners have been in the dark for years that a policy can be used to pay for Senior Care. Millions of seniors needlessly abandon life insurance policies in the final years of their lives because they either can no longer afford the premium payments, and/or they are looking at eventually qualifying for Medicaid. Life insurance counts against the policy owner for Medicaid eligibility. To qualify, the policy must either be surrendered to be spent down on care or it is subject to probate recovery action by the state to claw back all Medicaid dollars spent on care out of an eventual death benefit. The shocking truth is that 88% of all life insurance policies will either lapse or be surrendered before ever paying out a death benefit. But a little known fact is that it is the legal right of every life insurance policy owner to convert their policy into a Long Term Care Benefit Plan to pay for Senior Care. The Supreme Court ruled over 100 years ago that life insurance is personal property and the owner has the same property ownership rights with a policy as they do a home or any other asset. A homeowner would not abandon their home for nothing in return and the owner of a life insurance policy does not need to either. A policy owner has numerous guaranteed rights for the use of their policy including converting the policy into a Long Term Care Benefit Plan. VIDEO: How to Pay for Senior Care http://www.youtube.com/watch?v=aLfe5e79yi8 I founded Life Care Funding in response to this unfair lack of information for seniors, and created the Long Term Care Benefit to help them in response. Surrounded by a dedicated team of senior care advocates, our company’s mission is to give seniors an alternative to lapsing or surrendering a policy and going straight onto Medicaid. Seniors don’t want to become a ward of the state and go onto Medicaid. We knew we could help seniors in a time of difficulty maintain financial independence and dignity when it comes to making elder care decisions. We also knew that by delaying the time before a person would go onto Medicaid, we would be helping tax payers save money and states struggling with ballooning Medicaid budgets.

Seniors have an overwhelming desire to remain independent, and do not want to become a burden on their family or a ward of the state by entering Medicaid. Unfortunately, the current system to fund long term care has evolved into one that encourages seniors to impoverish themselves and move towards Medicaid as quickly as possible. For the wealthy, long term care costs can be absorbed. For the poor and disabled, government subsidized care is available. But what about the majority of middle class Americans that need access to long term care today? One solution available to millions of people is to convert a life insurance policy instead of abandoning it.

National Average Costs Senior Care • Nursing Home- $7,000/mo. ($84,000) • Assisted Living- $3,450/mo. ($41,400) • Homecare- $6,384/mo. ($76,608) *12 hours per day ($19/hr.) Genworth Cost of Care Survey 2013 Four Types of Long Term Care 1. Home Health Care: Living support and care at various levels provided at home by licensed or unlicensed workers as well as designated family members. Home health is primarily private pay, but Medicare and Medicaid will reimburse some forms of “medically necessary” home health services provided by licensed practitioners for people meeting eligibility requirements. Private pay is accepted and will cover a wider variety of medical and non-medical services. 2. Assisted Living: Housing for the elderly or persons unable to live independently that will provide mid-level custodial care, medication support, lifestyle activities, transportation, and meals. Assisted Living is a “private pay” environment not covered by Medicare and Medicaid. 3. Nursing Home: Higher level “skilled or SNF care” provided in a licensed facility with transfer agreements in place with hospitals for people requiring long term medical or nursing care; or short term rehabilitation services for injured, disabled, or sick persons. Medicare will reimburse 100 days of “medically necessary” rehabilitation care, and Medicaid will reimburse long term care for those people meeting medical necessity and eligibility requirements. Private pay is accepted and will allow for more choice such as private rooms, enhanced lifestyle options, and wider selection of locations. 4. Hospice: A specific form of care to manage pain, symptom relief, and emotional/spiritual support provided to people typically in the final 6 months of life as certified by a physician. Hospice care can be provided at home, in an assisted living community, a nursing home, or a free standing care center. Medicare and Medicaid will reimburse for certain levels of Hospice care. Private pay is accepted and not subject to requirements to be medically re-certified every 60 days. The reality is that long term care is an expensive proposition, but the owners of a life insurance policy are holding a financial solution in their hands that they can use to address their needs today.

Chapter 2: It’s your right: Use a Life Insurance Policy to Stay in Control of your Care A Long Term Care Benefit Plan is a tangible and protected asset to pay for Senior Care — it is not a long-term care insurance policy or a policy loan. The Benefit Plan is a unique financial option for seniors because there are no waiting periods, no care limitations, and there are no costs or obligations to apply. Additionally, seniors are no longer responsible for premium payments. A policy owner has the legal right to enroll in the Benefit Plan and immediately begin directing monthly payments to the coverage of their choice of Home Care, Senior Housing, or Long Term Care. Converting a life insurance policy allows the senior to remain private pay — meaning they are not reliant on public assistance and can choose the form of care that they want. A Long Term Care Benefit is considered a “qualified spend-down” of a life insurance policy asset for Medicaid eligibility. A life insurance policy is legally recognized as an asset of the policy owner and it counts against them when qualifying for Medicaid. If a policy has anything more than a minimal amount of cash value (usually in the range of $1,500-$2,000) it must be liquidated. That money is then allocated and spent down on the cost of care before the owner will qualify for Medicaid. Medicaid requires applicants to disclose whether they own a life insurance policy and, if so, to provide full policy details. Failure to disclose and comply is fraud and will disqualify a Medicaid applicant. The policy conversion option applies to any form of life insurance policy including universal, whole, term and group. The value of the conversion is not limited to cash value and in fact is based on the death benefit. This means the senior will receive a maximum amount of value toward their Long Term Care Benefit Plan. The Benefit Plan is an irrevocable, FDIC insured benefit account administered by a third-party ensuring the funds are protected for the recipient of care. The Benefit Plan can be adjusted to meet the changing needs of the enrolled, and provides a final expense benefit to help cover funeral expenses. Lastly, if the insured should pass away before the benefit amount is exhausted, any remaining balance is paid to the family or named beneficiary as a final lump sum payment. “Since 2007, Life Care Funding has been converting life insurance policies to help families pay for Senior Care across the United States”, explained Chris Orestis, CEO of Life Care Funding-- the company that created this funding option for seniors, “and for example we worked with a family whose father owned a $250,000 term life policy he was going to let lapse. Instead we converted it into a $150,000 Life Care Benefit that allowed their father to remain at home receiving professional Home Care for the rest of his life-- and avoided ever having to go onto Medicaid or move into a nursing home. There was even a substantial unused portion of the benefit at his death that went back to his family” Video: Meet Carrie and hear her story http://www.youtube.com/watch?v=OyAhN7Ez1c0

Caption: Carrie fought hard to do all she could during her father’s health and financial downturn. He needed expensive care and she turned to Life Care Funding for help. Hear in her own words how turning her father’s life insurance policy into a Long Term

Care Benefit made the difference for their entire family. Today, assisted living communities, nursing homes and home health companies across the country accept this funding method. They have embraced this option because it allows them to quickly help families who need financial assistance without the added steps, approvals and restrictions that come with Medicaid. Political leaders have also begun to realize the cost-saving implications by extending the time a person can privately pay before becoming Medicaid eligible through this conversion option. Converting life insurance to pay for Senior Care is a big win for seniors and their families, providers of elder care services and for the tax payer of every state in the country. At a time when seniors and their families are struggling with how to afford the high costs of senior care, and state budgets are looking for ways to save money, converting a life insurance policy to pay for long term care instead of abandoning it for nothing in return makes much more sense.

Chapter 3: Why would I convert my life insurance policy into a Long Term Care Benefit Plan? A Long Term Care Benefit Plan is a Medicaid qualified financial vehicle to address an immediate need for long term care services. Instead of lapsing or surrendering a life insurance policy, the owner will get a much higher value for their asset that will help them pay for the expensive out-of-pocket costs of long term care. Unlike a long term care insurance policy which a client must purchase years in advance or a policy loan that charges interest and must be paid back; the Long Term Care Benefit converts an existing life insurance policy from a death benefit that may have been purchased many years ago into a living benefit to meet today’s needs. There are no exclusions, no wait periods, no more premium payments, nothing to pay back and the policy will no longer be an asset that will count against the owner for future Medicaid eligibility. Enrolling in the Benefit is a 4 step process that takes about 30 days: 1) The policy owner will sell their life insurance policy for a percentage of the face value. 2) The proceeds from the policy sale are placed into an irrevocable, FDIC insured “Control Account” in the name of the policy owner. 3) At the direction of the account holder, the Account will make automatic monthly payments to their choice of care provider.(a) 4) The entire amount placed in the Account is protected and can only spent on long term care services (every account reserves a funeral benefit).(b) (a) The monthly amount and provider of care can be changed with advanced notice; (b) Any remaining Account balance in excess of the funeral benefit in the case of a death is paid to one or more named “Account Beneficiaries”. The Long Term Care Benefit Plan was specifically designed to help families pay for long term care services. It is an irrevocable, FDIC insured “control account” held and administered at a nationally chartered Bank and Trust institution. The entire proceeds from the policy settlement are placed into the account and then at the direction of the family, the monthly payments are made directly to their choice of care provider. If care needs change, and the family wants to change care provider and/or the monthly payment amount all they need to do is provide 30 days’ notice to adjust the account instructions. From the time of acceptance of the life settlement offer, the account can be established and funded, with payments to the care provider starting within 30 days. Because the policy is sold for its fair market value and the funds are preserved in the account to only be spent on care, it is considered a Medicaid qualified spend-down inside the look back period. It is also a tax advantaged account because the funds are tax deductible, and if the insured meets the HIPAA definition of chronic or terminal, than the funds are exempt from federal taxation. This program is endorsed by over 5,000 Assisted Living, Home Care and Nursing Home companies. National companies such as Emeritus Senior Living, Brookdale Senior Living, Visiting Angels, Genesis Healthcare, and Sunrise Senior Living all offer this program in their communities across the United States to families with life insurance policies that are looking for financial assistance.

Chapter 4: Wasted dollars that could be funding Long Term Care The impact of the long term care funding crisis is felt most directly by the middle class. People that have worked their entire lives, and have planned responsibly for the future through the purchase of a life insurance policy find themselves penalized when they reach the point that they require long term care. Compared to the 153 million Americans that own a life insurance policy, less than 10 million own a long term care insurance policy. Medicaid is the default funder of long term care services in this country, but the exploding population of seniors and a stagnant economy are significantly challenging the viability of the program to keep pace.

According to the National Association of Insurance Commissioners (NAIC), there is $27.2 trillion worth of inforce life insurance policies in the United States—that is triple the amount of home equity today! The insurance industry prices and makes profits from the fact that millions of people are paying billions of dollars in premium payments for policies that in the end will be abandoned. Too few policy owners’ possess the knowledge of how insurance works, and when their original need for a policy has run its course the vast majority of owners simply abandon what may be one of the most valuable assets they own—for nothing in return. In 2009, Conning and Company analyzed the emerging use of life insurance policies to pay for long term care as part of their Strategic Research Series. In the paper they surmised, “Both state governments and the long term care industry are working to find a solution to the budgetary threat to Medicaid created as aging Baby Boomers impoverish themselves in order to have the state pay for long term care. What is new is the concerted effort to integrate life insurance policies and long term care providers. This new source of funds represents a potential alignment of long term care providers and state governments”. In 2013, Conning and Company released a follow up study focusing on the growing market for using life insurance policies to pay for long term care. In this paper they cited Life Care Funding as the acknowledged pioneer of this approach: “Life Care Funding has been pioneering the use of life settlements in the long-term care market for several years. That effort appears to have paid off. One indication of how the partnership between a life settlement group and the assisted living company can work is seen in Emeritus Senior Living, a major assisted living care company. Its website explains how life insurance can help fund the cost of care.” And as these reports predicted, political leaders across the country have grown increasingly frustrated with the idea that people are abandoning billions of dollars’ worth of life insurance to jump onto Medicaid when converting those same policies could keep them private pay for years. The National Conference of Insurance Legislators (NCOIL) understood the implications of billions of dollars of life insurance policies in the hands of seniors being discarded when they unanimously passed the Life Insurance Consumer Disclosure Model Act in November, 2010. This consumer protection law requires that life insurance companies inform policy holders above the age of 60, or with a terminal or chronic condition, of approved alternatives to the lapse or surrender of a life insurance policy including “conversion to a Long Term Care Benefit Plan”. Every owner of a life insurance policy has the legal right to convert their policy to pay for long term care while still alive— but too few consumers and long term care professionals are aware of this fact.

Seniors want to remain financially independent and able to choose the form and place of care they want. They do not want to become a burden on their family or a ward of the state by entering Medicaid. Unfortunately, the current system to fund long term care has evolved into one that encourages seniors to impoverish themselves and move towards Medicaid as quickly as possible. Life insurance policies are unqualified assets for Medicaid eligibility and the owners must either surrender a policy with cash value to qualify, or if a policy is maintained it will become subject to asset recovery action by the state to claw-back monies spent by Medicaid on behalf of the individual. It would make more sense for the owner of a life insurance policy to convert its use to a living benefit that extends their ability to remain private pay and delays their entry onto Medicaid instead of encouraging them to abandon their policy to expedite their entry onto Medicaid.

Chapter 5: Dangerous Liabilities Lurk for Families and Advisors in Long Term Care Planning Aggressive legal threats across the country have become a real concern to insurance agents, elder law attorneys, and families facing long term care funding questions Introduction Unexpected and dangerous threats in the form of professional and personal liability have emerged in the wake of the growing LTC funding crisis. Law suits and mandated claw-back actions have been brought against families in attempts to recover monies spent on long term care. Insurance and legal advisors have also been sued by clients in response to fiduciary responsibility issues about options to fund long term care, or how to derive the highest value from a life insurance policy. Laws to recover LTC expenditures These aggressive legal actions take root from State Filial Responsibility Laws and federal Estate Recovery Mandates that have existed for decades. In 1993, the federal government passed a mandate in the Omnibus Budget Reconciliation Act of 1993 (OBRA ‘93) that requires states to implement a Medicaid estate recovery program, and the Deficit Reduction Act of 2005 (P.L. 109-171, DRA) contained a number of provisions designed to strengthen these rules. OBRA gives states the authority, and the obligation, to sue families via probate court to claw-back Medicaid dollars spent on a loved one’s long term care. In this law, states are required to sue the estates of Medicaid recipients, “ to recover, at a minimum, all property and assets that pass from a deceased person to his or her heirs under state probate law, which governs both property conveyed by will and property of persons who die intestate. Such property includes assets that pass directly to a survivor, heir or assignee through joint tenancy, rights of survivorship, life estates, living trusts, annuity remainder payments, or life insurance payouts”. The government has had the authority to take legal action against families to recover Medicaid dollars for over two decades. In fact, Medicaid recovers hundreds of millions from families every year, but as budget pressures increase estate recovery actions are becoming even more aggressive. Ironically, a high profile legal action recently taken against a family to recover costs spent on long term care was not initiated by the government, but was instead successfully undertaken by a nursing home company. In 2012, John Pittas, a 47 year old restaurant owner was sued by a nursing home company for $93,000 in expenses incurred by his mother over a six month period after she was denied Medicaid eligibility. The Superior Court of Pennsylvania (Health Care & Retirement Corporation of America v. Pittas Pa. Super. Ct., No. 536 EDA 2011, May 7, 2012) found in favor of the nursing home based on “filial responsibility law” (which is on the books in 28 states), and the son was forced to re-pay the entire costs for his mother’s care. The court finding even granted discretion to the nursing home company to seek payment from any family members it wished to pursue. (Forbes, 5/21/2012) Legal risks and exposure

But the legal exposure families’ face is only the beginning of the danger as the threat assessment level continues to rise. Insurance agents and elder law attorneys are also at great risk for not providing adequate advice (and at a minimum not documenting their recommendations) about long term care planning to clients. “Professional

advisors need to realize that the world we are working in has changed and become more dangerous for them,” said Don Quante, President of America’s First Financial Corp in St. Louis, MO. “I was in Florida recently where I saw attorney billboards advertising for people with long term care needs to call them. I placed a call only to discover that they were not providing planning services; what they were really doing is recruiting seniors in financial distress to sue their past advisors for insufficiently preparing them to pay for long term care.” There are a number of new funding options that are commonly used to help people pay for long term car, and it would be expected that any licensed agent or attorney would be current on these options and include these as part of any long term care planning discussion. If an individual is a war time veteran (or their spouse) they could be entitled to Veteran’s Aide and Attendance Benefits. Also, there are state specific voucher and waiver programs, as well as senior care specific and/or home equity based loan programs available to consider. And, if a person owns a life insurance policy they may be able to sell the policy into a tax exempt Long Term Care Benefit Plan. Millions of seniors own life insurance policies and have no idea that they can be “converted” or sold through a life settlement into a Long Term Care Benefit Plan. This has been a common practice for a number of years, and every senior care provider in the country accepts this form of payment. Once enrolled, the owner of a Long Term Care Benefit account can use the funds tax-free to pay for their choice of home care, assisted living, memory care, nursing home care, or hospice. According to elder law attorney William G. Hammond of Overland Park, Kansas, "A perfect storm has arrived that is changing the way long term care will be delivered and financed in our country. Baby boomers are entering their retirement years at a time when the economy is struggling to regain its footing after the Great Recession of 2008. The conversion or sale of life insurance policies to help pay for the cost of long term care is one of the strategies which can be utilized to help pay for the cost of care. Smart attorneys and advisors will be well-served to recognize this innovation and to use it to help their clients remain at home or in the community longer." For families with the need to pay for long term care, but are unable or unwilling to keep their life insurance policy in-force by maintaining premium payments, converting it into a Long Term Care Benefit Plan is a much better choice than abandoning a policy. At this point, advisors not discussing this option with clients that own life insurance are exposing themselves to the potential of serious legal liability issues. Policy owners attack A very recent example of what can happen if alternative options to lapse, surrender, or benefit reduction for owners of life insurance can be found in California where a couple filed a law suit in January, 2014 against Lincoln National Life (Larry Grill et al v. Lincoln National Life Insurance Company - California Central District Court). For the first time, a law suit has been filed against an insurance company for “actively concealing” the policy owner’s right to seek a life settlement as an alternative to lapse, surrender of reduction of death benefit. This is a first time ever situation that could establish a groundbreaking precedent when it comes to informing owners of life insurance policies about all of their rights and options to get the maximum value from their asset.

The ramifications for the world of insurance, financial services and long term care planning cannot be overstatedâ&#x20AC;&#x201D;or underestimated. Today, many insurance agents are outright prohibited from discussing the life settlement option for fear of reprisals from insurance carriers. Yet, it is clearly the fiduciary responsibility of an advisor to inform a policy owner of this alternative option to consider. This puts advisors in a very precarious position. For policy owners in search of options to fund long term care, selling a life insurance policy into a Long Term Care Benefit Plan is ignored at great peril by those relied upon to know the market and give sage advice. No sooner said than doneâ&#x20AC;Ś Twelve states have now introduced policy conversion consumer disclosure legislation to educate policy owners about the option to sell a life insurance policy to fund a Long Term Care Benefit Plan and remain private pay. It also codifies the Long Term Care Benefit Plan structure that protects the funds and ensures they will only be used to pay for long term care services in: California, Florida, Kentucky, Louisiana, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Texas, and Washington. Texas was the first to enact this consumer protection legislation into law in June, 2013 followed next by Kentucky in March, 2014. The point of the new disclosure law is to make sure people know they have the legal right in every state to use their life insurance to pay for long term care and remain private pay for as long as possible. The bill ensures that policy owners will be informed of this private pay option, and that they specifically use a Long Term Care Benefit Plan to protect the funds and make sure that they are only used to pay for the long term care services of their choice. This new law does two things: 1. Grants authority to the Medicaid department to inform and educate citizens that they can convert life insurance policies into a Medicaid qualified Long Term Care Benefit Plan to remain private pay as long as possible and choose any form of long term care they want instead of abandoning a policy to go straight onto Medicaid. 2. To qualify, the Long Term Care Benefit Account must be an irrevocable, FDIC insured account that makes payments directly to the care provider; the person must be able to choose the form of care they want; a funeral benefit must be preserved; and if there is any unpaid account balance when the person dies it must go to the designated account beneficiary. States are quickly realizing the savings that can be found for their beleaguered budgets by delaying entry onto Medicaid through the use of life insurance policy conversions into Long Term Care Benefit Plans. State legislative leaders across the country are taking action with these consumer protection disclosure laws to encourage consumers to convert their life insurance to pay for long term care as an alternative to abandoning their policies. Policy owners exercise their legal right to convert an in-force life insurance policy into a Long Term Care Benefit Plan and direct tax-free payments to cover their senior housing and long term care costs. Insurance, financial and legal advisors need to be aware of this option and how to incorporate it into a long term care financial plan. Families with a life insurance policy that is abandoned, only to later discover it could have

been used to pay for long term care, now have the legal precedence behind them to hold their advisor responsible. Where do we go from here? The world of long term care planning is starting to resemble the Wild West where vigilante justice is being extracted by all sides impacted by the long term care funding crisis. Governments have the right to recover funds from families; courts are ruling in favor of corporate interests going after extended family members to claw-back long term care costs; and in turn, families are going after insurers and advisors years after receiving what they perceive to be “actively concealed”, bad, or incomplete advice. Advisors are dedicated to helping clients by finding solutions to their needs and problems. The best way to accomplish this is to provide as much information and access to options as possible. Information should not be withheld or solutions ignored – as they say, “ignorance is not an excuse for the law”. Angry customers are coming back to sue advisors on the basis that it is the advisor’s responsibility to know and inform them about all available options. Simply not knowing about or ignoring an existing market option will not protect an advisor against this growing trend of angry clients facing financial ruin because of long term care costs that they were unprepared to meet. Clients assume advisors are aware of all options in the market that can help them, and expect to be informed so they can make decisions about how to plan and fund their long term care. People want to remain financially independent and in control of their care decisions for as long as possible. People do not want to go onto Medicaid, yet consumers lack awareness and are unprepared for how they are going to cover the costs of Home Care, Assisted Living, Skilled Nursing Care, or Hospice. It is a subject typically ignored until a loved one is in immediate need of care. The writing has been on the wall for a long time. The Baby Boomer crush coupled with the LTC funding crisis is starting to escalate this issue quickly. Consumers want to be private pay and choose the form and place of care that they want. They want to be in control and spare their families financial ruin. Political leaders want to see people remain private pay as long as possible and delay/avoid Medicaid. Providers of long term care services and supports prefer private pay. People with life policies need to be informed that they can turn their policies into a Long Term Care Benefit Plan instead of lapse/surrender. Clearly it is in the best interest of the consumer when they have an advisor that will make sure they are educated about planning for long term care, and that they understand their legal rights and available options. If not, unprepared families are facing possible legal action by the government, and advisors are facing possible legal action from unhappy families.

Chapter 6: Political Support and Media Attention We see it in the news every day. Seniors are living longer; the costs of Senior Care are rising; Medicare and Medicaid is forced to look for cuts to keep pace; and not enough people understand what they are up against, nor are they prepared to financially handle Long Term Care. Numerous studies have shown that this is a topic people ignore. They are not preparing for the eventuality of Senior Care, and most erroneously assume that whatever they want “will just be covered”. For seniors, and the providers of Senior Care services such as Assisted Living or Home Care, this is a big problem. Medicare and Medicaid will continue to be more restrictive in what will be covered and rates will continue to be reduced. Service providers and the people they serve are going to be forced to cope with less government assistance and more reliance on private funding options. The federal and state governments are looking for alternatives in the private market to pay for long term care. Political leaders across the country understand that it is impossible for Medicare and Medicaid to keep pace with demand for long term care services. “Private Pay” has become the holy grail of long term care, and a powerful combination of industry leadership and political action is opening up access for the consumer to this new funding option. State budgets are under siege from Medicaid costs and law makers are frantically looking for savings measures. That is why state governments have focused on the conversion of life insurance policies into protected Long Term Care Benefit Accounts that are only used for Senior Care. “I believe it could be a win for Medicaid service recipients, a win for the fiscal soundness for Medicaid, it could be a win for potential beneficiaries under life insurance policies and I think it could be a win for long-term care service providers," said Jack McRay, a spokesman for the Florida AARP during testimony before the Florida Legislature. The option to convert a policy to pay for long term care is available in all states, and now notification laws are being introduced and passed to make sure people are informed that converting a life insurance policy into a Long Term Care Benefit Plan is an encouraged part of a Medicaid spend-down. To qualify as a Medicaid qualified spend-down, this Conversion law calls for Life Care Funding’s specific Long Term Care Benefit Plan structure to protect the funds and ensure they will only be used for long term care services. “Right now life insurance policies are being abandoned, so the senior can receive Medicaid. If this consumer disclosure law passed, both the state and the policy holder would benefit. It’s pretty innovative. … It should be a win-win all the way around,” said Florida bill sponsor Rep. Jimmy Patronis. The point of the new law is to make sure people know they have the legal right in every state to use their life insurance to pay for long term care. The bill ensures that policy owners will be informed of this private pay option by the state government, and that they specifically use a Long Term Care Benefit Plan to protect the funds and make sure that they are used to pay for the long term care services of their choice. “It saves the state money, because otherwise you would just cash in the value of the life insurance and get $5,000 or something, and go on the Medicaid roll immediately,” Texas bill sponsor Rep. Craig Eiland. “The policyholder benefits because he has cash he can direct to his own care and expenditures.”

This new law does two things: 2. Grants authority to the Medicaid department to inform and educate citizens that they can convert life insurance policies into a Medicaid qualified Long Term Care Benefit Plan to remain private pay and

choose any form of long term care they want instead of abandoning a policy to go straight onto Medicaid. 3. To qualify, the Long Term Care Benefit Account must be an irrevocable, FDIC insured account that makes payments directly to the care provider; the person must be able to choose the form of care they want; a funeral benefit must be preserved; and if there is any unpaid account balance when the person dies it must go to the designated account beneficiary. Specific requirements for the Benefit Plan to be Medicaid Qualified (based on the Life Care Funding model): a) A schedule evidencing the total amount payable, the number of payments and the amount of each payment required to be paid for long term care; b) All proceeds must be held in an irrevocable state or federally insured account; c) The lesser of five percent (5%) of the face amount of the life insurance or $5,000 is reserved as death benefit payable to the estate or beneficiary; d) And, the balance of payments required under the contract unpaid at death of the must be paid to the estate or a named beneficiary. State Bill Numbers Policy Conversion Bills introduced (as of March, 2014): • CA- SB 214 • FL- HB 535 / SB 794 • KY- HB 414 (enacted into law-- 3/14) • LA- HB 545 • MA- SB1977 • ME- LD 1092 • MD- HB 846 • NJ- AB 1075 • NY- SB 5721 / AB 7952 • PA- pending assignment • TX- HB 2383 (enacted into law-- 6/13) • WA- HB 2777

Weiss Ratings Agency-- New Laws Help Seniors Manage Life Insurance “Insurance policies aren’t always the easiest to understand when it comes to the details. And many policyholders aren’t aware they may have the ability to convert a death benefit into a living benefit that will help pay for elder care services. This information will open more elder care options for some seniors, it will also save state budgets millions of dollars. States are looking for ways to reduce the cost of Medicaid, the state and federally funded health care program that helps those that don’t have money to pay for health services on their own.

The value a policy holder receives will be better than letting a policy lapse due to non-payment of monthly premiums or surrendering the policy for cash value. The clear advantage for seniors that avoid Medicaid is the ability to choose the health care services and providers they want rather than have the state make those choices. And many adult children may opt to have the resources to help defray long-term care costs for their parents rather than hold out for a larger inheritance later. This may not be the answer for everyone, but in some cases it can make sense to convert a policy to meet present and future care needs for assisted living, nursing home, home health care, and hospice services.” Legislative History—how a concept became a law In 2009, Conning & Company released a research paper about the evolution of the life settlement industry. In it, they specifically analyzed the growing use of converting life insurance policies to pay for long term care services. They surmised that there would be an alignment of interests between owners of life insurance policies, providers of long term care services and state governments to find ways to encourage the use of the full market value of a life insurance policy to pay for long term care as an alternative to the lapse or surrender of a policy to go onto Medicaid. “What is new is the concerted effort to integrate life insurance policies and long term care providers. This is a recent development involving – Life Care Funding. This new source of funds represents a potential alignment of long term care providers and state governments. Both state governments and the long term care industry are working to find a solution to the budgetary threat to Medicaid created as aging Baby Boomers impoverish themselves in order to have the state pay for long term care.” In 2014, Conning & Company released a follow up study focusing on the growing market for using life insurance policies to pay for long term care. In this paper they cited Life Care Funding as the acknowledged pioneer of this approach: “Life Care Funding has been pioneering the use of life settlements in the long-term care market for several years. That effort appears to have paid off. One indication of how the partnership between a life settlement group and the assisted living company can work is seen in Emeritus Senior Living, a major assisted living care company. Its website explains how life insurance can help fund the cost of care.” In 2010, NCOIL unanimously passed the Life Insurance Consumer Disclosure Model Law. Conversion of a life insurance policy to a Long Term Care Benefit Plan is one of the approved options in the Model Law. "It is imperative that policy holders understand that they have alternatives to merely lapsing or surrendering their policy. The model would require a clear notice to consumers… including conversion to long term care.” NCOIL President Rob Damron (KY). Life Care Funding’s model was used as the basis for the “conversion to long term care” option and Chris Orestis was invited to testify four times before NCOIL legislative committees. In 2011, Connecticut introduced study bill SB-1153 as “an act establishing a task force to study life insurance policy and annuity conversions and the provision of certain notifications by life insurance companies”. In 2012, Hawaii passed study bill, SB-2455 to “establish a task force to assess and make recommendations regarding… means of funding long-term care”. In 2012, Louisiana passed study bill SCR-66, “To establish an advisory work group within the Department of Insurance to examine options that may be available to allow an insured under a life insurance policy or contract holder of an annuity to fund long term care benefits.”

