by Kevin K. Johnson, Certified Senior Advisor (CSA)®
Here is a fact that should get your attention. The cost of long term care continues to rise at a rate that outpaces inflation!
BACKGROUND — At present, we have almost 12 million Americans in need of long term care services. From Wikipedia, Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods of time. It is common for long-term care to provide custodial and non-skilled care, such as assisting with normal daily tasks like dressing, bathing, and using the bathroom. Increasingly, long-term care involves providing a level of medical care that requires the expertise of skilled practitioners to address the often multiple chronic conditions associated with older populations. Long-term care can be provided at home, in the community, in assisted living facilities or in nursing homes. Long-term care is a commonly focused for senior citizens.
COSTS — Of the many options for long term care, the cost of receiving in-home care continues to be the most cost effective on average; its cost is increasing at a slower rate. This is a positive for seniors because the overwhelmingly want to age-in-place with “in-place” being their home. In light of the fact that the number of Americans over age 65 is projected to double over the next 40 years, continued increases in the cost of care and decreasing public financing options available to cover these costs, long term care is lining up to be one of the most important social issues of the first have of this 21st century.
According to Genworth, nationally, the 2014 median hourly cost for a home care aide from a home care agency is $19.75. Home health aide services have risen, on average, only 1.32% annually over the past 5 years.
The cost to receive care in an assisted living facility is rising at a much faster rate. The median annual cost for care in an assisted living facility is $42,000. This represents an increase of 4.29 percent annually over the past five years. The comparable cost for a private nursing home room is $87,600, which has increased 4.19 percent annually over the past five years.
Here’s the point; costs for long-term care is increasing year after year. Once you reach 65, there is a 70% chance that you will need some form of long term care services. That being a fact, it is only prudent that everyone apply considerable effort to creating a sound financial plan for managing their inevitable future long term care costs.
Let’s talk about the perimeters of a long-term care plan. You need to know that the average long term care claim current is about three years. Now working the math through the three prominent options what the resulting costs.
- In-Home Care via a Home Health Aid — nearly $136,000.
- In an Assisted Living Facility — nearly $143,000 and
- In a private nursing home room —over $260,000.
Now if we apply an inflation rate of just 3%, in 25 years, when many baby boomers will require long term care services, costs for an average length of stay in a private nursing home facility will be about $840,000, a huge expense that most of us will be unable to afford. Keep in mind that few workers have company sponsored time-honored pensions, and that their replacement vehicle, the 401(k) plan and the like, are badly underfunded by their individual owners. Also, most people don’t really realize that the government program, Medicare does not cover long-term care needs. Medicaid, provides a degree of coverage for long-term care, but only after life long savings have need nearly depleted.
WHAT TO DO? — For most Americans, private long term care insurance is one of the most viable and effective approaches to get prepared. But remember, long term care insurance is part of a comprehensive plan that should be developed as one part of your comprehensive retirement financial plan. Strongly consider augmenting your long-term retirement tools with one of several types of long term care insurance products.
Money is not the only issue with regards to long term care planning. It is critically important to remember that your long-term care planning needs to include specific directions and guidance for others in case you become unable to communicate those wishes yourself.
Advanced Directives — All adults can benefit from thinking about and planning for what their healthcare choices would be if they are unable to speak for themselves. These decisions can be written down in an advance directive so that others know what they are. Advance directives come in two main forms:
- A “healthcare power of attorney” (or “proxy” or “agent” or “surrogate”) documents the person you select to be your voice for your healthcare decisions if you cannot speak for yourself.
- A “living will” documents what kinds of medical treatments you would or would not want at the end of life.
- The Ohio Durable Power of Attorney for Health Care lets you name someone, called an agent, to make decisions about your medical care—including decisions about life-sustaining treatment—if you can no longer speak for yourself. The durable power of attorney for health care is especially useful because it appoints someone to speak for you any time you are unable to make your own medical decisions, not only at the end of life. Your durable power of attorney for health care becomes effective when your doctor determines that you have lost the capacity to make informed health care decisions for yourself.
- The Ohio Living Will Declaration is your state’s living will. It lets you state your wishes about health care in the event that you become terminally ill or permanently unconscious and can no longer make your own health care decisions. Your Ohio Declaration becomes effective when your doctor determines that you have lost the capacity to make informed health care decisions for yourself and you are terminally ill or you are permanently unconscious.
- The Organ Donation Enrollment Form allows you to register your organ donation choices with the registry, so that your organ donation wishes will be followed, even if your declaration cannot be found.
These forms do not expressly address mental illness. If you would like to make advance care plans regarding mental illness, you should talk to your physician and an attorney about a durable power of attorney tailored to your needs.
There are other advanced planning vehicles including ‘trusts’ that should be considered however, the basic elements of the advanced planning portfolio are what I’ve covered above. This is important and I urge every adult to proactively address advanced care planning today for the sake or yourselves and your families!
If you already have your Advanced Directives completed, I congratulate you. Just remember, as a matter of practice, to review your advanced planning documents annually. Your decisions and directions are subject to change by you, and you are certainly free to make modifications to your documentation as you feel appropriate. My advance is to use an attorney. Your family, who will be impacted by your advanced directives, is too important to leave to have a misinterpretation cause an unintended outcome.
Like the title of this blog suggest, have a sense of urgency with regards to your long-term care planning.
Thanks to Wikipedia and Genworth