What is the future of long-term care in the U.S.?

The age wave means more older Americans need long-term care — and that need will only increase.

That was the word from Bryan Langdon, Ash Brokerage’s national spokesperson for long-term care, during the National Association of Insurance and Financial Advisors’ Peak 65 Impact Day.

“People are seeing their parents, their grandparents, their neighbors needing care at an advanced rate,” he said. “Our clients, our friends, our neighbors are coming to us asking, ‘What do we do about long-term care? Do I have a need? Is insurance an option?’ There are many tools out there to help with this, and we must get ready for it.”

The baby boom generation is changing the way society and the industry look at long-term care, Langdon said, and consumers are beginning to ask about LTCi at younger ages.

“It used to be that people ages 65, 70 started asking us about long-term care insurance,” he said. “Now we’re getting questions about it from people in their 50s.”

‘Enormous pressure’ on the care system expected

The baby boomers will “put enormous pressure on the care system, not only because there are so many in that generation but because they are living longer,” Langdon said. If the supply of care in the form of long-term care facilities or home care workers doesn’t accelerate to keep up with demand, the price of receiving care will skyrocket.

Langdon suggested advisors help their clients devise a care funding solution that considers all income streams – not depending only on LTCi to cover care costs.

“Look at where they are in retirement, what income streams they have. Maybe long-term care insurance doesn’t cover 100% of the cost, but you can layer it in with income sources such as Social Security, pension, retirement funds or rental income. Don’t make the insurance cover 100%, but layer it in with a supply of income, SS, pension, retirement funds, rental income.”

Clients who have most of their wealth in qualified funds, such as 401(k) accounts, need their advisor to help them find nontaxable ways to pay for future long-term care, he said.

“There are many tools available for us to pay for long-term care,” he said. One tool is permanent life insurance with an LTC rider. In addition, he said, group LTCi is making a return to the marketplace.

Are partnerships the answer?

Long-term care is a financial risk that will touch most Americans, their families and the people surrounding them. The risk is getting larger and it’s not going away. Strategies to deal with an increasing need for LTC in an aging population were on the agenda during the Employee Benefit Research Institute’s Winter Policy Forum.

“The majority of us will need long-term care,” said Ben Veghte, director of the WA Cares Fund. “It’s not only a prevalent risk, it’s an expensive risk, and that makes it a prime candidate for insurance.”

Veghte said that most LTC planning is “based on an antiquated assumption that women and people of color provide caregiving for free. But it’s also important to recognize that family caregiving is not free.”

Many family caregivers drop out of the workforce to provide care, he said. The result is that those caregivers miss out on years of income as well as years of 401(k) matches and Social Security earnings credits.

Veghte said 11% of people in his state of Washington are family caregivers.

‘Problem will get much worse’

“Most of us don’t have a way to pay for long-term care,” he said. “The problem will get much worse in the coming decade. In our state, the population of those 85 and over will quadruple in the next 10 years.”

In addition, he said, as the population ages, fewer people will be of prime caregiving age, creating a shortage of available care.

WA Cares is the first-of-its-kind state program in the U.S., which provides up to $36,500 in benefits that can be used to pay for expenses, such as residential health assistance, transportation to medical appointments, medical equipment and residential and nursing home care. It’s funded with a 0.58% payroll tax collected by employers. Self-employed individuals can opt into the program as well.

But Veghte admitted WA Cares “is a modest premium for a modest benefit.” He called for a public/private partnership to help the states address long-term care needs and funding.

More public/private partnerships

An actuary also said he believed public/private partnerships are a way to address the long-term care crisis.

Robert Eaton of Milliman pointed to LTC claims stemming from Alzheimer’s disease and other forms of dementia as driving the cost and duration of care.

“Cognitive impairment claims make up 40% of all claims paid by long-term care insurers,” he said.

Medical advancements are enabling doctors to diagnose dementia and Alzheimer’s sooner, he said. “We’re finding that people are living more healthily earlier in life but then have a longer long-term care need,” he said.

Eaton called for insurers to develop a product that would cover the early years of a long-term care claim and then a public program that would kick in as the care need is prolonged.

A three-pronged approach to funding long-term care

A three-pronged approach to funding long-term care was one possibility discussed by Lynn White, president and CEO of CareScout Insurance, a subsidiary of Genworth Financial. CareScout helps older adults and their families navigate the aging journey and find care.

“No one entity can do this alone,” White said of funding care.

“We want to be able to partner so people can have the coverage they need and afford it. We want to make sure the middle market has access to coverage. But we don’t see a partnership on the catastrophic end, we see it more on the front end. A state program to cover the earliest costs of care, private long-term care insurance in the middle and federal catastrophic coverage at the end.”

Difficult to predict

“If there’s one thing we know about long-term care, it’s that it’s difficult to project how care will be received,” Eaton said. “What will be new modes of care and how will people receive care in the future? No one knows, yet this is what we are trying to predict.”

Eaton predicted the private LTCi market “will muddle through … they will figure out the economics of providing care. But we’re not optimistic.”

He said innovation is needed as the LTCi market evolves to serve a growing market.

“That’s what a public/private partnership offers — some way to offset the uncertainty.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].