They say invincibility is a trait of the young. It’s a mindset that changes gradually with knowledge, education, and wisdom. It’s also something a person gets over as they become less ignorant later in life. But apparently today, many supposedly older and wiser people still believe they are invincible.
Ask any financial planner worth their weight in salt about trying to help prospective clients and current clients with Long-Term Care planning, and the usual reply from a vast majority of them is along these lines: They will either never need any long-term care, or that they will never go into a nursing facility.
The problem with this invincibility mindset (besides being flawed in its most basic assumption), is when one looks at the data that surrounds this issue. Yes, the logic behind this belief of one never going into a nursing facility is most likely spot on, and the statistics support it. However, being right in this case is because of the completely wrong reasons.
The basic question is: Will you need Long-Term Care (LTC) in your future?
The odds are, yes. According to the Department of Health and Human Services, roughly 70% of all Baby Boomers are going to need some form of LTC in retirement, while 25% of that 70% will need to stay in an LTC Facility for longer than 3 years.
If you look at the numbers, there are presently 76 million Baby Boomers according to the US Census. A very large chunk of them will need this type of nursing care in their near future, but how many of them have LTC?
According to Sun Life ‘s “Flying Blind” survey, fewer than 8% of Americans have ever factored any health costs into any financial plan, let alone their own retirement plans. National Public Radio shed more light on this problem in its “Family Matters” radio show back in 2012. No, not the one with Erkel – the real one. NPR reported that “only about 8 million” Americans have LTC coverage out of a population of 313 million at the time of reporting.
Think about it: roughly 53 million people will need some type of LTC in the next 10 to 30 years, and fewer than 8 million of the total population even have it. The problems we have a nation are only going to be compounded later on as this demographic starts to divert the nation’s resources to tend to their care… all due to rationale of “invincibility.”
Mike Padawer, a Long-Term Care planning expert who is the head of Inertia Advisor Support Group and author of What is the Deal With Long-Term Care?, is often heard in his seminars asking the audience, “If you had a 70% chance of hitting the lottery, how many of you would buy a ticket?” The answer, which shouldn’t come as a shock, is that everyone would buy a ticket. So people will happily invest a buck on a scratchy at 70% odds, but won’t invest in their own Long-Term Care at those same percentages.
It should be noted that the notion of invincibility is not the only issue when it comes to planning for LTC. The cost of the insurance alone is most likely the true deterrent of not planning properly, but even that is starting to change.
Traditional LTC insurance, historically, has not only been prohibitively expensive, but it has also been a thorn in peoples’ sides for a while. Due to improper designs by insurance companies that market this type of insurance, premiums have been known to increase on policy holders over the life of the contract.
USA Today reported in 2014 that “The John Hancock Life Insurance Co. asked insurance regulators whether it could increase premiums by, on average, a whopping 45.9% on some 8,600 Long-Term Care insurance policies now in force in Connecticut.” John Hancock is not alone.
According to the same article, “many, if not all, Long-Term Care insurance firms have asked states to approve rate hikes.” For instance, Unum also increased their rates in 2014 on certain types of LTC insurance premiums. Some increases were as much as 90%. Comforting, right?
Luckily, there are other alternatives to help fund this type of cost, and people no longer have just one type of insurance product to turn to. One America, Pacific Life, and Lincoln Financial have all designed various types of insurance products that may be funded to cover this cost. They can be structured with a one-time premium. Or, they can be structured with a series of premiums over a set time period with a guarantee that premiums will never be increased.
As we asked before: Do you really even have a chance at ever going into a Long-Term Care Facility?
The odds are definitely not in your favor. According to the Kaiser Family Foundation, there are roughly (as of 2011), 15,645 Nursing Facilities in the United States. This may seem like a large number, but when you look at the number of beds in these facilities the problem is magnified.
In 2011, there were about 1.66 million beds available in all of the reported nursing care facilities throughout the US, but these facilities had an occupancy rate of roughly 84%.
This means that about 1.38 million of those beds were occupied, which leaves only 280,000 beds available to those who may need care later on.
