BY MARCIA ISRAEL
NEVER HAS THERE BEEN a time when issues surrounding Long Term Care have been more relevant or more top of mind in the public. We see the issues COVID-19 has presented with seniors. And we know that most people will get to a stage where they require an ever increasing need for loving care. How can we help our clients prepare for this care in the “autumn’ of their lives?
As insurance and financial professionals, most of us worry about how our clients will fare in retirement. Will they have enough money to hedge Medicare and other healthcare costs? Will they have enough life insurance coverage to leave something to their spouse or heirs? Will they be able to maintain their same standard of living? Most importantly, will they outlive their retirement funds?
These are all critical factors as we advise people to save, plan ahead and look forward to a worry-free retirement. Food for thought: Should advisors discuss more frequently with clients the reasons to purchase long-term care protection, notably as an essential component of every retirement plan?
When talking about long term care insurance (LTCI), other than cost, clients often asked the question, “Why is this coverage so fundamental?” Bear in mind that they need to purchase coverage way before they will use the benefits.
To answer the question of why, our agency consulted with several care specialists who actively find placement or are caring directly for seniors, either in-home, at assisted living, or at board and care homes. Here’s what veteran board and care homes, assisted living, placement, memory care, and home care experts share about the need for long term care insurance.
HOW ARE FAMILIES PAYING FOR CARE? “They literally ‘empty out’ the bank account.” One expert hears this often, “Financially, this is all we have, can you please help us…?”
Caregiving professionals all tell us that only about 3-8% of their clients have long term care insurance and the rest are private pay meaning that the clients must find ways to pay 100% for long term services (custodial care). They report that families with no LTCI are needing to do any or all of the following to pay for care: accelerate pensions, sell the home, find a reverse mortgage (if there is enough equity in the home), ask children/friends/family to pay a portion of the cost and/or deplete savings. This, of course, leaves the spouse or partner with reduced funds and security for their own long term care needs down the road. Those fortunate enough to have funds to pay for care can choose where, when, and who to receive care from; those who are more middle income, and have saved their whole lives for retirement, may see their hard-earned retirement savings exhausted in mere months.
If these specialists in the field are seeing only 3-8% of clients with LTCI, and these clients purchased coverage at least 10-15 years ago (when coverage was more affordable and underwriting much more lenient), we can only imagine as financial experts what a tsunami there will be in 15-20 years from now when so many baby-boomers do not have coverage and will need care. We need to ask NOW:
- Do families have a clear long term care plan in place?
- Have you chosen the place where you want to live?
- Where are the Military Service records?
- Is community living better for my loved one than home-care?
“Many people understand the need for retirement planning, creating trusts/wills, succession plans, etc. but most do not have a transition plan in place for when seniors need care.”
WHAT ARE MY OPTIONS IF MY LOVED ONE HAS ALZHEIMER’S OR DEMENTIA?
Most families do not have a specific plan in place for a long term care. The senior advocates we spoke to indicated that when families come to them seeking care for a loved one, the transition for needing care is often urgent and most times stressful. Families must, all too quickly, begin to sift through a host of options to find placement and pay for the care. The task is exhausting and overwhelming. Children and spouses must suddenly scramble to find any insurance policies (Life/LTCI/Chronic or Critical Care, etc.), consult with attorneys, accountants and/or financial planners to figure out what to do—and how to pay for these services. All of this takes place while simultaneously making important decisions about which caregiving services are most appropriate for the loved one. Having a plan in long term care plan and insurance coverage supports the family, and the loved one who needs care, allowing for a smooth transition from independent living to needing a part-time or full- time caregiver in-home, in assisted living, in a facility, at a board and care, and perhaps a nursing home. Most care begins as part time care with an increased need for services over time. Families who know and have easy access to legal records and documents are better able to make educated decisions about selling assets, utilizing LTCI, mortgaging the house, and accessing funds in pensions and retirement savings.
Many people understand the need for retirement planning, creating trusts/wills, succession plans, etc. but most do not have a transition plan in place for when seniors need care. Where will the funds come from? What needs to be done to secure the funds? Which form of care is best suited emotionally and physically for the loved one? Who will handle the care vs financial costs for the care? LTCI plays an essential role in funding these care solutions.
HOW DOES A LONG TERM CARE HEALTH EVENT AFFECT THE FAMILY?
- The caregiver may be at risk and pass away (as did my mom) before the cared-for loved one.
- Children or the spouse/partner may need to quit work, reduce hours, or suffer professionally.
- Caregiver retirement funds may be drastically reduced.
- What are the costs of human care?
Financial professionals understand the economic impact of care and paying for care, but what is the toll physically and emotionally? The loved one is being cared for, yet how does a long term illness affect the family? In many cases the spouse or partner has a diminished financial future. Medi-Cal may not be an option nor VA benefits. The family is scrambling to take shifts as caregivers. In some instances, the caregiving partner or friend also becomes ill or depressed, or even dies before the impacted loved one (in roughly 30% of cases). LTCI pays for respite care and Adult Day Care—offering family and friends time to refresh and renew.
LTCI TO THE RESCUE
The crucial question for the clients we advise is: What happens down the road when you actually need long term care services?
We all understand that custodial care is generally not covered by health plans, that Medicare may offer very limited help, and that Medi-Cal/Medicaid may require a spend-down of sorts to qualify. Are we, as financial professionals, looking at this from every standpoint when speaking to clients about planning for retirement? Are we discussing LTCI?
For answers, just look to the caregiving professionals who place or provide direct care for seniors. LTCI makes the transition to care easy and affordable. It is a necessary protection, as well as an investment that should be a part of every retirement portfolio.
Thank you to the wonderful caregiving professionals who helped contribute to this article: Ronda Wilkin (Silverado Senior Care- Memory Care); Ferdie Villegas (LivHOME–Home Care); Dina Vetchtein (Shalom Elderly Care–Board & Care); Elizabeth Godlewska (Marble Terrace-Board & Care); Kathleen Hall Goldner, SRES (Pinnacle Estate Properties); Daniel Sagal (Total Senior-Placement & Sr. Care Solutions); Barbara Oberman (Medicare & Sr. Care Advisor).