Figure 1 shows the distribution of LTC by duration.
Data from the survey were used to calculate the joint probability of long-term treatment in couples (Figure 2). In eight out of 10 couples (81%), one or both partners will need long-term treatment after reaching a HIPAA level of impairment.
The report highlights a second issue important to financial professionals: The survey’s projections underestimate the true likelihood and cost of a long-term payment. The reason is that this and most similar studies do not account for DTCs that are provided prior to reaching a HIPAA level of disability, which includes:
» Long-term activities due to limitations in instrumental activities of daily living (cooking, housework, laundry, managing finances and medical care, telephone and computer use, shopping and transportation).
» Long-term training due to inability to perform one activity of daily living rather than two or more ADL limitations required by HIPAA criteria.
» Long-term disabilities for some significant disabilities that can be mitigated with special equipment, such as wheelchairs, walkers, handrails and ramps.
How common was LTC at the pre-HIPAA level? An earlier study by the Urban Institute suggested that most DTCs could be provided to people with lower levels of disability who do not meet the threshold for DTC benefits. Estimates are that one in four people (26%) who pay for LTCi and almost three in four (71%) who receive only unpaid long-term care would not meet the benefit threshold on a tax-qualified long-term care insurance policy .
Health and social care professionals have largely abandoned the term “long-term care” because the term is associated with end-of-life care for a severe disability. The preferred designation today is ‘long-term services and supports’, which includes a much wider range of unpaid and paid services that are required as a result of ageing, chronic illness or disability.
» Financial professionals typically equate DTC with advanced disability that meets the benefits criteria of a tax-qualified DTC policy. This approach creates an artificial distinction between LTC that is provided before and after HIPAA criteria are met.
» For customers, DTC is not a “Yes or No” dichotomy that is determined by an arcane government law or an insurer’s benefit criteria. Instead, DTC is seen as a continuum of care that evolves as the disability worsens over time. It begins when care is first needed and expenses are incurred.
» Most long-term treatment may be needed at lower levels of disability, which can exhaust caregivers and deplete pension funds. Some clients will never reach a point where their illness triggers an LTCi benefit, usually because death occurs at an earlier stage of disability.
» Recognizing the need for long-term treatment in earlier stages of disability provides new planning opportunities for financial professionals. The messages are that (1) long-term treatment will be needed by most people and is even more likely for couples, (2) caregiving usually involves both unpaid (family) and paid caregivers, and (3) many, sometimes all, care and costs will be incurred at lower levels of disability. This message should ideally be included in the financial plan, especially for single clients, widows and couples with limited financial means who might spend some of their assets before reaching the LTCi benefit threshold.
This more holistic approach to long-term care planning will reassure clients that financial professionals are concerned about the impact of long-term care across the disability spectrum. Some clients will still have no interest in LTC planning. But simply introducing this topic will often lead to discussions about investments, wealth transfer, financial planning, closer relationships with grown children who will be primary caregivers and potential clients in the future, and product options including life insurance and long-term insurance , annuities and Medicare supplement insurance.