long-term care - · pdf filelong-term care talking points × smart long-term care...

?

Long-Term Care

Talking Points

× Smart long-term care planning has the ability to make or break a retirement plan.

× The long-term landscape is changing quickly.

× Long-term care is a subject that's overwhelming to many clients, who don't know where to begin.

× The "right" answer to the vexing long-term care question is individual-specific, and depends on the

individual's level of wealth, age, desire to leave a bequest, and need for peace of mind, among other

factors.

× Step one in helping clients is making them realize how common and costly care can be, and introducing

them to their options.

× Long-term care has its own unique vocabulary. Understanding that vocabulary is step two in helping

clients make the right decisions for themselves or loved ones.

Christine Benz’s Talking Points September 2017

Contents 1 Talking Points 3 75 Must-Know Statistics About Long- Term Care 9 The Language of Long-Term Care

Long-Term Care | September 2017

of 14

http://www.morningstar.com/company/direct


of 14

75 Must-Know Statistics About Long-Term Care Sobering data on usage, cost, insurance products, and the toll on unpaid caregivers.

In my years of speaking to groups of retirees and pre-retirees, I've learned that there are a handful of

topics that will send an event completely out of my control.

One is the long-term viability of Social Security; I don't go there, but it sometimes comes up as a

question. The other hot-button topic—and one that I do touch on in my talks because it has the

potential to make or break a retirement plan—is long-term care.

People have lots of questions about long-term care: Is the insurance worth it, given how insurers have

been jacking up premiums? If you're going to raid your own coffers to pay for long-term when and if you

need it, how much money do you need to have saved? And people have plenty of experiences to share,

too—horror stories of insurers haggling over claims and foisting premium increases on seniors living on

fixed incomes, as well as more positive tales of parents' long-term care policies that paid for themselves

many times over.

The most frustrating part of long-term care decision-making is that the long-term landscape is changing

so quickly. Given their difficult claims experiences, many insurers are throwing in the towel on this

market altogether. Soaring premiums have also contributed to the confusion about whether the products

are worth it—even if you can find one that's affordable at the outset.

Unfortunately, the "right" answer to the vexing long-term care question is pretty individual-specific, and

depends on the individual's level of wealth, age, desire to leave a bequest, and need for peace of mind,

among other factors.

To help ensure that your decision-making is based on the numbers as much as it possibly can be, I've

compiled 75 statistics related to long-term care.

Usage of Long-Term Care

6.3 million: The number of Americans who have a high long-term care need because they need help with

two or more activities of daily living or are experiencing cognitive decline.

15 million: The number of Americans expected to have a high long-term care need by 2050.

52.3%: The expected percentage of people turning 65 who will have a long-term care need during their

lifetimes.

By Christine Benz Published August 31, 2017


of 14

47.7%: The expected percentage of people turning 65 who will have no long-term care need during their

lifetimes.

46.7%: The expected percentage of men turning 65 who will have a long-term care need during their

lifetimes.

57.5%: The expected percentage of women turning 65 who will have a long-term care need during their

lifetimes.

22%: Percentage of individuals over 65 in the highest income quintile who will have a long-term care

need of two years or longer.

31%: Percentage of individuals over 65 in the lowest income quintile who will have a long-term care

need of two years or longer.

10%: Percentage of Americans over age 65 who have Alzheimer's dementia.

38%: Percentage of Americans over age 85 who have Alzheimer's dementia.

35%: Projected increase in number of people with Alzheimer's dementia between 2017 and 2030.

110%: Projected increase in number of new Alzheimer's cases between 2010 and 2050, barring the

development of a new treatment to prevent or cure Alzheimer's disease.

2 years: Average number of years that individuals age 65 and older will have a high long-term care need

during their lifetimes.

0.88 years: Average duration of nursing-home stay for men.

1.44 years: Average duration of nursing-home stay for women.

22%: Probability of needing more than one year in a nursing home, men.

