Long Term Care Planning During Difficult Times

Small Business

COVID-19 among the elderly has dominated headlines. Where will you and your loved ones choose to receive care?

The pandemic has affected many aspects of our lives, but arguably the most devastating impact has been on the elderly, particularly those in nursing homes. News reports of care facilities with large outbreaks and strict lockdowns have prompted many to contemplate where they or their aging relatives would be best off receiving future care. The current situation has also generated more interest in Long Term Care (LTC) insurance, which can provide a choice of care options, including home care.

According to Genworth’s 2020 Cost of Care Survey, costs for nursing homes, assisted living facilities, and home care are higher than most people have planned for and costs continue to rise. In the past year, we’ve seen significant increases in home care and facilities costs as the industry struggles to address the safety needs of a rapidly aging population during this unprecedented health crisis.

The pandemic has also worsened caregiver shortages. Occupancy rates have declined at long term care facilities, with many transitioning to home care that is inherently more labor-intensive and expensive. This shift to home-based care is apt to further worsen the caregiver shortage, which will continue to drive costs up.

The median yearly cost of home care in the United States in 2020 was $54,912 for a home health aide and $53,768 for a homemaker.¹

Planning for Care

According to HHS’s Administration on Aging, someone turning 65 today is nearly 70% likely to need some type of long term care – and 20% will need it for longer than five years. The risk is greater for women than men – with 80% of those turning 65 likely to require care and generally for a longer duration than men.²

Despite these sobering statistics, long term care is often our largest unfunded retirement expense. The American College of Financial Services recently found that only one-third of retirees have any type of plan in place.³ The pandemic has prompted many to acknowledge this gap with Americans now establishing long term care plans at a higher rate than in recent years.⁴

If we have learned anything, it’s the value of staying out of a nursing home. Those who own comprehensive LTC insurance policies may find that their plans cover services from a multitude of providers in various care settings—including their own homes. Those still planning should understand that the future may bring new ways of providing care, so it will be important to have a plan that can adapt to new, emerging types of care by covering costs for care providers in a wide range of locations.

Ownership of LTC insurance has increased by 20% percent, the first significant rise since 2016.⁵

Applying for LTC Insurance

While the pandemic is generating interest in LTC insurance, it’s also making it a bit more complicated to qualify for and purchase coverage.

It’s always been more difficult to qualify for LTC insurance as you age. Now, because older individuals are at a higher risk for COVID-19, insurers are limiting applicants by age, particularly for those who would normally require in-home interviews. Insurers have also placed additional restrictions on those who have been in contact with COVID-19. To ensure that you are fully recovered and back to normal activities, your application may be postponed by three to six months if you have tested positive, been hospitalized or quarantined, or have been identified as a close contact.

The good news is that the shift to all-remote, electronic applications can accelerate the application and purchase process, especially for younger applicants who haven’t had COVID-19. So if you’re young and relatively healthy, now is the time to apply.

Where to Begin

In light of the pandemic and due to the changing nature of long term care options, it’s best to work with an LTC Insurance Specialist who can help you sort through the plans and benefits available based on your age and current health status.

For some, traditional LTC insurance will be the optimal solution. For others, a hybrid insurance policy that combines both LTC benefits and life insurance or an annuity payment may be more appealing. Others may choose to self-fund their plan or may rely on government funding through Medicare. Every situation is somewhat different, but everyone needs a plan.

¹Genworth Cost of Care, Trends and Insights, 2020, https://www.genworth.com/aging-and-you/finances/cost-of-care/cost-of-care-trends-and-insights.html.

²“Covid-19 Reinforces Need For Long-Term Care Planning,” Forbes, September, 2020, https://www.forbes.com/sites/jamiehopkins/2020/09/24/covid-19-reinforces-need-for-long-term-care-planning/?sh=7a3eb4764645

³The American College of Financial Services 2020 Retirement Income Survey, https://www.theamericancollege.edu/about-the-college/media-center/press-releases/2020-retirement-income-literacy-survey

⁴Forbes, September 2020.

⁵2020 Insurance Barometer Study, LIMRA, https://www.limra.com/en/research/research-abstracts-public/2020/2020-insurance-barometer-study/