By Cyril Tuohy
Even if long-term care insurance is out of reach for most Americans because it is too expensive, advisors can help clients think about how best to organize their lives knowing they may one day have to care for parents, siblings and even children.
The long-term care advice in question may have nothing to do with finding ways to pay for a long-term care policy. Instead, it may spur clients to build an addition on the house, accept a lower-paying job closer to the family, or retrofit the minivan.
With surveys showing elderly long-term care patients prefer to stay at home rather than go to an assisted living or long-term care facility, that $15,000 in-law suite is a lot more affordable than $50,000 in annual room and board at a skilled nursing, long-term care or assisted living facility.
Accepting that $75,000-a-year job within an hour’s drive of mom and dad makes a lot more sense than saying yes to a $125,000-a-year job 2,000 miles away, but one that will require flying once a month to deal with an infirm parent.
In the ad hoc world of long-term care, where so much care is provided piecemeal by family members scrambling for help, advisors are in a position to offer more “value-added” advice than even they may realize. If nothing else, advisors should start by reminding clients that long-term care isn’t covered by primary health insurance or disability insurance.
Medicare, which is geared toward acute care, offers limited benefits for long-term care. Medicaid, distributed by the states, varies widely, imposes complex eligibility requirements and often requires depleting assets before it kicks in.
The news that long-term care isn’t covered – or isn’t covered as comprehensively as many people seem to think – could ultimately prove a costly misunderstanding. Anticipating and preparing for the profound changes could turn out to be more valuable than any long-term care policy.
A survey by Northwestern Mutual last year found, for instance, that 43 percent of consumers believe they are covered for long-term care by their primary health or disability insurance policy, Medicare or Medicaid.
Despite the growing need for long-term care as the baby boomers age, 41 percent of Americans are either unsure of how they will handle long-term care or do not plan to address their potential long-term care needs, Northwestern Mutual’s Long-Term Caregiving Study found.
That may represent a major opportunity for advisors to step in and get clients thinking about their lives 30 years down the road.
Steve Sperka, vice president of long-term care for Northwestern Mutual, which released the findings of its Long-Term Caregiving Study in November, said that with people living longer, “the need for care is very real.”
More than 12 million Americans rely on personal assistance and other long-term services and supports in their home or in an institution, according to the federal Commission on Long-Term Care, which issued its final report to Congress in September.
Many elderly Americans neither want to age in an institutional setting nor can afford it, and for those at home much of that care comes in the form of unpaid assistance from family, according to the long-term care experts who testified before the commission.
“Family caregivers sacrifice other family and work responsibilities and bear a financial and emotional burden that can be overwhelming,” the Commission said. Paid services are expensive, even “financially catastrophic” in some cases.
Sperka said that long-term planning and putting in place solutions for potential care needs gives families more options later on when the time comes for help, and 18 percent of Americans – nearly one in five – have provided or are currently providing long-term care for a family member or friend, according to the survey.
"Younger people are more aware today of the effects that long-term care issues could have on their lives, especially if they find themselves in a caregiving role,” he said. “As a result, they're taking a more proactive approach to addressing and planning for their own future needs."
That’s good news for advisors as it’s likely many of their clients are in the midst of grappling with and planning for the burden of long-term care.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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