In 2012, the state of Florida passed HB 5001, to “to examine methods to allow an insured under a life insurance policy or the contract holder of an annuity, to convert the policy or annuity to a long term care benefit. The agency shall submit a report of findings and activities of the workgroup, including recommendations and proposed legislation, no later than January 15, 2013.” In 2012, Florida State University Center for Economic Forecasting and Analysis released study analyzing the cost savings of policy conversions to pay for Long Term Care “scored” at $150 million annually. Florida State University Center for Economic Forecasting and Analysis, Scoring Medicaid Savings of HB 1055: Conversion of Life Insurance Policies to Long Term Care Benefit Plans in Florida, published January, 2012 In January 2013, Florida Agency for Health Care Administration (AHCA) releases legislative report and bill language to Florida Legislature recommending use of life insurance policies to defray costs of Medicaid. By 2014, twelve states had introduced Policy Conversion Consumer Disclosure legislation to educate policy owners about this option to remain private pay and to codify the Long Term Care Benefit Plan structure that would protect the funds from the Medicaid Life Settlement and ensure that it would only be used to pay for long term care services: California, Florida, Kentucky, Louisiana, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Texas, and Washington. Texas and Kentucky are the first states to enact the legislation into law. Legislative Advocacy to develop the Law Life Care Funding has worked with the National Conference of Insurance Legislators (NCOIL), the Florida Medicaid Department, the Florida and Texas Health Care Associations, AARP, the insurance industry, and the life settlement industry led by Coventry First and LISA to develop this private pay funding option to provide important consumer protections and ensure that it is recognized as a Medicaid Qualified spend-down. Since 2010, Life Care Funding has testified before NCOIL, the state legislatures of Florida, Texas, Maine, a special joint meeting of the New Jersey Medicaid and Insurance Departments, and provided expert testimony before legislative workgroups in Florida, Louisiana and Maine. Life Care Funding has published numerous studies and spoken across the country about the importance of making sure the owner of a life insurance policy understand that they are better off converting a life insurance policy into a Long Term Care Benefit Plan instead of lapsing or surrendering their policy to go directly onto Medicaid. According to the Florida Health Care Association: Due to the Medicaid spend-down path, seniors currently in need of Medicaid long term care services must either cash surrender or outright abandon their policies. By allowing seniors to use the value of their life insurance policies to pay for much needed Medicaid long term care services, HB 535 / SB 794 will give seniors more choice, including whether to receive care at home for a longer period of time or cover their nursing facility care costs if that type of medical care is more appropriate. States and senior advocates support this option to help families access more private pay dollars for Senior Care services because it is tapping into the maximum present day value of an asset they already own instead of abandoning the asset for little to nothing in return. A $100,000 life insurance policy might have $5,000$10,000 of cash surrender value but the average policy conversion is around 45% of the death benefit which would put $45,000 into their irrevocable; FDIC insured Long Term Care Benefit Account. “Texas was the first state to enact this important legislation to stimulate more private pay dollars by encouraging the conversion of a

life insurance policy into a private market Benefit Plan,” said Rep. Rob Damron (KY), “but they are not the only state to recognize the importance of making sure that the owners of a life insurance policy are informed of their right to convert their policy as an alternative to abandoning the policy and going directly onto Medicaid. We introduced this legislation in Kentucky and expect passage during the 2014 legislative session.” The idea that seniors can convert life insurance policies to pay for Senior Care has also caught the attention of the national media and the Blogosphere. There is a lot of online discussion about this issue, and numerous national publications, radio shows, and TV news programs have been doing stories about the implications of this national movement to help families pay for Senior Care. According to the Wall Street Journal article, States Ease Use of Life Policies to Pay for Elder Care (June 17, 2013): State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long-term care—and lower the Medicaid tab in the process. The states hope to stop people from dropping their lifeinsurance policies in order to qualify for Medicaid. "This focuses on middle-class policyholders with coverage worth $100,000 on average,” said Chris Orestis, chief executive of Life Care Funding LLC of Portland, Maine. "They're not wealthy enough to pay for long-term care for a long time, and they're not poor enough to qualify for Medicaid right away." To keep policy owners from spending settlements frivolously, the bills generally require that the money go straight to an irrevocable bank account used solely to pay for long-term care.

Chapter 7: Long Term Care Benefit Plan Conversion Success Stories Life Care Funding has been helping families pay for the costs of Senior Living and Long Term Care since 2007. Every family that we have been able to help means something very special to us. It always feels good when families stay in touch with our team or when we receive a holiday card. Navigating the long term care maze can be very confusing and frustrating—we know because we do it every day. It is easy to get confused about the differences between the various forms of care and what is covered and what is not. People just don’t spend time thinking about or planning for long term care. And it’s understandable—it’s not a pleasant topic and one that is easily put off until another day. Unfortunately, for most families the conversation about long term care usually starts because of a health setback with a loved one. Families often don’t start having this discussion until they are at the side of a loved one in the hospital facing discharge to a skilled nursing rehabilitation facility. Hard decisions need to be made in these circumstances and understanding the options to pay for care will be one of the biggest decisions necessary. In these examples, every family found themselves in this kind of a situation when they contacted Life Care Funding. Fortunately, we were able to work with them to quickly understand their unique situation, examine their life insurance policy before they lost it and then turn it into a Long Term Care Benefit Plan to help pay for their care needs. Maybe one of these stories will sound familiar to you…. VIDEO Meet Gary and hear his story http://www.youtube.com/watch?v=XMXBmL8DQGg Caption: Gary was a successful insurance agent for MetLife. After his wife passed and

the time came to fund Homecare he knew his best option was to use his life insurance policy to pay for the monthly expenses. Hear in his own words how he did not want to be a burden on his children’s families and he turned to Life Care Funding to make it possible. A Medicaid spend down stops an eviction A family contacted Life Care Funding about their mother who was in a nursing home and was facing eviction. The daughter became overwhelmed with handling her mother affairs. They owned a life insurance policy with a small amount of Cash Surrender Value. The Medicaid office informed them that until they liquidated the policy and spent it down on care she would be unable to qualify for Medicaid. They already owed the nursing home money but they family was able to reach a win-win arrangement to keep their mother from having to move out. They converted the life insurance policy to enroll in the Long Term Care Benefit Plan for a higher amount than the cash surrender value. They were then able to extend their mother’s stay by spending down at a Medicaid qualified private pay rate while they applied for Medicaid to pay for the costs once the Life Care Funding Benefit was finished. Converting a policy keeps a loved one at home

A wife had been caring for her husband at home on her own. She has been trying to get financial assistance to help with the care of her husband as it was becoming too difficult to care for him any longer. They owned a life insurance policy they could no longer afford to keep paying premiums and were going to let it lapse. A Geriatric Care Advisor told her about the better option of converting the policy into a Long Term Care Benefit with Life Care Funding. With the benefit set up thirty days later, she was able to hire a helper to assist with his care and keep him at home with her. A Son helps his Mother move into assisted living The applicantâ&#x20AC;&#x2122;s son called to inquire about converting a life insurance policy they were planning to abandon. His mother was unable to live at home alone any longer and they were looking into Assisted Living but needed financial help. Fortunately, their mother owned a life insurance policy. He completed a Life Care Funding application and submitted it along with policy information, authorizations and medical records. The family moved their mother into the Assisted Living community she was hoping to reside in with a number of her friends and relatives. Within 30 days, the application was approved and the monthly Long Term Care Benefit payments began that same day. By adding the monthly benefit payment to what they already had available to pay for her care, instead of moving her into their home and trying to hire home health aides, they were able to keep their mother in the community for over two years. Son helps his mother convert policy and move into assisted living before he deploys for Afghanistan A family was struggling with how they would pay for the costs of moving their mother into an assisted living community. Increasing the pressure was the fact that her son was going to be leaving for Afghanistan within 90 days for a tour of duty with the military. Their mother owned a life insurance policy that was going to lapse if they did not immediately make an expensive premium payment. The family was trying to determine what all of their options with the policy might be when the assisted living community suggested that they contact Life Care Funding to discuss options and consider converting the policy into a Long Term Care Benefit plan. Before the policy could lapse, Life Care Funding converted the policy into a Benefit Plan that allowed them to immediately move their mother into the community. There was still time for her son to help her move-in and get settled before he left for Afghanistan later that month. Benefit payments started in assisted living and then moved to cover a nursing home Medicaid Qualified Spend-down A husband and wife were living together in assisted living when his wife passed away. His condition began to deteriorate as these circumstances often do. It became necessary to move him to a nursing home but he owned a life insurance policy that was counting against his Medicaid eligibility. The assisted living community referred the family to Life Care Funding so the life insurance policy could be converted into a Long Term Care Benefit. He was able to remain in the assisted living community for a little longer with the Benefit Payments covering the costs. Once he was moved to the nursing home, the monthly payment amount was increased to cover the escalating costs of care. The remaining Benefit was spent-down in the nursing home until Medicaid took over. A Term policy is converted to pay for home hospice care A young, single woman suffering from cancer could not care for herself any longer but wanted to remain at home. She had a term life policy that she no longer needed and was going to allow it to lapse. She was

introduced to Life Care Funding and discovered that she could convert her policy into a Long Term Care Benefit plan that could help cover her home healthcare needs. Once her policy was converted, she was able to purchase a specialty bed and remain at home to receive hospice care in a private and dignified setting. A retired insurance agent converts life insurance to fund his care (twice) The applicant’s daughter called about her father needing help with the costs of long term care in an assisted living community. They were running out of money but did not want to have to relocate their father into a nursing home. Her father had been a career life insurance agent and suggested that they contact Life Care Funding and look at trading-in one of his policies for a Long Term Care Benefit plan. He owned a number of policies and asked Life Care Funding to evaluate the conversion value of one of the policies they were going to abandon. Within 30 days they were able to set up a Long Term Care Benefit plan that would contribute every month towards the money the family was spending on his care. This extended the amount of time by almost two years that they could afford for their father to remain in the community. The family contacted Life Care Funding a second time after the first benefit period concluded to convert another of their father’s policies. He had another policy that they quickly converted to extend the time he could remain in place. Their goal is to extend the amount of time he will be able to remain in the community by combining their income and the ongoing monthly benefit payments. Turning Frustration into a Long Term Care Benefit Their mother was already living in an assisted living community. The family was growing frustrated that they kept receiving lapse notices on her life insurance policy from the insurance company. The premium amount kept changing and was growing expensive. They were planning to not send in another premium payment and letting it lapse when the assisted living community told them they could convert it into a Long Term Care Benefit plan. They contacted Life Care Funding and converted the policy before they needed to make another premium payment. Instead of lapsing the policy they set up a monthly benefit payment towards their mother’s assisted living costs and never had to make another premium payment again. A life insurance policy is converted to make up a financial gap to pay for assisted living A family was coming up a little short in their ability to pay for their mother to move into an assisted living community. She owned a life insurance policy and they were going to surrender it for the remaining cash value. The community director told them that they should first contact Life Care Funding to see if they could convert the policy for more than they would get by surrendering it for cash value. The family was approved to enroll their mother for a Long Term Care Benefit Plan that was 6 times greater than the cash value they would have received. They were able to combine the monthly benefit amount with what they could afford to cover and move their mother into the assisted living community where they all wanted her to live. Converting two life insurance policies covers outstanding balance in arrears and monthly expenses for husband and wife The business office of an assisted living community called about a couple that was currently in residence. They had limited income and were in arrears with a growing unpaid balance. They both have LTC policies but the husband does not yet qualify for benefits to start. They were receiving limited benefits from the wife’s LTC policy but it was not enough to take care of both them. They applied to convert a life insurance policy the husband owned and a life insurance policy the wife owned for immediate Long term Care Benefit Plans to

cover them both. Within 30 days they were approved to enroll with a one-time benefit payment made to satisfy the outstanding balance and then a twelve month combined benefit period was established to pay for the gap that LTC policy was not able to cover for both of them. Family Testimonials Enrollee

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I wanted to thank you for all the help you gave us in finding a financial solution for providing him the care that my sister and I felt he needed. Your assistance was very much appreciated and allowed us to be sure he was safe and well taken care of. Thank you so much for all your help and support though out this extremely challenging time for our family, bbut I know I speak for my sister when I say we sincerely appreciate all your time and attention to all our questions. You have been a pleasure to work with and always so good about getting back to us in a timely manner.

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Thank you very much for all your help you and your company had helped us during our difficult time!

Elbert A

Great news! Although Monday would have been just fine.... thank you so much for taking time to inform me on a Saturday morning instead of waiting!! You just made my weekend so much better! My heart felt gratitude to you. Thank you so much. You have given me wonderful news today that I needed so badly. This will help my father and his finances as well as my own! And now I can be caught up financially and back on schedule. He has been in care for over 4 years. Terrible disease and very expensive. He has not known me since I put him in there. Again thank you so much for calling and the great news you have given me today!! Thank you so much! And I have and will continue to tell everyone I know about your company. My heart felt gratitude to you. Thank you so much.

Assisted Living Community Executive Director

Thank you for the information. I appreciate the way you are helping us address the family’s financial needs. As this is our first opportunity to work with Life Care Funding, we are learning ways to streamline and assist families in accessing this resource in a more timely manner in order to avoid the uncomfortable moments caused by “unresponsive” insurance companies. You all have been wonderful to quickly respond to my questions and the needs of everyone here and the family.

Elizabeth T

Thank you very much for your assistance in helping my mother. GOD Bless You.

James B

Thank you again for all of your help and hard work.

Assisted Living Community Executive Director John P

I’ve enjoyed working with you!

Thank you so much for help. This illness and the financial stresses are very overwhelming. I appreciate the kindness you showed me during this process.

Ellen H

THANK YOU FOR YOUR PATIENCE!!! Thanks so very much for all your work on this. I appreciate it!!!!!

Carrie S

My father was upset that he was a financial burden on me and my husband causing a lot of strain on our marriage. Life Care Funding took all that away. Your company moved swiftly and got the job done with your long term care benefit plan. I cannot express to you the burden off of me. With your program he is in his condo, looking out his window, two care takers are tending to his every need. If he wants toast at 4:00am he gets it, if he wants a back rub he gets it. Your company is the real deal- in a world where it seems like no one cares. You treated my father and myself with respect, love, concern –I will be forever grateful!!

MaryLu A

Thank you so very much for all your help! I really do appreciate it! Rainbows and Hugs!!! Thank you so much for all you have done for me!

Patricia R

I appreciate all the help you gave us because we never could've afforded the wonderful woman who came to help us these last 8 months. We never could've afforded her care. Thank you soooo much for everything!

Phillip H

I CANNOT EXPRESS MY SINCERE GRATITUDE FOR THE EXTRA MEASURES YOU HAVE GONE TO MAKE THIS HAPPEN FOR ME. Thank you for your helpfulness and for being so responsive.

Jerry A

You have been an 'Angel' for me throughout these last months/days. You will always have a special place in my heart! I never wanted to move her to a state supported nursing home and you helped me make that happen - Thanks for all of your help. You have been great to work with! .....and I meant what I said about what a pleasure it is to work with you. Thank you for your assistance in getting me started on this process

A letter from Carrie Sekulich

September 15, 2010 Mr. Chris Orestis President Life Care Funding Dear Mr. Ores tis, I have been trying to write this letter to you for months. I am taking this opportunity to do it now. Words cannot describe the 5 years in my fathers life and in mine. He went from a vibrant man who owns his own business, apartment buildings, home- to bankrupt, homeless, and sick. Everything he saved for his whole life in 1 year was gone. He was a very frugal and smart business man. My dad was always a planner and if I was not going through this with him I would never believe that this could happen! His sickness and operations and the closing of his business took all his financial security away. I was taking care of him for the three years of his sickness physically and financially. I bought him a nice condo to live and we were managing. Two years ago my husbands successful electrical business of 25 years disappeared with the economy. I could no longer afford my dad's expensive medicines and

his living expenses. He was growing more ill and needed more care and I could not afford assisted living. Then I saw your ad online and it saved our lives! Your representative Jane Kremer is an angel! She talked with me everyday and became a friend. She listened to my emotional breakdowns on my bad days with my dad, just like a family member. We had some problems and you and your company created a program for me and my father and you gave him back his dignity! He was upset that he was a financial burden on me and my husband causing a lot of strain on our marriage. Life Care Funding took all that away. Your company moved swiftly and got the job done with your long term care benefit plan. I cannot express to you the burden off of me. I still am going through my dad dying, but I don't have to worry every night how I am going to care for him, how can I get his medicine, where I am going to come up with the money to meet his medical needs as he grows weaker each day. With your program he is in his condo, looking out his window, two care takers are tending to his every need. If he wants toast at 4:00am he gets it, if he wants a back rub he gets it. His family has the opportunity to come and spend time with him. My heart is filled with joy because he is my daddy and I want the best for him until the day he dies! When I first approached this idea, not anyone in my circle of friends/family heard of such a thing, and quite frankly, they called it "ambulance chasing". I told them I felt differently because we had no money to take care of dad and I would welcome the help and would not mind converting his life insurance policy which we could not afford to keep. Many of my business friends said I would never get that kind of money for the policy. Well they were wrong. I get the money every month on time and I would be happy tell talk to any of your clients who are skeptical. Your company is the real deal- in a world where it seems like no one cares. You treated my father and myself with respect, love, concern -Iwill be forever grateful!! One more thing Chris, Jane needs a raise! She is what every CEO prays for to represent his company! She is priceless! Thank You and God Bless You, Carrie Sekulich & Larry Hunter Proud Recipients of Life Care Funding

Chapter 8- Press interviews about the Silver Tsunami and the long term care funding crisis 1) Radio Interview WOCA â&#x20AC;&#x153;The Sourceâ&#x20AC;? talk radio of Ocala on station 1370 AM services the Gainesville-Ocala http://www.lifecarefunding.com/media/woca-interviews-chris-orestis/ 2) Broadcast Interview ProducersWEB Part 1: http://www.youtube.com/watch?v=5f2q-JiuqrM Part 2: http://www.youtube.com/watch?v=orew8bHONtQ 3) Skype Radio Interview This Week in America http://www.youtube.com/watch?v=5Cz5yyXfHY&feature=c4-overview&list=UUZrEhg89PvLFQCiiWx3RmWw 4) Harvard Club Presentation http://www.youtube.com/watch?v=Q_Zsvn_L2js

5) Print Interview Producers E Source Q: We have been watching numerous states introduce legislation about converting life insurance policies to help people pay for long term care before they would go onto Medicaid by enrolling them first in a Long Term Care Benefit Plan. What is a Long Term Care Benefit Plan? A Long Term Care Benefit Plan is the conversion of an in-force life insurance policy into a pre-funded, irrevocable Benefit Account that is professionally administered with payments made monthly on behalf of the individual receiving care. This option extends the time a person would remain private pay and delays their entry onto Medicaid. By obtaining the fair market value for the life policy, and then at the direction of the policy owner putting the funds into an irrevocable bank account which can only be administered third-party to pay for Medicaid/Medicare qualified long term care services; the Long Term Care Benefit Plan is a regulated and Medicaid qualified financial vehicle to help cover the costs of long term care. Q: Is legislation necessary for policy owners to be able to convert their life insurance into a Long Term Care Benefit Plan? What is the goal of this law passed in Texas and introduced in ten states? The owner of a life insurance policy has the legal property ownership right to convert their policy into a Long Term Care Benefit Plan in every state and no new legislation or regulation is required for a policy owner to access this financial option. The legislation would empower the Medicaid Department to inform policy owners that they have this right as an alternative to lapse or surrender of a policy to go directly onto Medicaid. Because the policy proceeds are locked up in an irrevocable, FDIC insured bank account that can only be administered to pay for the costs of care, the Benefit Plan is a Medicaid qualified spend-down of the life policy asset. The point of the Long Term Care Benefit Plan is that is keeps a person private pay and off of Medicaid for as long as they are spending down the funds in their Benefit Account. As long as the funds from the policy

conversion are keeping them private pay there will be no cause for “Medicaid Payback (also known as asset recover action) because Medicaid dollars would not have been spent on the individual during the Benefit period. The consumer notification laws are to make sure people are being informed that they can convert a life insurance policy into a Long Term Care Benefit Plan and that it is an already accepted part of a Medicaid spend-down. Political leaders, advocacy groups and providers of long term care services all want to make sure people know they have the legal right in every state to use their life insurance to pay for the long term care services of their choice. Q: What does the legislation require for a policy conversion to be a Medicaid qualified spend-down? Key elements of the “Private Option” Long Term Care Benefit Plan include: • A schedule evidencing the total amount payable, the number of payments and the amount of each payment required to be paid for long term care; • All proceeds must be held in an irrevocable state or federally insured account; • The lesser of five percent (5%) of the face amount of the life insurance or $5,000 is reserved as death benefit payable to the estate or beneficiary; • And, the balance of payments required under the contract unpaid at death of the must be paid to the estate or a named beneficiary. Q: How is this policy conversion option regulated? What kind of protections are in place for the consumer who enrolls in a Long Term Care Benefit Plan? Converting a life insurance policy into a Long Term Care Benefit Plan provides multiple layers of consumer protections: • The transfer of ownership of life insurance policies conforms to the rigorous regulatory standards that govern life settlements in each state. • The irrevocable, FDIC insured Benefit Account is held by a nationally chartered bank & trust company and must conform to federal and state banking regulations. • Because the account is irrevocable and can only be spent on long term care services, the Benefit Plan is administered as a Medicaid qualified spend-down. • Seniors are specifically protected by numerous federal and state elder laws and regulations governing the rights and care of seniors. Elder abuse (both physical and financial) is a serious crime and providers of long term care services are among the most highly regulated and scrutinized entities in the United States. o Texas seniors for example are protected by: § 102.003 Texas Human Resources Code A life insurance policy owner has the legal property ownership right to convert their policy into a Long Term Care Benefit Plan in every state in America. Q: Does the owner of a life insurance policy get a good value for their policy when converted into a Long Term Care Benefit Plan? Every year billions of dollars’ worth of life insurance policies is needlessly abandoned by seniors seeking Medicaid eligibility. Seniors lapse or surrender a life insurance policy because they either can no longer afford premium payments or they are preparing for Medicaid eligibility and they abandon the policy because it is an unqualified asset that will count against them. For a policy owner looking for an alternative to abandoning their

policy and accessing private-pay dollars for long term care, the option to convert their life insurance policy into a Long Term Care Benefit Plan will allow them to procure the true, fair market value of their policy and spend it down in a Medicaid compliant manner. As long as the individual remains private pay they can choose whichever form of long term care they desire: home health, assisted living, or nursing home care and are not constrained to whatever Medicaid reimbursed service they are eligible to receive. Q: Is this a good option for state Medicaid programs struggling with budget problems? The Conversion of a life insurance policy into a Long Term Care Benefit Plan delays entry onto Medicaid. Typically, when a life insurance policy owner applies for Medicaid, they will either surrender or lapse the policy to qualify for Medicaid as quickly as possible. But if the same applicants convert their policy for its fair market value to enroll in a Long Term Care Benefit Plan, they will remain private pay and off of Medicaid for months, if not years. By delaying entry onto Medicaid through a Medicaid qualified spend-down of the policy asset, the state will save tax payer dollars. In 2012-2013, Florida State University released an economic impact study analyzing this use of life policy conversions to pay for long term care and determined that approximately $150 million per year would be saved by extending the time a Medicaid applicant would remain private-pay before they became eligible. Q: Does the Long Term Care Benefit Plan preserve anything for the policy owner’s estate? Anyone who converts their life insurance policy to enroll in a Long Term Care Benefit Plan has the dual estate protection of final expense “funeral” benefit reserve of 5% of the death benefit or $5,000, whichever is the lesser, to provide a funeral benefit payment to the Account’s named beneficiary. Also, should the enrollee pass away with additional funds unused funds in their Benefit Account, the remaining balance is paid directly to the enrollee’s named beneficiaries. Enrollees and/or their beneficiaries are assured to receive the full Benefit amount even if the client dies before all monthly payments have been made. Q: What type of life insurance qualifies for conversion into a Long Term Care Benefit Plan? Will this option help most people looking to fund long term care? Life insurance policies of any type (term, universal, whole, group) with $50,000 of death benefit and above, qualifies for conversion into a Long Term Care Benefit Plan. Once the policy has been converted, the enrollee can select any form of long term care they desire: home health, assisted living, or nursing home care. Unlike life or long term care insurance, the Long Term Care Benefit Plan is a unique financial option for seniors because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, no requirement to be terminally ill, and there are no premium payments. Q: Is there a potential conflict of interest or “moral hazard” between the providers of care and the seniors using life insurance policies as a liquid asset to pay for long term care? When a life insurance policy is converted into a Long Term Care Benefit Plan, there is an immediate alignment of interests between the enrollee, the provider of long term care services, and the tax payer. The enrollee is able to remain private-pay and choose their preferred from of long term care service provider; the long term care service provider would prefer to receive private pay funds for as long as possible; and the tax payers are saving money the longer a senior can remain private pay. The provider of long term care services has no vested

interest in the life insurance policy (that would be a conflict of interest and a regulatory violation that would threaten their license) and it is in the interest of the care provider to receive payments for as long a time period as possible. The care provider has a fiduciary and regulatory responsibility to their patient and the question of â&#x20AC;&#x153;moral hazardâ&#x20AC;? does not exist. Q: What is the typical size of a policy owned by a senior who would look to this option to help fund long term care? What is the potential size of this market? 153 million Americans own $27.2 trillion worth of life insurance. Every year 10 million people receive long term care services in the U.S. Medicaid spent $425 billion on long term care reimbursements in 2011. With such a massive pool of life insurance policies in-force, and 10,000 Baby Boomers turning 65 every day, the size of the senior population that own life insurance policies and are looking for alternative means to pay for long term care is substantial. Life Care Funding enrolls people with life insurance policies between $50,000 and $1,000,000 death benefit and the average size policy we work with is usually between $100,000 and $250,000 of death benefit. Q: Is ownership of a life insurance policy an obstacle to Medicaid eligibility? How many Medicaid applicants might own a policy that would count against them? The Government Accounting Office (GAO) released a study in 2007 analyzing assets owned by Medicaid applicants and the impact on eligibility. This study determined that 38% of Medicaid applicants owned a life insurance policy that would impact eligibility. For policy owners that have no cash value (term or universal/whole with no built-up value) that keep a life insurance policy and enter Medicaid; their estate would be subject to federally mandated asset recovery action to claw-back what had been spent by Medicaid on care out of the death benefit through probate action. Q: What determines if a policy would count against a Medicaid applicant? A life insurance policy is legally recognized as an asset of the policy owner and it counts against them when qualifying for Medicaid. If a policy has anything more than a minimal amount of cash value (usually in the range of $2,000) it must be liquidated and that money spent towards cost of care before the owner will qualify for Medicaid. All Medicaid applications specifically ask if the applicant owns life insurance and full policy details. Failure to disclose and comply is fraud. Q: What if a policy owner wanted to keep their policy and go onto Medicaid anyway? Couldnâ&#x20AC;&#x2122;t a state just allow a policy owner to go onto Medicaid and keep their policy? The owner of any form of life insurance is exposed to either Medicaid eligibility or Medicaid asset recovery considerations. A life insurance policy with anything more than a minimal amount of cash value must be surrendered and spent-down on care; conversely, a policy that is kept in-force by a Medicaid recipient is subject to federally mandated asset recovery actions. The rules governing Medicaid eligibility and the treatment of assets are not easily remedied. Facing this dilemma, owners of life insurance policies too often lapse or surrender a policy to qualify for Medicaid as quickly as possible without considering alternatives such as the

conversion of their policy into a Long Term Care Benefit Plan which will sustain them as a private pay patient over the course of an extended, Medicaid qualified spend-down. Q: How is the Long Term Care Benefit Plan administered? The Benefit Plan is held as an irrevocable account by an FDIC insured, nationally chartered Bank & Trust company, and the monthly benefit is administered third-party by a licensed Benefit Administration company. 1. First, the policy owner voluntarily directs a licensed Provider that the entirety of the proceeds from their policy sale conversion is moved from an escrow account and into their irrevocable, Benefit Account held by an FDIC insured, Chartered Bank & Trust Company. 2. Second, the enrollee provides specific instructions that the irrevocable account be used only to make monthly payments directly to their choice of long term care provider (home health, assisted living, and nursing home) and monthly payments are administered third-party by a licensed Benefit Administrator to ensure it remains a Medicaid qualified spend-down. Q: Who are the “winners” from converting a life insurance policy into a Long Term Care Benefit Plan? There are three clear winners with “Private Market” Policy Conversions: 1. The policy owner and their family win because they are able to obtain the fair market value for their life insurance policy and use the proceeds in a Medicaid qualified spend-down to extend the time they are private pay before going onto government assistance. This financial independence allows a senior to choose the form and setting of long term care they want which gives them choice, dignity and quality of life; and this provides peace of mind and financial relief to the entire family. 2. The provider of long term care services wins because they are operating under extremely thin margins and any private pay dollars they can receive for their services translates to higher quality services for everyone under their care. 3. The state of Texas’ Medicaid program and the tax payers all win because the longer a person can remain private pay before becoming Medicaid eligible translates into critical budget/tax savings. Q: Can you give a couple of examples of families that have used this policy conversion option to help pay for their long term care? 1) An applicant’s son called to inquire about converting a life insurance policy they were planning to abandon. His mother was unable to live at home alone any longer and they were looking into Assisted Living but needed financial help. Their mother owned a $100,000 life insurance policy. He completed a Life Care Funding application and submitted it along with policy information, authorizations and medical records. The family moved their mother into the Assisted Living community she was hoping to reside in with a number of her friends and relatives. Within 30 days, the application was approved and the $2,000 monthly Long Term Care Benefit payments began that same day. By adding $2,000 a month to what they already had available to pay for her care, instead of moving her into their home and trying to hire home health aides, they were able to keep their mother in the community for over two years. $35,000 Total Benefit

$2,000 Monthly Benefit 15 month Benefit Period $5,000 Funeral Expense Benefit

2) A family was struggling with how they would pay for the costs of moving their mother into an assisted living community. Increasing the pressure was the fact that her son was going to be leaving for Afghanistan within 90 days for a tour of duty with the military. Their mother owned a $95,000 life insurance policy that was going to lapse if they did not immediately make an expensive premium payment. The family was trying to determine what all of their options with the policy might be when the assisted living community suggested that they contact Life Care Funding to discuss options and consider converting the policy into a Long Term Care Benefit plan. Before the policy could lapse, Life Care Funding converted the policy into a Benefit Plan that allowed them to immediately move their mother into the community. There was still time for her son to help her move-in and get settled before he left for Afghanistan later that month. $39,000 Total Benefit $2067.50 Monthly Benefit 15 month Benefit Period $5,000 Funeral Expense Benefit Â

Chapter 9: Frequently Asked Questions-- What is a Long Term Care Benefit Plan? A Long Term Care Benefit Plan is the conversion of an in-force life insurance policy into a pre-funded, irrevocable tax-exempt Benefit Account that is professionally administered with payments made monthly on behalf of the individual receiving care. This option extends the time a person would remain private pay and delays their entry onto Medicaid. It is a unique financial option for seniors because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, no requirement to be terminally ill, and there are no premium payments. Policy owners use their legal right to convert an in-force life insurance policy to enroll in the benefit plan, and are able to immediately direct tax-free payments to cover their senior housing and long term care costs. The Benefit is administered specifically to be a Medicaid qualified spend-down of the asset proceeds. By obtaining the fair market value for the life policy, and then at the direction of the policy owner putting the funds into an irrevocable bank account which can only be administered third-party to pay for Medicaid/Medicare qualified long term care services; the Long Term Care Benefit Plan is a regulated and Medicaid qualified financial vehicle to help cover the costs of long term care. Converting a life insurance policy into a Long Term Care Benefit Plan provides multiple layers of consumer protections: • The transfer of ownership of life insurance policies conforms to the rigorous regulatory standards that govern life settlements in each state. • The irrevocable, FDIC insured Benefit Account is held by a nationally chartered bank & trust company and must conform to federal and state banking regulations. • Because the account is irrevocable and can only be spent on long term care services, the Benefit Plan is administered as a Medicaid qualified spend-down. Q: What types of life insurance qualify for conversion into a Long Term Care Benefit Plan? A: The conversion option applies to any form of life insurance: Universal, Whole, Term, and Group. The value of the conversion is based solely on the death benefit, and cash value is not a factor in determining the conversion value of a life insurance policy. Q: What forms of long term care qualify? A: The Benefit Plan will pay the following monthly expenses directly to the health care provider: • Nursing Home • Assisted Living • Hospice Care • In-Home Nursing/Health Care

Q: Is there a Funeral Benefit? A: Yes, all Benefit Accounts reserve 5% of the death benefit or $5,000, whichever is the lesser, to provide a funeral benefit payment to the Accountâ&#x20AC;&#x2122;s named beneficiary. Q: Are there any fees or obligations to apply? A: No, there are no application fees and no obligations to apply. Once a policy is converted by the owner, the Long Term Care Benefit payments begin immediately and the enrollee is relieved of any responsibility to pay any more premiums. Q: How long does the enrollment process take? A: The typical enrollment time is 30 days. The actual time to complete the process will vary on the applicantâ&#x20AC;&#x2122;s ability to provide the necessary requirements for review such as: signed application and authorizations, copy of life insurance policy, last two years of medical records, and offer/enrollment packet. Q: What happens if the enrollee dies before all of the Long Term Care Benefit is paid out? A: Should the enrollee pass away with additional funds remaining in their Benefit Account, the remaining balance is paid directly to the enrolleeâ&#x20AC;&#x2122;s named beneficiaries. Enrollees and/or their beneficiaries are assured to receive the full Benefit amount even if the client dies before all monthly payments have been made. Q: Is the enrollee actually transferring the ownership of the life insurance policy? A: Yes, the enrollee will transfer all ownership and beneficiary rights to the life insurance policy to enroll in the Long Term Care Benefit Plan. From the moment the Benefit Plan is established, the Benefits Administrator will begin making monthly payments to the appropriate health care provider as well as all future premium payments on the life insurance policy. The enrollee is no longer responsible for premium payments and the policy is no longer considered an asset that will count against them for future Medicaid eligibility. Q: Which states can a policy be converted? A: A life insurance policy owner has the legal property ownership right to convert their policy into a Long Term Care Benefit Plan in every state in America. Q: How is a Long Term Care Benefit Plan regulated? A: The policy transaction is specifically designed to conform to the secondary market regulations that govern life settlement/viaticals; and the Benefit is administered specifically to be a Medicaid qualified spend-down of the asset proceeds. By obtaining the fair market value for the life policy, and then at the direction of the policy owner putting the funds into an irrevocable, FDCI insured bank account which can only be administered thirdparty to pay for Medicaid/Medicare qualified long term care services; the Long Term Care Benefit Plan is a regulated and Medicaid qualified financial vehicle to help cover the costs of long term care.