36%: Probability of needing more than one year in a nursing home, women.

2%: Probability of needing more than five years in a nursing home, men.

7%: Probability of needing more than five years in a nursing home, women.


of 14

Paying for Care

$30 billion: Long-term care expenditures in U.S., 1980.

$225 billion: Long-term care expenditures in U.S., 2015.

57.5%: Percentage of individuals turning 65 between 2015 and 2019 who will spend less than $25,000

on long-term care during their lifetimes.

15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000

on long-term care during their lifetimes.

$217,820: Estimated end-of-life care costs in patient's final five years for individuals without dementia.

$341,651: Estimated end-of-life care costs in patient's final five years for individuals with dementia.

$17,680: Median annual cost for adult day care (five days/week), 2016.

$43,539: Median annual cost for assisted-living facility, 2016.

$82,125: Median annual nursing-home cost, semiprivate room, 2016.

$92,378: Median annual nursing-home cost, private room, 2016.

$164,250: Average annual nursing-home cost, private room, Manhattan, 2016.

$63,875: Average annual nursing-home cost, private room, Monroe, Louisiana, 2016.

$22,887: Median annual income from all sources for individuals who are 65 or older.

$38,515: Median annual income for households headed by people 65 or older.

3.5%: Five-year annual inflation rate in nursing-home costs, private room, 2016.

21.9%: Percentage of long-term care costs that are paid out of pocket, 2013.

13.2%: Percentage of people who receive professional home healthcare who have long-term care

insurance coverage, 2010.

$5,518: Median total household wealth for people who have lived in a nursing home for six months

or more.

$0: Median household wealth for people who have lived in a nursing home for six years or more.


of 14

Caregiving

37 billion hours: The annual amount of long-term care provided by unpaid caregivers, 2013.

$470 billion: The dollar value of long-term care provided by unpaid caregivers, 2013.

$3 trillion: Estimated lost lifetime wages due to unpaid caregiving responsibilities.

83%: Percentage of help provided to older adults that is delivered by friends or family members.

46%: Percentage of all caregivers who provide help to someone with Alzheimer's or dementia.

$230.1 billion: Value of assistance provided by unpaid caregivers to people with Alzheimer's or dementia,

2016.

65%: The percentage of older adults with long-term care needs who rely exclusively on friends and

family members to provide that assistance.

More than 75%: Percentage of caregivers who are women.

63: Average age of caregivers for people who are 65 and older.

70%: The percentage of caregivers who suffered work-related difficulties due to their caregiving duties.

$15,000: The average amount of income that caregivers will lose due to time demands of providing care

to those with Alzheimer's or other dementias.

State and Federal Funding

62.3%: Percentage of long-term care services and supports that are provided through Medicaid.

20%: Percentage of Medicaid funding that went to pay long-term care costs in 2016.

$120,900: Maximum amount of assets that a healthy spouse can retain for the other spouse to be

eligible for long-term care benefits provided by Medicaid, 2017. (Actual amounts vary by state.)

100: Days of care in a skilled nursing facility ("rehab") covered in full or in part by Medicare following a

qualifying hospital stay.


of 14

Long-Term Care Insurance

125: Number of insurers offering standalone long-term care policies, 2000.

Less than 15: Number of insurers offering standalone long-term care policies, 2014.

380,000: Number of individual long-term care insurance policies sold, 1990.

129,000: Number of individual long-term care insurance policies sold, 2014.

72,736: Number of hybrid life/long-term care policies sold to individuals, 2009.

305,068: Number of hybrid life/long-term care policies sold to individuals, 2013.

4.50 million: Number of individuals with long-term care insurance coverage, 2000.

7.25 million: Number of individuals with long-term care insurance coverage, 2014.

$1.98 trillion: Maximum potential benefit of all long-term care policies in force today.

$1.87 billion: Annual claims on long-term care insurance policies, 2000.

$8.73 billion: Annual claims on long-term care insurance policies, 2014.

