By Mimi Santry
The topic of aging and long-term care is avoided by most people. As an eldercare advisor, I have several clients whose status is listed as “waiting for a crisis” to dive into planning. I understand their hesitancy. Families want to avoid the hard conversations, are unaware of the potential costs of long-term care or don’t want to bear the burden of one more expense. As a result, many folks are woefully unprepared.
When policy experts argue that our country is heading towards a crisis regarding access to care, particularly for the elderly—they are not being dramatic. Only 1 in 3 adults have funds set aside specifically for long-term care and only 4% of Americans hold long-term care insurance policies. While these statistics are grim, I hope they spur individuals to take action NOW and not wait for the crisis.
So what do people need to know?
1. The Odds of Requiring Care are High
Data suggests 70% of individuals over the age of 65 will require long-term care during their lifetime.
This reality has been driven by the longer average lifespan of our population. In the early 1900’s the lifespan was 48 years and now it is nearly 77 years. Many folks are living to their late 90’s. A longer life span is good news, right? Yes and no. A longer life also means more years during which an individual might require care and need to fund related costs.
2. The Cost of Long-Term Custodial Care is Paid Privately, not by Medicare
Long-term care is typically custodial care, which is help doing the things we do for ourselves every day, such as bathing and dressing. The biggest misconception is that health insurance (Medicare/private medical insurance) will cover the costs of long-term care. It doesn’t. Medicare covers costs when we are getting better – hospitalizations, prescriptions, doctor’s visits, and rehabilitation—but it does NOT cover long-term custodial care. Caring for someone’s basic activities of daily living is born privately by the individual and their family. This even applies to disabling diseases such as Parkinson’s and Alzheimer’s.
The exception is for low-income individuals who have exhausted all their resources and qualified for Medicaid. In that situation, the state and federal government will cover their care in a skilled nursing facility. These Medicaid programs are coming under increasing pressure due to the fact that Medicaid reimbursements only cover 82% of the actual costs of long-term costs.
3. Care Costs Can be Significant
Let me share some statistics.
Across the U.S. a 65-year-old couple retiring in 2025 can expect to spend over $315,000 on healthcare through retirement.
Costs in the NY metro area including Fairfield County are significantly higher than the national average.
According to the NY Life Insurance Financial Calculator, average costs in the CT/NY/NJ metro area are:
Homecare for 8 hours/5 days weekly. $74,048 per year
Assisted Living Studio.
$ 94,597 per year
Assisted Living 1-Bedroom $100,747 per year
Skilled Nursing Private Room. $208,776 per year
4. What Can Be Done to Prepare?
If possible, start early with disciplined contributions to a long-term care insurance policy or investment program with guaranteed returns that can protect against these healthcare costs. There are many options to consider. Working with a financial planner or independent insurance consultant (who is not tied to one issuer insurer) is recommended. Long-term care insurance is one of the best vehicles to protect against the potential costs. and The benefits are not taxable and not dependent on market performance. Long-term care premiums could be tax deductible and can be paid with an HSA.
5. Recommendations from my Trusted Network of Eldercare Specialists:
Mike LaMagna, Esquire -Elder Law Attorney
LaMagna McKenna Attorneys at Law
“In my practice, clients often assume that their assets determine their long-term care options, when in reality the real differentiator is whether they have long-term care insurance. When care is being paid for by insurance, families are far more likely to obtain the appropriate level of care without hesitation. When clients are relying solely on their own assets, they tend to limit or delay care. Long-term care insurance is a powerful planning tool because it preserves choice, giving people the ability to decide how, where, and by whom they receive care at a time when so many other options already feel constrained.”
Laurie Sappern Gaugler, CLTC – Independent Long-Term Care Insurance Specialist
Owner of LTCI Insight, LLC.
“If a loved one needs care, it is a crisis for the family. Without a plan to fund the care, it’s worse. Which asset should be liquidated first? What kind of care is best for the situation? Will all family members agree? There are solutions for a plan that can be paid for with pre-tax dollars from retirement savings plans. Some plans have life insurance or annuity benefits if care is never needed. I recommend that families consult with us (or another independent insurance expert) to help understand options and make an educated decision.”
We are hopeful that greater exposure to the eye-opening facts and probabilities regarding long-term care will spur more people to do their planning and take action NOW to equip themselves for this phase of life.
Mimi Santry is a certified senior advisor and owner of Assisted Living Locators of SW Connecticut. She advises clients on matters of care, housing and resources related to aging.
