Do You Make These 10 Mistakes With Cost Benefit Analysis?

Mistake #1: Not thinking widely enough to explore all feasible options.

First, a note about benefits - if you can provide a solution that provides more benefits than the current process, then not only do you benefit (hopefully in practical and emotional ways) but also the company profits, so do the shareholders and so does the economy. If more of these positive benefit decisions were being made daily by more and more people then we would all be better off!

It is human nature to want to think about the problem quickly, get to an answer (instead of a list of good answers) as soon as possible and move on.

This is the MAIN mistake that needs to be addressed before launching into the rest of the mistakes.

For Example: If a decision is to be made regarding the company's business systems, close study would need to be given to ensure all feasible software providers were involved. Not only would you need to look at software providers but also hardware sources and bureau services. Also, will the future direction of the business mean that simply replacing "like with like" be suitable? Also is the "do nothing" option viable?

Mistake #2: Not using "Cradle to Grave" timeframe.

As the term implies, all costs and benefits associated with the project from the time the analysis begins ("birth") to the sale ("death") of the asset must be included. If this process is neglected, costs such as sale of assets and/or disposal of assets, site cleanup and site re-instatement may be omitted from the calculations that could provide an erroneous result (and maybe embarrassment to you as the project champion). In addition, this provides for all "birth" costs, such as new asset purchase costs, transport costs, site preparation costs and the sale of the old asset to be included in calculations. Don't neglect these - they can make a huge difference to the outcome.

Mistake #3: Not using Net Present Value to take account of the Time Value of Money.

Typically the life of the assets, or the decision being made, have an impact over more than 1 year. This is usually 3 - 5 years (computers, software, factory machinery), 20 years for some large electrical equipment and even up to 100 years for underground pipes as used in water and sewer reticulation.

As you would know, and as Howard Hughes said in 1937, "A million dollars is not what it used to be". This is because inflation, year by year, reduces the buying power of the dollar causing us to spend more each year to purchase the same item. So it is with projects whose life span is more than one year.

(Let's say, that the interest rate is 5%, you would only need to deposit about $95 today to get $100 next year. Economists would say that, at a 5% discount rate, $100 next year has a present value of $95.) For longer periods of time, and/or higher discount rates, the effect is magnified.

Costs and benefits that occur in year 3 or 4 of the project would not have the same impact as if they occurred in year 1. There is a function within Excel that accounts for this so there is no real need to concern yourself with it too much here.

Suffice to say that transactions further into the future have less of a dollar impact than the current transactions. This must be included in your calculations.

Mistake #4: Including other than CASH transactions in the Costs and Benefits calculations.

Some practitioners use accounting terminologies such as Depreciation, Accruals or Deferrals in their Cost Benefit models. This is not correct. We are only dealing with the cash costs and benefits. This keeps the model:

- Easy to understand for non-accountants

- Free from any artificial spreading of costs and income that are not really related to the period

It is important that the cash flow of costs and benefits are shown in the years they actually occur - since moving them into other years can increase or decrease their value due to the time value of money as discussed above. (A cash transaction occurs when there is a monetary transaction - either outflow or receipt.)

Mistake #5: Not considering the "Do Nothing" option.

Just because an asset is ageing or in need of repair, it does NOT necessarily mean that a replacement is the best use of the available resources. It could well be that this option continues to be the most feasible option. This option should always be considered and accounted for when thinking of ALL feasible options.

Mistake #6: Forgetting to include non-financial Costs and Benefits.

There are many benefits and costs that can be part of the decision process, which really do not have hard quantifiable values. Some of these could be:

- The cost of a human life (e.g. saved by installing traffic lights a school crossing)

- Damming of a river and the loss of habitat of many flora and fauna species

- Extra noise created as a result of road relocation

- Increasing obesity of school children and poor health outcomes

Another example of non-financial costs and benefits could be political affiliations/expediency that could sway a decision even though the Cost Benefit model shows this to be a less beneficial option than other options.

Mistake #7: Thinking that Cost Benefit Analysis is THE solution to the problem.

Cost Benefit Analysis and NPV are tools or techniques that assist in the decision or judgement. These processes are not an end in themselves. They are part of a suite of tools that /engineers/accountants/managers/business owners can call upon to assist in the making the final decision.

Mistake #8: Adding in Sunk Costs on the projects prior to the Cost Benefit Analysis being undertaken.

Costs that have been expended are NOT to be included since these have been made outside the view of your analysis. You cannot go back in time to add in past costs, only deal in the current and the future, as best you can.

Mistake #9: Not delivering on savings promised in the Cost Benefit Analysis proposal.

I have seen many Cost Benefit Analyses where the purchase of new computers or machinery has relied on (at least to some extent) the savings in labour. This is all well and good.

The project champion has ensured that ALL the labour costs were included (eg annual leave, superannuation, health care costs, public holidays and other loadings) but once the project had received the go-ahead he/she has omitted to make the labour savings by making the labour redundant or finding these employees gainful employment in other parts of the organization.

Another example is when machine hours have projected savings shown in the Cost Benefit Analysis model but due to internal politics the changes to operating procedures were not implemented once the project was implemented.

You will notice when building a Cost Benefit model that the Costs are reasonably easy to calculate since most of them have quoted prices or contracts etc. on which to rely. It is the Benefits that will cause most discussion and these need to be tied down tightly prior to the go-ahead being given.

It is really important to be certain of all your assumptions so that you can confidently argue the merits (and drawbacks) of the project.

Mistake #10: Not performing a Project Completion Review during the life of the project once it is implemented.

Unless this step is taken any lessons to be learned either by you or the organization are lost. Yes, it may cause some embarrassment if not all the benefits were not realised and some costs came in at more than planned. But that is not as important as repeating these "sins" again and again on subsequent projects. Make this part of the corporate culture and you will notice an improvement over time to your benefit and the benefit of the company and the economy.

Ready to learn more from Bruce Hokin, The Cost Benefit Coach, about making better financial decisions, being more confident, and being recognized for these skills? Then grab your FREE copy of "The Absolute Beginners Guide to Cost Benefit Analysis" and FREE spreadsheets at http://www.thecostbenefitcoach.com Not only will you discover how to create your own Cost Benefit Analysis spreadsheet models in less than 60 minutes, guaranteed, you'll be using tested and proven, real-world methods.

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Cost Benefit Analysis - How It Helps You Make Better Financial Decisions - 9 Ways

Good financial decisions are the life-blood of a vibrant business. The 9 ways listed below will help you to improve the way you make financial decisions, guaranteed. Let's list them out shall we?

1.Forces more options

It is pointless doing this analysis if you do not investigate ALL the available options. More options will mean a better outcome. What is the use of just hoping that your decision is best if you haven't spent the time to ensure you have canvassed ALL the feasible ways of solving your problem?

