The Importance of Planning for Long Term Care
Monday, July 19, 2010
By Anthony C. Stratidis, CLTC LTCP
The chances of suffering a debilitating disease, illness or chronic condition are far greater than people imagine or want to admit. The longer our life-expectancy, the higher the odds of suffering a condition, disease or accident requiring extended care. Individuals who reach the age of 65 have a 70% likelihood of needing long term care before the end of their lives.
The average home care event spans 3.7 years. However, individuals with cognitive impairments, such as Alzheimer’s, require care for 8.9 years on average. For standard level care, the national cost of services right now is $79,000 annually. These costs can range from $60,000 in Chicago, to $76,000 in Los Angeles, to over $100,000 in Boston, and up to $130,000 in New York.
These costs also are rising dramatically, due to inflation and demand. A reasonable assumption is that a 50-year-old facing an exposure of $9,000 a month in care expenses today will face an exposure of $42,800 per month in care expenses 30 years from now. And the costs of care in assisted living or in-home can be just as great or greater: round the clock home health aid services can cost up to $20,000 per month right now.
Approximately 80% of long-term care giving falls on the shoulders of family members. The cost of the free services family members provide, when calculated at current value paid to professional providers, is in excess of $375 billion. As our population ages, we are left with an increasing gap between the number of persons requiring care and the resources available to provide care. All of this adds up to a heavy financial burden.
The emotional burdens on caregivers also are sizeable. These individuals perform tasks that range from medical and nursing care coordination to assistance with activities of daily living. Caregivers who also work may be responsible for coordinating the long-term care needs of an aging parent while juggling the responsibilities of their jobs, their immediate family and young children. The time and effort devoted to care-giving can negatively impact an employee’s on-the-job attendance and performance, causing the employee to suffer undue stress.
The considerations facing people planning for long-term care include:
Who will be the primary planner, care-giver and day-to-day decision-maker?
How does this point-person secure the expertise to deal with contingencies and changing needs?
How do I balance the needs of the person requiring care with my family and work responsibilities?
The financial and emotional effects born of a family member’s chronic and debilitating illness, disease or condition cannot be underestimated.
Purchasing a long-term care (“LTC”) insurance policy can alleviate much of the financial burden by offering a vehicle for reimbursement of care costs through the insurance benefit. Premium payments are stretched out over a longer period and the distribution is tax free. When such a plan is properly structured, 100% of the premium paid into the policy, less any amounts paid out in benefits, can be paid back by the insurer to the insured’s estate or to a trust.
Compare the cost of the premium payments now to the direct and indirect costs of funding the care through savings and the sale of investments at the time care is needed. The LTC insurance option also alleviates much of the emotional strain by providing peace of mind by easing financial burdens. Do not underestimate the financial and emotional benefits of having a comprehensive LTC plan in place.
Anthony C. Stratidis, Senior Vice President of Marsh Private Client Life Insurance Services, is a nationally recognized authority on long-term care insurance (LTCI) with more than 18 years devoted to providing long term care solutions for high net worth individuals and employer groups. Anthony has served in many capacities, permitting him to observe the industry from diverse perspectives. Anthony serves on the State of Connecticut Long-Term Care Partnership Committee. He also is a member of the American Association for Long-Term Care Insurance (AALTCI) and holds professional designations of Certified in Long Term Care (CLTC) and Long-Term Care Professional (LTCP).