Human Capital Briefs

Helping Employees Plan for Long-Term Care

July 31, 2019

Business is regularly affected by the long-term care needs of Americans. Many employees are serving as caregivers for others, and there is more pressure on them because they and the people they are caring for have not planned for meeting their needs for assistance. Research indicates that there are huge gaps in long-term care planning.  The need for help, and possibly a lot of help, later in life, has a huge impact on multiple generations of many American families. Society of Actuaries’ research studies show that while many people are aware of the risk, few do advance planning for managing it.  Rather, they choose to deal with long-term care and other risks when they happen. 

The Society of Actuaries’ 2019 publication Financing Long-term Care Needs is a guide to help consumers think about the issues and plan for them. As people age they often need help with a variety of tasks including driving, household tasks, daily finance management,  doctor visits, etc. Some people also need assistance with the activities of daily living (ADLs) including bathing, dressing, eating, etc. The Society of Actuaries guide is suitable for distribution to employees. It does not advocate any specific products or approaches but is designed to help people think through a range of alternatives and their pros and cons. It is helpful to start the conversation for people who will work with an advisor and for setting up questions and options for people who are thinking about the issues.

Some of the key items covered in the guide include:

The costs of long-term care: Most people who need moderate levels of assistance receive it from family or friends.  But when paid help is needed, it is costly. The average annual cost for assisted living is $48,000, a home health aide costs an average of $22/hour, and the national average daily rate for a semi-private room in a nursing home is $245 a day or about $7,500 a month.

Options for paying for long-term care: Private long-term care insurance (LTCI) can be a big help, but most people have not purchased it. They are a variety of other approaches including use of personal savings, home equity, life insurance policies that include chronic illness benefits, and annuity contracts that offer additional income at high ages. Medicaid is often a last resort for those who have spent down their assets.

Basics of various insurance contracts and how to find them: LTCI policies vary in many areas such as what they cover, what conditions trigger eligibility for benefits, and for how long benefits are paid. The guide also provides some things to think about in deciding whether to buy insurance. 

The importance of housing: Some housing combines support with housing. A variety of different housing options have different levels of support built in. Most people prefer to stay in their own homes if they can, and there are options for making this more feasible. 

The guide also includes a list of additional resources.

Employers and employees may be interested in additional research to help them understand long-term care issues better. The Society of Actuaries research report Caregiving for Older Individuals: Perspectives of the Caregiver and the Care Recipient  offers consumer research including findings from the 2017 Risks Survey and various studies on people age 85 and over. This research provides insight into experiences of Americans and shows us how important planning is. Some highlights of the research are:

• Americans often underestimate the amount of long-term care they may need, and they are overly optimistic about having resources to pay for it. They overestimate the costs that Medicare and supplemental insurance will pay. They also underestimate the amount of help they may need and the potential burden this may create for those who will help them.
• Family is often willing to step up to help when care is needed. However, families frequently do not plan for this in advance, and few families have advance discussions about expected help needed and long-term care options.
• Children are generally more involved in helping with tasks than in providing financial support to parents, although many children do provide some financial support. Parents are more likely to provide financial support to adult children than vice versa.
• While parents express concern about not burdening their children, children often provide help when needed. Family support provides an important cushion for many older people. Family help often includes driving, household tasks, daily finances management, doctor visits, etc.  Paid help and/or assisted living or nursing home care are more likely to be needed when people need help with the activities of daily living.

Caregiving is a part of retirement for many Americans, and it can have a significant impact on them. But most people don’t consider the potential that they will be caregivers when they plan for retirement.  Survey respondents say the impact is often greater emotionally than financially. See the report Retirement Experiences of People Age 85 and Over for insights into the situation at high ages, where help is most often needed.  This report offers an overview of several different research projects dealing with high age individuals and caregiving. Results include insights on help needed, how it is secured and the planning for long-term care.