Planning for Long Term Care

Most Elderly Fail to Plan for the Most Devastating Portion of Their Lives

If we were to ask an older person what his or her most important concerns are we would probably get a variety of different answers. But according to surveys frequently conducted among the elderly, the most likely answers we would receive would include the following three principal concerns or wishes.

• Remaining independent in the home without intervention from others.
• Maintaining good health and receiving adequate health care.
• Having enough money for everyday needs and not outliving assets and income

Although aging seniors are definitely concerned about the need for planning for these issues it is not high on the list of concerns. It is human nature not to worry about an event until it happens. The aging concerns or wishes listed above are not issues that seniors want to deal with at this point in their lives. If they happen - so be it - otherwise worry about things that are more easily dealt with. For example, everyone is concerned about having his house burn down or having an accident or getting an illness or ending up in the hospital and people do plan for these risks and have set money aside or bought insurance or prepared written documents to cover the unexpected.

For the elderly the actual advent of chronic poor health, running out of money or losing independence is probably the most devastating unexpected event that could happen to them. This is because any or all of these events typically remove any level of security an elderly person may have with the three major lifestyle concerns or wishes mentioned above. Typically, they will have to rely on others for their care. This is called long term care. No other late-life event can be as devastating to the lifestyle the elderly are so concerned about maintaining. No wonder many elderly care recipients withdraw, become angry and suffer from severe depression.

Yet very few aging seniors spend money or time to plan for long-term care. It seems a paradox that someone would be more concerned about buying insurance for a home fire when the risk of needing financial or physical or mental support from someone else is 600 times more likely. Or what about the cost of insuring for an auto accident when the risk of needing care is 120 times more likely and is potentially 20 times more expense?

Or why the overwhelming concern to buy Medicare supplement insurance when without it Medicare would still cover most of their health needs after deductibles and co-pays? We're not recommending going without insurance coverage we're simply using it as an example of how people refuse to deal with the issue of their aging years and losing their money, their health or their independence or all of them. Ironically, older people painstakingly scrape together $100-$200 a month to buy Medicare supplement insurance to cover a risk about equal to the yearly premiums of the policy itself. Why not just put the money in a savings account? Or as another example, aging seniors will go without and sacrifice food, recreation and activities in order to hold on to the last few dollars in their savings accounts because of fear of an uncertain future.

No one knows why people beyond age 65 are not more concerned about preparing for long-term care. Perhaps they have seen it in their family or among friends and seen the effect that it has. Because of the unsavory aspect of receiving long-term care, perhaps the elderly prefer to ignore it rather than embrace the need for it. Perhaps they mistakenly think the government will take care of them. Or they are assured that family and friends will provide the care when needed, but don't know how difficult it really is for loved ones to provide that care when the time actually comes. Whatever the case, without proper planning, the need for long-term care can result in the single greatest crisis in an elderly person's life.

This lack of planning will always have an adverse effect on the older person's family. It usually results in great sacrifice or financial cost on the part of the spouse or children. Or for those with no immediate family, long-term care can be a burden to extended family members.

The Current Generation Needs to Plan for Long-Term Care

As if the current lack of planning for long-term care were not a great enough burden on the immediate or extended family, the failure to plan, for the current generation of baby boomers, could be even more devastating on spouse or family in the future. Here is a list of factors that will make long-term care in the future an even more pressing burden than it is today.

• We are living longer. The population segment of the "very old", older than age 85, is the fastest-growing age group in the country. The older the person, the more likely the need for long-term care and the more likely a need for care which lasts not just months but years. Over 50% of the age group over 85 is receiving long-term care.
• The older the person the more likely the risk of onset of dementia. The Alzheimer's Association estimates about 46% of people over the age of 85 have dementia or Alzheimer's
• The number of overweight and obese people in the United States is increasing dramatically. Obesity is a major contributor to disability and poor health in the elderly. Estimates are that the effects of obesity will increase nursing home enrollments by an additional 15% to 20% by the year 2020.
• The ranks of the elderly are growing larger. The population of elderly over 65 will double from about 37 million people today to about 77 million people in 2035, 30 years from now. Based on current estimates of the rate of long term care this means that in 30 years about 17 million elderly Americans will be receiving long term care.
• It is estimated that 6 out of 10 people will need long term care sometime during their lifetime.
• With a large and growing number of single person households there is no spouse and oftentimes no children to provide care. About 40% of the population is single.
• The birthrate is going down, families are getting smaller. The combination of fewer children, the increasing number of single person households and a growing number of elderly will eventually create a situation where there are more people needing care than there are available family caregivers.
• Out of approximately 116 million women in this country who could be employed in the workforce about 60% or 69 million are employed. With women being the traditional caregivers, this means only about 40% of traditional caregivers are at home and able to provide long term care for loved ones without having to juggle a work schedule as well.
• Children are moving far away or the elderly are relocating after retirement and this makes it difficult or impossible to provide the resulting long-distance caregiving.
• The number of elderly as a percent of the population is growing larger putting a burden on the tax base and availability of money for government programs and the availability of younger caregivers. Over the next 50 years the elderly will grow from about 12% of the population to over 20% of the population.
• Medical science is preventing early sudden deaths which often results in a prolonged life with impaired health and a higher potential need for long-term care.
• Government programs are already stretched thin for long-term care services and will experience even greater stress on available funds in the future.
• The government does not seem inclined to provide a national long-term care insurance plan
• There is a worldwide trend, in all major industrial countries, to not deal with the problem of long-term care and very few countries, including the United States, have taken the initiative to adequately address the problem.
• Most healthy people in their 50s and early 60s prefer to ignore this future problem and their lack of planning will further burden public programs in the future.

