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Americans Rely on ‘A Hope and A Prayer’ As They Ponder Long-Term Care Needs
By Chuck Kavitsky, President, Allianz Life Insurance Company of North America
(ARA) - Long-term care is one of those things most people procrastinate about, but no one should. Only those who have had a need for long-term care or know someone who has, truly understand the risks they are taking by not being financially prepared.
A recent independent national survey sponsored by Allianz Life Insurance Company of North America revealed that Middle Income Americans, the largest population segment, could be hardest hit if they don’t plan for the financial impact of long-term care for themselves or family members.
The survey, “Allianz Life Report on American Priorities: Long Term Care Snare,” found that nearly three-fourths (71 percent) of respondents are very or somewhat concerned about needing long-term care in the future. However, less than one-fourth of the respondents (21 percent) have purchased long-term care insurance. This, despite the fact that 68 percent think long-term care insurance is very or somewhat important to the financial security of their family.
It’s clear that although people fear the possibility of needing this type of care and the costs associated with it, they are overwhelmed and would prefer to look the other way and ignore the financial strains they or their family could face if care is needed. Those relying on relatives for their care, must take into consideration the added emotional stress and disruption of employment and family life.
When survey respondents were asked what they would do to prepare for the possibility that they (or their spouse) would need long-term care, common responses included “nothing,” “hope and pray,” “wait for the government to do something,” “start saving money,” and “research information on long-term care needs.”
This signals a potentially ominous crisis, given that one out of five Americans over the age of 50 may need some level of care in the next 12 months, according to Americans for Long-Term Care Security (ALTCS).(1) The type and length of care needed varies and care options carry different price tags, but, should nursing home care be required, the estimated annual cost of nursing home care is $55,000, according to the AARP.(2) Put the two together, and it could spell serious hardships for many families.
Middle Income at Risk
Despite their failure to prepare for the possibility of needing long-term care, most survey respondents understand that they cannot count on government assistance to pay for it. Sixty percent realize that Medicare is not likely to cover the total costs of their care, even if they can’t afford to insure themselves. One-fourth believes Medicare will pay if they can’t.
According to the National Academy of Elder Law Attorneys, more than half of the entire population will need long-term care at some point in their life, (for some only a short period of time).(3) Government programs provide financial assistance, primarily to people with few assets and income, for long-term care.
This means the vast majority of the population -- the Middle Income -- will be responsible for paying for long-term care themselves. They are too well off to qualify for Medicaid assistance, yet paying for it out-of-pocket could mean a severe setback to their families.
What options do Middle Income Americans have to cover the risks of living longer? They can rely on their family to care for them, they can risk depleting their assets to pay for care, or they can protect themselves with long-term care insurance. However, many believe traditional long-term care insurance is too complicated and/or expensive. Respondents gave the following reasons when asked why they didn’t buy the coverage:
Too expensive -- 36 percent
Don’t know enough about it -- 21 percent
Didn’t know why/refused to answer -- 18 percent
Don’t need long term care insurance/waste of money -- 13 percent
Have enough in savings to cover the costs -- 12 percent
Clearly, Middle Income Americans have the most to lose. It won’t take long for many people to see their retirement nest eggs melt away when they’re paying $50,000 a year, out-of-pocket, for nursing home care, or more than $20,000 annually for Assisted Living Facility expenses.(4) People should ask themselves, would they rather pay several thousand dollars a month for long-term care services, or a fraction of that to protect their assets with long-term care insurance?
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