Few people enjoy thinking about or anticipating the worst-case scenario. Still, as a financial, estate planning or care manager professional, your job is to make sure your clients are prepared. Planning involves two main components with lots of moving parts in between. The two crucial pieces are finances and education.
People must be prepared for any scenario financially, but also know their options along the way. Starting at the end and working your way back is a good strategy for educating your clients and creating the financial cushion they will need for the future. Of course, much depends on how long someone lives and how long they will reside in more expensive care environments. The current lifespan for 2021 in the US is 78.99 years. And as you probably know, more and more people are living to 100 and beyond.
Worst Case Scenario: Nursing Home
There might be some disagreement that this is the worst-case scenario, but it is the most expensive form of care for many people and the least desirable. According to Genworth, the median monthly cost of care for a semi-private room in a nursing home in 2020 was $7,756 a month. Medicaid pays for over 6 out of 10 nursing home residents due to that high cost. Qualifying for Medicaid means that the estate is exhausted. People run out of money.
The alarming information about poor infection control, inadequate care, and surging COVID cases has added to the negative views of long-term nursing home care.
Jane was doing reasonably well, living in her home for many years when she fell and broke several bones. Jane qualified for rehab but could never regain her previous functioning level. Due to the high level of care she needed, nursing home placement was the only option (or so she thought). Jane's home still had a mortgage, and she had to sell her house to finance her nursing home care. Her profit from the sale was $150,000. That amount will pay for about a year and a half of care, with nothing left to leave her children.
Your clients might be surprised to learn that Medicare does not pay one cent towards an assisted living. The US's median monthly cost for assisted living in 2020 was $4,300. But costs can be much higher than that if your client requires additional care. Prices for an assisted living continue to rise.
Assisted living costs rose 6.15%, the highest spike among all care segments. Those costs are expected to go even higher due to staff shortages and COVID costs. Someone could live in assisted living for several months or several years. Older adults should plan for several years' worth of assisted living costs.
Independent Senior Living
For many older adults, independent senior living is a transition from home to somewhat more supportive care. Depending upon the community, services might be robust or lacking altogether. Independent living rates will vary dramatically depending on where someone lives and the type of community they choose. Costs can range between $2,000-$9,000 or more per month, depending upon amenities. Although most people probably plan on staying in independent living for the remainder of their lives, they often need to bring in an in-home caregiver as their needs evolve, or move into assisted living.
Since most older adults say they want to age at home, home care is the best way to make that possible. Hours of care as tailored to individual needs and care goals. It’s worth noting that costs can start to exceed the monthly cost of assisted living, but if someone starts to require more care due to declining health and mobility, their monthly costs in assisted living will go up as well.
The median hourly cost for homemaker services in 2020 was $23.50 an hour. If a client wants to remain in their home, there are ways to finance that care that won't involve moving. One overlooked part of advance planning should be pursuing a healthy lifestyle that involves regular exercise, fall prevention, and a nutritious diet. Home care can help reinforce these healthy habits.
Family caregiving is often where things start. Family caregiving is a time-honored tradition but one that comes with costs. According to AARP, "More than half of family caregivers have to take time off from their main job, reduce hours at work or quit their jobs altogether to accommodate their responsibilities, AARP researchers found. This can mean diminished chances for promotions, less job security, fewer employment benefits, reduced money set aside for their retirements and lower Social Security benefits for themselves when the time comes."
Family caregivers provide about 470 billion dollars' worth of care in the US a year. And getting back into the job market in the current employment environment could be a real challenge. So, even though a family caregiver may think they are saving money by providing hands-on care themselves, they must consider the long-range financial consequences.
Out of Pocket Medical Costs
Traditional Medicare and Medicare Advantage plans don't pay for everything. Far from it. Dental care, hearing aids, and co-pays can add up over time. According to a Kaiser Family Foundation report, the average out of pocket costs, including premiums, were $5,460 a year in 2016. It is prudent to plan for higher costs than that as a cushion.
Future Planning for Today
As elder care professionals, our job is to give our clients options and the price tags associated with those options. Working through resistance and educating our clients will provide them with the confidence to make informed choices and the financial stability to support the lifestyle they want as they age.