The failure of the current pre-retirement generation to plan for long-term care will have an even greater future negative impact on our culture and our families than the lack of planning does today.

Government Programs Only Pay for About 16% of Long-Term Care

Government programs such as Medicare, Medicaid and the Veterans Administration will cover the cost of long-term care under certain conditions. Medicare will cover rehabilitation from a hospital stay or limited care at home if there is a skilled (medical) need. The Veterans Administration will cover the cost of nursing home care indefinitely if the veteran is at least 70% service-connected disabled. The VA will also cover other forms of home-based or community-based care if there is a medical need.

Medicaid will cover both medical and non-medical related long-term care but in order to qualify for Medicaid a person has to have less than $2,000 in assets and income that is insufficient to pay the cost of care. In other words a person must be impoverished. Otherwise Medicaid will not pay.

Based on our analysis of yearly, one-on-one care hours, we estimate that about 84% of all long-term care is not covered by government programs. This is primarily family-provided home care to help with activities of daily living, or help with maintaining a home, providing meals and support, or care services providing supervision or companionship or providing transportation and shopping services. Care not covered by the government is also care provided from family out-of-pocket payments in nursing homes and assisted living facilities. Families are also hiring more and more aide services to help with care at home.

Common Excuses People Use to Justify Not Planning for Long-Term Care

Here is a sample of some of the excuses we have heard from people who refuse to plan for long-term care. Some of these objections seem perfectly reasonable and you may wonder why we list them as an excuse not to plan. The answer is, in the light of further analysis, none of these reasons are realistic.

• "I'm in good health, I'm going to live a long time and I won't need it"
• "No one in my family has ever needed it"
• "My family has a history of early deaths and poor health. I'll die first"
• "If that happens just take me out and shoot me"
• "My family has a history of longevity and I won't need it"
• "I'll have a gun under my pillow and that will solve the problem"
• "I'll have my wife call Dr. Kevorkian"
• "Aunt Nellie is 100 years old and she's doing great. Her faculties are like that of a 20 year old." (forgot to mention that Nellie, like most people her age, is in a nursing home)
• "I'm a veteran and the VA will take care of me"
• "Uncle Jim got along just fine with the government paying his care"
• "I can give away my assets and have the government pay for it"
• "We have a trust and all of our assets will go to our family so the government will pay for our care"
• "My CPA has made sure my estate is set up properly and no one can come after that money"
• "I'm not interested in home care or assisted living, just stick me in a nursing home and Medicaid will pay the bill"
• "Long term care insurance is too expensive"
• "If I don't use long-term care insurance I don't get my money back"
• "I'll use my retirement savings since it will happen at the end of my life"
• "I can invest the equivalent of the premiums for long-term care insurance and come out a lot better"
• "I'll just sell my rental apartments and they'll cover the cost"
• "My kids say I don't need to plan they'll take care of me"
• "My kids don't want me to buy long-term care insurance, it's a waste of money, they'll take care of me"
• "My daughter is a nurse I don't have to worry about it"
• "I'll move in with my oldest daughter. I raised my kids it's time for them to take care of me"
• "My father died suddenly of a heart attack and my mother died after only a week in a nursing home. I won't need it because I'll probably go the same way."
• "I'm not worried, when the time comes I'll deal with"
• "I'm too busy right now with other problems I might do something about it in the future"
• "I have to talk with my children to see if they think it's a good idea to plan for this"
• "I have to talk to my financial advisor, I'm not sure this is something I need to be concerned about"
• "My daughter will quit her job to take care of me. I'm sure there is a government program that will pay her for that"
• "This is a decision that takes a lot of commitment. I have to think about it"
• "I'll put some extra money into my retirement savings plan and that should cover it"

People who use these objections to long-term care planning , typically have only a few basic, underlying, real reasons for rejecting the concept.

• They don't think it's a problem, they're convinced it won't happen to them or they don't want to think about it
• They don't think the gravity of the problem warrants their time or attention and they can put it off until some future date
• They truly believe if it happens they will be taken care
• If it's something that requires spending money, it's not a good use of the money for the reasons above

People who do actually embrace planning are very likely to have gone through long-term care with a loved one and see the need for planning. It's also interesting to note that from our experience some people who have seen long-term care in their family still fail to plan. Our experience has been these particular people were never involved directly in the care of a loved one. Another member of the family was probably saddled with the entire load and responsibility. Non-involved members of the family escaped unscathed from the responsibility of care for a loved one and as a result do not see long-term care as a big problem. People who refuse to do planning are more likely to have never experienced it and are prone to deny that long-term care can happen to them.