Inflationary Pressures Underscore Importance of Proactive Long-Term Care Planning

Soaring inflation, with essential expenses like food and energy exceeding expectations, serves as a stark reminder for individuals and families to prioritize proactive long-term care planning. With an overall inflation rate of 6.4% in January 2024, the rising cost of living presents significant challenges for managing future care needs.

According to the U.S. Labor Department, the consumer price index (CPI), a critical measure of inflation, indicated a 3.1% rise in January compared to the same month the previous year, marking a decline from December's 3.4% rate. The CPI tracks the price changes for a wide range of items, including groceries, personal care services, entertainment, and home appliances, throughout the U.S. economy.

Worrying figures show that food and energy costs have surged by 10.4% and 8.7%, respectively. Such increases directly affect the expenses associated with long-term care services, meaning that the costs of assisted living facilities, in-home care, and nursing homes are expected to keep climbing.

Increasing Labor Costs

Meanwhile, labor shortages are expected to increase labor costs in long-term care. The home health and home care sector is grappling with a pronounced labor shortage, especially in roles filled by caregivers and nurses, a situation projected to worsen by 2024. Despite the workforce for direct care workers—including roles like personal care aides, certified nursing assistants, and home health aides—more than doubling since 2000, the supply is still not meeting demand. 

According to the U.S. Bureau of Labor Statistics (BLS), the industry is expected to add a million new home health and personal care aide positions by 2031, yet it faces challenges in adequately filling these essential roles.

As the population ages and advancements in medical care extend life expectancy, the demand for long-term care services is on the rise. This increased lifespan, however, brings the need for more assistance with daily living activities or supervision for conditions like dementia.

NIC MAP market fundamentals data from January reveals that senior living occupancy rates rose for the 10th consecutive quarter in the last quarter of 2023, indicating a trend toward reaching pre-pandemic levels by the latter half of this year.

McKnight's Senior Living highlights that in the primary markets during the fourth quarter, the demand for both assisted living and independent living properties surpassed supply, contributing to higher occupancy rates.

Paying for Care is Challenging

The LTC NEWS Cost of Care Calculator provides insights into the present and anticipated future costs of long-term care services across the country, broken down by metropolitan areas within each state. Costs fluctuate based on location and the specific types of services provided.

Exacerbating the challenge of long-term care is the issue of funding. Health insurance, including Medicare and supplements, covers only short-term skilled services and does not extend to long-term care. Furthermore, these insurance options do not cover custodial care, such as assistance with daily living activities or supervision for cognitive impairments, which most individuals need long-term care.

Medicaid coverage for long-term care services is restricted to individuals with minimal income and assets, presenting a significant limitation for many. In contrast, Long-Term Care Insurance covers various types and levels of care comprehensively. However, obtaining these policies is contingent upon medical underwriting, making it impossible to acquire coverage if care is already needed or if the individual is in poor health. 

Typically, Long-Term Care Insurance is acquired between the ages of 45 and 65, a period when premiums are more affordable, and an individual's health is usually better, offering a strategic window for securing future care.

As the costs of in-home care and assisted living continue to surge, and nursing home expenses already averaging over $100,000 a year, the absence of foresight in planning for long-term care can lead to significant financial strain on American families.

Many states participate in the federal/state partnership program, yet many consumers and financial advisors remain uninformed about them. A Partnership Long-Term Care Insurance policy is a unique arrangement that allows individuals who purchase qualifying Long-Term Care Insurance to protect a portion of their assets equal to the benefits paid out by the policy. 

• What Is the Partnership Program in Long-Term Care Insurance?

This means that after the benefits from the insurance policy are exhausted, the policyholder can apply for Medicaid without having to spend down all their assets, as typically required, thereby offering additional financial protection.

The challenge of escalating long-term care costs is set to intensify with the rising demand for services and the continuous increase in expenses. Although a greater number of individuals are exploring Long-Term Care Insurance than before, many procrastinate or neglect to make timely decisions, thereby shifting the financial and caregiving burdens of future long-term care onto their families and personal finances.

Federal and state tax incentives are available to encourage individuals and businesses to purchase Long-Term Care Insurance. Additionally, some states are exploring the implementation of state payroll taxes to finance programs for individuals without a qualified LTC policy. 

• Long-Term Care Insurance Tax Benefits Guide

Regardless, consulting with a qualified Long-Term Care Insurance specialist can offer tailored information relevant to your specific situation, ensuring you understand the benefits and potential tax advantages of securing an LTC policy.

If you're currently facing the challenge of finding quality care for a loved one or anticipate needing to do so in the near future, navigating the options can be daunting. The LTC NEWS Caregiver Directory simplifies this task by offering access to a database of over 80,000 care providers nationwide. This free and extensive directory streamlines the process of securing reliable care for your loved ones, making it more manageable.