Long-term Care Faces Challenges
The increased need for more long-term care, partially caused by an aging baby boomer population, is accompanied by a predicted shortage of care workers. At the same time, the premiums for long-term care insurance are rising, and one large insurer plans to charge single women more. Click here to view article.
By any measure, the current prospects for long-term care (LTC) are not encouraging. First, the sheer size of the aging baby boomer population will mean a greater need for LTC at the same time the pool of paid caretakers will be shrinking.
Moreover, LTC insurance policies are getting more expensive. Because of the high costs of paying claims, several insurance giants are no longer accepting new customers, and all are increasing premiums. In the face of rising costs of claims, most LTC insurance companies are becoming more cautious about who they insure.
One expert suggests ways to improve the labor shortage, while others offer ideas for lowering the costs of individual LTC insurance coverage.
Aging and Unprepared Population
By 2030 the number of Americans age 65 and older is projected to be about 72 million, or about 19 percent of the total U.S. population (up from over 40 million, or 13 percent, in 2010) (data from Society for Certified Senior Advisors webinar, “Baby Boomers and 65+: The Long Term Care Challenge,” by Robert Semro, a policy analyst for the Bell Policy Center).
By 2050, when the last baby boomers turn 85, the number of Americans age 65 and older is projected to grow to almost 89 million, or about 20 percent of the total U.S. population. At the same time, the number of Americans who need LTC is expected to increase from approximately 12 million today to 27 million in 2050.
Between 2004 and 2008, the number of seniors at risk of outliving their resources increased by nearly 2 million households. More than one out of every three seniors was determined to be economically insecure in 2008.
Many boomers are not realistic about retirement costs and, due to insufficient savings, are not prepared for their own retirements. Working longer may not be enough because many boomers are unaware of the potential cost of LTC and do not save adequately. (See sidebar for LTC costs.)
Shortage of Care Workers
Because the overall labor pool will be smaller in the future, compared to the increase in older people, experts on aging predict a shortage of qualified LTC workers. Today, families often take care of elderly parents, but because of declining fertility rates, fewer adult children will be available to handle that chore (“New Areas of Reform on the Long-term Care Labor Force Crisis,” presented to Society of Certified Senior Advisors by Lisa Rill).
In order to meet the demand for LTC services in the near future, a new pool of qualified workers is needed, Rill states. She believes that LTC workers such as CNAs and home health aides are undervalued and underpaid, partly due to society’s prejudice against the elderly. One solution to attract and keep better workers is to increase pay and benefits, as well as create more opportunity for career advancement. Just as crucial is redesigning the models of care, so clients have a bigger role in their own care. This would create a more efficient setting and would allow workers to become more directly involved in client care.
In 2007, Medicaid covered nearly half of the nation’s nursing home expenses, according to the Congressional Research Service. Because the government is a leading player in LTC, through Medicaid, experts say that the government needs to raise the training requirements for skilled LTC workers as well as work with public and private sectors to find solutions.
Changes in Long-term Care Insurance
In the last two years, many of the big insurance companies, including MetLife and Prudential, have stopped selling new LTC insurance policies. Experts blame declining revenues on insurers’ underestimation of the number filed claims; underpriced policies, particularly for those sold more than a decade ago; and low interest rates over the last four years, which means lower returns on investments made by the insurance companies and significant impact on the reserves needed to pay future claims.
To compensate for these losses, most major insurers are raising their rates for policyholders, requesting average increases of 20 to 28 percent. For those who can’t afford to pay the increase, this means dropping the policy and losing any money already invested.
For females, the news is even worse. Because women outlive men on average by five to seven years and represent almost 80 percent of the population in assisted living facilities, they cost insurance companies more. As a result, Genworth, the nation’s largest LTC insurance provider, plans to increase rates for females by as much as 40 percent for single women applicants. Married women are not as severely impacted.
Also, many insurance companies are now requiring a paramedical exam with fluids, the same exam required for most life insurance and disability income policies. It consists of your medical history, height and weight measurements, blood pressure, pulse and urine and blood specimens.
In the face of these changes, and the fact that LTC insurance is less expensive at a younger age, insurance experts recommend that those who plan on getting LTC insurance should do it sooner rather than later. While that gives the insurance carrier more time set aside reserves for future claims, that also leaves a longer period of time for insurance companies to raise their rates.
Suggestions for Reducing Costs
Most financial experts say the best time to buy LTC insurance is while you are healthy, preferably before your 70s.. But if you’re too late to do that, options exist to reduce the high costs.
Coverage time: The average amount of time spent in a nursing home is three to five years, and the LTC insurance payout generally kicks in after 90 days of facility care. Financially it might make sense to get as much coverage as you can afford for a shorter period of time, say two to three years rather than five.
Hybrid products: Some life insurance policies offer the option of withdrawing up to a certain percentage, typically 2 percent, toward end-of-life care. These policies typically require repositioning more of the applicant’s assets to accomplish the same level of protection that a traditional LTC insurance policy would offer. Hybrid products allow the insured to make withdrawals for LTC expenses without penalties or charges. Similarly, some annuities are offering LTC benefits.
Marriage benefits: Some insurers are offering “shared care” policies that allow a married couple to take out separate but connected plans and transfer the benefits if one of the spouses needs LTC. For example, if the policies provide a four-year benefit period for each spouse, then the couple has a combined benefit of eight years, which either of them can use. Should one spouse die without ever using the policy, the survivor “inherits” the policy and has an eight-year benefit period.
For those who have assets to protect and who can manage the premiums, LTC coverage can be a useful component of a family’s financial planning. If you’re just starting out looking for LTC policies, financial experts recommend finding someone who specializes in LTC planning and is not restricted to representing only one insurance company. An independent representative can shop around because policies’ prices and benefits vary widely, and factors of age, health and where someone lives play an important role.
Sources
“Changes in store for long-term care insurance,” Dec. 2, 2012, Pittsburgh Post-Gazette
“Long-Term Care Insurance Becoming Tougher For Women To Purchase,” Feb. 2013, Forbes
“Navigate a Course for Long-Term Care,” May 2012, Kiplinger
“Studying your long-term care insurance options more important than ever,” May 25, 2013, the Oregonian.
Average Costs for Long-term Care
The U.S. Department of Health and Human Services calculated average costs for U.S. long-term care in 2010:
- $205 per day or $6,235 per month for a semi-private room in a nursing home.
- $229 per day or $6,965 per month for a private room in a nursing home.
- $3,293 per month for care in an assisted living facility (for a one-bedroom unit).
- $21 per hour for a home health aide.
- $19 per hour for homemaker services.
- $67 per day for services in an adult day health care center.
http://www.optimumseniorcare.com/services/alzheimerscare.php