Maybe the 'Do Nothing' option is the best way. Unless you test it out you won't know.

There are resources to assist in thinking more creatively thereby allowing you to generate more ideas and options. Search the Internet under "creative thinking", you will find many to choose from.

Thinking through all the options lays a good foundation for the analysis that follows.

2.Puts $s to costs and benefits

Placing a $ figure against all the costs and benefits provides a standardized way of looking at the answer. The answer is termed the Benefit Cost Ratio. There are certain costs and benefits that must be included and there are some that must be excluded.

Follow the proven guidelines and you can't go wrong.

Some costs and benefits that must be included are: - purchase price - set up costs - on-going maintenance costs - resale price - savings in labor, input resources, increased safety,

Some costs and benefits that must be excluded are: - sunk costs - depreciation and other accounting arbitrary allocations - loan interest and repayments - price changes due to inflation

This method provides a clear analysis of the option so that the best option stands out.

3.Takes account of inflation/time value of money

Typically the life of the assets or the decisions being made, have an impact over more than 1 year. This is usually 3-5 years (computers, software, factory machinery), 20 years for some large electrical equipment and even up to 100 years for underground pipes as used in water and sewer reticulation.

As you would know, inflation, year by year, reduces the buying power of the dollar, causing us to spend more each year to purchase the same item. So it is with projects whose life span is more than one year. Costs and benefits that occur in year 3 or 4 of the project would not have the same impact as if they occurred in year 1. Agreed?

This is a very important aspect of Cost Benefit Analysis-one you cannot discard. If you want to make the best decision this needs to be taken into account.

Cost Benefit Analysis models clearly outline the assumptions, the costs, benefits and the method of adjusting for changes in purchasing power over time.

4."Cradle to Grave view of assets

When making decisions regarding asset purchases it is critical that ALL the costs relating to the asset are included in the proposal. How can you make a valid comparisons between competing proposals unless all the costs are thought through and included?

Some costs that are commonly missed are: - installation costs - initial transport costs - tender preparation costs - de-commissioning of old plant - de-commissioning of this plant at the end of its life - extra administrative effort - labor on-costs

5.Clearly shows assumptions

Cost Benefit Analysis offers the ability to clearly outline all assumptions and how they were arrived at. This is especially important when discussing the merits, or otherwise, of each competing proposal. It also provides a firm foundation for discussing the lessons learnt once the successful proposal has been implemented.

6.Clearly shows which projects are VIABLE and which are UNVIABLE

The Cost Benefit Analysis model clearly shows which option is worthwhile adopting and which is not. If the Benefit Cost Ratio is 1 or greater, that project is viable, less than 1 means it is unviable (all other things being equal). Once this has been calculated for all competing feasible options you can then choose the option with the highest Benefit Cost Ratio from those that are classed as viable.

The option with the highest Benefit Cost Ratio will also add the most shareholder value as well.

7.Provides basis for sensitivity analysis

No doubt, when you build your assumptions some elements are more sensitive to change and produce a greater impact on the overall result than others. The process to test these elements is called Sensitivity Analysis. Since the assumptions are clearly laid out, it is usually quite easy to create a Sensitivity Table. This can add a lot of weight to your proposal.

8.Makes post completion review a breeze

Once the correct option has been chosen, funded and implemented and has been operating for about a year it is a good time to go back and assess the quality of your original assumptions. You can check on the cost and benefits elements-compare assumed prices with actual. and see how close they were.

What lessons can be learned here? Mostly costs are underestimated and benefits overestimated. Were there any mistakes made?

This analysis can help you ensure that any mistakes made are not transferred to the next project.

9.Proven framework-makes selling easier

If you need to 'sell' your project to various stakeholders, be they employees, shareholders, the press, unions, politicians or the Board of Directors, the fact that you have used the proven, tested process will make the selling easier.

These are just a few of the ways Cost Benefit Analysis can help you make better decisions.

Ready to learn more from Bruce Hokin, The Cost Benefit Coach, about making better financial decisions, being more confident, and being recognized for these skills? Then grab your FREE copy of "The Absolute Beginners Guide to Cost Benefit Analysis" and FREE spreadsheets at http://www.thecostbenefitcoach.com Not only will you discover how to create your own Cost Benefit Analysis spreadsheet models in less than 60 minutes, guaranteed, you'll be using tested and proven, real-world methods.

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9 Profitable Ways Accountants Can Boost Their Business Using Cost Benefit Analysis

When dealing with decisions using Cost Benefit techniques it is very important to follow the proven principles. The health of your company and your reputation depend on it. If these rules are not followed then your decisions could be flawed.

Let's start, shall we?

Profitable Way #1. Making Better Asset Purchase Decisions for Your Company

Cost Benefit Analysis is very useful when deciding between competing financial outcomes. Do we purchase this new asset or that one? Do we proceed with this investment in new technology or continue as normal? Is it time to replace an aging asset yet, or should it be kept longer?

Profitable Way #2. Making Better Asset Purchase Recommendations for Your Clients.

All the comments above relate just as much to you as to your clients- even more so, since there may be repercussions if your recommendations are flawed.

Think of the benefits to the business if you can show your clients a proven easy-to-understand system used by many governments and large corporations world-wide for making better financial decisions.

This methodology will withstand external scrutiny - it has done so many times in the past.

Profitable Way #3. Consulting to Clients on How to Spend their Scarce Investment Capital on Competing Projects.

Cost Benefit Analysis is very useful in ranking projects based on their Benefit Cost Ratio results. The project with the highest Benefit Cost Ratio should be authorised first since it will increase the company's value the most (all other things being equal).

Profitable Way #4. Audit Client's Cost Benefit Methodology.

Another separate opportunity is for you to offer to "audit" your clients' project development plans and spreadsheets for mathematical correctness as well as the validity and strength of their assumptions.

Large companies will appreciate an objective review of their project methodology. It can add weight to their funding applications also.

Profitable Way #5. Offer These Services to Charities

Not-for-Profits and Charities need to show their stakeholders/shareholders that their financial decisions are based on proven principles. They may not have sufficient spare funds to undertake this analysis themselves. However, you could offer to audit and consult in the area of Cost Benefit Analysis, gratis, in return for some acknowledgement in their Annual Reports.

Profitable Way #6. Implement this Method Across Client Companies

Once you learn the principles of Cost Benefit Analysis you will appreciate that most companies would benefit from an "across the board" implementation of this method. This could mean extensive training and developing an implementation strategy. More business opportunities for you.

Profitable Way #7. Training in Cost Benefit Analysis

Running training programs in Cost Benefit Analysis for many invited clients can lead to further business, both in implementation and other consulting work.

Profitable Way #8. Advertise Cost Benefit Analysis Services in Newsletters and Client Correspondence.