99%: Percentage of new long-term care policies that cover nursing home and in-home care, 2014.

37%: Percentage of new long-term care policies that cover nursing home and in-home care, 2000.

$2,772: Average annual premium, long-term care policies being sold, 2014.

$1,677: Average annual premium, long-term care policies being sold, 2000.

0.5%: Percentage of all businesses offering long-term care insurance to their employees.

20%: Percentage of businesses with 10 or more employees offering long-term care insurance to their

employees.

$52,000: Amount that a person buying the average long-term care policy at age 60 would have paid in

premiums by age 82.

$547,000: Amount of total benefits available at age 82 for a person who purchased a typical policy at

age 60.


of 14

19.6%: Increase in short-term care insurance sales in 2015 relative to 2014. (Short-term care insurance

policies cover periods of one year or less.)

17%: Percentage of applicants ages 50-59 denied long-term care coverage due to health issues.

45%: Percentage of applicants ages 70-79 denied long-term care insurance due to health issues. K


of 14

The Language of Long-Term Care Navigating the care maze can be overwhelming; understanding the lingo can help.

As I reflect on my parents' final years, a period that included multiple hospital stays, trips to rehab, and

the hiring of in-home caregivers, I realize that my siblings and I were often a step behind with our

responses.

We initially hired in-home caregivers to help for 10 to 20 hours a week when, in hindsight, we should

have had them there every day. We made the difficult decision to move my dad to a long-term care

facility with memory care only after he had taken a few serious falls at home that caused him a lot of

physical discomfort. And so on.

There were a lot of reasons for our slow response times. There was no doubt a healthy amount of

denial—both on my parents' part as well as from me and my siblings—about their decline. My parents

had always expressed a strong preference to remain independent and in their home for as long as

possible. Another factor was that each ramp-up in care came with its own sometimes steep learning

curve. On the fly, we figured out which rebab facilities in our community were the best (and which to

avoid), and the pros and cons of hiring caregivers on our own versus using an agency. Each of those

learning experiences took a little bit of time and brought some angst, too.

Further complicating matters is that long-term and end-of-life care have languages of their own: To

figure out what you're doing, you need understand the difference between rehab and a nursing home,

and how palliative care is different from hospice.

Any long-term care journey, whether it's your own or that of someone you love, is arduous in its own

way. To aid a tiny bit in the process, I've compiled a list of some of the key terminology related to long-

term care.

Types of Care

"Rehab": A generic name for rehabilitation therapy to help patients recover from a serious illness, injury,

or surgery. Medicare covers, in full, the first 20 days of rehab care in a qualified facility following a

qualifying hospital stay (defined as three days in a row in the hospital as an inpatient). For days 21-100

(again, following release from a qualifying hospital stay), you must pay a copayment (often covered by a

supplemental health-insurance policy) while Medicare covers the remainder of the cost. For days 101

and beyond, Medicare does not cover the costs of rehab care. Patients receive rehab therapy in two

main settings: acute inpatient rehabilitation facilities or skilled nursing facilities.

By Christine Benz Published August 20, 2017


of 14

Acute Inpatient Rehabilitation Facilities: These facilities deliver the most intensive type of rehab, and

are usually only recommended for patients who need some type of specialized care that cannot be

adequately provided in a skilled nursing facility. Because care in an IRF is more costly than in a skilled

nursing facility, the requirements for admittance are more stringent.

Activities of Daily Living: Basic activities that are used to measure a disabled or elderly individual's level

of functioning. The key ADLs are bathing, dressing, eating, ambulating/transferring (moving from place

to place, or from standing position to chair), grooming, and toileting. Activities of daily living are metrics

used within the healthcare system, but families can also think about them when calibrating how much

care their loved ones need.

Instrumental Activities of Daily Living: More complex self-care tasks, including shopping and meal prep,

navigating transportation systems, and personal financial management. Slips in IADLs are usually the

first signals that an elderly parent or loved one needs more help.

