According to a recent report from the American Action Forum, in just ten years, an estimated 24 million Americans will need long-term care services and supports. The report says that as Americans get older, there will be an increased rate of chronic health issues, and these forces will drive up these costs over the next few decades.
In fact, increasing demand for long-term care services and labor shortages have increased labor costs, making care costs even higher.
America is getting older. With Generation X (born between 1965 – 1979), Late-Boomers (born between 1956 and 1964), and the remaining baby boomers, 158 million Americans are getting older and facing a higher risk of needing long-term care services.
People require long-term care due to an illness, accident, or the impact of aging. With advances in medical science, we have seen greater longevity. However, this means more people will need help with what are known as "ADLs" – activities-of-daily living. Plus, as we reach certain age milestones, there is a higher risk of cognitive decline that requires supervisory care.
Can't Depend on Health Insurance or Medicare to Pay for Extended Care Costs
Health insurance, including Medicare and supplements, will not pay for most of this type of care. We are already in crisis as not enough people have planned for the financial costs and burdens that come with getting older.
Medicaid will pay for long-term health care, but you must have little or no income and savings, and you must use Medicaid providers.
According to Health Affairs, 54% will not have sufficient funds to pay for this care. Most families are forced to use family caregivers. These family members who provide care are unpaid but provide almost 80% of long-term care services at home, according to the U.S. Department of Health and Human Services.
Those who own Long-Term Care Insurance have guaranteed tax-free resources to pay for care. In 2020, according to the American Association for Long-Term Care Insurance, the major insurance companies spent $11.6 billion in benefits either for care at home or in adult day care centers, assisted living facilities, memory care centers, and traditional nursing homes.
However, you must obtain Long-Term Care Insurance coverage before your health fails as, like with life insurance, you must have reasonably good health to meet the underwriting requirements.
Demand for Long-Term Care Services Increasing Dramatically
The report indicates that supply and demand for long-term care are "moving in opposite directions." It says as the population ages, the need for services will increase. Many experts say that demand is more than just demographics.
A Research and Markets report said, "The U.S. health care industry continues to evolve in response to ongoing cost containment imperatives, aging of the population and relatively low rates of wellness within large segments of the general public (obese persons, people with diabetes, persons with addictions, etc.). This is leading to increased utilization of all forms of long-term care."
American Families Face Many Challenges Caring for Loved Ones
So as demand for long-term care services grows, the financial and emotional impact on American families will increase. The American Action Forum report says that by 2050, the number of people aged 85 or older will triple. The number of people using paid long-term care services in any setting will nearly double from 14 million in 2018 to 27 million.
Yet, despite these facts and common sense, many Americans ignore the problem of longevity. Even those people who have planned well for their future retirements tend to ignore long-term care risks.
Even in a good economy, the cost of long-term health care can adversely affect income and drain savings, changing lifestyle and legacy. Inflation, downturns in the economy, or world events can happen at any time, placing more financial stress on a family when attempting to fund professional care.
"When you see markets drop, as we have numerous times before, being dependent on your assets to pay for future long-term care is problematic. We see normal swings in the markets, but on occasion, an unanticipated event, like the COVID-19 crisis, can devastate assets, at least in the short term," said Matt McCann, a nationally recognized Long-Term Care Insurance specialist.
McCann noted that there is no ability to time the markets or your need for future long-term health care. If you are forced to sell assets to pay for care when the markets are down, you may be selling at a loss. Often, your 'loss' may still be a taxable gain.
LTC Insurance Offers Guaranteed Benefits and Access to Quality Care
McCann said the guaranteed tax-free benefits of a Long-Term Care Insurance policy give you access to your choice of quality care in the setting you desire, including in-home care. However, LTC Insurance does more than just give you access to quality care options.
Long-term care is both a cash flow issue and a family issue. The resources from a policy allow you to safeguard your assets, but in addition, it reduces the stress and anxiety otherwise placed on those you love.
Despite being untrained and unprepared for the role, family caregivers are often the first line of caregiving. McCann says as demand for all types of long-term care services, including in-home, increases, the cost of care will increase, making LTC Insurance even more critical.
Not only do people with Long-Term Care Insurance get access to quality care, but they also tend to get the appropriate care sooner, providing them with a better quality of life.
"My clients with LTC Insurance are more likely to get help earlier, which often leads to a quality life for both the client and the family. The LTC insurance policy gives the client options when care is needed and can sustain care in the home for a much longer period of time," said Jenny Novy, President of Amada Senior Care in suburban Chicago.
Amada Senior Care provides a variety of home care services nationwide. They also help their clients process Long-Term Care Insurance claims to simplify their clients' families.
LTC Insurance is Affordable Income and Asset Protection
McCann says that despite some talk to the contrary, Long-Term Care Insurance is very affordable, but premiums can vary dramatically between companies for the same coverage. Plus, too many insurance agents and financial advisors recommend products or design benefits that are not appropriate.
"Recently, I spoke to a couple in Texas in their 50s who were told Long-Term Care Insurance would run about $8000 a year. This premium quote was for a traditional partnership plan, not a hybrid asset-based policy with a death benefit. The actual cost was a fraction of that. To say the least, they were delighted," he said.
The cost of care is expensive and is increasing every year. Most of the cost is labor, but the labor costs will continue to grow in the decades ahead based on supply and demand.
Cost of Extended Care is Expensive and Rising
According to the LTC NEWS Cost of Care Calculator, skilled nursing home costs are the most expensive. While skilled nursing is the least used type of care service, it is costly. The national average cost of a nursing home is currently over $100,000 a year.