This service can help in setting your company apart from your competitors. Why not advertise this expertise in your newspaper advertisements?

Profitable Way #9. Offer to Prepare Cost Benefit Analyses for Client Funding Proposals.

Cost Benefit Analysis is a powerful tool that can clearly show the benefits contained in the new proposal compared to the "do nothing" or other competing options. It can also show how soon the project will move from a net cost to net benefit position. Other measures of payback can still be included for reference purposes such as Payback, Internal Rate of Return and Present Value. It clearly shows the benefits received for each $ of cost expended

Ready to learn more from Bruce Hokin, The Cost Benefit Coach, about making better financial decisions, being more confident, and being recognized for these skills? Then grab your FREE copy of "The Absolute Beginners Guide to Cost Benefit Analysis" and FREE spreadsheets at http://www.thecostbenefitcoach.com Not only will you discover how to create your own Cost Benefit Analysis spreadsheet models in less than 60 minutes, guaranteed, you'll be using tested and proven, real-world methods.

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10 Critical Benefits You Receive by Using Cost Benefit Analysis

When dealing with decisions using Cost Benefit techniques it is very important to follow the proven principles. The health of your company and your reputation depend on it. If these rules are not followed then your decisions could be flawed.

Let's start, shall we?

Benefit #1. You can compare competing projects quickly and accurately - saving you time and effort.

Cost Benefit Analysis weighs the total expected costs and compares them to the total expected benefits of one or more actions. The outcome of Cost Benefit Analysis is a Benefit Cost Ratio that is used to compare and rank competing investment options.

Once you apply these techniques you will quickly be able to compare and rank projects with confidence knowing that governments and large corporations use these proven principles.

Benefit #2. You can quickly determine whether a project may be VIABLE or UNVIABLE - quickly cutting out unviable options thereby saving you time and effort.

As mentioned above, Cost Benefit Analysis compares the costs and benefits of competing projects and produces a score (Benefit Cost Ratio) which if less than 1 shows that the project is UNVIABLE (all other things being equal).

This can quickly weed out the projects that will not make the cut, saving time and effort for you and others charged with considering these projects and making a final recommendation.

Benefit #3. You will be noticed and you will gain increased recognition if you use this technique correctly - more opportunities for you.

Since this powerful, proven technique can save discussion time, provide more accuracy and confidence, it will be seen as a real improvement. If you champion its introduction you will be noticed and gain recognition.

Benefit #4. You will be able to more confidently join or lead asset expenditure review discussions - more recognition and opportunities for you.

Once you learn and apply this method you can join in discussions at higher levels and feel confident that your skills can add value to the deliberations. Your input will be recognised and appreciated.

Benefit #5. Learning this very marketable technique will provide you with more options in your future.

There are many ways you can apply these techniques.

You could train others in the skill - both to internal and also to external clients.

You could be the assessor of the methodology PRIOR to projects being reviewed by senior management. This will save them time and frustration if they know that someone knowledgeable has already OK'd the maths and reviewed the assumptions for reasonableness.

You may wish to apply for more senior roles in your current employment or try out in other companies.

Benefit #6. You can apply these skills across small to large projects - making you more versatile.

The Cost Benefit principles can be used for projects as small as a PC replacement to underground assets that form part of large multi-billion capital works programs.

Your Cost Benefit Analysis skills are just as useful at either end of the scale.

Benefit #7. You will become recognised as the authority on this subject - more options for you.

Once you learn the theory and can present your proposal with confidence you will be recognised as the authority on this subject. Others will come to you for assistance seeking guidance for their projects.

Benefit #8. You can be sure that your decisions can withstand external scrutiny - saving you worry and concern.

The principles underpinning Cost Benefit Analysis have been in use since the 1960s by both government and big business. As long as you learn these principles from a recognised source, and apply them correctly, you can be confident that your analysis can withstand internal and external scrutiny.

Benefit #9. This methodology is scalable across small to large businesses.

Successful implementation across the business can only add to your marketable skill set meaning more opportunities for you. This skill could lead to consulting work for external clients - be they large or small - or starting your own Cost Benefit consulting business.

Benefit #10. Once this methodology is implemented it can significantly reduce the time taken to decide on competing projects -saving you time and frustration.

If this method is implemented for all investment proposals across the company then the comparison and choice amongst competing proposals is simplified. All other things being equal the project with the highest Benefit Cost Ratio should be the first to be authorised. The value of the business will increase the most by implementing the project with the highest Benefit Cost Ratio.

Ready to learn more from Bruce Hokin, The Cost Benefit Coach, about making better financial decisions, being more confident, and being recognized for these skills? Then grab your FREE copy of "The Absolute Beginners Guide to Cost Benefit Analysis" and FREE spreadsheets at http://www.thecostbenefitcoach.com Not only will you discover how to create your own Cost Benefit Analysis spreadsheet models in less than 60 minutes, guaranteed, you'll be using tested and proven, real-world methods.

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Limited Benefit Plans - What Are They? And What Do They Really Mean?

To say there is a healthcare crisis is indeed an understatement!

We can't turn on a radio, a television, or pick up a newspaper without hearing, seeing, or reading about the nearly fifty million uninsured people in America! We don't have to go through all the statistics here. After all, you probably already know them.

What's amazing is that, of the FIFTY MILLION uninsured people, approximately HALF of them ACTUALLY HAVE JOBS!

It is no secret that the COST of health insurance is in an inflationary spiral! Trying to maintain employee benefits is creating a serious dilemma for companies across the country. The actual EFFORT to CONTROL these costs is directly affecting ACCESS to health insurance for many of their workers.

It seems this situation has created two SUBCLASSES of employees.

The FIRST subclass, we'll call the "working UNINSURED." These are primarily made up of people who don't work full time, and therefore CANNOT QUALIFY for their employer's health insurance plan, if there is one. However, these are not ONLY the part-time or seasonal workers. They also include the growing number of full-time employees who simply CANNOT AFFORD their share of the cost even though they are eligible! "Qualifying" for the plan doesn't mean much if it is financially out of reach! After all, if a person can't afford the premium, all the insurance in the world is useless!

But, let us not forget the SECOND subclass: the "working UNDER INSURED." To keep healthcare costs "affordable," companies have to raise the deductibles and co-insurance, and often increase the employee's contribution to the plan. This results in an INCREASE of the employees' OUT OF POCKET EXPENSE including PREMIUMS and the AMOUNT THEY MUST SPEND before the plan "kicks in," creating UNDER INSURANCE.

While some people can manage to "pay more" and "get less," others are often FORCED into the ranks of the FIRST subclass!

Often whenever there is a problem--or a solution for that matter--we can always "follow the money!" It all boils down to COST! Pure and Simple!

