‘Survey Says’ … Show Me Long-Term Care Planning!

Martin Levy of CorpStrat Inc explains why having necessary conversations about long-term health care helps avoid family feuds

To reference the Family Feud game show, there are many varying opinions about how to address the impact of aging within families.

Americans are living longer. As more and more Americans continue to have personal experiences with loved ones needing care or actually become a relative’s caregiver, the need to have a prudent plan for long-term health care is becoming increasingly apparent.

Consumers and advisors across the nation have varying perspectives on this issue, and while no one plan or financial strategy is right for all, there is consistent opinion that a need for people to consider healthcare costs associated with aging and cognitive impairment is critical, especially as retirement nears.

[To read more of Martin Levy’s thought leadership click here]

Americans downplay the risk of needing care; it’s part of the culture that is driven by consumption of fast food, sodas, and other calories. Given the scope of the epidemic of obesity, heart disease, and diabetes, and the impact of smoking as a contributing cause of premature death, it’s ironic that more focus isn’t placed on this issue.

It’s also ironic because 74% of Americans believe that “living a healthy lifestyle is the answer”but living healthfully may simply increase longevity and still leaves us vulnerable to diseases associated with the natural process of aging.

A lot of momentum is being given to research, medication, and antiaging therapies, all of which will most certainly extend average life spans across the globe. But will people have the dollars they need to pay for health care when it’s needed?

Consumers far underestimate the dollars needed just for retirement, and the retirement savings rate is at an all-time low. Beyond that, most never factor in the potential costs for long-term care. Those costs are staggering: The national hourly rate for at-home care is $23 per hour, exceeded by the staggering costs for a private nursing stay in a nursing home at a whopping $103,000 per year. And these costs will only continue to rise as Baby Boomers begin to flood the system.

There is little doubt that the aging U.S. population may require legislation and expansion of social welfare programs (such as Medicaid) to solve the problem of the large masses of the U.S. population requiring care without the resources to pay for that care.

Consumers far underestimate the dollars needed just for retirement, and the retirement savings rate is at an all-time low.  Beyond that, most never factor in the potential costs for long-term care. Those costs are staggering.

The Importance of Having ‘the Conversation’

Only 14% of Americans have discussed planning for care or talked with an advisor about how to plan for care. That’s surprising, given that 72% worry that they would not be able to provide adequate care if someone in their family needed it.

More than half of Americans say having a spouse provide their care is their plan, yet very few spouses signed up to do diaper changes, nor could most adequately care for an aging or sick spouse, given their own possible health concerns. That burden then falls upon the children—61% of whom say they don’t want to be someone’s caregiver—nor is that option even practical with today’s dual-income lifestyles.

The Role of Insurance

Given the uncertainties of the staggering costs of care and the strong sense that finances may not adequately pay for living expenses plus health care, why isn’t long-term care insurance more widely purchased or sold?

The answer is simple: scale. Because of the strong likelihood of someone going “on claim” (2 out of 3 Americans will need some type of long-term health care for at least 90 days during their later years), there is a permanency to this product that decreases the likelihood of the lapse of policies—the event is a near certainty!

Unlike life insurance, where people may only need insurance while building their assets or when children are dependent, the potential need for long-term care never ends, so policies seldom lapse. When certainty and actuaries collide, pricing risk requires massive scale to overcome loss due to risk—something insurance companies simply have not been able to overcome.

Yet, if transfer of risk is likely the only way that many nonindependently wealthy people can solve this problem, then how can people address it?

Enter Asset-Based Long-Term Care

The insurance industry has figured out a really great solution: asset-based long-term care plans. With these types of plans, clients use highly specialized life insurance policies that have IRS-approved regulations, (those associated with a life insurance living benefit), to build a hybrid’ product that allows people to position assets inside a life insurance chassis to gain long-term health care.

Think of this asset transfer as moving money from one pocket to the other, with the second pocket guaranteeing you can always return the money to the original pocket, but the dollars placed in pocket B are bigger than in pocket A. This product guarantees that, no matter what, you never lose! Here’s how it works:

Position assets in a specially designed contract:
Quit or things change: Get all (or most) of your money back.
Never use care: Get a tax-free death benefit multiple to heirs.
Need care: Your money gets leveraged up in value by six to eight times, rivaling any income you had to forego to position the money.

This is a comprehensive plan to address the financial challenges of healthcare, so spouses and kids don’t have to liquidate assets at the wrong time, never have to struggle between the need for care and the desire to preserve assets, and assure legacies and lifestyles when significant dollars are required for health care. Ask your financial advisor for information on asset-based long-term care.

What’s All the Fuss about Long-Term Health Care?

Longer-term care planning is just about creating a meaningful, loving and respectful way to exit, the way we came in, with the same thoughtful love and attention to our health care and well-being.

While lots of statistics point in the same direction—ultimately the choice is simple—are you going to have a conversation about the most important things with the most important people about the people you most care about?

[For more on CorpStrat’s approach to Life & Health click here]