If you are like most American families, you have family members who are living much longer lives. Longevity is not necessarily a bad thing, but it does dramatically increase a person's risk of needing long-term care services and supports. With a growing economy and record low unemployment, this is a combination that will directly impact your future retirement and the costs and burdens associated with long-term care.
You have read the headlines. Polls show people are feeling good about how the nation's economy has been performing in the past few years. The economy is recording low unemployment, and job openings are at a record high.
2019 ended on a high note for Wall Street, with people seeing nice gains in their 401(k)s and other accounts. The S&P 500 ended 2019, posting a gain of 28.9%. Nasdaq enjoyed a 35.3% gain. It was the best annual performance for both since 2013.
Recent market drops due to the coronavirus are expected to be temporary. However it shows that even in a good economy unexpected events can cause market drops.
Record Low Unemployment Results in Higher Long-Term Care Costs
The current economy is also producing record low unemployment rates. In February 2020, they remained at the 50-year low level of 3.5%.
The U.S. economy enjoyed record low unemployment at the end of 2019, which benefited many groups. The unemployment rates for adult men (3.1%), adult women (3.2%), teenagers (12.6%), Whites (3.2%), Blacks (5.9%), Asians (2.5%), and Hispanics (4.2%) showed little or no change and remained at record lows or near record lows.
At the same time, there is an ever-growing number of Americans 65+, which places a huge demand for health care services. The record low unemployment means labor costs for long-term care will continue to increase.
Aging America Means More People Will Require Long-Term Care
There will be 78 million people 65 years or older by 2035, compared with 76.4 million under the age of 18, according to the Census Bureau. By 2030, all baby boomers will be older than age 65. With advances in medical science, this creates a perfect storm. More people will need help with activities of daily living (things like bathing, eating, dressing, bathroom needs, etc.) or even supervision due to cognitive decline. With an ever-increasing demand for services and fewer people to provide these services, the costs of long-term care will continue to grow.
The costs of long-term care services and supports haven't gone up as fast as some other sectors in health care. But experts suggest as people continue to live longer, the demand for these services is outpacing the labor supply. Historically low unemployment with an ever-growing economy is also increasing the prices of this care, which are labor-intensive.
According to the 16th annual Genworth 2019 Cost of Care Survey showed a continued increase in the cost of long-term care services and supports. The Genworth report shows the cost of a home health aide, a person who helps individuals with their activities such as bathing, dressing, and eating, increased 4.55%.
Other types of long-term care services also showed higher costs. Adult daycare centers showed a 4.17% increase. Assisted Living facilities and nursing homes showed a 1 to 2 percent increase
Genworth, one of the nation’s leading insurance companies which provide Long-Term Care Insurance products, cites several factors in the increased cost of care services. These include:
- Shortage of skilled workers. Genworth says the demand is outpacing the availability of providers. There are not enough workers to fill these roles compared to the vast increases in the number of people who require extended care. These caregivers know they can demand more, and companies are willing to pay more for the best workers. Also, fewer caregivers mean more overtime, which means consumers pay more for care.
- Higher minimum wages. The higher payroll, along with changes in overtime pay rules, places additional pressure on the bottom-line of many healthcare agencies in many states. This increased cost of labor is hitting American families who require these care services.
- Difficulty attracting and retaining qualified workers. The expanding job market provides more job opportunities at higher pay. The role of a caregiver is a hard job and traditionally provides lower pay. Pay for these positions is increasing to counter the better job market.
- Business constraints. These care providers see more regulations and other business constraints. These include differing laws on certification of caregivers, compliance obligations, razor-thin profit margins, balancing care quality, and costs. Many states are increasing regulations. This makes it much more difficult to provide long-term care services and supports without increasing costs.
- Growing occurrence of Alzheimer's Disease and other dementias. Longevity is bringing a higher rate of those who suffer from cognitive decline. Supervision services for those with various forms of dementia often require more specialized care – and thus higher hourly wages. As more people live to older ages, the amount of the population, who have cognitive decline increase substantially.
- Many aging Americans require specialized care services. Since many people don't have Long-Term Care Insurance, they wait too long to receive professional care. By then, there needs have progressed, requiring more specialized services. More intensive levels of long-term care services and supports care are more expensive.
Long-Term Care Planning is Essential
The ever-growing cost of long-term care services means planning for the financial costs and burdens of longevity is becoming an even more significant part of a family’s overall retirement plan. With a Long-Term Care insurance policy, a family will have tax-free resources to provide you with your choice of quality care in the setting you desire, either at home or in a facility.
