While it is not difficult to convince people of the need to plan for their retirement, developing a strategy for funding senior care is a different story. That’s because most adults don’t know where the money comes from to pay for long-term care, according to a recent Home Instead Senior Care study.
The results of the online survey, conducted by the Boomer Project (www.boomerproject.com) among 166 seniors and 444 adults, revealed that both seniors and adult children would use Social Security and Medicare to pay for senior care. The truth is, neither of these options is a viable funding mechanism for long-term care. The study participants were less likely to identify those sources of funds typically used to pay for senior care such as personal savings and retirement plans.
These findings provide insight into the valuable role that agents can play educating their clients of all ages about the value of planning and paying for long-term care. Bill Comfort, a long-term care insurance specialist, broker and trainer who owns Comfort Assurance Group in St. Louis, is all too familiar with the misconceptions about who will pay for senior care.
“The reality is the best-laid retirement plans will be wiped out by a long-term care event,” Comfort says. “People fail to consider the extra costs associated with a long-term care disability in retirement, and that nothing will pay for the kind of care they want except their own money.”
The idea that Medicare and Social Security will pay for senior care is rooted in the misconception that there must be a government entitlement program that will cover such costs. “Many people do see the government taking care of disabled seniors in nursing homes,” Comfort says. “But it’s not what they think. Medicare only covers short-term acute and rehabilitative costs. When a nursing home is needed, Medicaid — a ‘means tested’ welfare program designed to help the poor of all ages — will pay. But that’s only when a senior has exhausted almost all of his or her own resources. And Medicaid generally pays only for care where a senior least wants to go: A certified nursing home.”
Medicaid not only requires seniors to deplete their assets, but once qualified, they must pay any remaining monthly income, including Social Security or a pension check, to the nursing home. Medicaid only pays the difference between the senior’s remaining income and the nursing home’s monthly charge.
“In one sense, the survey respondents are correct,” Comfort says. “Social Security does pay for care, but not as a specific long-term care benefit. Social Security is a source of retirement income — along with other retirement savings and income — that must be diverted from other lifestyle needs to pay for care expenses. This is especially true when seniors seek to receive care at home and all their regular expenses continue.”
Comfort relates a story about a client who pays for long-term care insurance for her father as a result of an experience with her stepmother. “Her step-mother needed Alzheimer’s care and she qualified immediately for Medicaid. What the family didn’t realize is that they couldn’t choose the nursing home they wanted so she was placed farther away from her home,” Comfort says. “The daughter is paying for long-term care insurance now so that her father has more options if he needs care. Here’s a family like so many that didn’t understand the full financing picture.”
It is imperative that agents talk with their clients about the risks and the consequences to themselves and their families in needing care. “Growing older, which we all hope to do, will create some need for care, and that costs money. Too many agents fail to bring up the subject with their clients. We must have that conversation with clients about getting old and needing care, and how they pay for it,” Comfort says.
More agents and financial advisors also need to discuss the subject of financing long-term care before their clients are ready for that care. Long-term care insurance has become an increasingly popular way to fund long-term care. But a great drawback for many seniors is the high cost if they wait to buy it later in life.
Paul Hogan is co-founder and CEO of Home Instead Senior Care. Home Instead Senior Care is among the nation’s largest providers of at-home care for seniors and has served more than 400,000 clients through a network of 800 franchise offices in the U.S. and 15 other countries. Hogan and his wife, Lori, are co-authors of Stages of Senior Care: Your Step-by-Step Guide to Making the Best Decisions (November 2009/McGraw Hill). For more information, go to www.stagesofseniorcare.com.