Granted, over the next 10 to 30 years many of these residents will pass away, and beds will become available. But will there still be enough beds for the projected 13.3 million Boomers who are expected to need at least a three-year stay? Probably not.
Now here is where many people will point to the obvious solution: All that we need to do is build more nursing facilities, and everything will be just fine. But even this solution has warts…
In order to open and maintain a nursing care facility, each facility must be staffed with at least one attending physician who can write prescriptions. Of course, there has to be a nursing staff to treat the residents on a daily basis. And this is also where demographics are catching up to us.
The American Medical Association is on record as reporting that the US is facing a shortage of more than 90,000 physicians throughout the country, along with a projected shortage of more than 800,000 nurses by 2020. This shortage is expected to increase as the bulk of nurses in the US are starting to approach retirement as well.
The Robert Wood Johnson Foundation has stated that “over the next 20 years, the average age of Registered Nurses will increase, and the workforce will plateau as they retire.” The average age of a nurse, according to data from the 2008 National Sample Survey of Registered Nurses that was released in September 2010 by the Federal Division of Nursing, is 47.0 years. We have already seen 6 years pass since the year the survey used for its data!
Ironically, in 1993 the same AMA reported that there were too many medical professionals in the country (yeah, and I’ve also got too much money in my wallet). We, as a nation, responded accordingly. Our medical universities and colleges conveniently capped the number of graduates in both fields. Since then, the number of graduates has stayed level, even though our population has grown by more than 50%.
Well, we’ve made our LTC beds, and now it’s time to sleep in them (see what I did there?). The state of New Mexico is bringing one of the largest providers of nursing care facilities to court, and it’s not for reasons of shoddy care per se, but because New Mexico is “alleging that thin staffing made it numerically impossible to provide good care.”
It continues: “New Mexico’s case includes evidence such as confidential witnesses from the nursing homes’ own staffs alleging that managers recognized that nursing assistants were too overwhelmed to change diapers or help residents shower in a timely fashion. Sometimes there weren’t enough people working to help incapacitated residents eat and drink.”
To quote Dr. David Levy, a gerontologist who runs Caregiver Reality, and is the nation’s thought-leader on caregiving in the home: “People have to realize that good nursing care facilities are still a business that needs to run not only a profit, but also needs to be able to pay staff and cover costs. Who is an administrator going to take, a person who has planned properly and has at least some way to pay for their care, or the other person who has nothing at all?”
“For a vast majority of Americans who retire, the quality care that they are going to need is most likely going to have to be administered at home. There is still going to be an extremely steep learning curve for family members, as well as large costs that go with it too.”
Do you now see the problem with perceived invincibility? And how improper planning for a need that is more than likely going to impact either you or someone you love? This reality cannot be swept under the proverbial rug – there’s a real cost here, even if you or a loved one never set foot in a nursing home. It’s not just the monetary cost for home care, either. As Dr. Levy points out, it is taxing on other family members who may be pressed into service to help you out.
It’s one thing to have ailments that affect us personally as we have a tendency to suffer silently and stoically, but it’s a completely different issue when we helplessly watch those that we love suffer. That’s a mental cost, which could impact us at work or in our general daily lives. Is Dad being taken care of properly?
There’s a monetary cost to family members as well. Think about those business development or networking meetings your son cannot attend because your homecare help has to leave early. He is the backup caregiver. Or, the days your daughter missed at work because your caregiver was a no show.
Long-Term Care and the planning we must do for it are not necessarily enjoyable topics to approach, but are ones that we, as responsible adults (who are no longer under the false belief of invincibility), must begin to address as soon as possible. There needs to be a plan in place for us and for our parents.
We may plan for all the wonderful things that we want to do in our third phase of life like travelling, spending time with family, and enjoying the fruits of our labor, but one thing is a fact of life – health happens. And when health happens, it does not care about your own personal goals and desires. You do not have to go into a nursing home either. But you do need a plan, and competent advisors who understand this subject.