Long-Term Care Trends and Strategies

According to the most recent iteration of the Retirement Income Literacy Study, a survey conducted by The College every four years to measure older Americans’ financial literacy in 12 knowledge areas related to retirement income, one of the top areas of concern facing Americans as they head toward retirement is paying for long-term care. A number of factors contribute to this, including cuts in Social Security, inflation, and the rising costs of healthcare.

However, despite their concerns related to long term care, many Americans have not reflected it when making their plans for retirement. In fact, a staggering nearly 80% of respondents did not have a plan in place to fund their long-term care needs. Furthermore, 60% of respondents stated they had not even looked into policies or explored their long-term care options. As a reminder, these respondents were between the ages of 50 and 75, meaning that three in five Americans between the ages of 50 and 75 had not even given serious consideration to their long-term care needs in any capacity.

Additionally, the study found that a significant number of Americans severely underestimated their need for long-term care, with only 44% of survey respondents expecting they would need long-term care as they grow older. In reality, Americans need some form of long term care at a rate of 70%. According to James Karthaus, CFP®, CLU®, ChFC® these numbers represent “nothing less than a crisis.”

“This is not an industry statistic. This is a governmental statistic, and it’s actually a little dated. … 70% of folks 65 and older are going to need some type of long term care service. … The average, not the high end, is three years. … 80% of folks don’t have a plan. To me, that’s nothing less than a crisis.”

- James Karthaus, CFP®, CLU®, ChFC®

In this discussion, featured in a recent webcast hosted by The College on their subscription-based learning platform Knowledge Hub+, Kaylee Ranck, PhD, director of research at The College, Karthaus, assistant professor of financial planning at The College, and Joellen Meckley, JD, MHS, ChSNC®, managing director of the American College Center for Special Needs and associate vice president of Centers strategy and operations at The College explored this disconnect between the average American’s expectations and the realistic need for long-term care, reviewed how exactly long-term care is defined, analyzed trends in the industry relating to long-term care, and discussed several real world examples relating to long-term care.

What is Long-Term Care?

In order to better understand the discrepancy between Americans’ expectations and the realities of long-term care, Meckley provided the audience with additional information as to what exactly long-term care is and how to determine if someone is in need of long-term care. According to Meckley, long-term care occurs when an individual needs assistance with two or more activities of daily living. These activities include:

• bathing
• dressing
• eating
• toileting
• transferring / mobility
• continence

Meckley also pointed out long-term care manifests in a number of different forms and the long-term care one person receives can look significantly different than what another individual receives. These different forms of long-term care can include in-home care, hospice care, and therapy, as well as others.

As Karthaus said, these different forms of long-term care are important to consider when choosing a policy that suits the goals of your client. “Make sure, if you do elect a policy, you’re meeting the clients in the space they want to be,” he said. “If they want to go to an assisted living facility, fantastic. Just make sure the policy that you’re paying for or having them pay for, can meet them where they want. If they want to be at home … (with) an unpaid caregiver, they need informal care on their policy.”

Trends in Long-Term Care

Karthaus went on to emphasize the importance of considering trends in long-term care and the history of different policies when electing the one that best suits your client. Karthaus offers comparisons between traditional long-term care insurance, hybrid policies, life insurance policies with long-term care access, employer-sponsored long-term care insurance policies, and others. Each of these has a variety of pros and cons, and he said it’s important to measure these when considering which policy is the best fit.

Meckley explained what happens when clients actually begin needing long-term care, indicating that many people seem to be unprepared for the experience: 

“Only one in three … respondents to our survey knew that it was not true that Medicare would pay for a year of nursing home care. … That’s often shocking to people. So there’s a huge knowledge gap out there. And unfortunately, it’s not just with clients, it’s also within the profession.”

Meckley continued by discussing other issues people face when attempting to use long-term care benefits, warning individuals of the 90-day elimination period in which they are waiting on long-term care benefits to become active, issues brought on by inflation, and the likelihood that an individual in need of long-term care will likely see that need increase over the course of their life, thereby seeing an increased cost they may not be prepared to pay.

Want to learn more about this important topic? Watch Ranck, Karthaus, and Meckley as they discuss the importance of long-term care, different forms of long-term care policies, and the challenges that can arise within families as the need for long-term care arises. Meckley also offers case studies that can be used to apply this knowledge during the discussion, allowing for a more interactive learning experience. You can gain access to this informative discussion on Knowledge Hub+, now available for free to members of The College’s Professional Recertification Program and as an open subscription to others!