All other care, including home care, is costly and getting more expensive.
In twenty years, the costs of long-term care services will be substantially higher. Failing to plan for this fact will be devastating to your lifestyle and legacy.
The cost of care does vary depending on your location and the type of care you are receiving at the time - Cost of Care Calculator - Choose Your State | LTC News.
To cover these higher costs in the decades to come, you either need inflation benefits on a Long-Term Care policy or have set aside a substantial amount of your own money and hope it is enough.
There are federal tax incentives for some people and, in some states, state tax advantages available when you purchase a Long-Term Care Insurance policy. In 45 states, unique Partnership Long-Term Care Insurance policies are available that provide additional asset protection.
Many states also have rate stability rules in force, making it difficult for future rate increases on these policies. Find your state by clicking here.
Expert Tips for LTC Planning
Experts suggest planning in advance for future long-term care costs. For many, this could be Long-Term Care Insurance. Use the following tips:
- Seek the help of a qualified Long-Term Care Insurance specialist. There are not many, but some do work virtually, which in the COVID-19 world makes research and shopping more relaxed and healthier. Be sure they represent many companies and understand policy design, underwriting, claims, and the partnership program.
- Be sure to have a policy with inflation benefits. Avoid any plan which only gives you an option to "buy" more insurance. You should also avoid a plan which increases benefits only by the Consumer Product Index (CPI). Some states require at least 3% compound inflation for partnership certification.
- Ideally, obtain a policy in your 40s or 50s when you still enjoy good health and could qualify for preferred health discounts.
- Be sure to ask if your state offers partnership policies. For most people, a partnership plan is the best option. However, a hybrid policy with a death benefit or a limited duration short-term policy may be appropriate.
- Be sure the agent asks you many questions about your health, family history, retirement plans, and finances. Without that information, they can't provide you with accurate quotes and professional recommendations.
- Research both the current and future costs of long-term care services where you live. Use the LTC NEWS cost of care calculator by clicking here.
Planning for Long-Term Care is About Family
We often think about long-term care planning as asset protection. While that is true, the big benefit of having an advance plan in place is to ease the stress and burden on those you love.
It is your family that would otherwise be responsible for either providing your future care, managing paid caregivers, and selling off your assets, or both.
There are physical, emotional, and financial burdens that loved ones face when you, in the future, require long-term care.
It is easy to ignore something you may think will never happen to you. However, every research study shows that you are more likely to need some type of long-term health care service as you get older. We see declines in our health, body, and mind as we get older.
You will either pay for the care out of your income and savings, have your family become caregivers or both - unless you have an advance plan that includes an affordable Long-Term Care Insurance policy.
You will enjoy more than just asset protection and quality care when you need it. You, and your family, will enjoy peace of mind, control, and independence.
About the Author
An LTC News author focusing on long-term care and aging.
Contributor since August 21st, 2017
You can't ignore getting older. Your health and body are not like it was 25 years ago. The decline in health, body, and mind increases the need for help with daily living activities or supervision due to memory loss.
Avoid a family crisis in your family and give your loved ones the time to be family instead of caregivers. The solution is affordable Long-Term Care Insurance. You will have guaranteed tax-free benefits, giving you access to your choice of quality care in the setting you desire.
Available Resources on LTC NEWS
LTC NEWS offers several tools and resources to help you in your research for a planning solution or help your family find the appropriate care for a loved one at the time of crisis.
To help you plan for the future costs and burdens of changing health and aging, LTC NEWS can put together several resources, including:
- The LTC NEWS Cost of Care Calculator will show you the financial impact of long-term health care where you live. It will also show you state-specific information on tax benefits, care options, rules, and more.
- The Ultimate Long-Term Care Guide is an outstanding read to help you get a good overview of the topic area.
- Compare the major insurance companies that offer Long-Term Care Insurance products here - Top Insurers for Long-Term Care Insurance | LTC News.
- A detailed tax guide that includes available tax incentives can be found by reviewing the Long-Term Care Tax Benefits Guide.
Find all the resources on LTC NEWS - Resources for Long-Term Care Planning | LTC News.
Seek Professional Advice
Experts suggest using a qualified Long-Term Care Insurance specialist to help you navigate the many options available to you and your family. Insurance rates are regulated, so no insurance agent, agency, or financial advisor can give you special deals. However, premiums do vary over 100% between insurance companies for the same coverage.
A specialist who works with the top companies can match your age, health, family history, and other factors and find you the best coverage at the best value. A specialist will save you money, and you will have the peace of mind knowing they are making the appropriate recommendations - Work With a Specialist | LTC News.
Find Quality Caregivers and Long-Term Care Facilities
If your parent or loved one needs care now - or soon - you will need to find the appropriate care in the right setting depending on their needs.
Take a moment and read -
Get Expert Help Filing an LTC Insurance Claim
LTC NEWS provides free assistance with no obligation to help you, or a loved one complete the claim's process with your Long-Term Care Insurance policy. You can also support finding quality caregivers and get recommendations for a proper care plan, whether a person has a policy or not. - Filing a Long-Term Care Insurance Claim | LTC News.
Benefits of Reverse Mortgages
Today's reverse mortgages for those aged 62 and older could be an ideal resource to fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance.
Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, even help with cash flow during your retirement.
Learn more by asking questions to an expert. LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages.
Just "Ask Mike." - Reverse Mortgages | LTC News.
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