The number of employers that offer health insurance has dropped 3% in the last three years alone! This situation creates an immediate need for new solutions.

Enter: Limited Benefit Plans!

This is the reason the new category of health insurance, known as Limited Benefit Plans, has grown dramatically in popularity for the last few years now reaching over 1,000,000 enrollees--becoming the one of the fastest growing sectors in the health insurance market.

However, there seems to be much controversy about these new plans. Opponents complain, correctly, that since they are "limited" in nature, they won't help much if the insured suffers a catastrophic illness. Proponents point out that these plans were not designed to provide catastrophic coverage, but only the basics, and that it beats having no insurance. (As my Dad has always said, "Half a loaf of bread is better than no bread at all.")

Given the option, lower wage workers are more interested in something that covers basic expenses. Realizing this, numerous industries nationwide like major retail chains, hospitals, nursing homes, food service, hospitality, and transportation are making Limited Benefit Plans available to their employees and setting the pace! Not only have they discovered a way to provide benefits to more of their employees--at lower cost--but also are reaping benefits themselves. Better employee attraction and retention is a logical "by-product" of a better benefit plan! (Who would'a thunk it?)

An Over-Simplification!

When most people think of Limited Benefit Plans, they automatically just lump them together under one term or another. They usually call them "mini-meds," not realizing that a mini-med is only ONE of the types available. There is ANOTHER! I think a quick study of both types, and how they differ, is in order. Please understand at the outset that NEITHER of these plans ARE MAJOR MEDICAL PLANS and ARE NOT A SUBSTITUTE for Comprehensive Major Medical insurance! The benefits won't last very long in the event of a serious illness or accident. This fact needs to be well communicated to any employee who is considering enrolling. We'll discuss the communication challenge a little farther along.

Limited Benefit Plans come in TWO FLAVORS! Plain Vanilla and Neapolitan!

There are two types of Limited Benefit Plans: The Mini-Medical or "mini-med" is one, and the "fixed benefit" or "indemnity" plan is the other.

A Mini-med Plan can be thought of as a "miniature" medical plan as compared to a "major" medical plan. The mini-med has many of the same "components" as the major medical including annual maximums, deductibles, and co-insurance. These plans generally have "caps" on specific services--with a very low overall maximum benefit. Whereas a major medical plan may have a $1,000,000 per year maximum, the corresponding annual maximum with the mini-med can be as low as $10,000 or less. Some plans have only a $1,000 annual max! Each service area may have its own "caps," such as up to $250.00 per day for hospital confinement.

Another important aspect of the mini-med is that its coverage is tied to "Usual, Customary, and Reasonable Charges" as defined by the insurance company. This means that the rates can be subject to "medical cost inflation" resulting in annual rate increases--just like comprehensive major medical!

An Indemnity Plan is a very different kind of Limited Benefit Plan. They do not base their benefits on the actual charges incurred. They literally pay a fixed amount for specific services rendered. For example, if a doctor's visit actually cost $60.00, and the indemnity plan is set at $75.00, the plan pays the $75.00. The provider is paid $60.00 for his services and the insured is paid the difference of $15.00. On the other hand, in the same example, if the doctor's visit cost $80.00, the insured is responsible for the additional $5.00. The plan, however, may limit the insured to a specific number of doctor visits per year.

These plans usually have no deductibles, co-payments, or co-insurance. Payments, therefore, begin with the FIRST DOLLAR of charges incurred.

Indemnity plans generally have NO OVER ALL MAXIMUM annual limit. Their limits are based only on the services used. For example, if the plan is set to pay $500.00 per day for hospital confinement, the limit may be for "up to 30 days" per confinement and a maximum of two confinements per year, per person. In this scenario, the plan could pay $15,000 for a 30 day stay, for hospital confinement alone. (Meanwhile, a "mini-med" with a $10,000 annual maximum would only cover charges up to their max, and then the plan is over for the year. Example: They may pay: "80% of UCR, maximum of $250.00 per day.")

Limited Benefit Plans, in general, usually offer a choice of two or maybe three options from which an employer can choose. These are "fixed" plans designed by the insurer. They are usually labeled Level 1, Level 2, or Bronze, Silver, or Gold--or something similar.

However, some INDEMNITY plans offer the employer an almost UNLIMITED choice of plan designs! One particular company has nearly three million possible variations! Talk about flexibility!

Now for the "Cherry on Top!"

Regardless of which Limited Benefit Plan you choose, look for one with access to a PPO (Preferred Provider Organization). This is indeed the CROWNING JEWEL that makes a good plan even BETTER! PPO's offer attractive discounts, up to 30%, which makes one's benefits go a lot farther "in network" than out of network.

Although these plans are obviously very different, comparing benefit by benefit, the Mini-med and the Indemnity are very close in premium. Therefore, an employer does not have to be "limited" to a mini-med solely because of cost. After all, due to the fact that the premiums are designed to be exceptionally low, they are usually paid 100% by the employee. This brings us to the "explanation" of these plans.

Communication is a wonderful thing...When it happens!

Imagine for a moment someone saying to you: "This plan pays up to 80% of the usual, customary, and reasonable charges for your specific geographic area, after the deductible, up to the built in limits within the plan...blah...blah...blah!

What did you learn? Zip, Zero, Nada! Most folks don't have a clue what a UCR is, much less what impact it can have on their coverage! This can cause severe confusion even to the smartest of people. It is simply an "unknown," until the bills arrive!

Such is the difficulty of explaining a "mini-med." Just hearing the term "80%" can make most people think that's what it pays! Can you see the difficulty here?

On the other hand, the Indemnity plan is far simpler to explain.

WYSIWYG! What on Earth are you talking about now?

According to The Wikipedia, "WYSIWYG (pronunciation: WIZ'-EE-WIG), is an acronym for What You See Is What You Get, used in computing to describe a system in which content during editing appears very similar to the final product. It is commonly used for word processors, but has other applications, such as Web (HTML) authoring. This phrase was originally popularized by comedian Flip Wilson, whose character "Geraldine" would often say this to excuse her quirky behavior."

I can't think of a better way to describe INDEMNITY plans. They are indeed What You See Is What You Get plans!

If the plan states that it pays $50.00 for a doctor visit, or $250.00 per day in the hospital, that is EXACTLY WHAT IT DOES! This leaves very little room for confusion!

See? COMMUNICATION can actually HAPPEN!

Who should consider Limited Benefit Plans?

These plans are obviously not for everyone. They ARE, however, a GREAT ALTERNATIVE for

Uninsured Part-time or Seasonal employees
Uninsured Full-time employees who can't afford the company's health plan
Under-insured employees who want a "supplemental" option to "fill in the gaps" in their current health plan caused by deductibles and co-insurance
Provides new hires basic coverage during their waiting period, prior to their "eligibility" for the company sponsored health insurance.