Generally, most policies provide an option for inflation protection. This way, your benefits increase each year. Usually, the premium remains level even though benefits increase. Some plans provide for “future increase options.” With that option, your premium would increase if you elect to take an increased benefit.
Partnership benefits Provide Additional Asset Protection
The Long-Term Care Partnership program requires a guaranteed automatic inflation benefit where the benefits go up each year but the premium does not as it is already factored in the cost of the premium.
The partnership program, available in 45 states, provides dollar-for-dollar asset protection if you have a qualified Long-Term Care Insurance policy.
Without Long-Term Care Insurance, the cost of care services will adversely impact savings, income, and lifestyle. These costs will drain your retirement savings, or your family will become caregivers. Caregiving is hard on family members. Paid care is expensive and adversely impacts income and lifestyle.
Plan Before You Retire
You will not know the day or time you will require long-term health care. You will also not know when an unexpected event could negatively impact the markets, creating losses in your 401k and other assets.
This time it was a virus. The next event, who knows? We are enjoying good economic news today, but in 20 years, you just don't know.
Affordable Long-Term Care Insurance provides you with guaranteed tax-free benefits that give you access to your choice of quality care in the setting you desire.
The best time to plan is before retirement when premiums are very affordable, and an individual’s health is usually good, making the qualification for a policy easier.
Start Your Research and Prepare Family & Finances
Start your online research by finding the cost of care in your state. The LTC NEWS cost of care calculator has the cost of care but also includes information on available tax incentives, partnership availability, and other state-specific information.
The reality of needing some type of long-term care service in the future is high. Addressing the issue will safeguard your savings as it eases the stress and burdens usually placed on family members.
Get Help from a Qualified Long-Term Care Insurance Specialist
Long-Term Care Insurance is very affordable for most people, but experts suggest speaking with a Long-Term Care Insurance specialist who works with the major insurance companies. They should have a complete understanding of policy features, underwriting, partnership benefits, policy design, and claims. Very few insurance agents and financial advisors have this expertise.
The cost of this care will always increase. With an affordable Long-Term Care Insurance policy in place, you have asset protection, which gives your family peace-of-mind.
About the Author
An LTC News author focusing on long-term care and aging.
Contributor since August 21st, 2017
One of the questions often asked about Long-Term Care Insurance is whether making a claim and receiving benefits is difficult. Most Long-Term Care Insurance claims are paid without issue.
Long-Term Care Insurance pays billions in benefits to policyholders helping them access quality care, including at home, and reducing the stress and burden otherwise placed on family members.
LTC NEWS has teamed up with Amada Senior Care to provide you with quality in-home care options, including free - no cost or obligation Long-Term Care Insurance claims processing and case management
If a loved one needs in-home care, whether they have LTC Insurance or not, Amada may be your choice for quality care options.
LTC NEWS has these comprehensive guides to help you in your process of finding care for a loved one now:
- Finding Quality In-Home Care
- Adult Day Care Centers (ADCCs)
- Assisted Living and Memory Care Facilities
- Finding a Quality Nursing Home
Find Professional Help in Obtaining Your LTC Policy
LTC Insurance is custom-designed, but premiums vary dramatically between insurance companies. Every insurance company must file its products and pricing with the state's insurance department before being offered to consumers. What that means is no insurance agent or agency can offer special deals.
Seeking professional help is vital when shopping for Long-Term Care Insurance. There are not many Long-Term Care Insurance specialists who work with the top companies and have a complete understanding of underwriting, policy design, pricing, claims, partnership, and other important aspects of LTC Insurance.
Look for some of these factors in finding an LTC Insurance specialist:
- An LTC Specialist will usually have helped at least 100 people or more with LTC Insurance. Be sure to ask; some specialists have helped thousands nationwide.
- An LTC Specialist will typically work with most of the major insurance companies offering these products, not just one or two.
- An LTC Specialist typically has years or more of experience and holds a Certified in Long-Term Care® designation (CLTC®).
- An LTC Specialist will understand the current and future cost of long-term health care and how most care is delivered so they can make professional recommendations without "over-insuring" the individual.
- An LTC Specialist will offer all types of long-term care solutions, including traditional (including Partnership plans), asset-based "hybrid" policies, and short-term cash indemnity policies.
- An LTC Specialist will know the underwriting rules with all the major insurance companies so they can match your age, health, family history, and other factors to provide you with accurate quotes.
- An LTC Specialist will typically have firsthand experience helping a client's family in the claim process.
Most people obtain coverage in their 40s and 50s.
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