Q: Is a Long Term Care Benefit Plan Medicaid qualified or tax advantaged? A: Yes, because the policy is sold for its full market value, and the funds are protected in an irrevocable account that is only used to pay for long term care services it is both a Medicaid qualified spend-down and a tax advantaged account. 1) Tax Status: In many cases, the proceeds received from converting a life insurance policy insuring the life of a chronically or terminally ill individual into a Long Term Care Benefit Plan will not be subject to U.S. federal income tax. As a general rule, proceeds from the sale of a life insurance policy are subject to U.S. federal income tax; however, the Internal Revenue Code provides special exemptions for sales of life insurance policies insuring the lives of individuals who are terminally ill or chronically ill. In the case of a terminally ill insured, the proceeds from the sale of the policy will not be subject to U.S. federal income tax regardless of how the proceeds are used. And, if the insured is chronically ill, the proceeds will not be subject to U.S. federal income tax so long as they are used solely to pay for qualified long-term care services. 2) Medicaid Qualified Spend-Down: According to the Center for Medicare and Medicaid Services (CMS), transferring ownership of a life insurance policy for less than its fair market value would be a violation of Medicaidâ&#x20AC;&#x2122;s asset transfer and look back requirements. A policy can be surrendered for its cash value to be spent down on care or a policy can be sold for its market value and the benefit of that proceeds can be used to pay for long term care as a qualified spend down. The Long Term Care Benefit Plan is a Medicaid qualified spend-down because the policy receives fair market value and the proceeds are only used to pay for long term care services. (Chris Orestis is not a CPA and Life Care Funding does not give tax advice. Families considering a Long Term Care Benefit Plan should seek independent counsel) Q: How is the Long Term Care Benefit Account safe-guarded? A: The Benefit Plan is an irrevocable; FDIC insured Long Term Care Benefit account held by a nationally chartered Bank & Trust and then administered by a licensed, third party benefit administration company ensuring that the funds are protected and only used for the recipient of care. The account also has the added protection for the enrollee of paying any remaining balance to a named account beneficiary and/or providing a final expense benefit to help cover funeral expenses. Q: How is the Long Term Care Benefit Plan administered? A: The Benefit Plan is held as an irrevocable account by an FDIC insured, nationally chartered Bank & Trust company, and the monthly benefit is administered third-party by a licensed Benefit Administration company. 3. First, the policy owner voluntarily directs a licensed Provider that the entirety of the proceeds from their policy conversion is moved from an escrow account and into their irrevocable, Benefit Account held by an FDIC insured, Chartered Bank & Trust Company. 4. Second, the enrollee provides specific instructions that the irrevocable account be used only to make monthly payments directly to their choice of long term care provider (home health, assisted living, and nursing home) and monthly payments are administered third-party by a licensed Benefit Administrator.

Chapter 10: Did you Know? https://www.youtube.com/watch?v=peOsFRy_yJw The costs of long term care increase every year, and most families do not understand what they will be confronting when it is their time to start paying for care. Too many people wait until they are in the midst of a crisis situation before they start trying to figure out how the world of long term care works. There are many aspects of long term care and how to pay that people just don’t know. Did you know that a life insurance policy can be converted to make immediate payments for Assisted Living, Homecare and all other forms of Long Term Care? Instead of allowing a policy to lapse or be surrendered, the owner has the legal right to convert the policy into a Long Term Care Benefit Plan. Please enjoy this series of short “Did you know” videos addressing a variety of aspects of long term care and how to pay for senior care. Topics covered include the legal rights of owning a life insurance policy and how to convert it into a Long Term Care Benefit Plan, what types of policies will qualify and what forms of care are covered, what are the different types of long term care and what are the various funding options out there, and what kind of consumer protections should you be aware of and what resources you should know about.

Did you Know videos and caption for each https://www.youtube.com/watch?v=x2uElJdOoNQ Did you know that 10,000 Baby Boomers turn 65 every day and that 70% of people over the age of 65 will need long term care in their lifetime? Families across the United States are struggling with how to pay for the costs of long term care. Not enough people plan for the almost certain eventuality that they will need to pay for long term care for themselves or a loved one. The costs of long term care increase every year. The monthly costs of Homecare or an Assisted Living community can easily reach $5,000 and can last 3-5 years. Long Term Care insurance won’t cover this and neither does Medicaid. Almost half of people who will require long term care in their life will end up in a nursing home. But, Medicare will only cover the first 100 days of rehabilitation in a nursing home; after that you either need to have private pay resources or go onto Medicaid if you can qualify. One overlooked solution that is in the hands of millions of Americans is converting a life insurance policy into a Long Term Care Benefit Plan that can pay for any form of Homecare, Assisted Living, Memory Care or Nursing Home Care. Before abandoning a life insurance policy, the owner should always find out what the conversion value of the policy is first. Insurance agents, legal professionals or the staff at an assisted living community, homecare company or a nursing home can help you find out more information on how to use a life insurance policy to help pay for long term care expenses for yourself or a loved one.

https://www.youtube.com/watch?v=VtmkgaiDYPs Did you know any type of life insurance policy can be converted to pay for any form of long term care? All types of life insurance can qualify to be converted into a Long Term Care Benefit including term life policies, whole life, universal life and group life. Cash value does not matter in a policy conversion because it is the death benefit that is being converted into a â&#x20AC;&#x153;living benefitâ&#x20AC;?. There are no costs or obligations to apply for a policy conversion. The underwriting process is simple, and the entire enrollment from beginning to end takes about 30 days. Once a policy has been converted and the Long Term Care Benefit is set up, monthly payments immediately start being made to any form of senior care that is desired. The Benefit will pay for Homecare, Assisted Living, Memory Care, or Nursing Home and Hospice care. The Benefit Plan is designed to be flexible to meet the changing needs of care. For example, the Benefit could start out at $1,000 a month for Homecare services but then switched at a later time to $5,000 a month to pay for Assisted Living if the person needs for care have changed. Thousands of senior care providers offer this funding option to help families pay for care, and some of the biggest Assisted Living and Homecare companies in the United States work with Life Care Funding every day to help families in need of care. https://www.youtube.com/watch?v=JvfJ09tN9y8 Did you know it is quick and easy, and there are no fees to enroll in a Long Term Care Benefit Plan? Life Care Funding does not charge any fees and there are no obligations to apply for the Long Term Care Benefit Plan. The application is a very short from that takes about 5 minutes to complete. If a person has an in-force life insurance policy with a death benefit range of $50,000-$1,000,000 they could qualify to enroll in the Long Term Care Benefit. Term life, Universal life, Whole life and Group life all qualify to be converted into a Long Term Care Benefit. The entire enrollment process takes about 30 days from start to finish with monthly benefit payments being made to the personâ&#x20AC;&#x2122;s senior care provider of choice. A person can select any form of senior care they want such as Homecare, Assisted Living, Memory Care, Skilled Nursing or Hospice and the Benefit account is flexible so it can be adjusted to move from one care provider to another, or the monthly Benefit amount can adjusted as care needs change. The Benefit Plan will also provide a final expense payment to help with funeral costs and if a person should pass away with any money still in their Benefit account, the entire balance will be paid to their family or designated account beneficiary. The Long Term Care Benefit Plan is a Medicaid qualified financial option to address an immediate need for long term care services. Instead of lapsing or surrendering a life insurance policy, the owner will get a much higher value that will help them pay for the expensive out-of-pocket costs of long term care.

https://www.youtube.com/watch?v=3A-5YrovBJA Did you know every Homecare, Assisted Living and Nursing Home company in the country accepts funding from a Long Term Care Benefit Plan? Life Care Funding is endorsed by over 5,000 Assisted Living communities, Homecare providers and Nursing Homes across the country that offer the Long Term Care Benefit to families as a way to help the pay for care. Policy owners can also learn more about how to qualify for a Long Term Care Benefit Plan through their financial, insurance or legal advisor who would be happy to assist in a policy conversion. A Long Term Care Benefit Plan is a protected account that makes monthly payments automatically to the care provider of choice. As long as the Benefit Account is in use, the person receiving care is considered â&#x20AC;&#x153;private payâ&#x20AC;?. Private pay individuals remain in control of their own decisions and do not have to go onto Medicaid. Private pay individuals are also preferred by Homecare providers, Assisted Living communities and Nursing Homes-- and for the most part Homecare and Assisted Living only accept Private pay. Seniors want to remain financially independent, and do not want to become a burden on their family or a ward of the state by entering Medicaid. Unfortunately, the current system to fund long term care has evolved into one that encourages seniors to impoverish themselves and move towards Medicaid as quickly as possible. For the wealthy, long term care costs are easily covered. For the poor and disabled, Medicaid is available. But what about the majority of middle class Americans that need access to long term care today? One solution available to millions of people is to convert a life insurance policy instead of abandoning it so they can remain private pay and access any form of care that they want. https://www.youtube.com/watch?v=9COv3dN0Mb0 Did you know a Long Term Care Benefit Plan is a Medicaid qualified spend-down that helps a policy owner stay private pay as long as possible? A life insurance policy is an asset of the policy owner and it counts against them when applying for Medicaid. But, by converting an existing life insurance policy to a Long Term Care Benefit plan, the owner is spending down the asset towards their cost of care in a Medicaid compliant manner while still preserving a portion of the death benefit for their family. A Long Term Care Benefit Plan is the conversion of an in-force life insurance policy into an irrevocable, FDIC-insured Benefit Account that makes monthly senior care payments on behalf of the individual receiving care. This option extends the time a person would remain private pay and delays their entry onto Medicaid. When a person is private pay, they can choose the form of care they want and remain financially independent. Assisted Living and Private Duty Homecare do not accept Medicaid or Medicare. Surveys show that people mistakenly think Medicare will cover their long term care needs. The fact is that Medicare will only cover the first 100 days in a nursing home and most often it is Medicaid that will end up covering

care in a nursing home. If a person goes onto Medicaid it means they have become a ward of the state because they are below the poverty line and they are not able to choose the form or place of care that they want and the person will typically have to share a room. People prefer to remain private pay and in control of their health care choices. Converting a life insurance policy into a Long Term Care Benefit Plan is a Medicaid qualified spend-down as it keeps a person private pay and off of Medicaid for as long as possible. https://www.youtube.com/watch?v=3DF2osXUpXU Did you know itâ&#x20AC;&#x2122;s your legal right to convert a life insurance policy into a Long Term Care Benefit Plan? Life insurance is legally recognized as an asset and your property ownership rights are guaranteed by the Supreme Court. The Long Term Care Benefit Plan is a unique financial option for seniors because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, no requirement to be terminally ill, and there are no premium payments or anything to pay back. Policy owners use their legal right to convert an inforce life insurance policy to enroll in the benefit plan, and are able to immediately direct payments to cover their choice of senior housing and long term care costs including homecare, assisted living, memory care and nursing home care. In recent years, state legislatures and advocacy groups have been working together to introduce laws making sure that policy owners are informed that they can convert their life insurance into a Long Term Care Benefit Plan. Consumer protection disclosure laws championed by Life Care Funding have been introduced in numerous states to make sure people are informed that instead of abandoning a life insurance policy to go onto Medicaid, they have the legal right to convert the policy into a Long Term Care Benefit Plan and choose any form of care that they want. We are proud that these consumer protection measures are based on Life Care Fundingâ&#x20AC;&#x2122;s program and we have helped to write the bills and have been invited to provide expert testimony in numerous states. Advocacy organizations such as the American Health Care Association, the Assisted Living Federation of America and the AARP in Florida have all spoken out in favor of this approach to funding long term care. https://www.youtube.com/watch?v=dt16u1x0Zyk Did you know a Long Term Care Benefit Plan is not a loan on the policy or Long Term Care Insurance? A Long Term Care Benefit Plan is not long term care insurance, and it is not a policy loan that costs fees and interest and must be paid back. When a policy owner converts their life insurance policy into a Long Term Care Benefit Plan, there are no fees, no premium payments, no interest charges and nothing ever needs to be paid back. The policy owner is actually obtaining the maximum present day value of the policy and protecting the funds in an

irrevocable Benefit Account that keeps them private pay. The policy is no longer considered an asset that could count against them for future Medicaid eligibility. In a policy loan, in addition to high fees and interest payments, the policy itself is collateral securing the loan and interest, which means that until the loan is paid back the policy remains an asset that counts against the policy owner for future Medicaid eligibility. With a Long Term Care Benefit Plan, the policy owner will never pay fees, interest, and nothing is ever paid back. Enrollment in a Long Term Care Benefit Plan can take as little time as 30 days and will start making immediate payments to cover any form of senior care. Long Term Care Insurance is purchased before a person needs senior care. The younger and healthier a person is when they purchase insurance, the lower the premium payments will be and the more option they will have. A person who would qualify to purchase long term care insurance would be too young and healthy to enroll in the Long Term Care Benefit Plan. By comparison, a person who qualifies to convert a life insurance policy into a Long Term Care Benefit Plan would be too old or sick to buy long term care insurance. If a person owns long term care insurance and life insurance they can convert the life policy and use both together to make sure they maximize their senior care options.

https://www.youtube.com/watch?v=ty2mmPJVECc Did you know that there are four primary forms of long term care? Long Term Care is not a subject that people spend much time thinking about– unless they need it. Until most people focus on the subject, they have a vague sense for the various forms of care and don’t really know the differences between Homecare, Assisted Living, and Nursing Home care. A nursing home– something you visited a long time ago when your grandparents were there? Homecare– care at home? Assisted Living– sort of like a really nice nursing home? Here is a simple breakdown of the four primary forms of long term care to help you better understand what they are– and the differences. Home Health Care: Care at various levels provided at home by licensed or unlicensed workers as well as designated family members. Home health is primarily private pay, but Medicare and Medicaid will reimburse some forms of “medically necessary” home health services provided by licensed practitioners for people meeting specific eligibility requirements.

Assisted Living: Housing for the elderly or persons unable to live independently that will provide midlevel custodial care, medication support, lifestyle activities, transportation, and meals. Assisted Living is a “private pay” environment not covered by Medicare and Medicaid. Nursing Home: Higher level “skilled care” provided in a licensed facility for people requiring long term medical or nursing care; or short term rehabilitation services for injured, disabled, or sick persons. Private pay is accepted and will allow for more choice such as private rooms, enhanced lifestyle options, and wider selection of locations. Hospice: A specific form of care for people typically in the final 6 months of life as certified by a physician. Hospice care can be provided at home, in an assisted living community, a nursing home, or a free standing care center. Private pay is accepted and not subject to requirements to be medically recertified every 60 days. The Long Term Care Benefit covers all of these forms of senior care by converting an existing life insurance policy from a death benefit that may have been purchased many years ago into a living benefit to meet today’s expensive senior care needs. https://www.youtube.com/watch?v=lvJpfaYCarU Did you know Medicare and Medicaid will only cover certain types of long term care, but a person that is “private pay” can choose any form of care they want? People are often confused about the differences between Medicare and Medicaid, how to qualify and what exactly will they pay for. Medicare is for people over the age of 65 that will cover the first 100 days of rehabilitation in a nursing home if a person is discharged from a hospital. Medicaid is for people below the poverty line that meet medical and financial requirements to qualify for care in an approved nursing home. Some Homecare can be covered by Medicare and Medicaid if the person meets the eligibility requirements. Assisted Living is not covered by Medicare or Medicaid. Private pay means a person is paying for their care with savings, investments, private insurance or a Long Term Care Benefit Plan. When a person is private pay they can choose any form of care that they want. If a person wants to be in Homecare or move into an Assisted Living community they can make that decision without worrying about government approvals. When a person converts a life insurance policy into a Long Term Care Benefit Plan the monthly payments will keep them private pay for as long as possible. Also, there are no more premium payments required, and the amount of the monthly payments is set by the family to cover the costs of care, and can be adjusted as needs change. But, because the Benefit Plan is a Medicaid qualified spend-down, if a person exhausts their Benefit account

they can then make a seamless transition over to Medicaid. Finally, the Long Term Care Benefit Plan provides a final expense benefit to help families with funeral expenses and if there is any remaining account balance it will all go to the family.

Chapter 10- Conclusion We have reached the point that we can no longer ignore the realities of an ever growing population that will require long term care, and the diminishing resources to pay for it. People need to arm themselves with information about their options to fund long term care if they are going to maintain dignity and quality in their lives. Government programs such as Medicare and Medicaid will become more difficult to access and the amount of coverage for long term care will continue to be reduced. People able to sustain themselves with private pay dollars will benefit from access to higher-end senior living environments and care providers, greater choice, more control, and less financial impact on loved ones. Those unable to pay for long term care at some level on their own through the use of savings and assets (such as a life insurance policy conversion), or with the assistance of family, will be forced to rely on the government. Medicare only covers a brief period of medically necessary â&#x20AC;&#x153;rehabilitationâ&#x20AC;? care, and Medicaid will only cover those that fall below set poverty levels requiring specific, medically necessary long term care services. People finding themselves in this position will quickly need to adjust their expectations about how little choice they actually have about their long term care options. New approaches to fund long term care must be encouraged, and converting life insurance is an option available to all owners of policies. Due to legislative action taken up by national groups like NCOIL and introduced as laws in states across the country, as well as national media attention from news outlets such as the New York Times and Wall Street Journal; less and less policies will be lapsed or surrendered as seniors and their families learn that life insurance policies they have been abandoning for decades could instead be converted into a Benefit to pay for Senior Care and delay their need to go onto Medicaid. More and more seniors who have paid premiums for years will learn that they have always had the right to convert a death benefit into a living benefit so that they can use the policyâ&#x20AC;&#x2122;s present day value to help pay for Senior Care expenses. This means less policies will be abandoned, but what might be lost in insurance profits will be more than made up for by a true public good for seniors and their families struggling with the costs of Senior Care. Not to mention the millions of dollars in annual savings for tax payers and relief for overly burdened state Medicaid budgets! Over time the insurance industry will embrace the rights of policy owners to decide for themselves the best use of an asset they have been paying for over many years and help those to better understand the hidden value of a life insurance policy as a Benefit to pay for Senior Care. In the meantime, Life Care Funding will continue to fight to make sure that consumers are educated about their rights as a life insurance policy owner; we will continue to tell this story in the press; we will continue to work at the grassroots level with advisors and providers of Senior Care services; we will continue to work with law makers to enact consumer protection laws across the United States; and Life Care Funding will continue to work with seniors and their families day-in and day-out to help them pay for the costs of Senior Care. Meet the Author: Chris Orestis, CEO of Life Care Funding Chris Orestis is an 18 year veteran of both the insurance and long term care industries is co-founder and CEO of Life Care Funding. His career began with senior positions on a number of political campaigns before working in 1993 and 1994 for both the White House and the Senate Majority Leader on Capitol Hill. From that point, he spent the next several years representing the health and life insurance industry as Vice President and Senior

Vice President respectively for the Health Insurance Association of America (HIAA) and the American Council of Life Insurers (ACLI). In 1999, he was awarded the Robert R. Neal Medal by HIAA for distinction and service to the industry. Chris Informed by his perspective on long term care from his family history and the work being done in Washington, DC on health care reform and long term care; he saw the enormous financial crisis facing our country and the families in need of long term care for a loved one. He saw how unfair the long term care system had become-- particularly for middle class Americans and in 2007, decided to take action by launching Life Care Funding. Chris is a nationally known senior care advocate and acknowledged expert on insurance and long term care issues, and is an author and frequent speaker, featured columnist and Contributing Editor to a number of industry publications, including: LifeHealth Pro, National Underwriter, Insurance News Net, Agent’s Sales Journal, Life Insurance Selling, Senior Market Advisor, Long Term Living Magazine, On the Risk, Society of Actuaries, HealthDecisions, ProducersWEB, ISIS, and InsureIntell. Chris was named to the Advisory Board of the 3in4 Need More Association for 2012. He contributed to the 2013 Long Term Care Commission report, and has also testified before national political bodies such as the National Conference of Insurance Legislators (NCOIL) and numerous state regulators and legislatures such as Florida, Louisiana, New Jersey, Maine and Texas. Chris’ family is nationally recognized by the long term care industry as the largest owner/operator of nursing homes and assisted living communities in the state of Maine. Chris is the author of the book “Help on the Way” and has been published on insurance and long term care funding issues over 50 times. His Blog on senior living and long term care funding issues (www.lifecarefunding.com/blog) connects with thousands of readers every month. A passionate fly fisherman, chess player, skier, and fan of New England sport teams; Chris currently resides in Falmouth, Maine with his wife of twenty years, Grace and their four sons. In 2011, he was elected to public office as a member of the Falmouth Town Council.

https://www.youtube.com/watch?v=eQl6CZeHd6k About Life Care Funding Life Care Funding was founded in 2007 to help seniors struggling with the costs of Long Term Care. The vast majority of long term care is paid for by Medicaid. To qualify, the applicant must meet asset and income limits that would put them below the poverty line. A standard practice is to “spend-down” assets to meet these limits. For owners of a life insurance policy, they will often lapse or surrender their policy so that it will not either count against them as an asset, or expose their heirs to asset recover action by the state to claw back the death benefit. We knew there was a better option for seniors that own a life policy than just abandoning an asset that they had made payments on for years. Life Care Funding helps the policy owner convert the policy’s death benefit into a “living benefit” that will allow them to remain private pay and choose the form of care that they want. Life Care Funding was the first to pioneer the concept of converting a life insurance policy into a Long Term Care Benefit Plan. Since our inception, we have enjoyed tremendous support from the long term care industry, the press and political leaders across the country. We have built a network of over 5,000 Home Care, Assisted Living and Nursing Home companies that offer our program across the United States; we have been featured in the Wall Street Journal, New York Times, Kiplinger’s, and numerous industry trade publications; on CBS, FOX, PBS and Bloomberg radio programs among others; speak at industry events across the country; and we have been the model for legislation specifically endorsing the Long Term Care Benefit Plan concept which has

been introduced in the state legislatures of CA, FL, KY, LA, MA, MD, ME, NJ, NJ, PA-- and passed into law in TX in 2013 and KY in 2014. DISCLAIMER Is a Long Term Care Benefit Plan Tax-Free?

In many cases, the proceeds received from converting a life insurance policy insuring the life of a chronically or terminally ill individual into a Long Term Care Benefit Plan will not be subject to U.S. federal income tax. As a general rule, proceeds from the sale of a life insurance policy are subject to U.S. federal income tax; however, the Internal Revenue Code provides special exemptions for sales of life insurance policies insuring the lives of individuals who are terminally ill or chronically ill. In the case of a terminally ill insured, the proceeds from the sale of the policy will not be subject to U.S. federal income tax regardless of how the proceeds are used. And, if the insured is chronically ill, the proceeds will not be subject to U.S. federal income tax so long as they are used solely to pay for qualified long-term care services. In addition, the current estate and gift tax exclusion is more than $5 million. Therefore, unless the insured has an estate in excess of the exemption, any residual amount of the Long Term Care Benefit which remains in the account when the insured dies may pass to the account beneficiary(-ies) tax free. If the policy owner and insured are not the same person then, in the case of a chronically ill insured who passes while funds remain in the Long Term Care Benefit Account, the policy owner will be required to pay U.S. federal income tax on any residual amounts remaining in the account. Please note that the actual tax treatment of the proceeds from the sale of a life insurance policy will depend on many factors, including but not limited to who owns the policy, the health of the insured, the use of proceeds, the size of the estate and the state in which the policy owner lives (for purposes of state taxation). This material does not constitute tax, legal or accounting advice, and neither Life Care Funding, LLC nor any of its agent, employees, or representatives are in the business of offering such advice. The information above cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. Anyone interested in selling a life insurance policy in order to fund Long Term Care Benefits should seek professional advice based on his or her particular circumstances from an independent tax advisor.

Appendix 1-‐ Forms of Long Term Care Q: Who needs Long Term Care? A: Long Term Care is necessary for people not able to complete personal care or other daily activities for themselves, most often as the result of a chronic illness or physical/cognitive disabilities. About 70 percent of people over age 65 will require some type of long-term care services during their lifetime. More than 40 percent will need care in a nursing home. Things that increase your risk or make it more likely that you’ll need long-term care include:

•

Age: The older you get, the more likely it is that you’ll need help.

•

Living alone: If you live alone, you’re more likely to need paid care than if you’re married or single and living with a partner.

•

Gender: Women are more likely to need long-term care than men, primarily because women tend to live longer.

•

Lifestyle: Poor diet and exercise habits increase the chance that you’ll need long-term care.

•

Personal history: Health and family history can increase the chances you’ll need long-term care.

Service and support needs vary from person to person and often change over time.

•

On average, someone who is 65 today will need some type of long-term care services and supports for three years.

•

Women need care longer (on average 3.7 years) than men (on average 2.2 years), mostly because women usually live longer.

•

While about one-third of today’s 65-year-olds may never need long-term care services and supports, 20 percent will need care for longer than 5 years.

If you need long-term care services and supports, you may receive or use one or more of the following:

•

Assistance with personal care or other activities from an unpaid caregiver who may be a family member or friend.

•

Services in your home from a nurse, home health or home care aide, therapist, or homemaker.

•

Services in the community such as adult day services.

•

Care in any of a variety of long-term care facilities.

** Department of Health and Human Services (HHS) National Clearinghouse for Long Term Care Information

Costs of Long Term Care Q: Who Pays for Long Term Care? A: Consumer surveys reveal common misunderstandings about which public programs pay for long-term care services. Many people believe they can rely on Medicare to pay for their long-term care services. However, Medicare only pays for long-term care if you require skilled services or rehabilitative care for a short period of time. Medicare does not pay for non-skilled assistance with Activities of Daily Living, which makes up the majority of long-term care services. You will have to pay for long-term care services that are not covered by a public or private insurance program. Medicaid is a joint federal and state program that pays for the largest share of long-term care services. However, Medicaid only covers you if your income is below a certain level and you meet minimum state eligibility requirements. Such requirements are based on the amount of assistance you need with Activities of Daily Living. Other federal programs such as the Older Americans Act and the Department of Veterans Affairs pay for long-term care services, but only for specific populations and in certain circumstances. Most employer-sponsored or private health insurance, including health insurance plans, covers only the same kinds of limited services as Medicare. If they do cover long-term care, it is typically only for skilled, short-term, medically necessary care. There is an increasing number of private payment options that can help you pay for long-term care services. These include long-term care insurance, reverse mortgages, life insurance options, and annuities. It is important that you understand the differences among the public programs and private financing options for long-term care services. Each public program and each private financing source has its own rules for the services it covers, and its own eligibility requirements, copayments, and premiums. ** Department of Health and Human Services (HHS) National Clearinghouse for Long Term Care Information

2-‐ Legal Rights of Policy Owners Consumer Rights: Converting Life Insurance to Pay Long Term Care Supreme Court Ruling on Life Insurance as Personal Property The Supreme Court case of Grigbsy v. Russell (1911) established the policy owner’s right to transfer or convert an insurance policy. Justice Oliver Wendell Holmes noted in his opinion that life insurance possessed all the ordinary characteristics of property, and therefore represented an asset that a policy owner could transfer or convert without limitation. Wrote Holmes, “Life insurance has become in our days one of the best recognized forms of investment and self-compelled saving.” This opinion placed the ownership rights in a life insurance policy on the same legal footing as more traditional investment property such as stocks and bonds. As with these other types of property, a life insurance policy could be transferred to another person at the discretion of the policy owner or converted to another use. This decision established a life insurance policy as personal property that contains specific legal rights, including the right to: • • • • • •

Name the policy beneficiary Change the beneficiary designation (unless subject to restrictions) Assign the policy as collateral for a loan Borrow against the policy Sell the policy to another party Convert the policy to a Long Term Care Benefit Plan

The right of an individual to name as beneficiary or assign the ownership of a life insurance policy to whomever they should chose was firmly established as a matter of law in 1911 by none other than one of the greatest legal minds in the history of the United States, Associate Justice Oliver Wendell Holmes. Named to the Supreme Court in 1902 by President Theodore Roosevelt upon the recommendation of Senator Henry Cabot Lodge. “…life insurance has become in our days one of the best recognized forms of investment and self-compelled saving. So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner's hands. …the policy having been taken out for the purpose of allowing a stranger association to pay the premiums and receive the greater part of the benefit, and having been assigned to it at once. …it has been decided that a valid policy is not avoided by the cessation of the insurable interest, even as against the insurer, unless so provided by the policy itself.” U.S. Supreme Court GRIGSBY v. RUSSELL, 222 U.S. 149 (1911) 222 U.S. 149 A. H. GRIGSBY, Petitioner, v. R. L. RUSSELL and Lillie Burchard, Administrators of John C. Burchard, Deceased. No. 53.

Argued November 10 and 13, 1911. Decided December 4, 1911. Messrs. Montague S. Ross, John A. Pitts, and K. T. McConnico for petitioner. [222 U.S. 149, 153]

Mr. George T. Hughes for respondents.