"Money doesn't buy insurance, health does. Money just keeps it in force."

ACCESS to health insurance is limited by two factors: COST and HEALTH! We've already covered the Cost factor. Let's take a moment to look at the Health factor.

Many Limited Benefit Plans offer GUARANTEED ISSUE. This is VERY IMPORTANT for those who unfortunately have PRE-EXISTING CONDITIONS! But, getting a plan issued is only the beginning.

Generally, mini-meds require waiting periods from 6 to 12 months for pre-existing conditions to be covered, and this may vary from state to state.

Some INDEMNITY PLANS HAVE NO PRE-EXISTING CONDITIONS AT ALL.

Therefore, this type of Indemnity plan can overcome BOTH LIMITING FACTORS: COST AND HEALTH.

A Final Thought...

What is the REAL MEANING of having ACCESS to BASIC HEALTH INSURANCE?

One employee summed it up very well. He looked at his Insurance I.D. Card and said, "This is my DIGNITY CARD!"

Consider offering YOUR uninsured employees SOMETHING MONEY CAN'T BUY: DIGNITY!

James A. Croy began his Life and Health Insurance career in 1974. With 30+ years of total experience and 21+ years experience in the Employee Benefits arena, he is Co-Founder of Life Solutions, U.S., located in the Metropolitan Atlanta, GA area. For more ideas, and contact information, he invites you to visit his website at: http://lifesolutions.us/ [http://www.lifesolutions.us/]

Copyright 2007 – James A. Croy. All Rights Reserved Worldwide. Reprint Rights: You may reprint this article as long as you leave all of the links active, do not edit the article in any way, give author name and follow all of the EzineArticles http://EzineArticles.com/ terms of service for Publishers.

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The 10 Most Asked Questions of Cost Benefit Analysis

When dealing with decisions using Cost Benefit techniques it is very important to follow the proven principles. The health of your company and your reputation depend on it. If these rules are not followed then your decisions could be flawed.

Let's start, shall we?

Question #1. Is this technique suitable for the small business owner?

Yes. The theory works equally as well for small business as it does for big business and government.

Cost Benefit Analysis is a decision-making technique that assesses the positive outcomes (benefits) as well as the negative outcomes (costs) of different decision alternatives. The trick is to make its implementation easy for the small businessperson.

Once you have basic knowledge of the theory and can enter data into a spreadsheet then the rest is not too difficult.

Question #2. Is this all I need to make better decisions?

No. Cost Benefit Analysis is a tool to assist in making better financial decisions. It is not an end in itself. However, part of the Cost Benefit process requires that you think widely on all options before making a final decision. This is often where most people fail in their decision-making attempts.

Cost Benefit Analysis is also very skilful at providing a single viability output for each competing option, making comparisons objective and easy.

Question #3. What do I include as the Costs and the Benefits?

Costs. All costs attributable to the project are to be included. Some of these are listed below:

- Asset Costs (both Capital and ongoing)

- Supply costs for purchased items

- Extra administrative effort required to manage project

- Delivery costs if to your account

- Replacement of assets in future years

- Tender preparation costs

- Any specialised tooling associated with the project

Revenue. Revenue can only be attributed to a project if it were not received were the project not to go ahead.

Asset Disposal and Residual Values. Some assets may be retired prior to the end of their useful lives or may be salvaged at the end of the project. This value is to be included in the cash flows (less the costs associated with their sale or disposal).

Cost Savings. All cost savings attributable to the project are to be included. Wage and salary cost savings must include their overheads and on-costs.

Question #4. How do I treat non-financial costs and benefits?

Since only cash transactions (both costs and benefits) are included in Cost Benefit models, non-financial costs and benefits are usually described by way of notes.

If the Benefit Cost Ratio is = to 1 or > 1 then the use of non-financial costs and benefits would not be required since the project is already VIABLE. Normally these non-financial costs and benefits would be included when comparing competing options whose Benefit Cost Ratio is close to each other.

Question #5. How can I test my assumptions?

You are best placed to make assumptions based on your own experience and judgement. However, you can use a technique to show others how robust your assumptions really are. This technique is called Sensitivity Analysis.

This technique is important to understand because you have made many assumptions in your analysis. These could have been, for instance, the level of new income generated, the savings generated or the residual value of the asset at the end of the project life. These assumptions are at the heart of your analysis and have contributed to your final Benefit Cost Ratio outcome.

Since the future cannot be accurately predicted there is a high probability that some of your assumptions may prove incorrect.

Using this technique will add conviction and weight to your proposal by showing how changes to costs and benefits affect the Benefit Cost Ratio. Do small changes move the project from VIABLE to UNVIABLE?

Question #6. How can I be sure that the project is VIABLE?

You have made your assumptions based on your project knowledge and experience. You have constructed the model that shows the project to be VIABLE. If you have followed the proven principles it should work out OK. Once the project has been authorised it is important to ensure that the assumptions are correct and in fact are deliverable.

To ensure this happens follow up on these items:

- Any labour savings must be delivered - re-assign affected resources

- Cost savings due to process changes must be acted upon swiftly

- Increased revenue from price rises must be implemented urgently

A Post Completion Review undertaken a year from the project's implementation will show you if all or some of your assumptions proved correct. It will also teach lessons on how this could done more successfully next time rather than making the same mistakes again.

Question #7. How can I implement this technique in my company?

There are a number of ways as follows:

- Use Cost Benefit Analysis yourself in a pilot project

- Convince the CEO of its benefits to the company and use that authority

- Use Cost Benefit Analysis in a specific business unit

All of these ways require a thorough understanding of the theory, the reasons for its implementation and the expected payoffs.

A training program would need to be undertaken so that all those involved understood the technique.

Question #8. Why does it have to include NPV to account for the time value of money?

Typically the life of the assets, or the decision being made, will have a financial impact over more than 1 year. This is usually 3 - 5 years (computers, software, factory machinery), 20 years for some large electrical equipment and even up to 100 years for underground pipes as used in water and sewer reticulation.

Inflation, year by year, reduces the buying power of the dollar causing us to spend more each year in dollar terms to purchase the same item. So it is with projects whose life span is more than one year.

Costs and benefits that occur in year 3 or 4 of the project would not have the same impact as if they occurred in year one.

The Benefit Cost Ratio and the final decision regarding VIABILITY could be completely wrong if NPV is not used in the model.

Question #9. Are there any limits to its applicability?

