Brian M. Johnson, MBA, CLTC
It’s no secret that Long-Term Care services such as In-Home Care, Assisted Living, Memory Care and Skilled Nursing can be financially devastating. Depending on the need, these costs can easily surpass $10,000-$15,000 per month. The high cost means that not everyone will be able to get professional care. In those cases, who will provide care and what does that mean for those care providers? Today’s care environment is both a challenge for giving and receiving care. Whether by necessity or preference – care is often provided by loved ones (informal, unlicensed) at home.
According to “Long-Term Care in America: Americans want to age at home” and a 2020 study by AARP, 88 percent of Americans would prefer to receive ongoing living assistance as they stay at home, 70 percent of people who provide care do so out of necessity, and 21 percent of Americans are currently caregivers. As the Baby Boom generation ages, these numbers are only going to increase.
According to “Caregiving in the U.S., AARP, 2020,” 36 percent of caregivers report high emotional stress and more than half of caregivers report financial strain from caregiving. This includes an end or pause to saving for their own future, taking on more debt, using personal savings and paying bills late or sometimes not paying them at all. In a 2018 report by the Harvard Business School, it’s estimated that if a caregiver is of working age, there is a 32 percent chance he or she will have to leave the workforce all together due to their caregiving responsibilities. If a caregiver remains employed, his or her work often suffers as they are typically tired, stressed and not able to fully concentrate on their job.
So what are our solutions? There’s no “silver bullet” here, but there are tools that can help Americans finance their potential need for care so they’re not a burden to those they love.
Medicare and Medicaid
Pros: It’s a government funded program.
Cons: The system is difficult to navigate and getting more restrictive. Medicare generally only covers acute care on a short-term basis (less than 100-days). Medicaid typically pays for care in a nursing home and requires an individual to financially qualify.
Personal Savings / Retirement Assets
Pros: If care is never needed, assets remain intact, creating a legacy for heirs.
Cons: If care is needed younger in life, there are steep penalties for accessing tax-deferred retirement accounts early. This can disrupt retirement plans or greatly impact a spouse’s standard of living if assets are needed to pay for care.
Insurance (Long-Term Care and Hybrid)
Pros: These policies often have robust benefits to pay for Long-Term Care services and will typically last longer than using one’s personal assets.
Cons: There are few companies offering such coverage, premiums are often cost prohibitive for most Americans, premiums in many cases are not guaranteed, and qualifying medically for coverage can be difficult.
Home Healthcare Plans
Pros: These policies are a new innovation in planning and act more of a subscription-based plan like AAA. There’s no medical underwriting, premiums are much more affordable than Long-Term Care insurance and offer subscribers up to a maximum of 10,000 hours of home healthcare.
Cons: These policies only pay for home healthcare. If assisted living or nursing home is needed, these plans do not pay.
So where do you go from here? Many of us have experienced the impacts of care firsthand. Whether it’s seeing the financial cost of care for a family member or witnessing the strain put on a friend caring for a loved one – the care crisis is all around us. The question is: what will we do about it? There are options, but one size does not fit all. To start, call our office and ask for our free planning guide. The telephone number is 518-688-8154.