[222 U.S. 149, 154]

Mr. Justices Holmes delivered the opinion of the court: This is a bill of interpleader brought by an insurance company to determine whether a policy of insurance issued to John C. Burchard, now deceased, upon his life, shall be paid to his administrators or to an assignee, the company having turned the amount into court. The material facts are that after he had paid two premiums and a third was overdue, Burchard, being in want and needing money for a surgical operation, asked Dr. Grigsby to buy the policy, and sold it to him in consideration of $100 and Grigsby's undertaking to pay the premiums due or to become due; and that Grigsby had no interest in the life of the assured. The circuit court of appeals, in deference to some intimations of this court, held the assignment valid only to the extent of the money actually given for it and the premiums subsequently paid. -- L.R.A. --, 94 C. C. A. 61, 168 Fed. 577. Of course, the ground suggested for denying the validity of an assignment to a person having no interest in the life insured is the public policy that refuses to allow insurance to be taken out by such persons in the first place. A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end. And [222 U.S. 149, 155] although that counter interest always exists, as early was emphasized for England in the famous case of Wainewright (Janus Weathercock), the chance that in some cases it may prove a sufficient motive for crime is greatly enhanced if the whole world of the unscrupulous are free to bet on what life they choose. The very meaning of an insurable interest is an interest in having the life continue, and so one that is opposed to crime. And what, perhaps, is more important, the existence of such an interest makes a roughly selected class of persons who, by their general relations with the person whose life is insured, are less likely than criminals at large to attempt to compass his death. But when the question arises upon an assignment, it is assumed that the objection to the insurance as a wager is out of the case. In the present instance the policy was perfectly good. There was a faint suggestion in argument that it had become void by the failure of Burchard to pay the third premium ad diem, and that when Grisby paid, he was making a new contract. But a condition in a policy that it shall be void if premiums are not paid when due means only that it shall be voidable at the option of the company. Knickerbocker L. Ins. Co. v. Norton, 96 U.S. 234 , 24 L. ed. 689; Oakes v. Manufacturers' F. & M. Ins. Co. 135 Mass. 248. The company waived the breach, if there was one, and the original contract with Burchard remained on foot. No question as to the character of that contract is before us. It has been performed and the money is in court. But this being so, not only does the objection to wagers disappear, bur also the principle of public policy referred to, at least, in its most convincing form. The danger that might arise from a general license to all to insure whom they like does not exist. Obviously it is a very different thing from granting such a general license, to allow the holder of a valid insurance upon his own life to transfer it to one whom he, the party most concerned, is not afraid to trust. The law has no [222 U.S. 149, 156] universal cynic fear of the temptation opened by a pecuniary benefit accruing upon a death. It shows no prejudice against remainders after life estates, even by the rule in Shelley's Case. Indeed, the ground of the objection to life insurance without interest in the earlier English cases was not the temptation to murder, but the fact that such wagers came to be regarded as a mischievous kind of gaming. Stat. 14 George III., chap. 48. On the other hand, life insurance has become in our days one of the best recognized forms of investment and self-compelled saving. So far as reasonable safety permits, it is desirable to give to life policies the ordinary

characteristics of property. This is recognized by the bankruptcy law, 70,1 which provides that unless the cash surrender value of a policy like the one before us is secured to the trustee within thirty days after it has been stated, the policy shall pass to the trustee as assets. Of course the trustee may have no interest in the bankrupt's life. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner's hands. The collateral difficulty that arose from regarding life insurance as a contract of indemnity only (Godsall v. Boldero, 9 East, 72), long has disappeared ( Phoenix Mut. L. Ins. Co. v. Bailey, 13 Wall. 616, 20 L. ed. 501). And cases in which a person having an interest lends himself to one without any, as a cloak to what is, in its inception, a wager, have no similarity to those where an honest contract is sold in good faith. Coming to the authorities in this court, it is true that there are intimations in favor of the result come to by the circuit court of appeals. But the case in which the strongest of them occur was one of the type just referred to, the policy having been taken out for the purpose of allowing a stranger association to pay the premiums and receive the greater part of the benefit, and having been assigned to it at once. Warnock v. Davis, 104 U.S. 775 , 26 L. ed. 924. [222 U.S. 149, 157] On the other hand, it has been decided that a valid policy is not avoided by the cessation of the insurable interest, even as against the insurer, unless so provided by the policy itself. Connecticut Mut. L. Ins. Co. v. Schaefer, 94 U.S. 457 , 24 L. ed. 251. And expressions more or less in favor of the doctrine that we adopt are to be found also in Aetna L. Ins. Co. v. France, 94 U.S. 561 , 24 L. ed. 287; Mutual L. Ins. Co. v. Armstrong, 117 U.S. 591 , 29 L. ed. 997, 6 Sup. Ct. Rep. 877. It is enough to say that while the court below might hesitate to decide against the language of Warnock v. Davis, there has been no decision that precludes us from exercising our own judgment upon this much debated point. It is at least satisfactory to learn from the decision below that in Tennessee, where this assignment was made, although there has been much division of opinion, the supreme court of that state came to the conclusion that we adopt, in an unreported case,-Lewis v. Edwards, December 14, 1903. The law in England and the preponderance of decisions in our state courts are on the same side. Some reference was made to a clause in the policy that 'any claim against the company, arising under any assignment of the policy, shall be subject to proof on interest.' But it rightly was assumed below that if there was no rule of law to that effect, and the company saw fit to pay, the clause did not diminish the rights of Grigsby, as against the administrators of Burchard's estate. Decree reversed. Mr. Justice Lurton took no part in the decision of this case.

Footnotes [ Footnote 1 ] U. S. Comp. St. 1901, p. 3451. United States Supreme Court

3-‐ Medicaid Eligibility: Life Insurance is a Disqualifying Asset Because a life insurance policy is legally recognized as an asset of the policy owner, it counts against them when qualifying for Medicaid. For Medicaid applicants, it has been standard practice to abandon a life insurance policy if it is within the legally required five year look back spend-down period. If a policy has anything more than a minimal amount of cash value (usually in the range of $2,000) it must be liquidated and that money spent towards cost of care before the owner will qualify for Medicaid. All state Medicaid applications specifically ask if the applicant owns life insurance and full policy details. Failure to disclose and comply is fraud. Some states allow for a final expense policy to be kept or transferred to a funeral home (the funeral home would keep the entire death benefit). Medicaid recovery units have become much more forceful about looking for life insurance policy death benefits (declared or undeclared) that have paid out to families after the death of a Medicaid recipient. Medicaid budgets are now facing extreme pressure and asset recovery efforts can be very aggressive. The Government Accounting Office (GAO) determined in a 2007 Medicaid study that 38% of Medicaid applicants owned life insurance policies that needed to be abandoned to qualify for the program. Recovering the entire cost of care through legal action by going after the death benefit payment paid to the estate and surviving family is federally mandated by the Omnibus Budget Reconciliation Act (OBRA) of 1993. This law requires each state to seek adjustment or recovery of amounts correctly paid by the state for people covered by Medicaid. The state must, at a minimum, seek recovery for services provided to a person of any age in a nursing facility, intermediate care facility for the mentally retarded, or other medical institution. States are required to seek recovery of payments from the individual's estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. Converting a life insurance policy into a long term care benefit plan is a Medicaid qualified spend-down. Instead of abandoning the policy and going immediately onto Medicaid, the time a person remains private pay is extended while the present day, fair market value of the life insurance asset is spent-down in a Medicaid compliant fashion—all while preserving a portion of the death benefit for the family during the extended time period. Q: What is the Medicaid Estate Recovery program enacted into law by the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93)? A: According to Health and Human Services (HHS)-Highlights of the 1993 Estate Recovery Mandate: States must pursue recovering costs for medical assistance consisting of: • • • •

Nursing home or other long-term institutional services; Home- and community-based services; Hospital and prescription drug services provided while the recipient was receiving nursing facility or home- and community-based services; and At State option, any other items covered by the Medicaid State Plan.

At a minimum, states must recover from assets that pass through probate (which is governed by state law). At a maximum, states may recover any assets of the deceased recipient. Medicaid Eligibility and Asset Transfer Rules (Order Code RL33593 Congressional Research Service (CRS) Report January 31, 2008) - Eligibility for Medicaid’s long-term care services is limited to persons who meet a

state’s functional level-of-care standards and certain financial standards (i.e., income and asset level tests). Persons qualify for Medicaid in one of the three ways: (1) they have income and assets equal to or below statespecified thresholds; (2) they deplete their income and assets on the cost of their care, thus “spending down”; or (3) they divest of their assets to meet these income and asset standards sooner than they otherwise might if they first had to spend their income and assets on the cost of their care. Since the enactment of the Omnibus Budget Reconciliation Act of 1993, Medicaid’s rules concerning eligibility, asset transfers, and estate recovery have been designed to restrict access to Medicaid’s long-term care services to those individuals who are poor or have very high medical or long-term care expenses, and who apply their income and assets toward the cost of their care. In an attempt to discourage Medicaid estate planning, (a means by which some individuals divest of their income and assets to qualify for Medicaid sooner than they would if they first had to spend their income and assets on the cost of their care), the Deficit Reduction Act of 2005 (P.L. 109-171, DRA) contained a number of provisions designed to strengthen these rules. The DRA lengthens the look-back period from three years to five years for all income and assets disposed of by the individual after enactment. It does not change the look-back period for certain trusts, which was already five years prior to DRA’s enactment. Under this change, asset transfers for less than fair market value of all kinds made within five years of application to Medicaid would be subject to review by the state for the purpose of applying asset transfer penalties. Medicaid Asset Recovery Rules- Omnibus Budget Reconciliation Act of 1993 (OBRA ‘93) requires states to implement a Medicaid estate recovery program. OBRA gives states the authority, and the obligation, to sue families via probate court to claw-back Medicaid dollars spent on a loved one’s long term care. In this law, states are required to sue the estates of Medicaid recipients, “ to recover, at a minimum, all property and assets that pass from a deceased person to his or her heirs under state probate law, which governs both property conveyed by will and property of persons who die intestate. Such property includes assets that pass directly to a survivor, heir or assignee through joint tenancy, rights of survivorship, life estates, living trusts, annuity remainder payments, or life insurance payouts”. http://aspe.hhs.gov/daltcp/reports/estreccol.htm State Filial Responsibility Laws- Filial responsibility laws (filial support laws, filial piety laws) are laws that impose a duty upon adult children for the support of their impoverished parents and can be extended to other relatives. These laws can include criminal penalties for adult children or close relatives who fail to provide for family members when challenged to do so. 28 states and Puerto Rico have filial responsibility laws in place: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia and West Virginia. (Wikipedia) and http://law.psu.edu/_file/Pearson/FilialResponsibilityStatutes.pdf Medicaid’s rules concerning eligibility, asset transfers, and estate recovery have been designed to restrict access to Medicaid’s long-term care services to those individuals who are poor or have very high medical or long-term care expenses, and who apply their income and assets toward the cost of their care. In an attempt to discourage Medicaid estate planning, (a means by which some individuals divest of their income and assets to qualify for

Medicaid sooner than they would if they first had to spend their income and assets on the cost of their care). Since 1993, Medicaid law has required states to recover, from the estate of the beneficiary, amounts paid by the program for certain long-term care, related services and other services at state option. Medicaid Eligibility Q&A Q: Does ownership of a life insurance policy count against an applicant for Medicaid eligibility? A: A life insurance policy is legally recognized as an asset of the policy owner and it counts against them when qualifying for Medicaid. If a policy has anything more than a minimal amount of cash value (usually in the range of $2,000) it must be liquidated and that money spent towards cost of care before the owner will qualify for Medicaid. All Medicaid applications specifically ask if the applicant owns life insurance and full policy details. Failure to disclose and comply is fraud. Some states allow for a final expense policy to be kept or transferred to a funeral home (but the funeral home would keep the entire death benefit). Medicaid recovery units have become much more forceful about looking for life insurance policy death benefits (declared and undeclared) that have paid out to families after the death of a Medicaid recipient. Medicaid budgets are now facing extreme pressure and asset recovery efforts can be very aggressive. Recovering the entire cost of care through legal actions against the estate and surviving family to go after the death benefit payment are common. Q: What options do owners’ of a life insurance policy have when attempting to qualify for Medicaid? A: Medicaid rules are very clear that a life insurance policy is an unqualified asset and counts against Medicaid eligibility. The owner of one or more policies has a variety of options to consider: • A policy with more than a minimal amount of cash value (usually $1,500 or more depending on the state) must be liquidated with the proceeds spent down on care. • A policy with no cash value does not need to be liquidated but the death benefit will be subject to Medicaid recovery efforts to return the amount of money spent on care. • Many states will exempt a “final expense” policy if the full death benefit value is assigned to a funeral home. • Assignment of a life insurance policy for less than its fair market value is a violation of asset transfer rules if done within the 60 month look back period. • A policy owner has the legal right to convert a life insurance policy into a long term care benefit plan at its fair market value and extend their spend down period by covering cost of care while preserving a portion of the death benefit until exhausted. Q: How does a policy conversion work? A: By converting an existing life insurance policy to a Long Term Care Benefit plan, the owner is spending down the asset towards their cost of care in a Medicaid compliant manner while still preserving a portion of the death benefit. If the insured passes away while spending down via their Benefit Plan enrollment, any remaining death benefit would pay out to the designated beneficiary without being subject to Medicaid recovery. Enrollees able to now use non-Medicaid dollars are allowing themselves to access the best level of care and options by remaining a “private pay” patient for as long as possible (private pay rates are at higher levels of 30% or more than Medicaid and is preferred by long term care providers). Medicaid reimbursements are less than the actual cost of care and are restrictive in what is allowed for coverage. Assisted living is not covered at all and home health coverage is limited and subject to change. The primary source of care for a Medicaid patient is a nursing home. Conversion of a life insurance policy to a Long Term Care Benefit allows for maximum choice of care options, and preservation of a partial death benefit instead of 100% abandonment.

Sources Health and Human Services (HHS) Center for Medicare and Medicaid Services (CMS) (www.hhs.gov) United States Government Accountability Office (GAO) report to the United States Congress, “Medicaid Long Term Care” report, March, 2007 Medicaid Eligibility Fact Sheet What is Medicaid: Medicaid is health insurance that helps many people who can't afford medical care pay for some or all of their medical bills. Medicaid is available only to people with limited income. You must meet certain requirements in order to be eligible for Medicaid. Who qualifies for Medicaid: Many groups of people are covered by Medicaid. Even within these groups, though, certain requirements must be met. These may include your age, whether you are pregnant, disabled, blind, or aged; your income and resources (like bank accounts, real property, life insurance, or other items that can be sold for cash); and whether you are a U.S. citizen or a lawfully admitted immigrant. The rules for counting your income and resources vary from state to state and from group to group. There are special rules for those who live in nursing homes and for disabled children living at home. Who qualifies for Long Term Care to be covered by Medicaid: In addition to financial eligibility, States determine if an individual meets the functional criteria by assessing the limitations in an individual’s ability to carry out activities of daily living (ADL) and instrumental activities of daily living (IADL). The Medicaid statute requires states to use specific income and resource standards in determining eligibility; these standards differ based on whether an individual is married or single. If a state determines that an individual has transferred assets for less than “fair market value” (FMV), the individual may be ineligible for Medicaid coverage for long term care for a period of time. Individuals who incur high medical costs may “spend down” into Medicaid eligibility because these expenses are deducted from their income. Spending down may bring their income below the state determined income eligibility limit. What type of assets count against Medicaid eligibility: Income and Assets are both calculated to determine Medicaid eligibility. Income from work, investments, and entitlements such as Social Security all need to be reported by the applicant. Assets such as cash, stocks, bonds, trusts, annuities, real estate, vehicles and life insurance all must be reported and are calculated for eligibility. States determine their own specific eligibility standards within federally mandated parameters. How is life insurance counted as an unqualified asset: Ownership of any in-force life insurance policies must be reported by the applicant when determining eligibility for Medicaid and failure to report is fraudulent. Specific limitations vary by state, but any policy with cash value in the range of $1,500 to $2,500 must be liquidated and the proceeds spent down on care before eligibility is approved. Exemptions are allowed for final expense policies if the entire policy is assigned to a funeral home. Term policies that do not have cash value are also exempt, but the death benefit and estate is subject to legal action and liens by the Medicaid department to recover all money spent on care for the deceased. Life insurance is an unqualified asset and counts against the Medicaid applicant’s eligibility to qualify. Any amount of money derived from ownership of a life insurance policy must be either spent down on care (cash value or monetary value available while alive) or the death benefit is subject to legal action against the estate as part of Medicaid’s required asset recovery procedures.

What are the rules for Medicaid Recovery actions: The Omnibus Budget Reconciliation Act (OBRA) of 1993 defines estate and requires each state to seek adjustment or recovery of amounts correctly paid by the state for certain people with Medicaid. The state must, at a minimum, seek recovery for services provided to a person of any age in a nursing facility, intermediate care facility for the mentally retarded, or other medical institution. The State may at its option recover amounts up to the total amount spent on the individual's behalf for medical assistance for other services under the state's plan. For individuals age 55 or older, States are required to seek recovery of payments from the individual's estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States have the option of recovering payments for all other Medicaid services provided to these individuals. People with Medicare are notified of the Medicaid estate recovery program during their initial application for Medicaid eligibility and annual redetermination process. Individuals in medical facilities (who do not return home) are sent a notice of action by their county Department of Social Services informing them of any intent to place a lien/claim on their real property. The notice also informs them of their appeal rights. Estate recovery procedures are initiated after the beneficiary's death. Medicaid Estate Recovery The Medicaid estate recovery program is intended to enable states to recoup e private assets (e.g., countable and non-countable assets held by recipients) upon a beneficiary’s death to recover Medicaid’s expenditures on behalf of these individuals. Since 1993, Medicaid law has required states to recover, from the estate of the beneficiary, amounts paid by the program for certain long-term care, related services and other services at state option.43 There are two instances in which states are required to seek recovery of payments for Medicaid assistance: when an individual of any age is an inpatient in a nursing facility or an intermediate care facility for the mentally retarded (ICF/MR), and is not reasonably expected to be discharged from the institution and return home. Can ownership of a life insurance policy be transferred to keep the policy in the family: When an individual applies for Medicaid, the State conducts a "look back" to find transfers of assets for 60 months prior to the date the individual is institutionalized or, if later, the date he or she applies for Medicaid. All transfers made by the applicant or the applicant’s spouse subsequent to January 1, 2010, whether from an individual or to an individual or from a trust or to a trust, have a five year look-back period. These provisions apply when assets are transferred by individuals in long-term care facilities or receiving home and community-based waiver services, or by their spouses, or someone else acting on their behalf. At state option, these provisions can also apply to various other eligibility groups. Transferring ownership of a life insurance policy for less than its fair market value would be a violation of Medicaid’s asset transfer and look back requirements. A policy can be surrendered for its cash value to be spent down on care or a policy can be converted for its market value and the benefit of that conversion can be used to pay for long term care as a qualified spend down. Look-Back Period Are there penalties or delays to qualify for Medicaid based on violations of asset transfers and reporting: If a transfer of assets for less than fair market value is found, the State must withhold payment for nursing facility care (and certain other long-term care services) for a period of time referred to as the penalty period. Since the enactment of the Omnibus Budget Reconciliation Act of 1993, Medicaid’s rules concerning eligibility, asset transfers, and estate recovery have been designed to restrict access to Medicaid’s long-term care services to those individuals who are poor or have very high medical or long-term care expenses, and who

apply their income and assets toward the cost of their care. In an attempt to discourage Medicaid estate planning, (a means by which some individuals divest of their income and assets to qualify for Medicaid sooner than they would if they first had to spend their income and assets on the cost of their care), the Deficit Reduction Act of 2005 (P.L. 109-171, DRA) contained a number of provisions designed to strengthen these rules. The DRA lengthens the look-back period from three years to five years for all income and assets disposed of by the individual after enactment. Under this change, asset transfers for less than fair market value of all kinds made within five years of application to Medicaid would be subject to review by the state for the purpose of applying asset transfer penalties. The length of the penalty period is determined by dividing the value of the transferred asset by the average monthly private-pay rate for nursing facility care in the State. Example: A transferred asset worth $90,000, divided by a $3,000 average monthly private-pay rate, results in a 30-month penalty period. There is no limit to the length of the penalty period. (Section 1917(c) of the Social Security Act; U.S. Code Reference 42 U.S.C. 1396p(c)) Sources Health and Human Services (HHS) Center for Medicare and Medicaid Services (CMS) (www.hhs.gov) United States Government Accountability Office (GAO) report to the United States Congress, “Medicaid Long Term Care” report, March, 2007 Order Code RL33593 Congressional Research Service (CRS) Report January 31, 2008 Medicaid Coverage for Long-Term Care: Eligibility, Asset Transfers, and Estate Recovery Updated January 31, 2008 Summary Medicaid is a means-tested entitlement program, covering the elderly with chronic conditions or illnesses such as Alzheimer’s disease or severe cardiovascular disease; children born with disabling conditions such as mental retardation or cerebral palsy; and working-age adults with inherited or acquired disabling conditions, among others. Spending on LTC pays for services in both institutional settings — for example, nursing homes and intermediate care facilities for individuals with mental retardation (ICFs/MR) — and a wide range of home- and community-based services such as home health care services, personal care services, and adult day care. Eligibility for Medicaid’s long-term care services is limited to persons who meet a state’s functional level-ofcare standards and certain financial standards (i.e., income and asset level tests). Persons qualify for Medicaid in one of the three ways: (1) they have income and assets equal to or below state-specified thresholds; (2) they deplete their income and assets on the cost of their care, thus “spending down”; or (3) they divest of their assets to meet these income and asset standards sooner than they otherwise might if they first had to spend their income and assets on the cost of their care. Since the enactment of the Omnibus Budget Reconciliation Act of 1993, Medicaid’s rules concerning eligibility, asset transfers, and estate recovery have been designed to restrict access to Medicaid’s long-term care services to those individuals who are poor or have very high medical or long-term care expenses, and who apply their income and assets toward the cost of their care. In an attempt to discourage Medicaid estate planning, (a means by which some individuals divest of their income and assets to qualify for Medicaid sooner than they would if they first had to spend their income and assets on the cost of their care), the Deficit Reduction Act of 2005 (P.L. 109-171, DRA) contained a number of provisions designed to strengthen these rules.

Additional State Rules Regarding Asset Transfers States have also established additional rules that go beyond federal law to further discourage people from protecting assets to qualify for Medicaid sooner than they might otherwise. Such state rules have been permitted under regulation and program guidance from the Secretary of HHS.41 In addition, the Secretary has advised states that they may add criteria to the determination of actuarially sound annuities or promissory notes, such as prohibiting balloon payments, or states may interpret gray areas of the law or areas where the law is silent.42 Medicaid Estate Recovery As discussed above, beneficiaries are allowed to retain certain assets and still qualify for Medicaid. The Medicaid estate recovery program is intended to enable states to recoup these private assets (e.g., countable and non-countable assets held by recipients) upon a beneficiary’s death to recover Medicaid’s expenditures on behalf of these individuals. Since 1993, Medicaid law has required states to recover, from the estate of the beneficiary, amounts paid by the program for certain long-term care, related services and other services at state option.43 General Statutory Requirements There are two instances in which states are required to seek recovery of payments for Medicaid assistance: when an individual of any age is an inpatient in a nursing facility or an intermediate care facility for the mentally retarded (ICF/MR) and is not reasonably expected to be discharged from the institution and return home. Provisions Affecting Asset Transfer, Eligibility, and Estate Recovery Requirements in the Deficit Reduction Act of 2005 The DRA made a number of changes to Medicaid rules concerning asset transfers, eligibility for long-term care coverage, and estate recovery. These changes are described below. Look-Back Period The DRA lengthens the look-back period from three years to five years for all income and assets disposed of by the individual after enactment. It does not change the look-back period for certain trusts, which was already five years prior to DRA’s enactment. Under this change, asset transfers for less than fair market value of all kinds made within five years of application to Medicaid would be subject to review by the state for the purpose of applying asset transfer penalties. Potential Impact: Lengthens the period of time for which transfers are evaluated for the purpose of Medicaid eligibility. Ineligibility or Penalty Period The DRA changes the start date of the ineligibility period, or penalty period, for all transfers made on or after the date of enactment. Rather than beginning the penalty period when a transfer was made, the DRA requires states to begin the penalty period on the first day of a month during or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for Medicaid and would otherwise be receiving institutional level of care, whichever is later. Potential Impact: Increases the probability that penalties applied will actually be experienced by applicants. Converts Uncountable Assets into Countable Assets DRA expands the types of assets that are counted for the purpose of Medicaid eligibility and asset transfer penalties. Under current law, states set standards, within federal parameters, for the amount and type of assets that applicants may have to qualify for Medicaid. In general, countable assets cannot exceed $2,000 for an individual. However, not all assets are counted for eligibility purposes. The standards states set also include criteria for defining non-countable, or exempt, assets. States generally follow rules for the Supplemental Security Income (SSI) program for computing both countable and non-countable assets. Other rules defining countable and non-countable assets apply only in particular states. States’ rules are generally intended to restrict

the use of certain financial instruments (e.g., annuities, promissory notes, or trusts) to protect assets so that applicants could qualify for Medicaid earlier than they might otherwise. Significant variation exists across states that have such rules. 62 Current law requires states to recover the private assets of the estates of deceased beneficiaries who have received certain long-term care services. Estate recovery is limited to the amounts paid by Medicaid for services received by the individual, and includes only certain assets that remain in the estate of the beneficiary upon his or her death. For purposes of recovery, estates are defined as all real and personal property and other assets as defined in state probate law. At the option of the state, recoverable assets also may include any other real and personal property and other assets in which the person has legal title or interest at the time of death. In general, assets such as living trusts, life insurance policies, and certain annuities that may pass to heirs outside of probate would be subject to Medicaid recovery only if a state expanded its definition of “estate.” Order Code RL33593 Congressional Research Service (CRS) Report January 31, 2008-- Report Excerpt Long Term Care Benefit Plan Pros and Cons (Courtesy PayingforSeniorCare.com and AgingCare.com) A Life Insurance Conversion is a new type of program and the owner of a life insurance policy sells the policy to a 3rd party for an agreed upon amount. The individual selling the policy does not receive a cash payment but instead the policy buyer makes monthly long term care payments on the policy seller’s behalf. For example, a policyholder sells their policy for $36,000. They move into an assisted living community that costs $3,000 / month. The policy buyer will pay directly to the assisted living community, the complete cost of care for one year ($3,000 / month x 12 months = $36,000). Should the assisted living resident pass away before the year is complete, there is a preservation of assets clause that will pay out the remainder of the agreed upon amount to a designated individual. The purchaser of the policy takes over payment of monthly premiums and collects the full death benefit value of policy from the life insurance company. This program is similar to a Life Settlement or a Viatical Settlement, but it is designed for policies of lesser value that typically would not qualify for those options. The policy would be of no value to the individual were it allowed to lapse and the cash surrender value might be very low relative to the policy amount. By converting the policy into long term care payments, the policy holder is able to get greater economic value from the policy then the cash surrender value and they receive that benefit while they are alive and require care. The other benefit of the program is that for the duration of the agreement, the family is freed from the administrative tasks of managing the policy and managing payments to their care provider. To participate in the Benefit Plan program an individual must have a need for on-going care. Their health status may impact the value of the settlement amount; those in poorer health can expect to receive higher settlement amounts. Generally, individuals with a life expectancy of less than 5 years should qualify. The big drawback of a life insurance conversion is that the family does not receive the death benefit from the life insurance and the settlement they do receive is typically between 20% and 60% of the death benefit amount. Advantages: • •

There are no monthly premium payments You can convert any type of life insurance plan: whole, term, group or universal

•

• •

Monthly payout amounts are adjustable based on how many months a person wants to receive payments. For instance, a person whose life insurance policy converts into $12,000 in total benefits could choose to receive 12 monthly payments of $1,000 or 24 monthly payments of $500) These monthly payouts would not count against an individual seeking to qualify for Medicaid coverage sometime in the near future. A long term care benefit plan is recognized by Medicaid as an acceptable spend-down during the five year look-back period. A long term care benefit plan is comprised of "private pay" dollars, which means that it can be used to pay for any kind of care—home care, nursing home, assisted living and hospice. A special fund is set aside for future funeral expenses

Disadvantages: •

•

Anyone wishing to apply for a long term benefit plan must have an immediate need for some form of acceptable long term care. This is because monthly payments are made directly to a long-term care provider, not the previous holder of the life insurance policy. It's not ideal for everyone. Individuals with smaller policies ($10,000 or less) are probably better off holding on to their plan, or giving it up it in exchange for the cash surrender value. Also, people who've got a life insurance policy with a large cash value built into it (i.e. a $100,000 policy with a $90,000 cash value) are better off taking that cash value than converting it. A long term care benefit plan is not the same as a long term care insurance plan.

Sources: http://www.payingforseniorcare.com/longtermcare/lifecare-assurance-benefit-plan.html http://www.agingcare.com/Articles/use-a-life-insurance-policy-to-pay-for-long-term-care-157309.htm

As Long Term Care Insurers abandon the marketplace what other options will step forward? Published by Chris Orestis Less than twenty years ago there were dozens of major insurance companies selling long term care insurance (LTCi). Today there are under thirty. The paradox is why just as Baby Boomers started turning 65 at a pace of 10,000 per day, the LTCi market is shrinking instead of “Booming”? The list of companies that have abandoned the LTCi market is a who’s-who of insurance industry giants: MetLife, Prudential, AIG (American General), Guardian, UNUM, Allianz, and CNA to name just a few. When MetLife announced they would be exiting the market it was a shock as if General Motors announced that they would no longer be selling automobiles. But why would the companies that pioneered LTCi from the beginning abandon the market just as the 72 million Baby Boomers started entering their retirement (and prime long term care planning) years? The reasons given boil down to some simple economic and demographic facts that we were not accounted for in the early years of selling this product. Among the challenges that LTCi insurers faced is the simple fact that they sold the product at too low a price in the hunt for market share. Without sufficient premium payments coming in, they could not weather unexpected developments like longer life expectancies than had been predicted requiring the insurers to continue making benefit periods for extended timeframes. Also, unlike life insurance which has a high abandonment (lapse) rate, owners of LTCi held onto their policies and kept making premium payments until they could collect their promised benefits. LTCi companies bet wrong when they priced their products by assuming people would live for shorter periods, and that a great many more would abandon their policies before they started collecting benefits.