Not really, as long as you are dealing with financial costs and benefits. It has application to large and small decisions, complex and simple, long lived and short lived assets, also profit based and government and charities. There are some general limitations:

Subjectivity - It is quite unlikely that two analysts working separately will estimate exactly the same Cost Benefit Ratio number. There are many variables that can be treated slightly differently, some of which are listed below:

- Estimation of physical and/or economic life of the asset/project

- Estimates of costs/benefits of environmental protection

- The choice of discount rates (the rates illustrated above are indicative of a range which could be applicable)

- The value of benefits can be different for different groups in society (i.e. the value of a $ to the poor section of the community is different to that of the affluent class)

Political Decision Making - The necessity of making political judgements on the viability of the project (timing of elections, regional loyalties) can sway an outcome. Also decision-makers are not consistent over space and time.

First Round Effects - We would normally only include the effects that are directly attributable to the project going ahead. We would not, for instance, include the increased community agricultural output generally due to a project going ahead. This would only be justified if the sector was originally under-employed.

Question #10. How can this technique actually help me?

There are many ways - some are listed below:

- Increases your confidence knowing you have used a proven reliable method.

- Having thought of all the options for solving the problem you can present your proposal knowing you have the answers.

- Using this technique will ensure you gain recognition and more opportunities for advancement

- Once the company sees the benefits of this technique it may wish you to be the trainer of other staff or the implementation champion - more opportunities for you.

- This technique will you save time in project assessment and ranking of competing proposals.

Ready to learn more from Bruce Hokin, The Cost Benefit Coach, about making better financial decisions, being more confident, and being recognized for these skills? Then grab your FREE copy of "The Absolute Beginners Guide to Cost Benefit Analysis" and FREE spreadsheets at http://www.thecostbenefitcoach.com Not only will you discover how to create your own Cost Benefit Analysis spreadsheet models in less than 60 minutes, guaranteed, you'll be using tested and proven, real-world methods.

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Employee Benefit Or Worker Entitlement

Fasten your seatbelt because whether you are an employer or an employee, your benefit program is about to change.

During the booming industrial age when a potential employee would seek out employment at a medium to large sized company, they would look at wages as the main reason for choosing one company over another. Most employers would typically offer the same benefit plan which included medical and dental insurance. This same employee also knew that if they stayed with this employer until retirement, their retirement needs would be met through a defined benefit plan.

Employees during this time period did not need to be educated on their employee benefits program because they had little to no choice in the matter. Typically, these employees were enrolled automatically in their benefits and could not make any adjustments or changes to their plan or plan design. Benefits were viewed as and became entitlements.

Now enter the information age. With the cost of offering a competitive employee benefits program at an all time high, employers are having to share some of the costs associated with offering such benefit plans with their employees. As employers are struggling to attract and retain good quality employees, they are finding wages are not the only issue as it pertains to hiring a new employee. The employee benefits program has now taken center stage.

The result, as employee benefits continue to cost more and more each year, employees will now make changes to their employment over benefits not just wages.

The one constant between the two ages is the perception that employees are entitled to these employee benefits and they are not viewed as an employee perk.

So how does this perception get changed? By introducing employee driven benefit plans.

By allowing employees to take control of specific design elements of their own personal benefits plan, the employee and the employer receive huge dividends. Although, this may sound like the old cafeteria plans of yester year in which the employer gave their employees a sum of money to purchase benefits from a benefit bank, this strategy works much differently. The cost of this program becomes transparent to the employee and therefore they see the total cost of their benefit program.

Since the employee sees the actual cost of their own employee benefits program, this strategy requires input from the employee to design their own program in which variety is the key. By offering a multitude of benefit options, the employee is in control of their own plan design as well as the cost. Most employee driven plan designs offer multliple medical, dental, short term disability, long term disability and many other insurance offerings including voluntary benefits such as accident, cancer, life and identity theft coverages. Just to name a few.

So how does this employee driven benefit plan work and what is the best strategy for implementation?

There are three main aspects to developing this type of benefit strategy:

1. Communication. Communicating the features and benefits of this type of strategy should be the foundation of offering an employee driven benefit plan. It is important for an employee to be educated on their benefit options as it pertains to their situation and allow them to make good decisions as it relates to the benefits and their cost.

This can be accomplished through group meetings, newsletters, informational call center or through licensed benefit couselors. Of all the options, the latter is preferred.

2.Enrollment. As the employee designs their own benefit plan, each design may be different from one employee to another. For this reason there must be an electronic enrollment system in place for ease of enrollment and to assist in the transfer of data electronically to multiple vendors and/or carriers.

3. Administration. As employers look to cut their budgets or to reduce costs, it is important that a strategy like this does not increase the overall cost of administering the employee benefits plan or add an additional administrative burden. So having an electronic enrollment system that can be used as an administrative and billing tool is of the essence.

Once this strategy is implemented there are 4 main benefits for the employee and the employer.

1. Since the employees become educated through this process, he or she has a higher level of understanding of their own benefit plan and how to maximize the benefits for their own use.

2. Benefit statements can be produced and printed from the enrollment/administration system so the employee can see the total costs of their benefits and the amount the employer is contributing on their behalf. The employer may also include items on this benefit statement such as the cost of additional taxes or benefits paid on behalf of the employee to show the employee their total compensation received for that year. Most employees never see this type information.

3. Tax savings. Since most of the additional benefits in this employee driven benefit model are pretax, the overall costs are reduced for both the employee and the employer.

4. By including the employee in the overall process and by allowing them to understand the costs associated with offering an employee benefits plan, the employee understands the employer cost and feels appreciative of the benefit. Their benefit program becomes a benefit again.

So what is the end result?

The end result of this employee driven benefit strategy is plan understanding, employee appreciation and transparency of cost which will allow all parties to maintain control the costs associated with offering a complete benefits program. As technology continues to develop, more options related to this type of plan design will be available.

Rick L. Guetzkow has been a employee benefits broker and consultant for over the past 15 years. He has helped many companies design, build and enroll this new employee driven benefit strategy with great success.

To learn more please go to http://www.bluechip-advisors.com

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Veterans Aid and Attendance Pension Benefit - Long Term Care Benefits for Veterans

Veterans Aid and Attendance Pension Benefit -- Long Term Care Benefits for Veterans What Is the Aid and Attendance Benefit? The Veterans Benefits Administration offers a disability income available to veterans who served during a period of war or to their surviving spouses. This special benefit is officially called "pension" but is more popularly known as the "veterans aid and attendance pension benefit". For a pension benefit for veterans younger than 65, evidence of total of disability must be provided. Veterans 65 and older do not have to disabled.

The National Care Planning Council estimates that as much as 30% of the US population over the age of 65 would qualify for the aid and attendance pension benefit under the right circumstances. That's how many war veterans or surviving spouses of veterans there are. The benefit is such a well-kept secret that only a small fraction of these eligible veterans are actually receiving it. Death pension -- a benefit available to a surviving spouse-- is a lesser amount based on the same rules for applying for a living pension claim. In other words, the deceased veteran must have met the rules for pension -- with the exception of being totally disabled or over age 65 -- or have been receiving pension in order for his or her spouse to receive the lesser benefit. In addition, in order to be eligible or keep receiving the benefit, the surviving spouse must remain single.

