Financial Planners

Long-Term Care Unaware

Financial planners may need to spend more time educating clients on the cost of services for the elderly, a new poll suggests.

January 2, 2002

Most Americans are unaware of the actual costs of long-term care services, which could be undermining financial planners’ ability to communicate the true value to their clients.

When planning for retirement, many people factor in money for travel, entertainment and health care coverage. "They don’t stop and think about the cost of their long-term care," said Elinor Ginzler, manager for independent living and long-term care at the AARP, which sponsored a recent poll. "People don’t want to think about this. It’s even more difficult for them to consider their potential needs for LTC than it is to think about death."

The survey data, gathered from 1,800 telephone interviews of adults 45 and older during July and August of 2001, asked participants what they thought was the cost of a variety of LTC services:

• About 15% of the participants gave a close estimate of the correct cost of nursing homes, while 19% said the answer was based on a guess. (The average monthly cost of nursing home care is $4,654; It can cost as much as $8,000.00.)
• About 27% of the participants gave a close estimate of the correct cost of assisted living, while 32% said the answer was based on a guess. (The estimated median cost for assisted living per month is between $2,000 and $2,500; $4,200.00)
• For in-home visits from a registered nurse, the survey said the mean response was $211 per visit, while the median was $105 per visit. About 47% based the answer on a guess. (The average Medicare reimbursement is $109. The actual cost is closer to $200.00 and varies.)
• For in-home visits from an aide, the survey said the mean response was $131 per visit, while the median response was $78 per visit. About 50% said the answer was based on a guess. (The average Medicare reimbursement is $64. The actual cost is closer to $120.00 and varies.)

*The statistics in green have been added to show the actual statistics for the Pacific Northwest.

The survey also said that about 31% have purchased insurance that covers long-term care expenses either through work, a private policy or by some other means.

Experts said the number is high. Some participants may have limited LTC coverage -- either through an HMO or through Medicare -- where, for example, the patient has a time frame that’s covered, but they are still paying co-pays for the services.

"It may indicate that there’s a little bit more post-acute, but it also may indicate that people are becoming more aware of long-term care," said Barbara Stucki, an independent long-term care consultant in Bend, Ore., about the number of survey participants who have LTC coverage.

For financial planners looking to add long-term care policies to their clients' insurance coverage, she said a critical hook is to start on clients early and be sure they understand that long-term care planning is necessary to protect their accumulated assets. "That is the $64 [million] dollar question. As long as you associate long-term care with disability or health care, you’re probably not going to make a lot of headway," Stucki said. "Retirement planning really has to include long-term care. You’re not just saving for retirement, you’re protecting your retirement."

The topic of long-term care should also be addressed several times (and hopefully decided) before the client reaches retirement age. "The first time that you bring it up, it’s not something on their hit parade. It takes a little bit of explanation as well as the what the costs can be for waiting [to purchase a policy]," said David Bohannon of Consultants Corner in Louisville, Ky.

The client should be approached from a non-threatening point-of-view -- either by discussing in-home care or how a spouse’s finances would be affected. "That opens the door for the other things," said Scott Bordelon of Financial & Investment Management Advisors in Covington, La. "I think people are starting to look at this problem as America grays and are more receptive to talking about it."

The biggest mistakes people make concerning Long Term Care:

• "It will never happen to me" (nobody in a nursing home planned on going to a nursing home).
• Applying via the Internet or direct mail pieces (if you are denied, even if it is due to a mistake on the application, you might never get approved for the rest of your life).
• Waiting until they actually need the coverage before applying for it (by that time, it is usually too late to get approved).

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