The impact of these challenges has driven major insurers out of the market and forced others wishing to continue offering LTCi to raise rates not only on future sales; but for existing policies as well. According to the 2012 LTCi Index, policy premiums have been increasing at an annual rate of 17%. Two of the largest remaining insurers selling LTCi recently announced rate increases that would raise premiums on policies already sold in some cases by almost double. John Hancock will raise rates between 40%-80% and Genworth announced increases between 25%-50%. In a statement released by Genworth about the increases, Martin Klein, Genworth's acting CEO said, "We must rebuild value for shareholders." In an article written by Dave Lieber for the Fort Worth Star-Telegram, he interviewed Anna Emmons, 75 years of age, who has owned a John Hancock LTCi policy for ten years. The rate increase means her monthly policy premiums would go up 64% from $151 to $247. If she canâ&#x20AC;&#x2122;t afford that increase, her choices for the policy going forward include abandoning it after ten years of premium payments or reducing the benefits she originally bought to keep the premiums at a lower level. Despite these market realities, LTCi can still be a viable option to help people pay for future long term care needs. Sales of hybrid policies that offer a combination of life insurance protection that can later be converted to LTCi benefits are on the rise. There are a number of options along these lines and consumers need to fully understand the costs involved, if rates are subject to future increases, and if the level of benefits would be sufficient to cover long term care expenses years down the road. For people in their peak earning years (30-60) this is certainly an option to consider, and obviously the younger/healthier one is when purchasing the policy the more affordable it will be. But what about the millions of Baby Boomers and seniors who bought traditional life insurance policies over the last thirty years and require the financial means to pay for long term care services today? Providers of long term care services such as nursing homes, assisted living communities and home health agencies have been quick to embrace the conversion of a life insurance policy into a Long Term Care Benefit Plan as an alternative form of payment. State governments too are realizing that there is tremendous value to be found by converting life insurance policies to help pay for the costs of long term care. Any form of life insurance can qualify for conversion: universal life, whole life, term life, and group life. Policy owners use their legal right to convert an in-force life insurance policy to enroll in the benefit plan and are able to immediately fund their care through a guaranteed monthly payment stream for the entire benefit period. The benefit plan will pay for all forms of long term care: home health, assisted living, and nursing home care. For families with the need to pay for long term care, but are unable or unwilling to keep their life insurance policy in-force by maintaining premium payments, the Long Term Care Benefit Conversion option is a much better choice than abandoning a policy. Consumers lack preparation and awareness of how they are going to cover the costs of long term care. It is a subject typically ignored until a loved one is in immediate need of care. Families that need long term care are in a particularly difficult position if they have not planned with savings or LTCi. Unfortunately, that is how you would describe the vast majority of people who require senior housing and long term care today. We need to do all we can to educate people on how to plan for their long term care futures. But what about the majority of unprepared people that need access to long term care today? It all starts with education and awareness. Millions of seniors are holding a potential solution in their hands if they own a life insurance policy. Unfortunately they are unaware of their legal rights and available options such as a policy conversion to a long term care benefit plan. As the word spreads across long term care providers, advisors and with the consumer; the growing use of life insurance policy conversions will begin to have a measurable, positive impact on the long term care funding crisis across the United States.

4-‐ A Roundtable Discussion: Converting Life Insurance to Pay for Long Term Care Following the panel session Consumer Disclosure Law: The Changing Face of Long Term Care Funding on August 25, 2011 at the Annual Senior Market Advisor Expo; representatives from politics, senior living, insurance producers and private market funding solutions came together to discuss the crisis situation for seniors attempting to pay the costs of long term care in today’s environment. Session Panelists: • Chris Orestis, President of Life Care Funding as host and moderator • Jayne Sallerson Executive Vice President of Emeritus Senior Living • Rep. Rob Damron (KY) immediate past president of the National Conference of Insurance Legislators (NCOIL) • David Kitaen, CLTC senior financial advisor and long term care insurance agent Question- What are some of the factors changing the face of long term care funding today in the United States? Answer- (Chris Orestis) Our country has begun a demographic sea change with 10,000 Baby Boomers turning 65 every day. This started on January 1st, 2011 and will continue uninterrupted for the next 20 years! The pressure this is creating in how we will pay for long term care led Federal Reserve Chairman Ben Bernanke to declare the aging population and exploding cost of health care as the #1 challenge facing the U.S. economy and government budgets. Question- How has the government reacted to this demographic sea change? Answer- (Chris Orestis) The current economic crisis could not have happened at a worse time and we see it in the news every day. Just as the Baby Boomers started qualifying for Medicare and Social Security, this massive surge in the aging population is forcing the government to enact swift and draconian cuts to Medicare and Medicaid. There is not a budget proposal in Washington, DC without cutting hundreds of billions in Medicaid spending. CMS announced in August that as of October, 2011 they would institute an 11.1% across the board reduction in expenditures for all long term care related programs. This is an unprecedented reduction and the consumer is going to be forced to dig into their pockets to make up for it. Question- As Executive Vice President for the largest assisted living company in the world, what do you see as key challenges families are facing in today’s environment when trying to pay for senior living and long term care? Answer- (Jayne Sallerson) Equity in homes of most seniors has eroded and many can’t sell anyway, pensions and retirement plans have lost tremendous value, and most have not planned with products such as long term care insurance. Too few families plan for long term care or even understand the differences between assisted living and skilled nursing, Medicare and Medicaid, Medigap and Long Term Care Insurance and how all of it works. Unfortunately most families just don’t deal with long term care until they are in a crisis mode and have very little time and even fewer options. Many people are trapped in their homes and/or are getting insufficient or no care whatsoever based on their conditions and declining ability to live independently and safely. Making matters worse, programs like Medicare and Medicaid are experiencing huge cuts and the responsibility to pay is being pushed back on the individual and their family. We are seeing more emphasis on families covering long term care expenses with private pay dollars, but most have no idea what their options are and where to turn for help.

Question- As one of the first and longest active LTCi producers in the country, how do you view the current state of affairs for seniors and long term care? Answer- (Dave Kitaen) The combination of the toughest economy since the great depression, a growing senior population, and cuts to Medicare and Medicaid are making things very difficult for seniors and families confronting the need for long term care. This should be the boom years for LTCi with the highest sales levels on record, but sales have not been growing and companies like MetLife have left the market. MetLife leaving the market is like General Motors announcing they no longer will be selling cars. The costs of long term care services rises every year but the ability of seniors to pay has been declining since the economic crash of 2008. Seniors need help understanding all of their financial options and how to get full use of any available assets. Question- As president of the National Conference of Insurance Legislators (NCOIL), was this situation with long term care funding one of the factors contributing to passage of the Life Insurance Consumer Disclosure Model Law? Answer- (Rep. Rob Damron) Yes, we saw the billions of dollars in life insurance policies owned by seniors being abandoned by the owners ever year. These seniors did not understand their legal rights of ownership or available options to use these policies in a better way such as to help pay for their costs of long term care. The motivation behind this model law is to educate policy owners that they have options such as converting their life insurance policy to a long term care benefit plan that can be set up to help pay for their costs of long term care every month. We would rather see these policies being used by their owners to address their long tem care needs than be abandoned with the entire policy value going to the insurance company’s bottom line as profit. Question- Life Care Funding has been an active supporter of the model law, what do you hope is accomplished as the model law is adopted in states around the country? Answer- (Chris Orestis) We want to see the high lapse and surrender rate of life insurance policies by seniors reversed. We believe this will happen as they come to understand their legal ownership rights and options to use the policies as a tool to help them pay for long term care. Billions of dollars in life insurance could be converted instead of abandoned and then used to help pay for long term care costs. By giving the consumer access to information about their legal rights and options as a policy owner they can make informed decisions about best use of an asset they already own. In today’s environment it is important that consumers know they can convert a life insurance policy to a long term care benefit plan. It is a Medicaid qualified spend down of an asset they have been needlessly abandoning. Now instead of abandoning a policy they own and have paid premiums sometimes for decades, it can sustain a person’s long term care needs at private pay levels for months and years. Question- What are LTC providers doing to educate and help consumers? Answer- (Jayne Sallerson) Emeritus has been promoting “Financial Solutions” to the consumer to help pay for costs of housing and care for many years. We educate the consumer at each of our over 550 communities across the United States about the availability of options and the importance of being financially capable. We have partnered with companies like Life Care Funding Group, make this information available on our website, and we discuss it in the press and participate in public forums such as this on a regular basis. Despite our efforts and the efforts of many others, we find the vast majority of consumers are uninformed and unprepared when it comes to this point in their lives. We plan to be active supporters of the NCOIL model law so seniors understand they should not be abandoning life insurance policies when they could be converting them to an Assurance Benefit plan to help pay for senior housing and long term care. Question- What more do advisors need to do help seniors in this situation?

Answer- (David Kitaen) LTCi still has a role to play in helping seniors pay for long term care but it is not a magic bullet and other solutions will be important as well. It is hard to ignore the fact that 153 million Americans own almost $30 trillion worth of life insurance and seniors are abandoning billions of dollars of policies every year. Converting life insurance policies into a long term care benefit plan is a Medicaid qualified spend down, it is written into the NCOIL law and senior care providers all over the country accept the benefit plan as a way to help pay for senior housing and long term care. An Assurance Benefit plan can address immediate needs quickly. Advisors need to be informing clients that if they have a life insurance policy they should not abandon them but instead hang onto the policy because they can convert it when they have a need to help pay for assisted living, home health and nursing home care. Question- Is a Long Term Care Benefit Plan an insurance policy? Answer- (Chris Orestis) No, it is not LCTI, it is not a hybrid policy or annuity, itâ&#x20AC;&#x2122;s not a loan, and it is not an accelerated death benefit. It is the conversion of an in-force life insurance policy to a benefit plan that is set up as a dedicated long term care account administered specifically to help pay monthly costs of assisted living, home healthcare and nursing home care. For families confronting a long term care crisis speed is of the essence, so the enrollment process is designed to be quick and uncomplicated for the policy owner bypassing the carrier all together with enrollment completed in 30-60 days. Question- Can you tell us about your experience using the Long Term Care Benefit conversion for one of your clients? Answer- (David Kitaen) I had an 81- year old male client with a $100,000 UL policy he was five days away from lapsing when I contacted Life Care Funding about trading in the policy to enroll him in their Long Term Care Benefit to pay for his assisted living costs. Over about a 45 day period he was enrolled in the Benefit with a policy conversion amount of $35,000. My client is now receiving a $1,700 monthly benefit being sent to his care provider of choice for the next 15 months and has a $5,000 final expense benefit in place for funeral costs in the future. He is now receiving home healthcare as he starts making the transition to assisted living. When I was with the family the day we signed the enrollment papers, my client and his two sons all actually gave me hugs and thanked me for so quickly taking a policy they were about to throw away and instead turned it into a long term care benefit that is covering them today. Question- What do you see as the momentum for passage of the Disclosure Law around the county in light of the current economic crisis to fund long term care and what can agents/advisors do to help? Answer- (Rep. Rob Damron) Cuts to Medicare and Medicaid will make private pay options such as use of a life insurance to pay for long term care important. Remember, these are our tax dollars we are talking about, and for every person able to extend their ability to pay for long term care and stay off of Medicaid a little bit longer the tax payers of this country are saving money. The Life insurance industry opposes the Model Law because if less policies are abandoned it will cut into their profits Iâ&#x20AC;&#x2122;m not just an elected official and a tax payer; I am an agent/advisor myself. Every one of us needs to contact their state senate and legislators to express support for this model law so consumers can get access to information about their legal rights and options as a policy owner. Other industries such as the long term care providers support this model law and they will be actively lobbying to see measures that promote private pay options move forward. One of the requirements of the model law is that agents and advisors are part of the process to inform consumers about their optionsâ&#x20AC;&#x201D;and that creates an opportunity for every one of us supporting this measure. Question- What is your prediction for where things are going?

Answer- (Chris Orestis) Baby Boomers started turning 65 this year at a pace of 10,000 people every day and that will continue uninterrupted for the next 20 straight years. That will cause a lot of stress on the system that programs like Social Security, Medicare and Medicaid will have difficulty handling and moves like NCOIL made will be more common. The responsibility to pay for senior housing and long term care will continue to shift back to the consumer and their family, but the economic crisis will make this a difficult challenge. The ability to tap into private pay options and billions of dollars every year in available life insurance policies will be an important part of the equation that consumers, the long term care providers and political leaders will not be able to ignore. Portions of this interview originally appeared in Senior Market Advisor October, 2011 issue

5-‐ Press Quotes 1- New York Times- A New Way to Pay for Long Term Care (October 9, 2013): I was visiting an assisted living facility recently with my sister, whose disability made that a prudent choice, when the marketing manager handed us a brochure. It asked, “Did you know a life insurance policy can pay for long-term care expenses?” Life Care Funding, said Chris Orestis the chief executive, pays older adults an average 40 to 45 percent of a policy’s face value. Life Care Funding puts the money in an F.D.I.C.-insured account used to send monthly payments directly to a long-term care provider: a nursing home or assisted living facility, an adult day program, a home care agency, a hospice, an individual hired privately for home care. You can switch from one provider to another as your needs change, but you can’t use the money for a vacation (or blow it at a casino). 2- Wall Street Journal- States Ease use of Life Policies to Pay for Long Term Care (June 16, 2013): State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long-term care—and lower the Medicaid tab in the process. States hope to stop people from dropping their life-insurance policies in order to qualify for Medicaid. To keep policy owners from spending settlements frivolously, the bills generally require that the money go straight to an irrevocable bank account used solely to pay for long-term care. "This focuses on middle-class policyholders with coverage worth $100,000 on average," said Chris Orestis, chief executive of Life Care Funding LLC of Portland, Maine. "They're not wealthy enough to pay for long-term care for a long time, and they're not poor enough to qualify for Medicaid right away." 3- Investment Advisor- Big Questions Lurk in LTC’s Future (September 9, 2013): While the recommendations that the Long Term Care Commission voted Sept. 12 to include in its final report to Congress later this month are “Band-Aids on [the] large and ever-growing problem” of LTC financing, according to one LTC expert, another expert believes the report was “a step in the right direction as it makes very clear that there is a crisis situation facing the country.” Chris Orestis, CEO of Life Care Funding, a long-term care specialist and former insurance industry lobbyist, says he’s “glad” that the commission acknowledged there is a “national financial crisis surrounding long-term care,” he’s hoping “they will do more to act on solutions, such as Life Care Funding.” As he explains, Life Care Funding is one private-funding option recommended to the commission. It would allow middle-class seniors with too much money for Medicaid and too little to pay for their long-term care to convert their life insurance policies into LTC benefits earmarked to pay for such services as in-home nursing care and assisted living. “Numerous states introduced legislation this year, and Texas passed into law, a bill that would require their Medicaid departments to inform seniors” of the Life Care Funding option, he says. “The seniors can sell the death benefit — instead of just giving up the policy they’ve been paying premiums on for years — and use the funds to pay for their care.” This allows them to “avoid the restrictions imposed by going on Medicaid and they keep future Medicaid eligibility intact.” 4- InsuranceNewsNet.com- More than one way to pay for long term care (November 6, 2013): Life Care Funding reported that five of the top 10 Home Care companies in the United States are now using an alternative arrangement to help pay for care. This alternative entails converting a life policy death benefit into a living benefit which can then be used

to help pay for senior care. According to the company, this option is not long-term care insurance and it is not a policy loan. Rather, the life care benefit “is an irrevocable, FDIC insured benefit account that is administered to extend the time a person would remain private pay and delay their need to go onto Medicaid," Chris Orestis, Life Care Funding chief executive officer, said in a statement. 5- Wall Street Journal- Survival Tips for Caregivers: Are you ready for the great family caregiver shortage? (August 30, 2013): Use life insurance. In most cases, owners of life-insurance policies can sell them to life-settlement firms to pay for long-term care. Some adult children caring for their parents are helping their parents cash in to help pay for their care now instead of receiving an inheritance later. Chris Orestis, chief executive of Life Care Funding in Portland, Maine, frequently works with families of middle-class policyholders with term coverage worth $100,000 on average, he says. The amount they could receive would depend on the policyholder’s age and health status. State lawmakers who have introduced laws to publicize the option have pointed out that it beats surrendering a policy to access government benefits while also giving families more control over how to spend the money. 6- ThirdAge.com- Convert a Life Insurance Policy into a "Life Care Benefit" (September, 2013): We don’t often think of living a long life as a problem, especially for those we love. But what happens when Mom, Dad, a spouse or another beloved family member need regular health care yet are apparently short on finances? Actually, paying for care may be well within your loved one’s means, says insurance expert Chris Orestis. “It’s a secret the life insurance industry has managed to hide for decades: Your policy can be used to pay for long-term health care such as home care, assisted-living or nursing home expenses,” says Orestis, a former insurance industry lobbyist. “Many people who need long-term care can’t afford it, so they drop the policies they’ve been paying on for years in order to qualify for Medicaid. The life insurance companies profit from the fact that they get all those years of premiums and never have to pay out a death benefit.” Orestis, who’s been lobbying state legislatures to make the public aware of their legal right to use this option, says seniors can instead sell their policies for between 30 and 60 percent of the death benefit value. The money can be put into an irrevocable fund designated specifically for their care.

7- Think Advisor (sponsored by Nationwide Insurance)- Medicaid Privatization Begins in Florida, Likely to Grow Nationally (October, 2013): “You only have so many dollars to go around, and we have a growing senior population,” said Chris Orestis, CEO of Life Care Funding. “The sad reality is that very few people plan for long-term care.” While retirements are ideally funded by long-term investments and Social Security, the sudden and unexpected need for assistive services can quickly drain savings and drop seniors into the low income brackets necessary to qualify for Medicaid. In fact, Orestis said he has already worked with several states, including Florida, to introduce legislation that allows seniors to augment Medicaid payments for long-term care by selling their life insurance policies. Designed to lower future Medicaid bills and increase middle class access to much-needed care, one of these bills has already passed in Texas. Similar to Florida's program, this new law allows seniors to use the proceeds from their policies to pay for the long-term care providers of their choosing.

“But people need to remember that when they're on Medicaid and funded by taxpayer dollars, they have very limited choice. Both privatized and public have pros and cons, and you're not going to get the same benefits that you would if you were paying with your own money.” “I think it's inevitable that more seniors are going to have to fund their own care, long-term and otherwise.” 8- InsuranceNewsNet Magazine- Hybrid Policies Add to the LTCi Market Challenge (November, 2013): Another trend that has appeared is the use of traditional life insurance products to fund long-term care. In 2013, eight states (California, Florida, Kentucky, Louisiana, Maine, New Jersey, New York and Texas) introduced Medicaid Life Settlement legislation as a way to encourage more use of private pay dollars for long-term care through the conversion of a life insurance policy into a long-term care benefit plan. Among these states, Texas is the first state in the nation to enact this legislation into law. The law grants authority to the Medicaid department to inform and educate citizens that they already have the legal right to convert life insurance policies into a Medicaid qualified long-term care benefit plan and can choose any form of long-term care they want instead of abandoning a policy to go straight onto Medicaid. “Seniors have been abandoning their life policies because they can’t afford the premiums and they’re looking at the Medicaid spend-down,” said Chris Orestis, chief executive officer of Life Care Funding. “We are seeing the trend of converting policies – selling them on the secondary market – to pay for care. It’s a great way to keep more people off Medicaid and remain private pay.” He added that the proceeds of this policy conversion are “locked” in a fund that can be used only for long-term care. The U.S. Department of Health and Human Services estimates that at least 70 percent of those over the age of 65 will require some long-term care services at some point in their lives. And every day for the next 16 years, another 10,000 baby boomers will celebrate their 65th birthday. This all adds up to a “silver tsunami” of Americans with a need for care and the funds to pay for it. 9- Examiner.com- How to keep the gold in your Golden Years (October, 2013): Since ancient times, alchemists have attempted to convert lead into gold; however, none were successful. Now, with our tough economic times, many seniors have seen their golden years turn into lead. The senior population is soaring, due to the influx of baby boomers. Beyond physical health is financial health. Finances will be a major problem for many of them, especially if boomers develop health problems that affect their ability to live independently, notes insurance expert and CEO of Life Care Funding Chris Orestis. Orestis notes that a life insurance policy can be converted into a Life Care Benefit; this conversion is an accepted method of payment for private duty in-home care, assisted living, skilled nursing, memory care, and hospice care. Financial concerns can cause a senior to cash out their life insurance to avoid saving the premiums. Orestis notes that a better option is to take the present-day value of the policy while they are still alive and convert it into a Long Term Care Benefit Plan. In so doing, seniors will remain in private pay longer and be able to choose the form of care that they prefer as well as be Medicaid-eligible when the benefit is spent down. 10- AgingCare.com- How to use a Life Insurance Policy to pay for Long Term Care (April 18, 2013): Anyone in possession of an in-force life insurance policy has the ability to transform that policy into a prefunded financial account that will disburse a monthly benefit stipend to help pay for that individual's long term care needs. Unlike life insurance, a long term care benefit plan account is a Medicaid qualified asset. If this process sounds unfamiliar, don't worry, you're not alone. Most people don't know that the long term care benefit conversion option exists.

"For the last 100 years, anyone who's owned a life insurance policy has had the right to do this," says Chris Orestis, co-founder and CEO of Life Care Funding, a company specializing in life insurance policy conversions. "The problem is that most people are unaware that this option exists." The pros and cons of conversion On the surface, it seems like life insurance policy conversion is a no-brainer. But, like everything, the method has its advantages and disadvantages:

Advantages: •

There are no monthly premium payments

•

You can convert any type of life insurance plan: whole, term or universal

•

These monthly payouts would not count against an individual seeking to qualify for Medicaid coverage sometime in the near future. A long term care benefit plan is recognized by Medicaid as an acceptable spenddown during the five year look-back period.

•

A long term care benefit plan is comprised of "private pay" dollars, which means that it can be used to pay for any kind of care—home care, nursing home, assisted living and hospice.

•

A special fund is set aside for future funeral expenses Disadvantages:

•

Anyone wishing to apply for a long term benefit plan must have an immediate need for some form of acceptable long term care (see examples above). This is because monthly payments are made directly to a long-term care provider, not the previous holder of the life insurance policy.

•

It's not ideal for everyone. Orestis says that individuals with smaller policies ($10,000 or less) are probably better off holding on to their plan, or giving it up it in exchange for the cash surrender value. Also, people who've got a life insurance policy with a large cash value built into it (i.e. a $100,000 policy with a $90,000 cash value) are better off taking that cash value than converting it. It is also important to note that a long term care benefit plan is not the same as a long term care insurance plan. According to Orestis, the biggest benefit of transforming a life insurance policy into a long term care benefit plan is that it allows a person to remain private pay for a longer period of time. "The process can actually help aging individuals maintain some financial independence and dignity. It helps them exert more control over the type of care they receive," he says. 11- Florida Public Broadcasting System (PBS)- Life Insurance Proposal Gives Families a Financial Lifeline (March 8, 2013): Right now policies are counted as assets, and a person would have to cash it in, often at a reduced value, as part of the Medicaid spend down. The second part of the bill would allow the

life insurance policy to be sold to a third party—often at a far higher value. The money would then be deposited into an account with automatic withdrawals going directly toward the facility. It’s very similar to a sort of reverse-mortgage for healthcare. And Chris Orestis, CEO of the company Life Care Funding, which specializes in these kinds of transactions, says they are beneficial to middle class families who have too many assets to qualify for Medicaid, but not enough to foot the bill for long-term care. “You have this middle class bulge, that is quite frankly, penalized for having too much assets to go onto government assistance, but not enough that they can afford their choice of care and extend their ability for private pay," Orestis said. Orestis says converting life insurance policies into a form of long-term care insurance is something people can do now, but many families aren’t aware of it. And advocates of the proposal say as long as the bills reporting and disclosure requirements are left in place, they’ll continue to back it. 12- Wall Street Journal- New State Laws Threaten Insurers (June 27, 2013): There’s growing recognition among state lawmakers that elderly residents with modest life-insurance policies could be using it to pay for long-term care – and delay, or maybe avoid altogether, having to use Medicaid, which pays for such care for Americans whose resources run out. Now, insurance industry analysts are trying to measure the impact of older adults’ tapping their life insurance to pay for long-term care, rather than surrendering such coverage to qualify for Medicaid. “Seniors have been abandoning policies needlessly, and the insurance companies have been benefiting at the expense of the policy owners and taxpayers who have been picking up the tab with Medicaid to cover longterm-care costs,” says Chris Orestis, chief executive of Life Care Funding of Portland, Maine. “Now that the word is really starting to spread, more seniors will understand they have this option to help them, and it is a much better option than abandoning their life policies to go on to Medicaid,” he adds.

13- Fox Business News- Why it’s time to change our approach to Long Term Care (September 19, 2013): One of the biggest question marks hanging over every boomers’ retirement plan is how much money they will need for medical costs. It’s a figure that is impossible to predict, and can be financially devastating if not adequately covered. Last week, the federal Commission on Long-Term Care released more than two dozen recommendations detailing ways to enhance and make services for older Americans and people with disabilities more affordable. While the commission didn’t endorse specific new programs, it draws more attention to the growing affordability problem. Chris Orestis, a long-term care specialist and the CEO of Life Care Funding, has made formal recommendations to the commission and created a model to provide an option for middle-class people who are not wealthy enough to afford paying for long-term care out of pocket, and not poor enough to qualify for Medicaid assistance. Orestis discussed some of the findings of the commission and how we need to change our approach to long-term care. Here’s what he had to say: Boomer: Does the Congressional Long Term Care Commission report offer new ways in which long-term care is financed?

Orestis: The LTC Commission deliberations and report are a confirmation that Medicare and Medicaid alone cannot sustain the aging populationâ&#x20AC;&#x2122;s reliance on these programs to fund long-term care services. The commission stated that it is an unsustainable proposition to expect Medicare and Medicaid to continue paying the vast majority of long-term care costs in this country and that private market solutions will need to be a growing contributor to the equation. Boomer: Why is long term-care insurance no longer the solution? Orestis: In 2000, there were over 100 long-term care insurers in the market. Today there are less than a couple dozen. Major companies like MetLife and Prudential have abandoned the market because they cannot make the product work profitably. Remaining companies such as John Hancock and Genworth have been forced to increase premiums and reduce benefits on existing policies they sold in years past. Ironically, as the baby boomers began turning 65, the long-term care insurance market shrank instead of growing as had been expected.

Boomer: What are a few of the reportâ&#x20AC;&#x2122;s highlights? Orestis: The report was a step in the right direction as it makes very clear that there is a crisis situation facing the country but six of the panel members voted against the commissionâ&#x20AC;&#x2122;s final report because they do not believe it goes far enough in recommending specific ways to address the financing of long term care. Boomer: What are some underutilized private-funding options recommended by the report? Orestis: There were numerous policy proposals given to the commission that are part of the record, but not specifically included in the final report. The report calls for private market innovations to help create cost savings and new financial options but does not give enough specifics. Boomer: What is the option for middle class people who are not wealthy enough to pay for long-term care and not poor enough to qualify for Medicaid? Orestis: One option recommended to the commission that addresses the middle class is converting life insurance policies owned by seniors into long-term care benefits instead of encouraging seniors to lapse or surrender policies to qualify for Medicaid quicker. Numerous states have introduced legislation in 2013, and Texas passed a law that would require its Medicaid department to inform seniors that own life insurance that it is their legal right to convert those policies into a long term care benefit by selling the death benefit and using the available funds as a living benefit to pay for their senior care and remain private pay for a longer period of time.

6-‐ What are political leaders and consumer advocates saying about using a life insurance policy to pay for Long Term Care? 1.

“I believe it could be a win for Medicaid service recipients, a win for the fiscal soundness for Medicaid, it could be a win for potential beneficiaries under life insurance policies and I think it could be a win for longterm care service providers,” said Jack McRay, a spokesman for the Florida AARP.

“Texas is the first state to enact this important legislation to stimulate more private pay dollars by encouraging the conversion of a life insurance policy into a private market Long Term Care Benefit Plan,” said Rep. Rob Damron (KY), “but they are not the only state to recognize the importance of making sure that the owners of a life insurance policy are informed of their right to convert their policy as an alternative to abandoning the policy and going directly onto Medicaid. We introduced this consumer rights legislation in Kentucky and expect passage during next year’s 2014 legislative session.”

“It saves the state money, because otherwise you would just cash in the value of the life insurance and get $5,000 or something, and go on the Medicaid roll immediately,” Texas Rep. Craig Eiland, a Galveston Democrat who introduced the bill in the Texas House, told the Journal. “The policyholder benefits because he has cash he can direct to his own care and expenditures.”

“We believe this consumer protection legislation is a win-win solution that will save taxpayer dollars while preserving the funding facilities need for care delivery and maintaining a stable workforce,” Florida Health Care Association Executive Director, Ed Reed.

“Right now life insurance policies are being abandoned, so the senior can receive Medicaid. If this consumer disclosure law passed, both the state and the policy holder would benefit. It’s pretty innovative. … It should be a win-win all the way around,” said Rep. Jimmy Patronis (R-FL).

“Our goal at Emeritus is to ensure that seniors are properly cared for, and part of that goal is to help families with the financial decisions and details involved in caring for their loved ones,” said Jayne Sallerson, Executive Vice President at Emeritus Senior Living. “Many seniors and families are unaware that their life insurance policies are valuable assets and can be used in this way, and as a result some let active policies lapse. We hope that we can help educate seniors about their resources, so that more seniors can have access to the long term care that they need.”

“One of the biggest challenges families face when moving into a long term care facility is the monthly expenses. For millions of seniors with a life insurance policy, they now have an option available to convert a portion of the death benefit into a benefit that can cover these costs. The current economic conditions have compounded the problems some families face when it comes to paying for the costs of senior living or long term care. Most people do not realize that a life insurance policy is an asset that they are legally entitled to convert into another form of coverage,” said Ron Aylor, Senior Vice President at Brookdale Senior Living. “The Life Care Benefit Plan gives people a quick and simple option to convert a life insurance policy’s death benefit into a life care benefit and immediately apply it toward covering the costs of long term care residing in a Brookdale community.” 8. “Converting life insurance policies into a Long Term Care Benefit Plan is a Medicaid qualified spend down, it is being written into laws across the country, and all Long Term Care providers the benefit plan as a way 7.

to help pay for their services,” said David Kitaen, CLTC, the first Long Term Care Insurance agent in the United States, “The Life Care Benefit is designed to address immediate needs quickly. Advisors need to be informing clients that if they have a life insurance policy they should not abandon them but instead hang onto the policy because they can convert it when they have a need to help pay for assisted living, home healthcare and nursing home care. I have helped my clients with this solution.” 9.

“This creates a way for individuals to fund some long-term care costs from the proceeds of the sale of their life insurance,” said Lifeline Program President and CEO Wm. Scott Page. “Currently, they have to surrender their policies and receive nothing in return. Under the new law, many individuals will receive thousands of dollars that they can use to pay private medical providers of their choosing for long term care. It’s groundbreaking legislation.”

10.

“Most over 65 have still not purchased LTC Insurance when they should have, or could not medically qualify to get coverage. They now have to pay for Long Term Care out of their life savings. Far too many seniors let their very valuable $100,000 to $500,000 Life Insurance Policies lapse. I recently had a call from a 82-year-old man from Napa, California who could not get a Long Term Care Insurance Policy for himself,” explained Valerie VanBooven RN, BSN. “He explained that he was now in a wheel chair, and was being cared for at home by his two adult children. I asked if he had a Life Insurance Policy. He said that he had a $200,000 Life Insurance Policy, but “that won’t help, it only pays when I die.” He told me that because the premiums were now so high, about $8000 per year, he had not paid his premium in a while, and that it had probably lapsed. We were able to save the Life Insurance from lapsing, by about one week. We converted The Death Benefit, to a Long Term Care Benefit Plan Account. Instructions are to send a Monthly check to the Home Care Providers. Now, the man no longer has to pay the $8000 annual Life Insurance Premium, his Home Care Agency gets a regular Monthly check, his adult children are relieved of Care responsibilities, and they don’t have to sell the house to pay for care. If he should die before all the money is used, what is left from the Conversion goes back to his estate.

11.

“While the features of a Medicaid life settlement might be aimed at smaller policies, their owners, rather than those that are more affluent, represent a large and underserved segment of the population,” said Robin S. Weinberger, CLU, ChFC, CLTC. “When family members can’t or don’t want to buy the policy, a Medicaid life settlement could provide an important option for these policy owners and, at the same time, benefit the taxpayers who are footing the bill for Medicaid. With all these advantages, it is no wonder more and more states are considering Medicaid life settlement laws. There is one important exception to Revenue Ruling 2009-13, however, which is likely to apply to many Medicaid life settlement transactions. Under IRC Section 101(g), proceeds paid to a terminally or chronically ill insured may qualify as death proceeds and escape taxation entirely.”