Who can submit a claim? A claim is submitted by the veteran or by the veteran's single surviving spouse in the case of a death claim. A duly appointed service organization, an employee of the local regional VA office, or a VA approved agent may file a claim on behalf of the veteran or the spouse. A claim cannot be filed with a general or durable power of attorney. The application will be sent back requesting proper documentation for a VA power of attorney. The veteran must sign a document specifically authorizing a power of attorney for someone to submit an initial claim for him. Many chagrined children with a durable power of attorney have submitted claims on behalf of a parent only to have the claim rejected by VA.

What happens if the veteran is incompetent? If the veteran cannot submit the original application or sign a power of attorney for a surrogate to file an application, then a duly appointed guardian can complete the application. VA also allows the spouse, a parent or next of kin, or a friend to complete and submit an application on behalf of an incompetent veteran if that person submits the proper power of attorney request and indicates the applicant could be considered incompetent for financial affairs. Even though the veteran or surviving spouse may be incompetent for financial affairs, he or she should always sign the power of attorney request if he or she is competent to do so. VA may appoint a fiduciary to take over the claim and the affairs for the claimant if VA determines he or she is incompetent.

How does VA handle power of attorney? Employees of VA and veterans service organizations already have authorization for power of attorney to file an application on behalf of the veteran. They have forms for the veteran to sign to allow this to happen. An attorney representing the veteran in other affairs can also request a power of attorney in the proper format and on his or her letterhead. Any single individual may also submit a letter requesting power of attorney to submit an application if it is signed by the veteran and if the letter provides certain required information. There is also a VA form in the book support packet that can be submitted for power of attorney. All attorney requests submitted for power of attorney must state that the veteran is not paying a fee to file the application on his or her behalf.

What is an "aid and attendance" or "housebound" rating? A "rating" is granted by a veteran service representative where a condition exists that makes the disability more severe. Medical evidence is required unless someone is a patient in a nursing home, and then the requirement is waived. The rating allows VA to pay an additional monthly amount of pension or compensation to a veteran or a surviving spouse for additional costs associated with this disability.

How does one qualify for aid and attendance or housebound rating? The application form has a block allowing for a request for either rating. Submitting medical evidence in advance instead of waiting for a request from VA can help expedite the process of getting this rating. We have provided in the book support packet, a sample form that might be used for this purpose. This form is also designed around information that VA is looking for and may be a more effective presentation of the facts than typical medical records from the doctor.

What is the effective date? The effective date is generally the day VA receives an original application. If it takes three months for the process of approval or six months, it doesn't matter. The effective date still reverts to receipt of the original application.

When does payment begin? Generally, payments start on the first day of the month following the month of the effective date. This means that if it took six months to get approval, at least five months of benefit will be paid retroactively. VA requires automatic deposit of awards in a checking or savings account.

What happens if the veteran dies during the period of application? If the veteran dies during the period of application and the application was not approved prior to the death, there may be accrued benefits. If the regional office had all of the information in its possession that would have led to an approval, then there is an accrued benefit payable. Otherwise there is none. The full benefit is available for the month of death of the veteran and to a surviving spouse through an application on Form 21-534. This is the same form a surviving spouse uses for a death benefit claim for himself or herself. VA will award either an accrued benefit or death benefit to the surviving spouse whichever is larger. If there is no surviving spouse or dependent child, VA will pay the unreimbursed costs of last illness and burial to the person who paid those costs. A special claim must be submitted for these costs, not Form 21-534.

What is a veteran's federal fiduciary, and does that affect the application? For a veteran who is considered incompetent to handle his own financial affairs, VA will appoint a fiduciary to receive the money and pay the bills. A federal fiduciary is an individual appointed for this purpose, usually a spouse or a family member. In most cases -- except for the spouse living with the veteran -- there is an interview required and mounds of paperwork. This process can take a long time, and it is to the advantage of the person filing an original claim to request the appointment of himself or herself as a fiduciary or for some other appropriate person or organization to help expedite the process. VA always makes the final decision on whom it appoints as a fiduciary. In fact, the agency might well ignore court appointed fiduciaries. In general, the decision favors declaring the veteran competent and avoiding a fiduciary where at all possible.

What is the income test for pension? If the household income adjusted for unreimbursed medical expenses and a deductible is greater than the maximum allowable pension rate -- MAPR -- there is no benefit. In 2007, the maximum allowable rate for a couple with aid and attendance allowance is $21,615 a year. For a single it is $18,234 a year. Without aid and attendance or housebound allowance the maximum couple's rate is $14,313 a year and for a single it is $10,929 a year. Death pension rates are lower. People seeking a benefit with adjusted incomes greater than these levels will be denied.

Can a household with income above the maximum limit qualify for pension? A quirk in the way benefits are calculated can allow individuals and couples earning between $24,000 to $60,000 a year to still qualify for a benefit. It has to do with the treatment by VA of the very large recurring medical costs associated with home care, assisted living, or nursing home care.

What is the pension household asset test, and what can be done if the asset test is not met? As a general rule assets cannot exceed $80,000. A veteran or spouse occupied-house, a reasonable amount of land upon which it sits and a vehicle are exempt from the asset test. In reality there is no specific test in the regulations. Veterans service representatives are required to file paperwork justifying their decision if they allow assets greater than $80,000. Thus this amount has become a traditional ceiling. The service representative is encouraged to analyze the veteran's household needs for maintenance and weigh those needs against assets that can be readily converted to cash. In the end, the decision as to allowable assets is a subjective decision made by a service representative. In certain cases a benefit award could be denied even if assets are below $20,000 or $10,000 or even zero dollars. There are legal ways to get around the asset test if assets are too high. These are described in our book.

What proofs and documents are required with the pension claim? We have already discussed the requirements for power of attorney and fiduciary if they apply. In addition, an original copy of the discharge from service -- typically DD 214 or form WD -- is required and the discharge must have been honorable. If there is a question about the marriage relationship, a marriage certificate or other proof may be necessary. Birth certificates of dependent children are usually not required but may be necessary under certain conditions. A dependent child is a minor, a dependent student under age 23, or a totally dependent adult child. There are certain documents that need to be submitted to prove future recurring medical expenses and to prove need for aid and attendance or housebound allowances. VA does not furnish these documents nor provide any information that they are required. Sample documents that could be used for these purposes are included in our book.

