The Consequences of Living Longer



Long-term care is a continuum of care services and housing that you will need later in life. Think you won't live a long life? Think back 25 years ago. If you had cancer or a stroke, you simply died. Few ever heard of Alzheimer's. Today, it is the leading cause for long-term care services. The longer you live, the more likely you are to need care. The question is not who will take care of you, because your family will most often, but rather what will that care do to your family and finances.

Long-Term Care is Usually Custodial Care

Long-term care is defined as needing assistance with your activities of daily living (toileting, bathing, dressing, eating, transferring from one point to another, and continence). It also includes cognitive impairment so severe that the individual needs constant supervision. If you need custodial care, chances are it will be delivered in the community, not in a nursing home. Many of you have heard compelling statistics from The New England Journal of Medicine stating that 43% of those over age 65 will need nursing home care. What the article actually said is that that number may spend some time in a facility. The fact is, few end their days in one. Every study conducted finds that care is overwhelmingly provided at home. The key question, of course, is who is going to pay for it? Who Covers the Cost?

Medicare & VA

Medicare, the primary health care program for retirees pays only for skilled or rehabilitative care, not custodial care in any venue. Medicaid, a federal and state program for financially needy individuals will pay for custodial care, but primarily in nursing homes. Funding for home care and assisted living is very limited and based on availability of funds. Veterans believe that the VA will pay for home care, adult day care, or assisted living. As with Medicaid, funding is limited and generally based on service-related disability. In fact, the federal government has as much said this to veterans by encouraging them to purchase long-term care insurance through the new Federal Long-Term Care Insurance program. The result is that consumers are forced to pay privately for their care. Unfortunately, the best thought-out retirement plan rarely takes into consideration living a long life. Put another way, those assets and income have been allocated to pay for retirement, not for the consequences of living a long life. This results in the need to invade principal and divert income. As a result, one of a seniors' greatest fear, outliving their assets, literally may come true.

The Role of Long-Term Care Insurance

The use of long-term care insurance thus becomes an important part of planning for disability caused by living a long life. The product has two roles: helping keep families together and allowing your retirement portfolio to execute for the purpose for which it was intended, namely retirement. From a family perspective, who will provide your care? Like it or not, children will play a key role. Long-term care insurance (LTCI) doesn't replace the need for family involvement in providing care but rather builds on it. It pays professionals to assist the person with the toughest tasks such as toileting, bathing, feeding and continence. This, in turn, allows the family to provide care better and longer at home. That leads to a critical question: have YOU planned for the consequences of living a long life? From a financial point of view, LTCI allows your retirement plan to stay intact. That is particularly important given the recent steep decline in portfolio value. The product, in effect, protects the balance of your account value. LTCI also protects income. Although you may qualify for Medicaid to pay for nursing home costs by transferring assets, your income (pension, social security, IRA and or 401k payout) cannot be protected. When buying this insurance, look for a long-term care specialist. Consider their training, educational credentials, and commitment to help solve your long-term care needs. The key is whether they talk first about a plan or a product. If they are interested in the plan, you are dealing with a professional. If they focus first on product and price, consider getting another opinion.