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Turning the Tables to Make Sense of Long-term Care Planning

July 20, 2021

If you are like a lot of financial professionals, you have had many clients say to you “thanks, but no thanks” to helping them plan for their potential long-term care (LTC) expenses. Common responses are “I won’t need it”, “my wife (or daughter) will take care of me”, “we aren’t ready to do LTC planning yet”, and so forth.

In reality, most of the apprehension surrounding LTC planning centers on a few obstacles we can easily break down. Once those obstacles have been handled and a LTC strategy is in place, clients are usually very grateful to have this planning done; and with that comes a stronger relationship with your client and in many cases, appreciation from the adult children.

While there are many hurdles and misconceptions we could discuss, for sake of space I am going to concentrate on just three.

Long-term care is an event…. not a place

Many clients who hear the words “long-term care” immediately visualize a nursing home or some other dreadful situation.  They see long-term care (LTC) as a “place” they would prefer not to be – along with losing control of their life. But in reality, long-term care is an “event”; an event you need to plan for just like any other financial event.

A retirement plan without the backing of LTC planning may not be a complete financial strategy. The unexpected expenses of long-term care could disrupt the best-laid plans for remaining at home while receiving care, continuing the lifestyle of a surviving spouse, and/or legacy planning. Having a long-term care plan in place can help a person or couple maintain more control of their situation.

According to the 2020 Nationwide Retirement Institute® Long-Term Care Survey, 71% of people say they would prefer to receive care at home. Thus, a good way to open the LTC conversation might be, “Mr. and Mrs. Smith, while you are here today reviewing your retirement plan, let’s discuss how to keep you in your home as long as possible should you start to need some help”. From there you can transition to using terms such as “extended care”. If possible, delay using the words “long-term care” until your clients feel comfortable that you are trying to help them put a plan in place for receiving LTC on their terms. At that point, you will be on your way to having a relevant planning conversation.

It is not about risk….. it’s about consequences

Another pitfall financial professionals fall into is using statistics and risk assessments. As referenced in CLTC training, telling a healthy male that “there is a 70% chance that you will need LTC services at some point in your life”, will only result in a response like, “well, I plan to be in the 30%”! If the outcome has any chance of going the way the client wants it to, they will cling to that chance, even if the percentage is slim.

However, discussing the consequences of not having a plan in place is harder to argue against. My mother told me continuously over the years – from the day I became an adult – that she never wanted to move in with me and have me take care of her. She didn’t have to tell me why – I knew why.  My dear grandmother came to live with us when she could no longer live safely on her own. While she was my Dad’s mother, Mom loved Grandma as if she was her very own mother. Yet in taking care of Grandma, she had to make choices at times that she did not like – and she never wanted me to be in that same position.

Ask your clients if they have ever been a caregiver, or helped a parent be a caregiver. Ask them about their experience, what it was like, and the impact caregiving had on their life. Did caregiving impact your job or income? How did it affect time with your own family? What was the physical and emotional impactDid your siblings agree with how care and finances were being handled for your loved one (or was there some dissension)?

Answering such questions will help remind your client of the consequences that can arise when there is no LTC plan in place; and that they don’t want their children to face the same challenges. Family care should be a choice, not a necessity. If it is a choice, there needs to be a solid plan in place – ideally including LTC coverage that can help compensate family members who are subject to significant out-of-pocket expenses or loss of income due to providing care to their loved ones.

Misconceptions of Medicare and Medicaid

Many clients believe Medicare and Medicaid cover LTC expenses and that those programs are available to all. It may help to clarify with your clients how these programs interact with LTC needs.

Does Medicare Cover Long-Term Care?

Despite people’s belief that Medicare covers long-term care, Medicare does not cover “convalescent care”, which is what most continuous long-term care is. Medicare is generally available only to people who will recover.  If you are able to qualify for benefits – and that is not always easy – it will pay for 100% of care for the first 20 days. Starting on day 21, there are up to 80 more days of benefit payments available (for a total of 100 days of coverage), but that is subject to a significant co-pay – $185.50 for 2021.  That’s $14,840 out of pocket! Medicare at best is a band-aid providing free care for 20 days. Medicare is not a solution to long-term care needs.

Does Medicaid Cover Long-Term Care?

This is a welfare program, not available to the general public, and requires the majority of a person’s countable assets to be spent down (in most states down to $2,000) to qualify for coverage. In addition, in many communities, Medicaid benefits will only pay for care in a nursing home. You do not get to go to any facility of your choice, you must go to a place that has a Medicaid bed available. 

The value of long-term care coverage

Having LTC coverage can help people maintain choice, control, and flexibility of their care. It provides a dedicated stream of funds off to the side, ready to go when needed, to help pay LTC expenses – and helps keep a portfolio from being tapped at an inopportune time. This coverage can help preserve assets and income for the surviving spouse. And the adult children won’t have to wonder, worry, or disagree on how to pay for their parent’s care.

Part two of the blog will focus on types of LTC coverage, how to position the various choices with your client’s needs, and how important benefit payment models are in making a policy choice.

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