7-‐ Elder Law Articles published in 2013 Life Settlements Laws Gaining Momentum as States Seek to Reduce Medicaid Expenses Northern California Center for Estate Planning and Elder Law When people apply for Medicaid, known as Medi-Cal in California, they have to be able to prove that they do not own more than the specific asset limit. If they qualify, Medicaid will then pay for their health and long-term care expenses. Those who don’t qualify for Medicaid and who need to transfer to a nursing home or extended care facility, or who require other types of long-term care, will have to pay for these expenses privately. Legislation is aimed at preventing people from spending down their life insurance cash surrender value in order to qualify for Medicaid. It also allows seniors to privately pay for any necessary long-term care expenses without having to apply for Medicaid, a program primarily paid for by the individual states. New York Medicaid "Life Settlements" Ettinger Law Firm Most know that in order to qualify for Medicaid one must "spend down" assets. Life insurance is also lost in this way, as some are required to "surrender" their insurance policy in order to receive Medicaid support. Usually the surrender value is a small cash amount--far less than what would actually be paid out after passing to beneficiaries. The real winner of this requirement is the insurance company itself, as the company avoids the obligation of paying on a death claim. The seeming injustice of this scenario is leading some states to consider an alternative process known as "Medicaid life settlements." Hopefully our state seriously considers this option and all proposals that open up fairer choices for families to receive the care they need without losing life savings. Texas life insurance law breaks new ground Maryalene LaPonsie For seniors without long-term care insurance, paying for nursing home care may mean exhausting all their income and assets before getting any help from the government. In addition, it could require them to surrender their life insurance policies in order to receive Medicaid coverage. Medicaid life settlement laws are considered a win-win for both life insurance policyholders and states. Policyholders get some benefit from their life insurance rather than surrendering the plan. At the same time, states can delay the need for Medicaid to pick up the entire cost of an individual's long term care. Life Settlements and Long-Term Care: The Beginning of a Beautiful Friendship? Morris, Manning and Martin, LLP The Medicaid program is the largest single payer of nursing home bills in America and the payer of last resort for those who do not have the resources to pay for their own care. Medicaid eligibility rules are complicated and differ from state to state, but an important and often difficult to meet hurdle in all such laws is the asset and resource standard. If an applicant has assets which exceed the maximum limits, they will be ineligible for

benefits even if they cannot otherwise afford the necessary care. In an attempt to address this issue, innovative laws have been introduced that utilize life settlements (the sale of life insurance policies into the secondary market for life insurance) to make it easier for seniors with life insurance to afford critical care. Protecting your future: Some states aim to fix Medicaid, life insurance bind Bonnie Kraham, Elder Law and Estate Planning Attorney, Ettinger Law Firm Elder law attorneys work with families to protect assets from a spend-down, often by using a Medicaid asset protection trust and other tools. You might also lose the value of life insurance in a spend-down, as some applicants are required to "surrender" their insurance policies to receive Medicaid support. Usually the surrender value is a small cash value amount, far less than the death benefit to be paid to beneficiaries. The real winner of surrendering life insurance is the insurance company itself, as the company avoids the obligation to pay the death benefit. The seeming injustice of such a scenario is leading some states to consider an alternative process known as "Medicaid life settlements." The process works by allowing an individual applying for Medicaid to enter into a "settlement" where the proceeds of the life insurance policy are used for long-term care. One key benefit of the life settlement is increased flexibility. You may use the funds for care of your own choosing, as opposed to potentially more restrictive Medicaid options. The policy value is still used for care, but doesn't disappear to qualify for public benefits.

Law Promotes Using Life Settlements In Connection with Medicaid Planning Michael B. Cohen Elder Law Attorney Medicaid is “means tested” – so at the present time if a life insurance policy has a face value of over $1500, then the cash surrender value counts toward the countable (certain resources such as a homestead, car, pre-need funeral, etc. do not count) resource limit. So, generally, to get eligible for the Medicaid benefit, applicants often cash in their policy, borrow against the policy and buy non-countable resources or pay bills such as the cost of care or sell the policy and then use the proceeds similarly. If one uses a life settlement, they can use the proceeds for the health care provider of the life insurance policyholder’s choice. This endorsement of life settlements by the state is with the hope that the policyholders won’t simply surrender their policy and get on Medicaid quicker. States Moving to Encourage Seniors to Sell Life Insurance Policies to Pay for LTC Donna Stefans- Stefans Law Group When individuals find out they need to “spend down” their assets to qualify for Medicaid, selling a life insurance policy might seem like a great place to start. Though most people may not realize the sale will trigger the Medicaid eligibility penalty period, too. According to the Government Accountability Office (GAO), 38 percent of all Medicaid applicants have a life insurance policy. Many elderly policyholders (or their family members) in need of cash simply abandon or surrender the policies and receive little or no cash after years of paying premiums. States looking for ways to reduce Medicaid costs are beginning to encourage seniors to sell their life insurance policies to life settlement companies and use the proceeds to forestall their need to access Medicaid long-term care funds. For example, customers of Life Care Funding get about 45 percent of their policy’s death benefit, depending on their age and health.

Some States Moving to Pass “Life Settlement Laws” Cheryl David Estate and Elder Law Center Medicaid, a program primarily paid for by individual states, provides healthcare coverage to the young, infirm, and indigent people. Much of the expenses associated with Medicaid come from seniors who use the program to pay for long-term care costs. Now, some states are moving towards adopting so-called “life settlement” laws. These laws allow seniors to use their life insurance policies as a way to pay for the cost of nursing home care without having to rely on Medicaid. The law was essentially designed to give seniors with life insurance policies the ability to sell those policies to buyers at a premium, typically up to 10 times the cash surrender value.

Texas Seniors Funding Medicaid with Life Insurance Policies The Hale Law Firm Seniors who are considering selling their life insurance policies are typically doing so because they have been told that Medicaid coverage qualifications demand it, say elder care advocates. But, they caution, not all assets are counted. While a senior’s assets are not to exceed $2,000 for eligibility, home ownership, a car, and personal property are exempt. So is a life insurance policy; the “cash value” is countable, if the total face value exceeds $1,500. The “cash value” is what the life insurance company would pay out if the policy were cancelled, while the “face value” is what the beneficiaries would get when the senior died. Texas Medicaid does not include life settlement proceeds in asset assessment while determining an individual’s Medicaid nursing home benefits eligibility. The money typically goes directly into a nonrefundable account from which long-term care expenses are paid, not directly back into the pocket of the senior.

New Law Expands Life Settlements The Vermillion Law Firm, LLC Under Medicaid guidelines, anyone seeking to apply for the program must “spend down” their assets before they can become eligible. Medicaid considers the cash surrender value of any life insurance policy to be an asset. So, if an elderly person wants to apply for Medicaid and have a life insurance policy, he or she would have to spend the cash surrender value before becoming eligible. The legislation is targeted at seniors who dispose of their life insurance policies in order to qualify for Medicaid, a program paid for by the states and the federal government. Legislators hope the law will reduce the state’s Medicaid bill by allowing seniors to pay for long-term care on their own.

The Unintended Beneficiary of Your Life Insurance Policy Kilcommons, Shanahan LLC Attorneys at Law Instead of cashing in a policy for its cash value, say, $5,000.00, a policy worth $100,000.00 would be sold for $45,000.00 and provide about five months of nursing home care. That’s five months that would otherwise have been paid by Medicaid. States are desperate to raise funds to pay for the care of the estimated 78 million Baby Boomers heading into old age. This trend will continue

States Moving Ahead With Life Settlements Laws Law Office of Michael Robinson, P.C. Because so many people want to use Medicaid to pay for long-term care expenses, many of them spend down their life insurance cash surrender values because Medicaid has a specific asset limit. In order to qualify, elderly people must spend down their assets, or else they have to pay for long-term care expenses privately. The life settlement laws allow elderly people to use their life insurance policies as a way to more easily pay for private care. Life Settlements and Long-Term Care Darol Tuttle Elder Law and Estate Planning Attorney Some state governments are now accepting the idea of “life settlements” as a way for older Americans to finance the rising costs of long-term care. Essentially a life settlement is an agreement in which a life insurance policyholder sells his or her policy to a buyer who becomes responsible for making the premium payments. A number of states have passed bills authorizing Medicaid officials to inform people about the life settlement option. “Life Settlement” Laws Might Change Medicaid Budgets Robert J. Kulas, P.A. Attorneys at Law As states wrangle with growing Medicaid budgets, the life settlement laws are viewed as a way to curtail the growing expense associated with long-term care. Seniors who qualify for Medicaid can use the program to pay for their nursing home expenses. With the life settlement laws, states seek to allow seniors to pay for those expenses on their own for as long as possible. Once the seniors sell their life insurance policies and then spend the money they receive for the sale, they can later apply for Medicaid once they have spent down their assets to the program enrollment limit. In Medicaid Planning, Don’t Surrender Life Insurance—Trade It for LTC Instead William Byrnes, Associate Dean, International Tax & Financial Services Ownership of a life insurance policy can actually help clients in long-term care planning as more state Medicaid offices embrace the use of life settlements in conjunction with Medicaid coverage.

8-‐ The Silver Tsunami The Silver Tsunami WHITE PAPER Published August, 2008 Author, Chris Orestis Executive Summary The approaching surge of Baby Boomers and the ever expanding ranks of the 65+ generation have been on our radar screen for years. But today, it is no longer a concept far off on in the future. The reality is that the conversion of Baby Boomers turning into bona-fide seniors is actually now upon us. The oldest Baby Boomers began qualifying to take government benefits last year, and according to the U.S. Census Bureau, in less than three years 8,000 Americans will start to become Medicare eligible every single day. This generation, from the youngest Baby Boomer to those now in their eighties, will require innovative solutions from life insurance, annuities, health and disability coverage, and long term care to address their financial needs. But how well do we really know these people? What are their plans for the future and are they financially prepared? What are the realities that will confront them as they move across the age continuum of Baby Boomer to 65-- and then continue aging for many years to come? In this paper we will look at statistical data from a wide range of sources to create a picture of the Baby Boomers and the 65+ seniors ahead of them. Together they are a “Silver Tsunami” that will hit the U.S. economic and social fabric with a force unprecedented in any nation’s history. We will examine the opportunities and challenges associated with this group. We will also consider the impact of economic conditions and the eventual realities that will confront them, and us all, as aging and the necessity of long term care goes from a distant concept to a frighteningly expensive reality. Demographic Profiles The first step in harnessing the opportunities and mastering the challenges that will come in the wake of the “Silver Tsunami” is analyzing and understanding this population that is so different from any other in U.S. history. The “Silver Tsunami” population can be broken into two distinct cohorts: • •

Cohort 1- Seniors born 1939 or before that account for 35,986,082, or 12.6% of the U. S. population. The gender split is 42% male and 58% female. Cohort 2- Baby Boomers born 1946-1964 that account for 76,402,903, or 26% of the U. S. population. The gender split is 49% male and 51% female.

These two age based groups posses unique demographic characteristics that are important to understand if one is to measure, and then fully realize the opportunities of providing financial and healthcare services to meet their needs. Average life expectancy from age 65 increased from 77.7 to 84 years for males and 79.7 to 87 years for females in the 60 year period from 1940-2000. Life expectancy going forward into 2040 should add another 3 years on average for both males and females. The age group of 85+ is the fastest growing segment, and they are experiencing the highest gains in life expectancy on a percentage basis. Further, the population of Centenarians (age 100+) more than doubled from 37,306 in 1990 to 88,289 in 2004. Important to note with all of the life

expectancy gains is that the population of 65+ living in a nursing home accounts for 1,557,800 or 4.5% of the total cohort population. Most people that move into an assisted living or nursing home are a surviving spouse, and to that end, the number of seniors surviving a deceased spouse triples when moving from the age segment 65-74 to 85+. Fast Fact Top 5 states of residence for the 65+ cohort as a percentage of population - Florida (17.6%) - West Virginia (15.6%) - Pennsylvania (15.3%) - Iowa (14.9%) - North Dakota (14.7%) - Rhode Island (14.5%) Average household income for age 65-74 is $35,118, and then drops to $23,890 for age 75+. The 70-74 segment has the highest net worth at $120,000, but once seniors reach age 75+ their average net worth drops to $100,000. For the entire cohort of 65+, home ownership is 80% with almost 75% living unencumbered by a mortgage, but when you remove home equity from the equation, average net worth drops significantly from a high of $31,400 to a low of $19,025. Fast Fact Three largest expense areas for the 65+ cohort 1. housing and food 2. transportation 3. healthcare Baby Boomers account for 48% of U.S. families with 45 million households, and spending power of over $2 Trillion. The younger Boomers born between 1956 and 1964 have an average household population of 3.3 people (with 1 or more children), and an average annual income of $56,500 of which they spend $45,149. The older Boomers born between 1946 and 1955 have an average household population of 2.7 people (with 1 or no children), and an average annual income of $58,889 of which they spend $46,160. 69% of younger Boomers own their homes and devote a larger share of their monthly budgets to mortgage payments. This group also spends about 10% less than the average on life and other forms of personal insurance, while the older Boomers spend 20% more than the average. Fast Fact Over 50% of the Baby Boomers live in nine states California, Texas, New York, Florida, Pennsylvania, Illinois, Ohio, Michigan, and New Jersey. The population of 65+ will increase 48% and the population of 85+ will increase 43% by 2020. The growth of the 65+ population will be attributable mostly to the aging of the Baby Boomers, but the growth of the 85+ population is primarily a factor of increasing life expectancy. Currently, there are three states where the 65+ population exceeds 15% of the states total: Florida, Pennsylvania, and West Virginia. That number will grow to 42 states by 2020. When it comes to tracking and categorizing the financial habits of the growing populations of Baby Boomers and Seniors, Claritas developed an effective demographic segmentation system called P$ychleNE (for more information visit www.claritas.com) which is particularly insightful for producers of annuity and life insurance products. Their system breaks down U.S. households by financial behavior across 58 segments within 13 life stage groups going back to 1987. For our two cohorts, the 65+ seniors of cohort 1 and the Baby Boomers of cohort 2, P$ychleNE segments them into two unique groups, and then two more that they share with similar

characteristics regardless of age classification. Based on their financial behavior, the segments break out across the following primary classifications and related sub-sets that describe key aspects of their life style and spending habits: Cohort 1 - Wealthy Seniors (Five sub-sets of 65+ retired and living in comfortable suburban homes with substantial nest eggs) o Globetrotters o Golden Agers o Civic Spirits o Savvy Savers o Annuity-Ville -

Mid-scale Matures (Four sub-sets of 65+ with working class wages and modest income producing assets) o Early-Bird Specials o Conservative Couples o Senior Solitaire o Old Homesteaders

Cohort 2 - Boomer Comfort (Five sub-sets of educated, well-off, tech savvy professionals with six figure incomes, strong performing assets and receptivity to insurance products) o Power Couples o Big Spenders o Jumbo Mortgagees o Bargain Lovers o Suburban Scramble -

Financial Elite (Two sub-sets of the most affluent segment in the U.S. with the highest income producing assets, highest incomes, and large sums of money to manage across stocks, real estate, insurance, and annuities) o Wealth Market o Business Class

Cohort 1 and 2 Blend - Upscale Empty Nesters (Four sub-sets of well-off 55+ with sizable income producing assets and retirement accounts with large portfolios of securities and real estate as well as accumulators of insurance and annuities typically with the assistance of financial planners and insurance agents) o Retiree Chic o Leisure Land o Travel & Antiques o Comfortably Retired -

Retirement Blues (Five sub-sets of 55+ with low levels of income and assets and very modest life styles) o Retirement Ready o Hunters & Collectors o Urbanistas o Senior City Blues

Impaired Risk

Underwriting impaired risk tends to be more prevalent with our two cohorts, particularly with the 65+ group. This is one of the faster growing segments for the insurance industry with life, annuity and long term care products. This is also becoming an important area for group and work site benefits such as health, disability and disease specific insurance. According to the U.S. Department of Labor, the number of employed people still working between the ages of 65 and 90 has increased from 4.7%, or 600,000 people a decade ago, to 6.4%, or now over 1 million people. This means that the numbers of workers age 65 and over accessing benefits through employers will continue to grow with these evolving economic and life expectancy trends. Over the last decade, advancements in underwriting and actuarial models, as well as medical science, have made it possible to price all insurance products at competitive rates in ways that once was unavailable to this age group. Underwriting seniors is a different process than underwriting “unimpaired” or relatively young and healthy applicants. Fast Fact Top health conditions that become causes of death for those 65+ - Vascular - Cancer - Stroke - Dementia - Influenza Once people reach age 65: 80% of seniors report having at least one chronic condition, 50% report at least two, and 30% report having three or more chronic conditions. Additionally, 30% of people 65-70 have reported vascular issues and that number jumps to 70% once you get past the age of 70! Beyond the obvious underwriting screens that are typically looked for; factors such as recent cessation of smoking, sudden weight loss, frailty and use of assistive devices, ADL impairments, MVR history and work/volunteering/travel schedules are scrutinized more closely with the 65+ group. Underwriting tools that can be used to measure impaired risk include Pulmonary Function Exams to measure decline of lung function, eGFR to measure kidney filtration, Serum Albumin levels as an indicator of “all-cause” mortality risk factors, and MMSE Cognitive Assessments to measure deterioration of visual, verbal, concentration, and orientation levels. Another important health screen for this cohort is any recent history of falls and broken bones. There is at least a 30% chance that a person will need to move into a nursing home after a fall, and only 33% regain their prefall physical condition. Also, there is as high as a 35% chance of death within the first year of a fall. As the individual ages, certain health conditions shift from being of concern to the norm. For example, seniors will typically experience a slowing of reflexes and loss of muscle mass. Renal and liver functions, as well as pulmonary and vascular capacity can all be expected to decrease. Cognitive abilities will begin to slow, and a certain level of “memory challenge” (not to be confused with Alzheimer’s Disease) will creep into the picture. Also, conditions such as cancer or heart disease that are long in remission, under control and/or being managed by medication become less of a factor in determining overall mortality and morbidity. Level of education has a direct correlation to income, which in turn has also been proven to have a direct impact to overall health. Baby Boomers are the most educated generation in U.S. history with almost 90% completing high school and then 28.5% going on to earn at least a masters degree. The bottom line is that the better educated someone is, then the higher their income will be and in turn they can expect to be in better health and live longer.

Lastly, an important life expectancy concept to understand is “Morbidity Compression”. Current life expectancy trends indicate that more people than ever are living at a relatively healthy state up to average target ages based on their demographics. But if a person experiences any significant health impairment, then their remaining life expectancy usually becomes compressed. For example, a healthy individual in the 75-80 age range that lives at home, is able to care for and transport themselves, and pursues leisure vocations and social interaction could have a life expectancy of ten or twenty years. But if that individual experiences a TIA/stoke or breaks a hip, and then must either access home care or move into an assisted living or skilled nursing facility, it is more likely that the life expectancy range would compress to less than five years. The Wild Card: Economic Challenges There are two inextricably linked fundamentals that determine the quality of life for Baby Boomers and seniors: health and finances. As they age and life expectancies compress, there is less time and vitality available to recover from injury and illness. The same is true of financial “vitality”. People in their thirties and forties have time to recover from set backs in the stock market, housing values, or business and investment fluctuations. Once people reach their sixties, it is too late to start a meaningful savings program (as the benefits of compound interest have long since abated) and if investments and/or property are underperforming there may be little time available to wait for recovery. Retirements funded by a corporate pension after a life time of service are almost extinct in this country. Beyond Social Security and Medicare, the vast majority of Americans today rely on equity in their homes to be a major component of their retirement. For seniors facing major costs such as health care and long term care, the current state of the economy could not be worse. The impact of the sub-prime mortgage implosion on credit and equities markets has resulted in a huge hit on many American’s net worth via erosion in home equity. In fact the National Association of Home Builders released a report in June of 2008 citing that, $426 billion of equity in the U.S. has vanished. That is almost half a TRILLION dollars taken away from Americans in less than two years! During an interview with former Federal Reserve Chairman Alan Greenspan in July, 2008 he was quoted as saying that the U.S. housing market is nowhere near the bottom and that our economy is teetering on the brink of recession. He described the confluence of economic factors currently battering the U.S. a once in a century “phenomenon”. Validating his concerns is the most recent reports released on foreclosures showing a 55% increase from July of 2007 to July of 2008. That translates into 1 in every 464 households in this country foreclosed in July, 2008. Maybe even more alarming is the 184% increase in bank repossessions during the same time period. The top states in the country for foreclosures is Nevada, California, Florida, Ohio, Georgia, Michigan, Colorado, Utah, Virginia, Texas, Illinois, and New York. When Greenspan talks about this “phenomenon” he is talking about the combination of the real estate woes and the alarming pace of inflation in core areas such as food and fuel costs. The impact of these two areas has been causing huge swings on an almost daily basis in the stock market furthering adding to people’s concerns. Energy prices are up almost 30% for the year and food prices have increased 6%. Even with recent declines in oil prices and a drop at the fuel pump, oil prices are still double what they were in the summer of 2007 and grain prices are double what they were in the summer of 2006. The impact that this is having on seniors is very serious. Home equity is in reverse and savings and equities are being chewed up by inflation and stock market losses. Social programs such as Social Security are not doing much better with the smallest benefit increase in the last four years at 2.3% for 2008. According to the AARP, the number of seniors filing for bankruptcy over the age of 55 in the last year was about 250,000. At this pace, the recent study by Ernst & Young LLP showing that three out of every five new middle class retirees will outlive their financial assets if they do not downwardly adjust their standard of living (expenses) by 24%-37% looks to be optimistic.

During good times, equity in homes and the growth of the stock market can propel a high standard of living in retirement and also help to fund the expenses associated with health care and long term care. But during hard times, when these critical economic engines are not cooperating the outlook can change drastically. Long Term Care Crisis The double-edged sword of the senior market is the long term care crisis. Everyone will eventually need to secure some form of long term care and/or assisted living, but no one likes to think about it today and making plans for the future is easily put off until later. In fact, the long term care crisis in the United States is a lot like global warming. There is no denying it is happening and that you are going to be impacted—but it seems like it is far enough away into an uncertain future that today’s needs and priorities take precedence. As is usually the case with the human condition, we seldom plan for a crisis and instead are forced to react to it when it is upon us. One study on how seniors make choices about senior residential and long term care options showed three distinct and familiar patterns: 1. 13% actively plan for retirement and how they will live as they grow older and frailer 2. 40% actively plan following a “near catastrophic” health event such as total joint replacement or extended illness 3. 46+% never plan and must make decisions about site of care in a very short period of time, usually while still in the hospital On the one hand, the exploding senior population and their inevitable need to finance senior residential and long term care options should be a tremendous opportunity for the financial planning and insurance agency world. The problem is that the combined impact of our nation’s economic strains and people’s tendency to not plan and save, is brewing a perfect storm that threatens to sink the vast majority of people’s chances for quality “golden years”. The costs of healthcare and long term care alone are staggering. According to a MSN Money.com Market Watch report (March 28, 2008) “a sixty five year old couple retiring now would need more than $300,000 set aside just to pay for health care costs over twenty years and would need $550,000 if they were to live into their early nineties.” Particularly alarming, according to the report, is the fact that these numbers, “haven’t factored in the costs of nursing homes, assisted living facilities or home health aides—and those costs are staggering!” Currently in the U.S. there are over 1.5 million people living in nursing homes. Of that population, 72% are female and the 85+ population is growing the fastest with a 20% increase. The oldest old are living longer and they are costing more than ever to support with private or public funds. This is important to consider when planning for the future because as of today, 56% of residents will live in a nursing home anywhere from one to five years or more (with a national average of 30 months). For the population of 900,000 people currently living in assisted living facilities, the vast majority of financing is private pay. In addition to the monthly cost for a room, apartment or cottage; residents may also face onetime entrance fees ranging from $60,000-$350,000 for higher end “resort style” or “cottage” properties. Additional monthly fees ranging from $348-$522 are often times charged for transportation, dementia care, meal delivery to residence, and other extras that would add to quality of life. As of 2000, the most recent year for data, there were 1,355,290 people receiving some form of extended homebased healthcare. Of that population, 70% were from our 65+ cohort and 65% were female. The average time span of care was for 312 days, and over 93% of the care was being delivered by Medicare/Medicaid certified agencies. With the reality of these kinds of costs and the growing senior population; we will see increasing pressure on publicly funded programs such as Medicare and Medicaid (which combined pays for roughly 80% all long term care related expenses in the U.S.), and moves to make it more difficult to qualify. The economic squeeze of

inflation, the real estate crisis and stock market performance are all contributing to declines in tax revenues for the states. When taxes shrink one of the most vulnerable areas is also one of the most expensive for state budgets: Medicaid and other social support programs. The long term care industry and the government at all levels are in agreement on how to compensate. More emphasis must be placed on the individual to pay for as much care and housing as possible with private funds before any public funds are made available. But what are some private funding options that people should be considering? An obvious source of funds to cover these expenses would be from long term care insurance. The only problem is that attractive tax deductions have never been established to incentivize growth in the market, and it has been stalled for over a decade. As of today, long term care insurance accounts for an anemic single digit percentage of all funding for senior housing and care. That leaves private pay to pick up close to 20% of the approximate total of $200 Billion spent on all long term care service last year. But where do those funds come from if you have not saved literally hundreds of thousands in cash? A primary option that people have often looked to is cashing in their home through a sale to raise the funds to sustain themselves (or to meet spend down requirements). But, the current real estate market has taught us, as is the case with the stock market, that it is always vulnerable to a correction. Another means to extract equity from a home could be through a reverse mortgage, and it might be a good option for a home healthcare arrangement, but what happens if health conditions deteriorate rapidly and the person must move into a facility on short notice? The home owner is then faced with the dilemma of funds that can’t be used for a setting outside of the home, and a loan that must be paid back immediately. If a person has built up cash value in a life insurance policy, they could consider taking a loan against the policy or surrendering it for the cash value. Also, if someone attempts to qualify for Medicaid, a life insurance policy would be an “unprotected” asset subject to the 60 month look back period. It would need to be liquidated and spent down on care before eligibility could begin. According to a Federal Government Accounting Office (GAO) report released to the U.S. Congress in March, 2007: when examining a sample population of over 500 Medicaid applicants entering long term care facilities, 38% owned a life insurance policy that needed to be liquidated because it exceeded minimum state mandated asset levels. When cashing out a life insurance policy, either by choice or because of an eligibility mandate, the superior option is a Life Settlement. This process will ensure that the highest possible value is obtained for the policy through bidding from multiple institutional sources in the secondary market. Also, any tax implications for capital gains realized from a Life Settlement would be offset by deductions based on spending the money for “the entire cost of maintenance in a nursing home or home for the aged” (sec. 1016 U.S. Master Tax Code 2008). The Conning & Co. Research study "Life Settlements: Additional Pressure on Life Profits” found that senior citizens owned approximately $500 billion worth of life insurance in 2003, of which $100 billion was owned by seniors eligible for life settlements. Statistical data gathered on policies “settled” in 2007 continues to verify that the difference between the amounts of money that can be realized through a Life Settlement is significantly greater than through cash “surrender” value. When the time comes to look at funding vehicles to pay for long term care related expenses, cashing in a life insurance policy through a Life Settlement could be an excellent financial move. Conclusion Previous generations retired on schedule and then lived the rest of their lives on pensions and government benefits. For the most part, they ceased becoming viable consumers of insurance and financial services. The Silver Tsunami generation will live, work, and stay active much longer than any generation in history. This will prolong their need and ability to continue being acquirers of health and financial security products. And with their expectations for quality lifestyles until the very end—they are going to need every possible financial tool to make it happen.

Sources AARP Public Policy Institute, Across the States Profiles of Long Term Care and Independent Living, Seventh Edition 2006 Claritas P$ycleNE, Actionable Segmentation Solution Genworth Financial, 2008 Costs of Care Survey, April 2008 Government Accounting Office (GAO), Report to Congressional Requesters on Medicaid Long Term Care Impact of Deficit Reduction Act, March 2007 Health Care Financing Review, Winter 2002 Study John Hancock Life Insurance, More Tools for Underwriting the Elderly?, October 2007 Life Policy Dynamics, 2007 Summary: U.S. Life Settlement Market Analysis, March 2008 MetLife Mature Market Institute, Demographic Profile Americans 65+, 2008 MetLife Mature Market Institute, Demographic Profile American Baby Boomers, 2008 MetLife Mature Market Institute, Market Survey of Nursing Home & Assisted Living Costs, October 2007 Society of Actuaries, Life Settlements 101: Introduction to the Secondary Market in Life Insurance, October 2007 Swiss RE, Underwriting the Elderly presentation at NEHOUA 24th Annual Seminar, October 2007 United States Census Bureau

9-‐ Lifecare Funding

January 14, 2013 Mr. Eric Lingswiler, Bureau Chief of Managed Health Care Accelerated Life Benefit Technical Advisory Workgroup Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308 To Mr. Lingswiler and the honorable members of the Workgroup: I want to thank you and the entire Workgroup for the effort you have put into executing the charge of the Accelerated Life Benefit Technical Advisory Workgroup. I also want to thank you for inviting me to address your body in November and to contribute comments as part of the drafting process. I appreciated having the opportunity to discuss Life Care Funding’s work to help policy owners and their families struggling with how they will pay for the costs of Senior Living and Long Term Care. Having testified before the National Conference of Insurance Legislators (NCOIL) four times since 2010, to help develop the Life Insurance Consumer Disclosure Model Law and advocate for the concept of utilizing life insurance policies as an asset that can contribute towards the costs of long term care across the country; we are very grateful for the outcome of this Workgroup’s efforts. As we have presented to the Workgroup (and NCOIL), Life Care Funding allows the owner of an in-force life insurance policy to convert their death benefit into a Long Term Care Benefit Plan. The Policy Conversion is not a long term care insurance policy, annuity, any form of hybrid life/LTCi policies, or an accelerated death benefit-- it is actually the exchange of a life insurance policy for a Long Term Care Benefit Plan at the time that care needs to be paid. Policy owners use their legal right to convert an in-force life insurance policy to enroll in the Benefit Plan and are able to immediately direct payments to cover their senior housing and long term care costs. This option is designed to serve a large but ignored middle market population. A large number of these life insurance policy owners unfortunately end up either lapsing or surrendering their policies because they can no longer afford to keep their policy in-force, or they are on a Medicaid spend down path. Owners of small face life policies with an immediate need for long term care have limited options to use their policy for anything other than a death benefit, and it is too late for them to purchase a long term care insurance policy. Life Care Funding provides an opportunity for them to convert any form of in-force life insurance policy, in as little time as 30 days, to a Long Term Care Benefit Plan that is administered third party on their behalf with payments made every month directly to their choice of long term care provider: home health, assisted living, or nursing home. Important to note, this is a regulated transaction complying with the same standards as any other secondary market transfers for a life insurance policy. The Long Term Care Benefit is set up as an irrevocable, FDIC insured Benefit Account administered by a third party benefit manager. The entire amount of the benefit account is guaranteed and a final expense funeral benefit is also provided. The Long Term Care Benefit Plan conversion option is considered a “qualified spend down” of a life insurance policy asset for Medicaid eligibility. According to a GAO study in 2007, 38% of Medicaid applicants owned a life insurance policy that needed to be liquidated to qualify. There is $27.2 Trillion worth of life insurance

policies owned by 153 Million Americans (NAIC, 2011), and 7.4 million Citizens of Florida own $1.5 trillion worth of life policies. As Medicaid budgets continue to be pressed, more efforts to find private market solutions such as the Long Term Care Benefit conversion option will become an important part of the equation. Families with the need to pay for long term care that are unable or unwilling to keep their life insurance policy in-force by maintaining premium payments, or are planning to abandon as part of a Medicaid spend down regimen, a Long Term Care Benefit Plan conversion is a much better choice. Sincerely,

Chris Orestis, Chief Executive Officer Life Care Funding

10-‐ Blog Posts www.lifecarefunding.com/blog

What Will You Find When You Visit Your Parents this Holiday Season? December 11, 2013 / Chris Orestis How to look for the Warning Signs that your loved one(s) can no longer live alone The holidays and their aftermath are the busiest time of year for long-term care admissions. Between Thanksgiving and Christmas, families get together and many are seeing Mom and/or Dad for the first time in months. Some will discover that their parent’s health has declined and he or she should not be left to live on their own any longer. Warning signs that your parent may need to be evaluated for in-home nursing assistance, or a move to a more supportive setting, can be found in three areas of impairment: Memory (verbal clues), Health (physical clues), condition of home (visual clues) Here are some examples to look for– •

Confusion or forgetfulness about taking medications or who family members are

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Unstable/unbalanced (at risk of falling), loss of stamina and strength

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Change in hygiene habits or housekeeping (plants in the fridge or stove?)

