Long-Term Care
Recently, we worked with a client with an aging mother living in the United States but who has health benefits in a different country. One of the client’s concerns was having to cover a potential health bill for his mother because the family would prefer she seek care in the United States rather than go back to her country to use her government issued health care.
This situation prompted me to reflect on my own family. With aging parents in similar circumstances, I started to consider what my financial obligation would be if either one of my parents faced an acute medical emergency with a steep price tag. My parents are from Peru and live half the time in their ‘home’ country and half the time in Miami. While they benefit from Medicare, they do not have life insurance or long-term care, preferring to believe that ‘the town will come together to care for the elderly’ rather than insuring themselves. I’ve noticed similar reactions to insurance and medical benefits with clients describing them as “evil” or “a necessary evil.” Once clients understand the purpose of insurance based on specific and relevant examples, the conversation takes another turn.
It has been my personal and professional experience that while American families are often financially literate on insurance products, foreign-born families are less aware of their benefits, especially folks from less developed countries. As the patriarch of the family, my father holds his finances and any financial or estate planning very close to the chest. While not wonderful topics to discuss at family reunions, these are nevertheless necessary conversations to have, if only so that I can plan appropriately in case of a situation that creates a significant personal financial burden.
Furthermore, even financially literate folks prefer to de-prioritize long-term care because it evokes one’s real mortality. Ironically, it’s a concept far harder to cope with than even life or disability coverage. After all, the benefit of life or disability coverage often comes into play when a sudden, unlikely tragic event occurs, rather than a much more common degenerative health development. In fact, a recent Advisor Perspectives article states, “the economic costs of aging in the United States are real, and it's hitting the middle class hard. The escalating costs of long-term care, along with the failure of many Americans to save enough for their final years, pose a severe threat to the financial well-being of many seniors. With no long-term health care plan or funding in place, families are left scrambling to navigate a confusing and costly array of solutions, often depleting their wealth in the process.”
In the case of long-term care, the elderly have a steep hill to climb. The financial industry has collectively decided that long-term care coverage is no longer profitable enough as a standalone product. Instead, it has converted the benefit into an ‘add-on rider’ to other financial instruments, such as annuities or permanent life insurance policies.
Often people do not consider long-term care insurance unless they have had experience with a parent or loved one. Indeed, there are so many other types of insurance that have direct and relevant impact on one’s life (car, home, life, disability, etc.) that adding another one is not welcomed. Second, the mere scope and range of possibilities as to what long-term care can cover is daunting, anywhere from a part-time in-home nurse to a full-time 24-hour care facility. This range could span from tens of thousands of dollars to hundreds of thousands a year. Unlike disability or life insurance, which have modeled, projected, and calculated financial consequences, long-term care is far trickier to address. The same article maintains, “according to A Home For Mom, of more than 55.8 million adults in the U.S. aged 65 or older, 1.3 million live in nursing homes, representing 2.3% of the elderly population. An additional 818,800 reside in assisted living facilities. Assisted living centers serve those who do not need skilled nursing care but require assistance with daily tasks like dressing, bathing, and managing medications.”
It has been my experience that the best approach to broaching the topic of long-term care with a family member is not to have them consider a future frail and needy version of themselves. Rather, consider asking them whether they have contemplated unintended consequences of not planning properly, including the financial impact a health event may have on loved ones. While neither approach is exactly ‘fun’ to talk about, the latter at least frames the conversation in terms of that person’s responsibility on their family and therefore may seem more digestible to consider. Only then may you as a family start to plan and prepare emotionally and financially for the potential prospect of proper care for an elderly family member.
Is Long-Term Care Too Expensive? - Articles - Advisor Perspectives
Read the May 2024 Financial Planning Focus:
- “Are You Expecting Too Much from Your Target Date Fund” by Kristan L. Anderson, CFP®, CEBS® »
- “Tax Policy: The Next Political Battle” by Matt Cohen, CFP®, CIMA® »
- "Naming a 401K Beneficiary" by Kristan L. Anderson, CFP®, CEBS® »
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