These days, people who live to age 65 can expect to live at least another 20 years. That means many are likely to require some form of assisted caregiving. According to aging experts, the following guidelines describe characteristics of those most likely to need long-term care:
- Age – Risk increases as people get older
- Gender – Women are at higher risk because they tend to live longer than men
- Marital status – Single people are less likely to have family resources and will therefore need to pay for caregivers
- Lifestyle – People who do not eat a healthy diet and exercise are more likely to have debilitating health conditions
- Family history – People with compromised genetics are at higher risk
As for family caregivers, the typical profile has been shifting over the past few years. The following are some interesting new statistics from Genworth Financial, a leader in long-term care insurance.
- Men now comprise nearly half of family caregivers
- The average age of a family caregiver is 47 (age 53 in 2010)
- Only 57 percent of family members who require care are 65 or older (80 percent in 2010)
- 20 percent of long-term care recipients need help as the result of an accident rather than illness (10 percent in 2010)
- Caregivers average 21 hours of assistance a week for a duration of three years
Long-Term Services and Support
Caregiving needs can vary dramatically depending on the recipient’s condition. For the convenience of categorization, the term “long-term services and supports” (LTSS) refers to assistance with daily tasks such as bathing, dressing, preparing meals and household chores. A recent study reported that the average cost for people with high LTSS needs is about $10,000 a year.
How to Pay for Elderly Caregiving
One of the biggest problems in retirement planning is how to pay for long-term caregiving. Today, only 7 percent of the $300 billion the United States spends on long-term support and services is paid for through private insurance. According to the USC Leonard Davis School of Gerontology, about half of the U.S. population will be paying out-of-pocket for LTSS expenses by 2025.
While fees vary based on location and other benefits, the following are national averages for various types of long-term care services.
- Adult Day Health Care: $18,720
- Assisted Living Facility: $48,000
- Homemaker Services: $48,048
- Home Health Aide: $50,336
- Semi-Private Room in a Nursing Home: $89,297
- Private Room in a Nursing Home: $100,375
Regular health insurance covers only acute care, such as rehabilitation after a hospital stay. It is not designed to cover the cost of caregiving over the long haul.
Medicare used to pay for nursing home care only after a hospital stay, limited to 100 days. However, starting in 2019, Medicare Advantage (MA) plans are allowed to offer coverage for certain long-term care services as deemed medically appropriate by a licensed health care provider. Each insurer has the ability to define coverage options. Be aware that this new rule pertains only to MA plans, not original Medicare.
Long-Term Care Insurance
Long-term care insurance (LTCI) is specifically designed to cover caregiving associated with serious impairment over a limited period of time, such as three years. Today, about 40 percent of employers offer some form of long-term care insurance. In most cases, the policy is offered on a voluntary basis in which employees pay the full premium.
- Large employers (500+ employees) generally offer traditional long-term care insurance.
- Small- and medium-sized companies typically offer “multi-life” LTCI packages, which bundle individual long-term care insurance policies for a worker’s spouse and parents, offered at a discount. Note that these policies tend to require stringent medical underwriting.
Another option for tailored long-term caregiving is moving into a Continuing Care Retirement Community (CCRC). This type of community provides a progression of residence and care as a person’s health declines, ranging from an independent house or apartment, to assisted living, to memory care or skilled nursing for life. This type of community is typically rich in amenities, such as a community dining room, entertainment venue, fitness center and wellness programs, plus cultural arts and shopping excursions.
There are about 2,000 CCRCs nationwide, many with waitlists, and they are quite expensive relative to other senior living options. To initially qualify, you usually must be at least 62 and healthy enough to live independently. The entry fee ranges from less than $100,000 to more than $1 million, averaging about $320,000. Residents also pay a monthly fee, which averages $3,266 nationwide and tends to increase by 3 percent to 4 percent each year. Once residents die, their heirs can sell the property to another buyer who meets the entry criteria, and the CCRC may be entitled to part of any home-price appreciation.
Bear in mind that one of the primary reasons to make caregiving expenses a key part of retirement planning is to protect a household’s overall finances. In other words, you don’t want a couple’s entire nest egg used to pay for caregiving expenses of one disabled spouse – with nothing left over for the other spouse to live on.