Most families are not prepared for this and they don’t have a plan or resources, so the situation becomes traumatic and heart-breaking for everyone. It doesn’t have to be that way. Every family should be talking about this now and exploring options. Families should construct a three point plan for how they will discuss this matter with their loved one(s) and then act: 1. Siblings and spouses on same page about situation and next steps 2. Everyone needs an assigned job because “it takes a village” 3. Understand different types of care and how to pay (Medicare v. Medicaid / Private Pay / Insurance options) Once everyone is on the same page, ease into the discussion. Don’t just jump to “it’s time to move into a nursing home”! It also helps to bring in an objective third-party expert opinion. Look for a certified geriatric care planner in your area. They know how to evaluate the situation and then lay out care and financial

options. If your loved one is arguing against getting Home Care or making the move into assisted living, there are some positives to balance the loss of independence you can point out: •

Are they living isolated now? This can increase socialization and transportation

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How are they doing caring for themselves? This can improve hygiene and nutrition

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Are they in danger living alone? This can significantly improve their safety

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Are they properly taking care of their health? They will receive professional Healthcare and assistance with medications

Here are some other tips to help families’ better plan: •

Remember, there are many levels of care available. From a few hours of in-home assistance each week to residential communities that provide daily assistance with meals, laundry, etc., to a nursing home that provides round-the-clock care, there are many options to consider. Generally speaking, finding ways to keep your loved one at home for as long as possible is the least disruptive – and least expensive – option.

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Avoid resorting to Medicaid if at all possible. Nursing-home care costs start at $5,000 to $8,000 a month, which is often beyond the means of people otherwise considered financially healthy. Many families turn to Medicaid to pay for nursing home care, but it comes with many restrictions, including choice of facilities. In a situation where one spouse is healthy and the other is not, the spouse living independently will also face restrictions on the amount of assets he or she can retain, for instance, as of July 1, 2013, a maximum $2898.00 for monthly maintenance.

•

Don’t simply stop paying on a life insurance policy to save money. Any life insurance policy can be converted into a protected Long-Term Care Benefit fund which will pay for any level of care, from in-home to hospice. Policy holders typically receive 30 to 60 percent of the death benefit value when they convert the policy specifically to pay for long-term care. The benefit qualifies as a Medicaid spend-down, which means they’ll still be eligible for that program if the money runs out.

Do you have the Treasure Map to Survive Your Golden Years? December 5, 2013 / Chris Orestis Americans are living longer these days from an average 47 years in 1900 to more than 78 years as of 2010. We are also experiencing a deluge of adults reaching retirement age now that includes 10,000 Baby Boomers turning 65 every day. By 2030, when the last of the baby boomers have turned 65, nearly one in five Americans will be retirement age, according to the Pew Research Center’s population projections. Money will be a big problem for many of them, especially if boomers develop health problems that affect their ability to live independently. Life Care Funding created a financial solution for seniors that own a life insurance policy that converts the policy into a Long-Term Care Benefit Plan; this gives the policy owner the option to use their policy while still alive to help pay for their choice of any form of senior care services. With 30 percent of the Medicaid population consuming 87 percent of Medicaid dollars on long-term care services, we can see that’s not going to be sustainable. More individuals will be forced to find their own resources to pay for those needs. That’s why states such as California, Florida, New York and Texas are embracing legislation requiring seniors to be notified that they can convert their life insurance policy for 30 to 60 percent of its death benefit value. The money can be put into an irrevocable fund designated specifically for any form of care they choose. Here are more ways in which seniors might handle long-term care and other budgetary issues: Senior discounts really add up! Here’s a list of establishments to check out: www.lifecarefunding.com/blog/senior-discounts/. Restaurants, supermarkets, department stores, travel deals and other merchants give various senior discounts with minimum age requirements ranging from 55 to 62. Some of these places are worth making habits, with 15 percent off the bill at Applebee’s, 30 percent off at Banana Republic and 60 percent off at Food Lion on Mondays! Don’t forget your free cup of coffee at Dunkin’ Donuts if you’re 55 or older, and don’t be shy – at many of these places you’ll have to ask for the discount. Long-term care is a matter of survival, so use your best options. The practice of converting a life insurance policy into a Life Care Benefit has been an accepted method of payment for private duty in-home care, assisted living, skilled nursing, memory care and hospice care for years. Instead of abandoning a policy when they can no longer afford the premiums, policy owners have the option to take the present-day value of the policy while they are still alive and convert it into a Long-Term Care Benefit Plan. By converting the policy, a senior will

remain in private pay longer and be able to choose the form of care that they want but will be Medicaid-eligible when the benefit is spent down. Your “last act” may be decades away, so plan accordingly. It makes sense to finally enjoy your money after a lifetime of savings, but be smart about it. Take time to organize your paperwork and create a master file that holds things such as insurance policies, investments, property, wills and trusts, etc. so you have your financial picture in one place. Also, live smart today and hold off on that new car if you don’t need a new one. If your current car is paid off and you sit tight for an additional two years, you’ll save $7,200 on a new car with $300 monthly payments. Refinancing your home may also be a very good idea, since rates are still hovering around their all-time lows. Get at least three quotes, compare rates, terms and potential penalties to make sure you’re getting the best deal. Also, live healthy and buy more fruits and vegetables and less junk food to lessen the chance you’ll need long-term care in the future. Do you have the “treasure map” needed to survive your Golden Years? The key to financially surviving your Golden Years is information and preparation. Too many people ignore the realities of long-term care until they find themselves in the middle of a crisis situation. One of the oldest sayings in the book is “if you fail to plan you plan to fail”. It is important that family members have a discussion about how they want to handle long-term care for themselves or loved ones. You need to get a handle on the costs and what resources are available. If you have a life insurance policy don’t abandon it! Keep it in-force so that you can convert it into a Long-Term Care Benefit Plan when the time comes to pay for care and remain private-pay as long as possible. Do you understand the differences between Medicare and Medicaid? What they will and won’t cover? How to qualify? Have documents for power of attorney, wills, and end-of-life instructions been put in place? These are just some of the questions that you need to begin the family discussion about being prepared. Don’t wait for a crisis to hit before you begin.

Will a Nursing Home be the Financial Death of you? November 19, 2013 / Chris Orestis

Are you Financially Prepared for Long-Term Care? Maximizing Money for an Aging Population & Solutions for Long-Term Care Funding November is National Long Term Care Awareness Month and America is experiencing a deluge of adults reaching retirement age that are also living longer. By 2030, when the last of the baby boomers have reached 65, one of every five Americans will be retirement age, according to the Pew Research Center’s population projections. Money will be a big problem for many of them, especially if they develop a health issue that requires daily caregiving. Will a Nursing Home be the Financial Death of you? “Life Care Funding started out to develop a financial solution for the now protracted golden years and we realized the solution had always been right under our noses,” says Orestis, a former insurance industry lobbyist who recently contributed to the federal commission inquiry into long-term care solutions. “Your life insurance policy can be used to pay for your long-term health care today, including home care, assisted-living or nursing home expenses,” Orestis says. “Why hasn’t anyone realized it before? Because the life insurance industry benefits when people give up their policies because they can’t afford them.” With 30 percent of the Medicaid population spending 87 percent of Medicaid dollars on long-term care services, more individuals will be forced to find their own resources to pay for those needs. That’s why seniors should know that they can sell their policy for between 30 and 60 percent of its death benefit value. The money is put into an irrevocable account designated specifically to make monthly payments to help cover any form of Senior Care they want! This option is receiving significant political support around the country. States such as California, Florida, New York and Texas have been introducing notification laws to make sure people are informed by their Medicaid Departments that everyone has the right to use this options and that it is an accepted part of a Medicaid spenddown. In 2013, Texas became the first state to pass this law specifically endorsing the Long Term Care Benefit Plan solution. Here are some discussion questions to consider further about the long term care funding crisis:

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Will Medicaid’s funds simply dry up? If so, when?

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Can you convert a life insurance policy to long-term care?

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What type of life insurance policy can be converted?

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Is long-term care insurance a dying solution?

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Is refinancing one’s home a good idea when trying to pay for long-term care?

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Are there lifestyle choices that might help prevent the need for long-term care?

‘Gravity’ and the Long-‐Term Care Crisis October 31, 2013 / Chris Orestis I recently went to see the movie “Gravity” starring Sandra Bullock and George Clooney. It is a fast-paced, exciting thrill-ride from start to finish. After we left the movie, and I replayed the life-threatening events for the actors that unfolded on the screen, I could not help but begin drawing comparisons to the long-term care funding crisis currently unfolding in America today. Start with the stars of the movie: Sandra Bullock and George Clooney are both baby boomers and they find themselves unprepared to deal with a sudden crisis that puts them in immediate jeopardy. Most seniors and baby boomers are also unprepared for what is too often a sudden health crisis through which they must safely navigate. In space, an unexpected collision with a satellite or other object is disastrous. For a family, an unexpected fall or rapid decline in health can also be disastrous. The astronauts in “Gravity” had to contend with limited oxygen and how they could conserve this precious resource long enough to find sanctuary. For families confronting the costs of long-term care, money is like oxygen. It is a precious resource in limited supply that must be conserved. The biggest fear of the young is not living long enough, and the biggest fear of people in long-term care is living too long and outliving their “oxygen” supply. Once disaster strikes in the movie, Sandra Bullock and George Clooney are literally tethered together and entirely dependent on each other for survival. Spouses and their family also experience a similar “tethering” effect where they become very reliant on one another to make it through a long-term care crisis. The feeling of being overwhelmed can be helped by sharing the burden, and focusing on the ultimate goal of making sure a loved one will be able to receive the best possible care. In the movie, the astronauts are prepared for every contingency and have dedicated support systems in place to get them through each phase of their mission. Nonetheless, when disaster strikes things quickly spin out of control. In life, too few people have made plans for how to handle long-term care. A future long-term care patient may have close loved ones, but those family and friends may not be able to drop everything in devotion to a patient’s care. Families should put in time now to discuss the wishes of loved ones when it comes to longterm care, and understand the financial situation and available resources. Are there savings and investments that can be accessed; is there a long-term care and/or life-insurance policy in place that can be converted to pay for care—and where is it; is there a final will or living will, and should a power-of-attorney document be in place? In the movies, our heroes often work their way through challenges with a combination of luck and skill (and, of course, some movie magic) to find their way to a happy ending.

For families confronting the hard decisions and costs surrounding long-term care, however, they will not be able to count on a hero swinging in at the last minute to rescue them. But, a happy ending is possible for families that take the time now to prepare, seek out information and know how to work together to make sure their loved one will be able to achieve a safe landing.

Are you providing long term care support to a loved one without even realizing it? October 24, 2013 / Chris Orestis Many families don’t realize a loved one needs long term care or that they are in fact already acting as a care provider for a loved one. We often encounter people who are getting care from friends and family and really should be moving towards professional care—they just don’t realize it yet and will say they don’t need care. People in need of long term care are not always obvious and can seem to be living independently when they should actually be receiving Home Care or assisted living. For example, we have talked with families and asked about ADL’s such as can they shower for themselves. The response sometimes is “of course they can” but then we will hear more details such as: “but I do help them get in and out of the shower and I stand by while they are in there, and I also turn on the water to make sure it is not too hot”—but other than that they shower on their own”. The reality is that this person cannot shower for themselves and is already receiving family based care. Many families also don’t understand long term care or how to pay for it. Most life insurance policy owners don’t realize they have the legal right to sell and convert a policy into a Life Care Benefit to pay for their Senior Care needs. In the case of a recent enrollment, Life Care Funding worked with a family that did not realize the extent of their need for long term care until after we had concluded our review process. The policy owner and his family were not taking into account the long term care related factors of his current health situation. The policy owner was experiencing declining health and had just completed an extended skilled rehabilitation stay of 6 weeks. No one had yet considered the factors contributing to the growing need of long term care assistance. Their agent contacted us to see if we could take a look and possibly help them with the conversion of their life insurance policy into a Life Care Benefit. We reviewed the case and analyzed themost recent rehab records and interviewed the caregiver and family to determine serious gaps of information that were causing the family to underestimate the level of care necessary in this situation. Within a week we were able to determine that the policy owner should receive a significant valuation to convert the policy and immediately start their benefit payments. The family enrolled in the Life Care Benefit Plan, and we were also able to help them access a selection of Home Care companies to make sure the client would be receiving the best possible care for the next two-three years—which they can now afford.

The Congressional Commission on Long Term Care: Deadline September 12th August 30, 2013 / Chris Orestis The Long Term Care Commission Deadline of September 12 is Rapidly Approaching Life Care Funding CEO, Chris Orestis joins panel of experts and submits formal Medicaid Life Settlement policy paper to The Congressional Commission on Long-Term Care The Congressional Long-Term Care Commission will submit final recommendations to the President of the United States and the Congress on September 12th, 2013. Chris Orestis, CEO of Life Care Funding was one of the national experts on Senior Care and Finance to submit a written policy recommendation to the Long Term Care Commission. As part of the official Congressional Record, Life Care Funding’s recommendation lays out for the LTC Commission that life insurance policy owners have the legal right in every state to convert their death benefit through a life settlement into a living benefit that can be used to pay for long term care. Unfortunately too few policy owners understand their rights and will abandon a policy without realizing they have alternative options to use the policy while they are alive. Life Care Funding has been a tireless advocate for Senior Care rights and has developed legislative proposals and delivered legislative testimony before numerous state legislatures, published policy papers and articles, given speeches and seminars across the country, and has been interviewed by the media including the Wall Street Journal, CBS News, Fox News, PBS, Bloomberg, Kiplinger’s and numerous other news and media outlets about consumer rights to use life insurance policies to pay for long term care. On January 2, 2013 the American Taxpayer Relief Act was signed into law. As part of the law, a 15 member bipartisan Commission was established to, “…develop a plan for the establishment, implementation, and financing of a comprehensive, coordinated, and high-quality system that ensures the availability of long-term services and supports for individuals in need of such services and supports, including elderly individuals, individuals with substantial cognitive or functional limitations, other individuals who require assistance to perform activities of daily living, and individuals desiring to plan for future long-term care needs.” The Long Term Care Commission’s Task The Long Term Care Commission was given a herculean task and an incredibly short time frame of 6 months to complete its work. As is part of its charge, the Commission must deliver to the Congress by September 12, “a comprehensive and detailed report based on the long-term care plan… [described above]… that contains any recommendations or proposals for legislative or administrative action as the Commission deems appropriate, including proposed legislative language to carry out the recommendations or proposals.” The Long Term Care Commission is comprised of a panel of experts hand selected by Congressional leadership and the President of the United States. They have held four hearings and accepted policy papers from a cross

section of experts in long term care including Life Care Funding CEO, Chris Orestis. In a recent interview, Chris Orestis was asked to predict what the essence of the Congressional Commission on Long Term Care’s recommendations might entail. “Based on the hearings held so far here are the three key points that will be central in the Commission’s final report”: 1. The aging population and longer life expectancies is putting too much pressure on Medicare and Medicaid to sustain. Alternatives forms of funding long term care must be found and/or serious cuts and higher barriers to entry will be necessary. 2. Long Term Care insurance has not lived up to expectations. Major companies have quit the market and remaining companies are raising rates and cutting benefits. It is at this point at best a niche market that primarily serves higher net worth individuals who would probably not go onto Medicaid anyway. 3. A need for new innovations in the marketplace is essential, and private market solutions to find cost savings and new methods to fund long term care must be sought out and encouraged. In response to the Long Term Care Commission’s mission and call for the private market to step forward with innovative approaches to help seniors pay for long term care and help tax payers save money, Life Care Funding submitted this recommendation which is currently under consideration by the Congressional Commission on Long Term Care: Orestis Submits Formal Policy Paper to The Congressional Commission on Long Term Care Policy Recommendation: The Congressional Commission on Long-Term Care Title: Private Market Conversions of Life Insurance Policies into Medicaid Life Settlement Funded Long Term Care Benefit Plans Author: Chris Orestis, CEO of Life Care Funding LLC Date: August 25, 013 According to the most recent National Association of Insurance Commissioners (NAIC) Annual Report, there is almost $28 trillion of in-force life insurance policies in the United States. Billions of dollars’ worth of these policies will be abandoned annually by seniors who are navigating a Medicaid spend-down path. Life insurance is a dis-qualifying asset for Medicaid eligibility, and according to a 2007 GAO study 38% of Medicaid applicants they analyzed owned a policy inside the look back period that had to be properly dispositioned (i.e. lapsed or surrendered) to qualify. State regulatory bodies such as the National Council of Insurance Legislators (NCOIL) have passed model disclosure laws to mandate policy owners are made aware of their legal right to

convert the use of a life insurance policy death benefit (GRIGSBYv. RUSSELL, 222 U.S. 149 (1911) into a living benefit that can be used to pay for any form of Senior Care service. In January 2013, Florida State University Center for Economic Forecasting and Analysis released a study analyzing the cost savings of policy conversions to pay for Long Term Care “scored” at $150 million annually. Florida State University Center for Economic Forecasting and Analysis, Scoring Medicaid Savings of HB 1055: Conversion of Life Insurance Policies to Long Term Care Benefit Plans in Florida, published January, 2012 Subsequently, the Florida Agency for Health Care Administration (AHCA) released legislative report and bill language to the Florida Legislature recommending use of life insurance policies to defray costs of Medicaid. Following Florida’s introduction of legislation, By June 2103, eight states had introduced “Medicaid Life Settlement” legislation to educate policy owners about this option to remain private pay and to codify the Long Term Care Benefit Plan structure that would protect the funds from the Medicaid Life Settlement and ensure that it would only be used to pay for long term care services: California, Florida, Kentucky, Louisiana, Maine, New Jersey, New York and Texas. Texas is the first to enact the legislation into law. It is our recommendation that the Long Term Care Commission look at the legislation that has been introduced around the country and passed into law in Texas (see attached legislative language enacted June 20, 2013) as a national model that would provide seniors more choice and financial control of their long term care scenarios; more private pay funds in the long term healthcare system; and saving to tax payers by delaying or negating the need for seniors to enter Medicaid.

Long Term Care Insurance July 17, 2013 / Chris Orestis If the Long Term Care Insurance Market Collapsed, How are Seniors going to Pay for Care? In 2000, there were over 100 Long Term Care Insurance Companies and today there are maybe a dozen What happened? In less than 15 years the long term care insurance market has almost disappeared. Major insurance companies such as MetLife, Prudential, UNUM, and the Guardian have quite the market and no longer sell policies. The only companies left have been forced to raise premiums on families that bought policies years ago. This has backed people who bought policies planning for the future to make a choice between dropping their policies or negotiating reductions in coverage in return for less drastic rate increases. The problem is that the insurance companies that sold these policies underpriced the premiums in a scramble for market share and it came back to burn them because they miscalculated two important factors: Two Factors the Long Term Care Insurance Companies Miscalculated 1. Seniors are living longer and the cost of long term care is rising higher than had been expected 2. Insurance companies expected seniors to abandon a high percentage of these policies before ever paying a long term care benefit, but the owners who are counting on these benefits refuse to let go after making premium payments for years The insurance companies assumed that since 88% of life insurance policies purchased never pay out a death benefit because they are either lapsed or surrendered– the same would happen with long term care insurance policies. Instead the opposite happened, and the vast majority of policy owners held onto their policies despite numerous rounds of rate increases and benefit reductions. In the recent Wall Street Journal article (7/1/13), Long Term Care Insurance Leaves Customers Groping, the story of the Deane family is a cautionary tale. They were forced to battle with their insurance company about rate increases and benefit reductions to keep even a portion of the policy they have been paying premiums on for a decade. Rob and Katherine Deane had to contend with a rate increase of 77% on the policy they bought for Mrs. Deane ten years ago. After much distress and haggling with the insurance company, the increase was reduced to “only” 46% in exchange for reducing the time that she could receive coverage from 10 years to 6 years—a 46% rate increase in exchange for a 40% benefit reduction! Her husband, a doctor, said in the article, “Seniors are really getting hammered!” The insurance company refused to comment for the article….. Also, as the Wall Street Journal reported in this story, in today’s market many insurance agents and financial planners are steering clients to new “hybrid” coverage, basically life insurance with a rider providing long-term-

care benefits. One appeal: The policyholder can leave something to heirs even if the long-term-care benefits don’t get tapped. But the long-term-care benefits often are less generous than those in conventional policies, and policyholders typically have to write one big check upfront to obtain the coverage, rather than paying premiums each year, says Nancy Courser, the Deanes’ insurance agent. “We have no way of knowing if these policies will self-destruct in the future,” cautions Mary Ahearn, a financial planner in Arizona. There was a time when long term care insurance was thought to be the “silver bullet” private market solution that would pick up the financial slack for the costs of Senior Care in America. Obviously, that is no longer the case, but another insurance based solution has stepped forward and is getting a lot of support from consumers, providers and advisors of Senior Care services, and from political leaders across the country. Converting a life insurance policy’s death benefit into a living benefit that can be used to pay for Senior Care which is known as a Life Care Benefit or a Long Term Care Benefit Plan is recognized as a preferred form of private pay for Senior Care in every state and for every form of care services. Families struggling with the costs of care now have a better option than lapsing or surrendering a life insurance policy because they can convert it into an irrevocable, FDIC-insured account that will protect their funds and make sure the payments are being made on a monthly basis to cover their choice of Home Care (Private Duty and Skilled Medical), Assisted Living, Nursing Home, Memory Care, and Hospice Care. Seniors abandon more life insurance every year than there is long term care insurance in-force in the entire country. Now that seniors have an outlet to convert life insurance policies into a dedicated and protected account that will cover their choice of Senior Care services; there is another well regulated, private market solution to fund senior Care Services and help fill in the widening gap being created by the long term care insurance industry.

Long Term Care Commission takes on the Long Term Care Funding Crisis July 3, 2013 / Chris Orestis Life Care funding is aware of the troubles the US government’s Long Term Care Commission and Medicaid will be soon facing with long term care, and we have a solution. The Long Term Care Commission appointed by Congress to study and make recommendations about the rapidly escalating crisis facing Americans and their ability to pay for long term care, met for the first time in Washington, DC on Thursday, June 27th and the Long Term Care Commission’s prognosis was dire. It has long been known that once the Baby Boom generation started turning 65 the pressure on our country’s ability to fund everyone’s long term care needs would become almost impossible. We are now facing a Silver Tsunami of Baby Boomers turning 65 at a pace of 10,000 people every day and Medicare and Medicaid cannot keep up. With 30% of the Medicaid population consuming 87% of Medicaid dollars spent on long term care services (Kaiser Family Foundation, 2011) our country has reached a breaking point that will require more reliance on individuals using their own resources to pay for long term care—and the Long Term Care Commission agrees! It has long been known that once the Baby Boom generation started turning 65 the pressure on our country’s ability to fund senior’s long term care needs would become almost impossible. In an article published by the Kaiser Health News entitled, Facing A Tight Deadline, Long-Term Care Commission Panel Holds First Meeting, they provided details from the proceedings: During the Committee hearing, panelists explained to the Long Term Care Committee members that the public safety net can no longer sustain the pressure put upon it and private market alternatives must come forth. According to G. William Hoagland of the Bipartisan Policy Center, “Medicare and Medicaid have become the major source of long-term care funding, and cannot continue at the current pace,” he said. Americans should be encouraged to increase their retirement savings so that these programs are relied on as a last resort. In addition, using long-term care insurance to pay expenses is not an option for many Americans, as premiums rise and companies that can’t make a profit leave the market, said Marc Cohen, an industry consultant. Most of the long-term care policies available are sold by only 12 insurers, he said. “We know that 70 percent of people over the age 65 will need some form of long term care services and support,” said Dr. Bruce Chernof, the commission’s chairman. Although government programs provide a significant portion of long-term care, none offer the full range of services people need, said Kirsten Colello, a health and aging policy specialist at the Congressional Research Service. “We know that 70 percent of people over the age 65 will need some form of long-term services and support”

“The fact is that each of us will need these services and supports at some point in our lifetimes,” said Sen. Jay Rockefeller, who added the commission to the fiscal cliff compromise, said in a statement Thursday. “The question is whether most Americans can afford to pay for them.” Public policy, law makers and the realities that every family faces when confronted with the costs of long term care are now intersecting at a very precarious moment in our nation’s history. We are experiencing an explosion of aging Baby Boomers and longer life expectancies among seniors, but diminished financial resources across the board which has brought together a perfect storm of factors we must now confront. The simple fact is, more responsibility is going to be placed back on the individual and their families to find the resources necessary to handle the costs of long term care. Private market solutions other than long term care insurance will be required, and thankfully people are now waking up to the realization that billions of dollars from converting life insurance policies into Long Term Care Benefits is going to become an important part of the equation of paying for long term care.

Avoid Life Insurance Loans and Credit Programs July 1, 2013 / Chris Orestis Seniors beware of life insurance loan and credit funding programs that could disqualify you from future Medicaid eligibility. Seniors that own life insurance policies can convert their death benefit into a living benefit to help pay for Senior Care Services. The practice of converting a life insurance policy into a Life Care Benefit has been an accepted method of payment for Private Duty In-Home Care, Assisted Living, Skilled Nursing, Memory Care and Hospice Care for years. Instead of abandoning a life policy because they can no longer afford the premium payments and/or they intend to eventually apply for Medicaid eligibility; policy owners have the option to take the present-day value of the policy while they are still alive to convert the policy into a Life Care Benefit – Long Term Care Benefit Plan. By converting the policy in this manner the senior will remain private pay longer and be able to choose the form of care that they want, but will be Medicaid eligible when the Benefit is spentdown. Life Insurance Loan Programs Sensing demand in the Senior Care market, new companies have recently sprung up that offer lending programs against life insurance policies like life insurance loan programs. For estate planning purposes, taking a loan against a policy could make sense but for the use of funding Senior Care a life insurance policy loan can create unforeseen problems for the policy owner. First, if a person takes a life insurance loan (kind of like a reverse mortgage on a life policy) they will need to understand the fees, interest rates, and how the policy becomes collateral for the loan that must be re-paid upon death of the policy owner. Because ownership of a life insurance policy counts against the individual for Medicaid eligibility, the fact that a life insurance loan keeps the policy in the owner’s name because it is now secured collateral will disqualify the person from future Medicaid eligibility. Also, there are no protections provided for the funds that come from the loan, and they must be safeguarded and precisely administered by someone in the family to make sure they are used to pay for Senior Care. Funds procured in this way and not spent-down exactly right to pay for Senior Care inside the mandated 5 year look back period would be another disqualification for Medicaid eligibility. The correct use of a life insurance policy to pay for Senior Care is through the conversion of the policy into a Long Term Care Benefit Plan. The Life Care Benefit protects the funds in an irrevocable; FDIC insured account which is professionally administered to make monthly payments to the senior’s choice of care provider. The Benefit can be used to pay for Private Duty In-Home Care, Assisted Living, Skilled Nursing, Memory Care and Hospice Care and the account is structured as a Medicaid qualified spend-down. If the senior spends through the entire account they are then able to seamlessly transition to Medicaid. The account preserves a funeral expense benefit, and/or if the account owner should pass before using the entire account then any remaining balance is

paid out to a named account beneficiary. Also, if a personâ&#x20AC;&#x2122;s needs change the benefit can change as wellâ&#x20AC;&#x201D;for example a person could start with Home Care at $2,500/mo. and after six months could move to Assisted Living at $5,000/mo. with just 30 daysâ&#x20AC;&#x2122; notice. None of these perks are available with a life insurance policy loan program. Policy owners have the legal right to convert their policies into a Medicaid qualified Life Care Benefit in every state; but multiple states have introduced specific Medicaid Life Settlement laws mandating that their Medicaid departments inform citizens about this preferred option for the use of a life insurance policy. States want to make sure their citizens are being informed of their right to convert a life policy to pay for Senior Care and allow them to remain private pay for as long as possible before possibly needing to move over to Medicaid. Policy loans are not included in these laws because of lack of protections and the problems they pose for seniors looking to remain private pay without losing their ability to qualify for Medicaid in the future. In a 2011 Wall Street Journal story entitled, Life-Policy Loans Under Scrutiny, they reported on a raid by Federal agents on the offices of a company providing Life Insurance Loans: A recent federal raid on a littleknown Florida lender has turned up the heat on an obscure corner of the financial world, where life insurance policies are held as collateral for high-cost loans. Agents from the Federal Bureau of Investigation and other authorities descended upon the offices of a Boca Raton-based firm that makes loans almost exclusively to older people. Before a senior allows a policy to lapse or be surrendered they should understand what their rights and options are to use that life insurance policy to pay for Senior Care. They should also understand the difference between policy conversions that are an endorsed and approved funding method for Senior Care; and life insurance loans that pose problems for covering Senior Care and future Medicaid eligibility.

New York Medicaid Life Settlements June 18, 2013 / Chris Orestis Legislative Overview: Medicaid Life Settlement conversion of a life insurance policy into a Long Term Care Benefit Plan NEW YORK STATE ASSEMBLY, SENATE HEALTH COMMITTEE BILL NUMBER: S5721 As New York becomes the eighth state to introduce legislation to promote Medicaid Life Settlement conversions of life insurance policies into Long Term Care Benefits, and Texas becomes the first to enact this legislation into law, Life Care Funding was asked to provide some insight and commentary into what this new law means for consumers seeking the resources to pay for long term care; providers of long term care services; and state Medicaid Departments. TITLE OF BILL: An act to amend the public health law, in relation to Medicaid life settlements In 2007, Life Care Funding introduced the concept of converting a life insurance policy into a Long Term Care Benefit that would help a person stay private pay longer before becoming Medicaid eligible. By staying private pay they would be able to choose the form of care they most want, and in the process Medicaid Departments and tax payers would save millions of dollars. As the long term care industry embraced this concept Life Care Funding began to work in partnership with Home Care Companies, Assisted Living Communities and Nursing Homes across the United States to educate consumers and political leaders about the benefits to both seniors and tax payers if this approach were actively embraced and promoted by the states. PURPOSE: The purpose of the bill is to allow individuals who are about to access Medicaid to sell their life insurance policies pursuant to a life settlement contract and use the proceeds of the life settlement to directly pay for long term care expenses thereby delaying entry into the Medicaid system. Life Care Funding was invited by the National Conference of Insurance Legislators (NCOIL) to testify at three different hearings over two years about how people could sell a life insurance policy through a life settlement as a way to raise money from a policy that they would otherwise lapse or surrender to go onto Medicaid. The funds would be locked up in an irrevocable, FDIC insured Long Term Care Benefit Plan to protect the money and make sure it was spent only on long term care services. Payments from this benefit account would keep the individual private pay; allow them to choose the form of care and setting that they want; and would be paid directly to the care provider on a monthly basis. In 2010, NCOIL included “conversion of a life insurance policy into a Long Term Care Benefit Plan” as one of the expressly endorsed options of the new Life Insurance Consumer Disclosure Model Law.