Skilled Nursing Facility (sometimes called a SNF or "Sniff"): A type of facility that provides skilled

nursing care, usually medical care and/or rehabilitation services. Such rehab care is covered, in whole or

in part, by Medicare for up to 100 days. Some skilled nursing facilities do double-duty, providing short-

term rehab for patients who have had a qualifying hospital stay while also serving as long-term

residential facilities.

Nursing Home: A facility that helps individuals with the activities of daily living, including eating,

bathing, and getting dressed. Nursing homes are also likely to coordinate and/or provide medical care

for individuals who need it, but their central focus is to help residents with their daily lives. In contrast to

care provided in a skilled nursing facility to people who have had a qualifying hospital stay, nursing-

home care (sometimes called "custodial care") is not covered by Medicare. Instead, costs are covered

out of pocket, by long-term care insurance (for those who have such policies), or Medicaid for individuals

with limited assets.

Assisted Living Facility: A type of facility geared toward people who need assistance with ADLs and

IADLs but who do not need the type of extensive care provided in a nursing home. Most assisted living

facilities, like nursing homes, help patients coordinate medical care, but providing medical care to sick

individuals is not the central focus. Many ALFs now have locked "memory care" units geared toward

people with Alzheimer's disease or dementia. As with nursing homes, stays in ALFs are not covered by

Medicare; instead, such care is covered out of pocket, by long-term care insurance (for those who have

it), or Medicaid.

Independent Living Facility: A type of facility geared toward individuals who can live independently and

do not need assistance with activities of daily living, but want access to assistance to certain services

such as meals and transportation. As with assisted living facilities, stays in independent living facilities

are not covered by Medicare.


of 14

Continuous Care Retirement Community: A type of community geared toward providing a gradation of

care to older adults—from independent living to assisted living to nursing-home care. The goal of the

CCRC is to help older individuals reside in the same community for the remainder of their lives. Such

communities tend to be the most costly of all elder-care options, often requiring an upfront sum as well

as monthly charges that will vary depending on the level of care the individual is receiving. As with

nursing homes and assisted living facilities, most of the care provided within CCRCs is not covered by

Medicare, unless it's medical care or skilled nursing care that is normally covered by Medicare (see

"Skilled Nursing Facility," above).

Custodial Care: Nonmedical care provided to assist older adults with the activities of daily living. As a

rule, custodial care alone is not covered by Medicare; instead, such costs must be covered out of pocket

with long-term care insurance, or by Medicaid for eligible individuals.

Adult Day Services: Services, including social activities and assistance with activities of daily living,

provided during the day to individuals who otherwise reside at home. Approximately half of the

individuals who take part in adult day services have some form of dementia, according to the National

Adult Day Services Association; thus, adult day services frequently focus on cognitive stimulation and

memory training. Medicare may cover adult day services in certain limited instances, but generally does

not.

Palliative Care: Care geared toward providing pain relief and emotional support to individuals with

serious illnesses. In contrast to hospice care, which is for terminally ill patients, palliative care can be

provided to individuals undergoing curative treatment. Medicare Part B may cover some of the

prescriptions and treatments offered under the umbrella of palliative care.

Hospice Care: Care provided to individuals at the end of their lives; the focus is on keeping the patient

comfortable rather than extending life. Such care may be provided at home, in the hospital, or in a

skilled nursing facility. Hospice care is covered by Medicare if your doctor and the hospice director

certify that you're terminally ill and have less than six months to live. To be covered by Medicare,

hospice care cannot be delivered in conjunction with any curative treatment.

Insurance

Long-Term Care Insurance: Covers long-term care, including custodial/personal care not covered by

Medicare. Depending on the policy, the type of care covered may be delivered in a facility, at home, or

through adult day-care services. Owing to insurers' negative claims experiences (people who have

purchased the policies tend to use them and don't let them lapse), many insured individuals have

confronted huge premium spikes in recent years; other insurers have gotten out of the long-term care

business altogether.

