Given medical advancements, increasing life spans and the rising prevalence of Alzheimer's, it's safe to assume most of your clients will require long-term care. In fact, according to LongTermCare.gov, 70 percent of seniors currently 65 and older will need some form of long-term care.
When you account for the increasing longevity of baby boomers and the longer average life spans of married individuals, it's almost certain that at least one spouse per client couple will need nursing assistance, assisted living, or a part-time in-home helper at the very least.
Still, quite a few soon-to-be and current retirees don't know what to expect out of long-term care, and perhaps even more have neglected to plan. A recent Nationwide Financial Retirement Institute survey showed that seven in 10 affluent baby boomers mistakenly believe the Affordable Care Act will cover their costs. The reality is that neither the ACA nor Medicare have much to do with covering long-term services.
Overall, it seems few seniors fully understand their long-term care options: the types of services, amenities, funding and insurance plans they can access, as well as the coverage available to those who live far longer than they expect. To help clients make the best decisions possible – ideally before they lose their independence – it's critical that you educate them on the types, qualities and overall costs of services they'll probably need.
Wealth and Income: Important, but Not the Only Concerns
Not surprisingly, income and assets are the main determinants of the amenities retirees can expect in long-term care.
“It's all about their overall financial profile in that moment they need care,” said Lisa Horowitz, New York-based CLU, ChFC and long-term care expert. In most cases, clients' remaining assets, Social Security benefits and other income streams will determine whether they get wind up in lavish retirement communities, minimalist Medicaid-backed facilities or something in between.
That said, there are plenty of insurance policies that will help seniors maintain their living standards late in life, even as many insurers are hiking their premiums or leaving the long-term market. While few policies fully cover around-the-clock in-home help or decades of nursing care, average policyholders don't typically need such services – at least not for long.
“The average claim is still less than three years,” said Andrea Graham, an insurance broker specializing in long-term care. “If you're average, you're not going to outlive your policy.”
As for the types of care clients may require, “It all comes down to their physical and mental needs,” said Patricia Maisano, Professional Geriatric Care Manager and founder of IKOR, a national healthcare advocacy group for seniors. “Their needs will determine whether they need skilled care, assisted living or independent living.”
Ultimately, a consideration of assets, insurance coverage and current and future needs will help clients choose the amenities they can afford not just in their current states, but as their conditions potentially worsen with age.
Facility-Based and In-Home Options
When it comes to facility-based care, options vary wildly based on residents' needs, preferences and finances. Some individuals and couples will first move into independent living communities, which usually feature easy-to-manage, apartment-like homes and minimal help from caretakers. While an early move to such a facility may be the ideal option in terms of quality of life, longevity and lifetime costs, most people who require long-term care begin with assisted living.
Within assisted living facilities, there are usually four levels of care, according to Maisano. Level 1 residents must maintain almost complete independence, while level 4 residents receive daily care and assistance.
“Level 4 in assisted living is still not going to be the level of service or attention you'd get from a skilled nursing setting,” Maisano said. “Level 4 would include someone who comes to your door and leaves your lunch there. In a skilled care setting, it would mean help cutting and eating your food.”
Costs rise accordingly from one level to the next, and most communities require residents to move up once their needs outpace their current level of services. Also, because seniors' conditions tend to deteriorate more quickly at those higher levels of care, Maisano recommends clients move while they're still somewhat independent.
“Generally speaking, I take that highest level of function first because they'll stay at that lower level longer than if they'd moved into something more care-driven,” she said. Overall, clients can cut their long-term care costs and afford more favorable amenities if they move early and commit to longer stays.
Still, what happens when those early movers require higher levels of assisted living or even nursing care – and they run out of money?
“Your ability to get a better amenity is going to depend on whether you've already paid in to their system,” Maisano said.
Another reason to move earlier is that even high-end retirement communities usually reserve their Medicaid beds for residents who have spent money and years at their facilities. In contrast, options are sparse for seniors who don't move until they're on Medicaid.
“I wouldn't want to begin with Medicaid for anything if I could help it,” said Horowitz. “The facilities are low quality, and most doctors just don't want to participate.”
As cost-effective as retirement communities can be for seniors who plan, most still want to remain in their homes. And, as with retirement communities, the in-home services seniors require will largely depend on their physical and mental abilities.
According to Maisano, the four main levels of in-home care are: companion care, simple chores done for a few hours per day; personal care, help with basic movements around the house; nurse's aide care, hands-on help with bathing and other hygiene tasks; and licensed nursing assistance, specialized help for clients with injuries. Live-in caregivers are also available, but because they must be able to sleep and keep some of the daytime to themselves, they're only feasible for patients who don't have high demands.
Finally, while plenty of insurance policies provide equal coverage for facility-based and in-home care, there comes a point where staying at home isn't financially practical for the average retiree.
“If you have someone who only needs assistance for three or hour hours per day, it's much more economical to keep them at home,” said Graham. “But if you're looking at around-the-clock home care, it's probably going to be three times the cost of a nursing facility.”
Maisano likewise noted that while companion care and personal care might not exceed $20 per hour, licensed professionals may cost upwards of $50 per hour, and patients often require their help for long stretches of each day. Because it's so much more economical for staffed nurses to take care of multiple patients at a time, typically only the wealthiest retirees can afford to stay in their homes once they need nursing care.
Planning Is Key
Whatever long-term care services your clients may eventually need, planning is almost always the best option. In fact, saving early may be even more important for clients who won't retire for 20 to 30 years, and who may not need care until far later.
“The baby boomers will probably fine,” said Horowitz, “but after that, people just aren't saving money the way they used to.” Maisano said, noting that, “If people believe that Social Security will be their retirement, they're probably going to be hitting Medicaid almost right away once they need long-term care.”
Combined with the inevitable rise in long-term care costs and insurance premiums, the current lack of savings could spell big problems for future generations of retirees. Fortunately, even the current premium hikes are still percentage-based, and healthy clients can avoid unaffordable increases by signing up early and paying lower rates over longer time spans.