SUMMARY OF PROVISIONS: This bill would provide for the conversion of a life insurance policy in to a Medicaid Life Settlement Plan, pursuant to a regulated life settlement contract. As Life Care Funding worked with the Florida Study Group hosted by the state Medicaid Department in 2012 and 2013, the focus of the legislation as it was developed was to ensure there is significant consumer protections in place. Specifically, the Long Term Care Benefit Plan, or in legislative parlance the Medicaid Life Settlement Plan, would be a qualified Medicaid spend-down and the conversion of the life insurance policy would follow the regulatory requirements that govern a life settlement transaction. JUSTIFICATION: Many seniors who currently have in-force life insurance policies never take full advantage of their assets market value and instead let their policies lapse or abandon their policies by ceasing to pay their monthly premiums. Owning a life insurance policy will count against a Medicaid applicantâ&#x20AC;&#x2122;s eligibility. To qualify for Medicaid eligibility, the applicantâ&#x20AC;&#x2122;s assets must be below the poverty level. If a Medicaid applicant owns a life insurance policy they must either surrender it to spend any proceeds down on care first, or if they keep a policy the state can initiate asset recovery action against the family after the person dies to claw back any death benefit proceeds to take back what the state spent on long term care services. But, a life insurance policy usually has a higher market value than what a Medicaid applicant would receive in any remaining cash value from the insurance company. Instead of lapsing or surrendering a policy, this higher market value can be used by the policy owner to remain private pay longer and delay or avoid the need to go onto Medicaid. This bill benefits Medicaid applicants with life policies by providing them with a fair market value for their policies, as opposed to the cash surrender value or nothing if they are forced to surrender or otherwise terminate their policies in order to qualify for Medicaid. This permits the individual, using their own funds, to have an expanded choice of care, including such things as the level and type of care that meets their needs, as well as the type and location of the services or facility. Importantly, the individual who sells their policy and applies the proceeds directly to pay for long term care services will be deferred from going onto Medicaid for a considerable period of time, in some cases, permanently. Life Care Funding has been leading the way in many state on the issue of Medicaid life settlements. In 2013, Life Care Funding testified before the state legislature on Florida Medicaid life settlements and the advantages for the consumer to getting the highest value for their life insurance policy to help them pay for long term care. Testimony was also brought before the house committee concerning Medicaid life settlements in Texas. Likewise, Medicaid life settlements in Maine have been discussed in the state senate as a means of funding long term care. By converting the policy consumers would be able to stay private pay and choose Home Care, Assisted Living, Skilled Nursing, Memory Care or Hospice as best meets their needs. If they were to terminate the policy and go straight onto Medicaid they would become a ward of the state and not be able to choose the type of care they want where they would go.

This bill benefits long term care service providers through an increase in badly needed private pay revenue, paid directly from the trusts to the providers. During presentations before the American Health Care Association (AHCA) and the Assisted Living Federation of America (ALFA), Life Care Funding spoke about the importance of encouraging market based solutions to drive more private pay into the long term care system to offset the reductions in reimbursements by Medicare and Medicaid. By making payments from the irrevocable Long Term Care Benefit plan directly to the care provider, the family is assured that the funds are protected and monthly payments are being made to cover the costs of care. This bill will generate significant savings to the state by advising the owners of a life insurance policy to convert their policies into a Medicaid Life Settlement Plan instead of abandoning those policies or letting them lapse. This legislation will substantially extend the spend-down period of the life policy, on Medicaid qualified expenses, delaying the individual’s entry onto Medicaid for months or ears. FISCAL IMPLICATIONS: This bill will result in substantial savings to the Medicaid program. In 2012, Life Care Funding worked with Florida State University’s Center for Economic Forecasting and Analysis (CEFA) to study the cost savings impact of people using the full value of life insurance policies converted through a Medicaid Life Settlement into a Long Term Care Benefit Plan. Based on the research and analysis of cost savings to Florida’s tax payers by delaying entry onto Medicaid through a policy conversion instead of a lapse or surrender, the Center for Economic Forecasting and Analysis estimated annual savings of $150 million. EFFECTIVE DATE: This bill will take effect 90th day after it shall have become a law.

Searching for Private Pay Solutions as the Long Term Care Funding Crisis Worsens May 8, 2013 / Chris Orestis Unprepared for the Future Americans are doing little to prepare for long term care and are not very concerned. And maybe they don’t need to be concerned— because they need to be terrified! A recent poll released by AP-NORC Center for Public Affairs Research, and reported in the national media, verified a major factor contributing to the long term care funding crisis in this country: Two out of every three people over the age of 40, according to the poll, have made no plans about long term care and it is a topic they prefer to not consider. The irony is that seven out of ten people will need long term care services once they pass the age of 65. The poll also showed the continuing lack of understanding about how long term care is funded. Misconceptions continue that Medicare will pay for anything more than 100 days of skilled nursing rehabilitation care. Health insurance plans don’t cover long term care services, long term care insurance is limited and restrictive in coverage, and Medicaid will only cover long term care (primarily nursing home) once a recipient has spent-down their assets to below the poverty level. The growing population of Boomers retiring, and seniors requiring long term care services is creating enormous pressure on the system and an urgent drive to find new private pay solutions. One private pay resource that is on the rise is converting life insurance policies into Long Term Care Benefits. Millions of seniors own life insurance policies that they are in danger of abandoning without realizing they could quickly and easily convert the policy into a monthly Long Term Care Benefit Plan. These Benefit Plans will pay for any form of long term care service including Home Care, assisted living, and skilled nursing care; and any type of life insurance policy will qualify for conversion. Private Pay Solutions Emerge The long term care industry has been quick to embrace this concept and today thousands of assisted living communities, nursing homes and home health companies accept this funding method. Political leaders too have begun to realize the cost saving implications for their beleaguered Medicaid budgets by extending the time a person could remain private pay before becoming Medicaid eligible through the conversion of a life insurance policy as an alternative to abandoning the policy through lapse or surrender. Medicaid is a government program designed to help cover health care costs for the indigent (poor), disabled and children and/or dependents. The eligibility process is determined by asset and income levels that would measure an applicant as being below the poverty level. One of the assets that will count against a Medicaid applicant is a life insurance policy. The owner of the policy must surrender the policy for any cash value and spend it down on care, or if the policy has no cash value and the owner keeps it the estate will be subject to federally mandated asset recovery probate action against the death benefit collected by the estate to claw back

all Medicaid expenditures. Because of this reality, financial planners, elder law attorneyâ&#x20AC;&#x2122;s and geriatric care advisors have provided seniors and their families with the default guidance that in the case of ownership of life insurance policy (not including funeral policy exemptions), a life insurance policy still owned by the senior inside the 5 year look back period should be abandoned. Political Support Arrives Just in Time States are now coming to the realization that there is a much higher value found through the conversion of a life policy that can be deployed to extend private-pay as a Long Term Care Benefit Plan. Any owner of a life insurance policy has the legal right to convert it into a Long Term Care Benefit Plan. In 2010, the National Conference of Insurance Legislators (NCOIL) passed a national consumer protection model law that would mandate life insurance companies must disclose to policy owners about their legal right to convert their life insurance policies instead of abandoning them via lapse or surrender. The life insurance industry opposes anything that would discourage policy ownersâ&#x20AC;&#x2122; from abandoning their life insurance (because life insurance companies make huge profits off of seniors that have paid premiums for years and then abandon their policies in the last years of their life). Since passage of the NCOIL national model law; legislation has been introduced in numerous states to empower Medicaid departments to educate citizens that the conversion of their life insurance policies is their legal right and a better option than abandonment of their policies. As of May 2013, the states of FL, TX, KY, LA, and ME have introduced this legislation and numerous other states are preparing to introduce the same bill for enactment. Over the course of this year and next, people will continue to become more aware of their option to convert a life insurance policy to pay for long term care. All across the country the long term care industry and political leaders are looking for private pay options that not only help people pay for long term care, but save the tax payer money by delaying Medicaid eligibility. Three Clear Winners The policy conversion option is a clear winner for seniors and their families; providers of long term care services; and for tax payers in every state: 1.

The policy owner and their family are able to convert a life insurance policy and use the proceeds in a

Medicaid qualified spend-down to extend the time they are private pay before moving to government assistance. This allows freedom to choose the form of care they want, as well as financial control and dignity for themselves and their families.

Providers of long-term care services benefit because they are operating under extremely thin margins and

private pay dollars translate into higher quality services for everyone under their care. 3.

The longer a person can remain private pay before becoming Medicaid-eligible, the more budget/tax

savings for the citizens of every state in America.

Policy Conversion Report Released by Florida Medicaid Department January 18, 2013 / Chris Orestis The report and accompanying legislation includes the “Private Option” to convert a policy into a Long Term Care Benefit Plan modeled after Life Care Funding (see page 6 of the Medicaid Department Report). A powerful coalition of interests have come together to support the use of life insurance as a tool to pay for the costs of long term care. The Florida Health Care Association, the Florida Chamber of Commerce, AARP, the Florida Assisted Living Federation, the life insurance industry (carriers and agents), and the life settlement industry have all worked together to create this legislative proposal. Life Care Funding is grateful to have played a role in the development of this report and bill now before the Florida legislature. We testified before the workgroup and contributed comments to the drafting of the final work product attached. In addition, Life Care Funding’s model was analyzed and we are cited as a key contributor of research data to Florida State University’s Center for Forecasting and Analysis economic impact study: Conversion of Life Insurance Policies into Long Term Care Benefit Plans in Florida. The study “scored” the annual savings for the Florida Medicaid budget and tax payers at $150 million annually if policy conversions are used to extend the period a Medicaid applicant would remain private pay before qualifying for government assistance. Starting with our efforts working with the National Conference of Insurance Legislators (NCOIL) to develop and pass the Life Insurance Consumer Disclosure Model Law in 2010; through the passage of study bills about policy conversions into Long Term Care Benefit Plans by the state legislatures of CT, HI, LA and FL; and now the introduction of Policy Conversion law in the FL legislature (soon to be followed by the same in LA); Life Care Funding looks forward to continuing to educate the public, the long term care industry and political leaders across the United States about this important financial option to help seniors, their families and tax payers defray the escalating costs of long term care.

What is Long Term Care? November 17, 2012 / Chris Orestis Seniors and their families are already struggling with the costs of everyday living, if you add the costs of long term care to the picture it is a back breaking scenario for most Americans. A critical element of preparing for the costs of long term care is to understand the variety of “Private Pay” sources that can give you access to funds designed to help them pay for the various forms of long term care. Statistics show that the majority of people do not understand the differences between different forms of long term care, the variety of means to pay for it, and most do not plan for long term care until they are beset by a health care crisis. There are four specific types of long term care: 1. Home Health Care: Living support and care at various levels provided at home by licensed or unlicensed workers as well as designated family members. Home health is primarily private pay, but Medicare and Medicaid will reimburse some forms of “medically necessary” home health services provided by licensed practitioners for people meeting eligibility requirements. Private pay is accepted and will cover a wider variety of medical and non-medical services. 2. Assisted Living: Housing for the elderly or persons unable to live independently that will provide mid-level custodial care, medication support, lifestyle activities, transportation, and meals. Assisted Living is a “private pay” environment not covered by Medicare and Medicaid. 3. Nursing Home: Higher level “skilled or SNF care” provided in a licensed facility with transfer agreements in place with hospitals for people requiring long term medical or nursing care; or short term rehabilitation services for injured, disabled, or sick persons. Medicare will reimburse 100 days of “medically necessary” rehabilitation care, and Medicaid will reimburse long term care for those people meeting medical necessity and eligibility requirements. Private pay is accepted and will allow for more choice such as private rooms, enhanced lifestyle options, and wider selection of locations. 4. Hospice: A specific form of care to manage pain, symptom relief, and emotional/spiritual support provided to people typically in the final 6 months of life as certified by a physician. Hospice care can be provided at home, in an assisted living community, a nursing home, or a free standing care center. Medicare and Medicaid will reimburse for certain levels of Hospice care. Private pay is accepted and not subject to requirements to be medically re-certified every 60 days.

Seniors Don’t Want to Surrender Life Insurance and go on Medicaid November 11, 2012 / Chris Orestis The impact of the long term care funding crisis is felt most directly by the middle class. People that have worked their entire lives and have planned responsibly for the future through the purchase of a life insurance policy find themselves penalized when they reach the point that they require long term care. Compared to the 153 million Americans that own a life insurance policy, less than 10 million own a long term care insurance policy. Medicaid is the default funder of long term care services in this country, but the exploding population of seniors and a stagnant economy are significantly challenging the viability of the program to keep pace. Seniors have an overwhelming desire to remain independent, and do not want to become a burden on their family or a ward of the state by entering Medicaid. Unfortunately, the current system to fund long term care has evolved into one that encourages seniors to impoverish themselves and move towards Medicaid as quickly as possible. Life insurance policies are unqualified assets for Medicaid eligibility and the owners must either surrender a policy with cash value to qualify, or if a policy is maintained it will become subject to asset recovery action by the state to claw-back monies spent by Medicaid on behalf of the individual. It would make more sense for the owner of a life insurance policy to convert its use to a living benefit that extends their ability to remain private pay and delays their entry onto Medicaid instead of encouraging them to abandon or surrender their policy to expedite their entry onto Medicaid.

Converting Life Insurance into Long Term Care Plan Protects Consumers October 17, 2012 / Chris Orestis Consumer Rights Middle class policy owners and their families are caught in the ironically unfortunate position of not being poor enough to automatically qualify for Medicaid, but they are not wealthy enough to access the care they need with enough out-of-pocket funds. In America, the vast middle class market is financially punished for being caught “in the middle” when they reach the point that a loved one requires long term care. When a family has a life insurance asset to work with, the ultimate decision for those we talk with is based upon: what is the best possible outcome for a life insurance policy in relation to the immediate needs of the loved one and family? 1- The policy owner could keep their policy in force and ultimately the named beneficiaries collect the death benefit which of course is tax free. This option puts the policy owner and the family in the position to answer a couple of questions: a. What is more important to the policy owner and family—continue to pay the premiums and collect a death benefit at an unknown time in the future, or; b. Utilize the present day value of the policy to help pay for the costs of long term care for a loved one. 2- The answer to this question is often driven by one of two major factors: a. Can the policy owner (and/or family) afford to keep a policy in-force by continuing to pay the premium obligations, and; b. Can the policy owner (and/or family) afford for their loved one to receive the long term care services they require. An additional factor that must be taken into account for Medicaid applicants is that life insurance is an “unqualified asset” for eligibility. It has been standard practice for years to abandon a life insurance policy if it is within the legally required five year look back spend-down period. But, converting a life insurance policy into a long term care benefit plan is a Medicaid qualified spend-down. Instead of abandoning the policy and going immediately onto Medicaid, the time a person remains private pay is extended while the present day value of the life insurance asset is spent-down in a Medicaid compliant fashion—all while preserving a portion of the death benefit for the family during the extended time period.

When assessing the viability of the Long Term Care Benefit conversion option, families will assess their current needs and all available options are for them to consider maximizing the value of their policy, which typically would consist of the following: Keep the policy in-force to collect the death benefit Surrender the policy for any remaining cash value Consider a policy loan (requires they keep the policy in-force and cover interest payments and fees) Consider a life settlement (a policy less than $1M will get little to no interest in the secondary market and overall life settlement payouts offer a smaller percentage of face value than an Assurance Benefit conversion provides to fund senior living and long term care) Consider an accelerated death benefit (if the policy has such a feature and then there are very specific requirements by life insurance companies to verify terminal diagnosis to get approval) Consider converting the policy to a long term care Assurance Benefit plan

Theft by Family Members Most Common Form of Financial Elder Abuse September 19, 2012 / Chris Orestis Assisted Living Federation of America (ALFA) A new poll examining financial exploitation of American seniors finds that 79 percent of experts surveyed identified theft or diversion of funds by family members as the most common form of financial abuse. The poll asked state securities regulators, financial planners, health care professionals, social workers, adult protective services workers, law enforcement officials, elder law attorneys, and academics about their experiences with elder abuse. 77 percent of individuals surveyed thought that seniors are very vulnerable to financial abuse, and most cited financial abuse by family members as the most common form of financial abuse. Most respondents indicated that older veterans face the same deception risks as other seniors, but affinity fraud and VA Aid and Attendance fraud were also cited as important problems to address. About 70 percent of those surveyed reported financial counseling and education programs administered by local professionals, such as caregivers, adult protective services workers, and law enforcement agencies as the most useful tool for helping seniors effectively manage their finances. Programs delivered through senior centers and other senior care organizations and programs delivered by senior oriented national and local organizations were also considered positively by respondents. Learn more about the financial exploitation survey conducted by the Investor Protection Trust (IPT) and Investor Protection Institute (IPI) in response to questions posed by the Consumer Financial Protection Bureau (CFPB).

Author’s Curriculum Vitae Published Papers •

Feds eye life settlements for LTC funding (published December, 2013– Insurance News Net Magazine)

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POLICY PAPER SUBMISSION: Congressional Commission on Long Term Care (submitted August, 2013– United States Congress and Commission on Long Term Care)

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As Long Term Care Insurers Abandon the Marketplace, What other Options will appear? (published June, 2013– Caring Magazine NAHC)

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Paying for Long Term Care—are you Prepared? (published May, 2013– The Senior List)

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An Interview on Long Term Care Benefit Plans and Legislation (3 part series) (published March, 2013– Producers E Source)

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As Long Term Care Insurers Abandon the Market, What Other Options will Step Forward? (published October, 2012– Florida Health Care Association PULSE)

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Private Pay Solutions Bridge LTC Funding Gap (published June, 2012– Long Term Living Magazine)

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States Eye Life Settlements as a Solution for LTC Crisis (published June, 2012– Insurance News Net Magazine)

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Is Healthcare Illegal? (published March, 2012– ProducersWEB)

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WHITE PAPER-‐ The growing use of life insurance policy conversions to fund long term care (published February, 2012)

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Long Term Care Providers Look to Alternative Resources to Extend Private Pay Options in Florida (published January, 2012– Florida Health Care Association PULSE)

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Making Up the Difference (published December, 2011– National Underwriter)

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Funding Long Term Care: New Legislation Supports use of Life Policies to Pay for LTC (published November, 2011– Producers Esource.com and ProducersWEB)

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Healthcare Policy Synopsis: Super Committee holds fate of Medicare and Medicaid in its Hands (published October, 2011 – ProducersWEB)

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As Large Medicaid Cuts Loom, States Look to Convert Life Insurance Policies (published September, 2011 – ProducersWEB)

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A Growing Strategy: Paying for Long Term Care with Life Policies

(published August, 2011 – Producers Esource.com) •

Financial Focus: Private Funding Solutions for LTC (published June, 2011 – Long-‐Term Living Magazine)

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LTC funding crisis driving a search for alternatives (published April, 2011 -‐ Senior Market Advisor)

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Medicaid in Crisis: Treatment of life insurance as an unqualified asset for Medicaid eligibility (published March, 2011 -‐ ProducersWEB)

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How Life Insurance can help with LTC costs (published March, 2011 -‐ Life Insurance Selling Magazine)

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New Disclosure Requirements for Insurers—What NCOIL’s Life Insurance Consumer Disclosure Model Act Means to Your Client (published February, 2011 -‐ Insurance News Net Magazine) Life Insurance Consumer Disclosure Law: A Lifeboat in the Eye of the Storm (published February, 2011 -‐ Agent’s Sales Journal)

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Life Insurance as a Tool to Pay for Long Term Care (published January, 2011 -‐ Agent’s Sales Journal)

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MetLife Exits LTCI Market: Now What? (published November, 2010 -‐ Agent’s Sales Journal)

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CBO Projection—Government budgets will not keep pace with consumer demand for long term care spending (published July, 2010 -‐ ProducersWEB)

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Ask the Expert: Will a Life Settlement help pay Assisted Living expenses? (published June, 2010 -‐ National Underwriter)

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Overcoming America’s Long Term Care Crisis (published June, 2010 -‐ Insurance News Net Magazine)

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Electronic Medical Records: Resistance is Futile (published March, 2010 -‐ On the Risk)

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Convergence of Life Settlements and Long Term Care: A Funding Solution Emerges (published March, 2010 -‐ Insurance News Net Online)

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Life Expectancy Compression: The impact of moving into a long term care facility on length of life (published October, 2009 -‐ Insurance News Net Magazine)

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Life Settlements: Legal Rights and Opportunities for Policy Owners (published June, 2009 -‐ New York State Bar Association Journal)

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Legal Rights of a Life Insurance Policy Owner (published April, 2009 -‐ ProducersWEB)

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The Long Term Care Crisis has Arrived (published March, 2009 -‐ On the Risk)

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Life Settlements vs. STOLI: Let’s Get the Debate Straight (published December, 2008 -‐ ProducersWEB)

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Understanding the Differences between Stranger Owned Life Insurance (STOLI) and Life Settlements (published December, 2008 -‐ On the Risk)

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Life Settlements vs. STOLI (published December, 2008 -‐ Insurance News Net Magazine)

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Underwriting the “Silver Tsunami” (published November, 2008 -‐ ProducersWEB)

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Alternative Pay Plan (published October, 2008 -‐ Assisted Living Executive (magazine of ALFA)

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Economic Storms and Quality of Life in the Wake of the “Silver Tsunami” (published September, 2008 -‐ ProducersWEB, and ISIS)

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WHITE PAPER-‐ The Silver Tsunami (published September, 2008)

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The Silver Tsunami (published August, 2008 -‐ Insurance News Net Magazine cover story)

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WHITE PAPER-‐ Life Settlements: Looking for a Calm Financial Harbor in a “Perfect Storm” (published June, 2008)

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Underwriting in the 21st Century: Informal’s—Turning a Pain into Profits (published June, 2008 -‐ On the Risk, InsuranceNewsNet, ProducersWEB)

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Life Settlements: Protecting the Golden Goose (published April, 2008 -‐ Insurance News Net Magazine cover story)

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Underwriting in the 21st Century: Exploring the Direct-‐to-‐Consumer Channel (published September, 2007 -‐ On the Risk, and InsuranceNewsNet, September, 2007, ProducersWEB, November, 2007, posted on SmartBrief)

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Aging and Long-‐Term Care Insurance: A National Policy Perspective (published August, 2007 -‐ Society of Actuaries: Long Term Care Section Newsletter, and InsuranceNewsNet, September, 2007, ProducersWEB, September, 2007, posted on SmartBrief)

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Underwriting in the 21st Century: Remote Underwriting Study 2007 (Underwriting in your Underpants) (published June, 2007 -‐ On the Risk)

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Underwriting in the 21st Century: Understanding the Risks of Private Aviation (published March, 2007 -‐ On the Risk and InsuranceNewsNet, July, 2007 World News Network,

July, 2007, ProducersWEB, October, 2007) •

INDUSTRY STUDY-‐ Underwriting in your Underpants: Remote Underwriting Study 2006-‐2007 (Released at 37th Annual MUD Meeting as reported by National Underwriter, January, 2007, and featured by Insurance News Net, January, 2007, InsureIntell, February, 2007, Hot Notes by Hank George, 2007, posted on SmartBrief)

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Bringing Together the Pieces of the Insurance Puzzle by Understanding the Lifecycle of a Policy (published February, 2007 -‐ InsuranceNewsNet and HealthDecisions, InsureIntell, April, 2007, ProducersWEB, August, 2007)

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Breaking Down Barriers Between Underwriting and Distribution (published January, 2007 – InsuranceNewsNet and InsureIntell, February, 2007; ProducersWEB, July, 2007)

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Overcoming the Underwriting Crunch through Outsourcing (published January, 2007 – InsuranceNewsNet and InsureIntell, February, 2007)

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Underwriting in the 21st Century: Life Outside the Home Office (published December, 2006 -‐ On the Risk and InsuranceNewsNet, March, 2007, ProducersWEB, August, 2007)

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Underwriting in the 21st Century: Mastering the APS Paradox (published September, 2006 -‐ On the Risk and InsuranceNewsNet, February, 2007, InsureIntell, February, 2007, ProducersWEB, September, 2007)

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Underwriting As A Profit Center: Bringing Together the Pieces of the Puzzle (published June, 2006 -‐ On the Risk)

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How Insurance Companies Benefit from Professionally Summarized (APS) Attending Physician Statements (published June, 2006 – InsuranceNewsNet and HealthDecisions)

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Underwriting As A Profit Center or How I Survived The 21st Century (published December, 2005 -‐ On the Risk)

Public Presentations • • • • •

Maine Legislative Commission to Study Long Term Care Facilities-‐ November, 2013 The Life Settlement Conference– October, 2013 Texas Assisted Living Federation: Annual Meeting– September, 2013 Florida Assisted Living Federation: Annual Meeting– September, 2013 Life Equity Roundtable–July, 2013

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Life Insurance Settlement Association: Annual Meeting– May, 2013

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Maine Senate Committee on Insurance and Financial Services, Expert Testimony– April, 2013

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Texas House Committee on Human Services, Expert Testimony– March, 2013

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Florida Senate Committee on Banking and Insurance, Expert Testimony– March, 2013

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The Harvard Club-‐ Life Insurance Settlement Association: Institutional Investors Conference– March, 2013

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National Conference of Insurance Legislators (NCOIL), Testimony before Health and Long Term Care Committee – November, 2012 (Annual Meeting, Mobile, AL)

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Louisiana Department of Insurance, SCR 104 Advisory Work Group on Long-‐Term Care Benefits– November, 2012

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Florida Agency for Health Care Administration, Accelerated Life Benefit Technical Advisory Workgroup– November, 2012

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National Conference of Insurance Legislators (NCOIL), Testimony before Health and Long Term Care Committee – July, 2012 (National Meeting, Burlington, VT)

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ALFA Senior Living Leadership Forum – November, 2011

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Florida Health Care Association Legislative Conference – October, 2011

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Senior Market Advisor Annual EXPO – August, 2011

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AHCA Annual State Executive Directors Meeting – June, 2011

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National Conference of Insurance Legislators (NCOIL), FINAL Testimony on Consumer Disclosure Legislation before Executive Committee -‐ November, 2010 (Annual Meeting, Austin, TX)

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AAHSA (Leading Age) Annual Meeting – November, 2010

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ALFA Senior Living Leadership Forum – September, 2010

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National Conference of Insurance Legislators (NCOIL), Testimony on Consumer Disclosure Legislation before Life and Financial Services Committee -‐ July, 2010 (National Meeting, Boston, MA)

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21st Services’ Medical Directors Board of Review Annual Conference—October, 2009

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LTC 100 – June, 2009

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Maine Bar Association Elder Law Section – March, 2009

Radio Interviews National Shows

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The Small Business Advocate Show -‐ NATIONALLY SYNDICATED 1/20/14

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“People, Money, & Life” -‐ Sirius XM Radio 1/13/14

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Hometown Happenings -‐ NATIONALLY SYNDICATED 12/12/13

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Talk Back with Chuck Wilder -‐ NATIONALLY SYNDICATED 12/18/13

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Bloomberg Radio / Taking Stock Show/ Pimm Fox and Carol Massar 8/22/13

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Sirius Satellite/ Maggie Linton Show/ Maggie Linton 8/9/13http://www.lifecarefunding.com/media/the-‐maggie-‐linton-‐show-‐with-‐chris-‐ orestis/

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IRN USA Radio / News & Views/ Ronn Allen 9/6/13

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IRN USA Radio #2 / News & Views/ Ronn Allen 9/27/13

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This Week in America / Ric Bratton 8/11/13http://www.lifecarefunding.com/media/this-‐ week-‐interviews-‐chris-‐orestis/

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This Week in America #2 / Ric Bratton 9/7/13

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Genesis Communications Radio Network/ Josh Tolley 8/7/13

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Lifestyle Talk Radio Network/ Frankie Boyer 7/15/13

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Issues Today/ Bob Gourley 7/30/13

Local Markets

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KGO-‐AM 810 San Francisco, CA Katy Leaver 12/16/13

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WMGG-‐AM, Tampa, FL Deb Goldman & Evan Gold 7/12/13

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WMGG-‐AM #2, Tampa, FL Deb Goldman & Evan Gold 8/13/13

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KXFN-‐AM St. Louis, MO Kelley & Cassandra 7/23/13 http://www.lifecarefunding.com/media/chris-‐orestis-‐on-‐1380-‐the-‐woman/

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WNAV-‐AM, Baltimore, MD Bill Lusby 7/17/13

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CBS Radio, Sacramento, CA Walt Shaw 8/7/13

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KAHI-‐AM, Sacramento, CA Mary Jane Popp 7/30/13 http://www.lifecarefunding.com/media/chris-‐orestis-‐on-‐the-‐mary-‐jane-‐poppoff-‐show/

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KLGO-‐AM, Austin, TX Bill Swail & Dr. Marianne Calvanese 8/10/13

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KJCE-‐FM, Austin, TX Bill Swail & Dr. Amy Tyler 8/10/13

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WPTF-‐AM, Raleigh, NC Doug Kellett 7/10/13

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WFSX-‐FM, Fort Myers, FL Deanna & Patrick Renna 8/8/13

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WGCV-‐AM 620, Columbia, SC Armstrong Williams 7/24/13

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WOCA-‐AM Ocala, FL Larry Whitler & Robin MacBlane 7/17/13 http://www.lifecarefunding.com/media/woca-‐interviews-‐chris-‐orestis/

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WMGG-‐AM, Tampa, FL Alex Hinojosa 7/29/13 http://www.lifecarefunding.com/media/chris-‐on-‐news-‐and-‐experts-‐show/

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Maine Public Broadcasting System (PBS) 4/25/13 http://www.lifecarefunding.com/media/bill-‐aims-‐to-‐give-‐maine-‐seniors-‐another-‐option-‐to-‐ pay-‐for-‐end-‐of-‐life-‐care/

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Florida Public Broadcasting System (PBS) 3/8/13 http://www.lifecarefunding.com/wp-‐ content/uploads/Life-‐Insurance-‐Proposal-‐Gives-‐Families-‐A-‐Financial-‐Lifeline-‐_-‐WFSU-‐3.pdf

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Holistic Survival, Internet Show 8/15/13

National Webinars

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Society of Actuaries– June, 2013

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ALFA: Legislative Initiatives in the States and the NCOIL Model Law – April, 2011

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The Senior Care Investor: Boost your Census-‐ Solutions for Financially Challenging Times – November, 2008

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AHCA: Alternative Funding Options for Senior Living and Long Term Care – September, 2008