Can someone charge to help fill out the form? Federal code and VA regulations prohibit an agent, advisor or attorney from charging a fee to fill out and file a claim for pension. Most practitioners or providers help their clients for free, sometimes in the context of solving other retirement issues or providing long term care services. Some practitioners offer application advice for a fee (which is legal) but will send their clients to a veterans' service organization to complete the application. Some assisted living facilities or home care providers also offer free advice or help and this seems to be an acceptable practice. An agent or attorney can also be paid by a disinterested third party under certain conditions to complete an application. However, a home care agency, assisted living facility or nursing home that pays an agent or attorney to complete an application on behalf of a resident or client does not meet the definition of a disinterested third party is in violation of the prohibition for charging a fee

How are assets, income and unreimbursed medical expenses determined? The applicant must submit details on the application of all income and all assets including retirement savings accounts such as IRAs. Almost any type of money received or anything received that can be converted into money is income. The only exclusions for assets are a personal residence (occupied by the veteran or spouse) and a reasonable amount of land it sits on as well as vehicles and other personal possessions. Personal possessions used as an investment such as a coin collection are counted as assets. Unreimbursed medical expenses can be almost any expense related to medical needs.

Are there any other reporting requirements? VA requires that any change in income or assets be reported immediately. The award is calculated for 12 months in advance, but at the beginning of each calendar year, a formal report called an EVR (Eligibility Verification Report) must be filed detailing all income, assets and unreimbursed medical expenses for the coming calendar year. For example if the award is granted in April for 12 months in advance, an EVR must be submitted in January of the next year that could affect the award amount for the remaining four months of the initial 12 month period. The EVR will be used for determining benefits for the calendar year on which it is based.

What is a veteran's federal fiduciary, and does that affect the application? VA can appoint a number of different types of fiduciaries to manage the funds on behalf of an incompetent veteran. A federal fiduciary is typically an individual such as the spouse or a child whom the VA is most likely to appoint. If VA is not notified with the application that the veteran may be incompetent and that a fiduciary appointment is requested, this could slow down the application and approval process.

Will the pension benefit pay a nonlicensed homecare provider? VA does not pay providers directly but provides extra income to make up for the cost of licensed medical care. Medical conditions or injuries or diseases that require a need for ongoing licensed homecare will allow the applicant to reduce household income by the cost of homecare making it possible to receive the additional income from a pension award. If the beneficiary has an aid and attendance or housebound allowance, VA will allow deductions for nonlicensed providers as well.

Will the pension benefit pay a member of the family to provide care at home? As explained above, VA will not pay providers directly but only indirectly through extra income. If the beneficiary receiving care in the home has received a rating for aid and attendance or housebound, VA will allow expenses paid to a family member for care to be counted as unreimbursed medical expenses to qualify for the benefit. The care arrangement must be legitimate and appropriate evidence must be provided.

Does the pension benefit pay the costs of a nursing home? The application form has provision for indicating residency in a nursing home and whether or not the applicant is eligible for Medicaid. VA will automatically apply the monthly cost of the nursing home in determining the pension benefit. If the applicant is single with no dependent children at home and is eligible for Medicaid, VA is required to stop any payment of full benefits and only provide the veteran with $90 a month.

Does the pension benefit pay the costs of assisted living? As explained above, VA will not pay providers directly but only indirectly through extra income. If the beneficiary receiving care in assisted living has received a rating for aid and attendance or housebound, VA will allow expenses paid to assisted living for aid and attendance or housebound ratings -- including room and board -- to be counted as unreimbursed medical expenses. The cost of assisted living being used as a retirement residence is not considered a medical expense. It does not warrant a rating and cannot be deducted.

What are the requirements to receive a death pension benefit? The applicant must be a surviving spouse or a dependent child of an eligible veteran. VA form 21-534 is used to apply for death pension, death compensation, accrued benefits, or dependency and indemnity compensation (DIC). The surviving spouse must be single. A surviving spouse of any age is eligible as long as the deceased veteran served at least 90 days during a period of war. They had to be married at least a year prior to death or have a child as a result of the marriage. There is no requirement for total disability for the surviving spouse nor for the deceased veteran to have been totally disabled or older than age 65.

How does one prove that unreimbursed medical expenses will recur every month? VA has specific rules for proving future recurring medical expenses. Information in our book outlines the type of paperwork that must be submitted for each type of long term care service. The book also contains appropriate forms for this purpose. Neither the claims form nor information from the regional office provides any guidance on the rules for proving future recurring medical expenses for home care or assisted living. One simply has to know how to do it. This one crucial step often makes the difference between a successful claim and a denial.

What if the veteran or spouse is currently receiving Medicaid? Our interpretation of the rules leads us to believe that VA will not consider Medicaid payments as income. However, Medicaid will consider the nonallowance portion of the pension to be income. This could affect Medicaid eligibility in income test states. There is evidence that some income test states count the entire pension benefit including the allowance as income. According to federal Medicaid rules this should not happen.

What happens when the veteran or spouse wants to receive pension & Medicaid together? Federal law requires that a single veteran receiving Medicaid with no spouse or dependent children can receive no more than $90 a month from VA. Veterans in state veterans homes are exempt from this requirement. The veteran with a spouse can receive the benefit to help defray the costs of a nursing home. As a general rule, the pension benefit would probably not work if Medicaid were paying the bill. But the benefit does work well for non-Medicaid nursing home beds and while the recipient is going through the Medicaid spend down.

This article is an excerpt from the book -- "VETERANS AID AND ATTENDANCE BENEFIT -- LONG TERM CARE BENEFITS FOR VETERANS" -- published by the National Care Planning Council and written and edited by Thomas Day, Council Director. This first-of-its-kind book is available in two editions -- the Standard Edition (209 pages) for the general public and the Professional Edition (443 pages) to be used as a handbook for advisors and care providers. Both books contain the necessary information and forms to complete an application for the benefit. The Professional Edition also includes citations from rules and regulations, hypothetical planning cases, asset reduction strategies and a software CD with benefit estimate software, all applicable forms and planning sheets. To review and purchase the book go to http://www.longtermcarelink.net/a16veterans_books.htm or type in your browser window www.veteranbook.com.

Thomas Day specializes in the area of long term care planning. As director of the National Care Planning Council and chief spokesman for the Utah Elder Care Planning Council he maintains a busy schedule giving advice to concerned caregiving families and conducting radio and reporter interviews. He is also responsible for maintaining several Internet sites one of which, http://www.longtermcarelink.net is a frequently visited and popular site for long term care issues. The site currently is receiving the equivalent of 6 million hits a year. Tom is also busy writing articles and has completed three new books on long term care planning published by the National Care Planning Council.

Tom graduated from the University of Utah with a BA in physics and math and an MBA in finance. He holds a CLU designation from the American College. Tom and his wife Susan live in Centerville, Utah. They have seven children and 17 grandchildren.

Please contact Tom at 800-989-8137 or tomday@longtermcarelink.net

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