Hybrid Life Long-Term Care Insurance: A life insurance product that includes a long-term care rider. If

the individual required long-term care during his or her lifetime, the cash value of the life insurance

https://www.nadsa.org/consumers/overview-and-facts/

https://www.nadsa.org/consumers/overview-and-facts/


of 14

policy would be reduced accordingly. In addition to the attraction of providing a death benefit, the

policies also may be subject to less-stringent health screening than pure long-term care policies. Yet the

policies can also be complex, make it difficult to comparison-shop; purchasers can also face

opportunity costs.

Hybrid Annuity Long-Term Care Insurance: An annuity that includes a rider to provide a higher level of

monthly income if long-term care is needed. When long-term care coverage is needed, the value of the

benefit is subtracted from the value of the annuity. This article takes a closer look at both hybrid annuity

and life insurance/long-term care hybrids.

Short-Term Care Insurance: Structured much like long-term care insurance but covering care for one

year or less.

Elimination Period: Similar to a deductible for other types of insurance, this is the amount of time during

which one must pay long-term care costs out of pocket before insurance kicks in. The longer the

elimination period, the lower the premiums will be.

Benefit Triggers: Triggers used by insurers to determine whether a long-term care policy will begin

paying benefits. These triggers typically depend on the individual's ability to complete a certain number

of activities of daily living.

Medicaid Eligibility

Institutionalized Spouse: A spouse who has moved into a nursing home or other long-term care setting.

Community Spouse: A healthy spouse who remains in the community even after the other spouse has

moved into a nursing home and requires Medicaid benefits.

Exempt (or Noncountable) Assets: Assets that can be owned by the institutionalized person without

affecting Medicaid eligibility. Specific parameters depend on the state where you live, but exempt assets

typically include $2,000 in cash, a vehicle, personal belongings, and household goods. In most states, a

primary residence is also considered an exempt asset, even if an individual ends up moving into a

nursing home, so long as a spouse or child lives there. The individual's equity in the home cannot exceed

certain limits; for 2017, it's $560,000 in most states. Moreover, the state can attempt to recover any

money paid out through Medicaid when the owner dies and the home is sold.

Countable Assets: Assets that are counted when determining Medicaid eligibility. The specific

parameters depend on the state in which you reside, but countable assets usually include checking and

savings accounts, retirement-plan assets, and additional vehicles (in addition to the one vehicle that is

considered exempt).

http://news.morningstar.com/articlenet/article.aspx?id=663560


of 14

Community Spouse Resource Allowance: The amount of assets that the community (in other words,

healthy) spouse can retain, even as the institutionalized spouse qualifies for Medicaid. Those assets

typically include a house, a car, and financial assets equal to one half of the couple's assets, subject to

minimum and maximum thresholds. (The maximum allowable figure is $120,900 in 2017.)

Lookback Period: The five-year period prior to an individual's application for Medicaid benefits. If assets

were transferred to children or any other individuals during this five-year period, it will trigger a period of

ineligibility for Medicaid benefits. The length of the penalty period is calculated by dividing the amount

of the transfer by the average monthly nursing-home costs in the region or state where the individual

resides. The goal of this provision is to keep otherwise-wealthy individuals from transferring assets to

qualify for long-term care coverage under Medicaid. K


of 14

About Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe,

Australia, and Asia. The company offers an extensive line of products and services for individual

investors, financial advisors, asset managers, and retirement plan providers and sponsors.

www.morningstar.com

?

22 West Washington Street

Chicago, IL 60602 USA

©2017 Morningstar. All Rights Reserved. Christine Benz's Talking Points is produced and offered by Morningstar, Inc., which is not

registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization

(“NRSRO”). Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original

distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are

provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be

correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except

as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting

from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary

property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent

of Morningstar. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

long-term care - · pdf filelong-term care talking points × smart long-term care...

Documents