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When it comes to personal finances, the issue of long-term care insurance is generally a case of a 10-ton chicken that sooner or later will be coming home to roost. I find that many physicians are in denial about the need and cost of this expensive problem. At the age of 50 (or 60 for that matter), the idea of purchasing long-term care (LTC) insurance barely registers in their consciousness. When it finally registers at 70, the purchase of LTC insurance is often rejected as too expensive. The fresh eggs would be nice, but the cost of owning a chicken is unappealing.

But when care becomes necessary — tomorrow, or in 20 or 30 years — feathers fly as the chicken forces its way in and takes residence in your home, often gobbling up financial savings and family well-being in the process. If you’re 70, the cost of an LTC insurance policy today with a solid insurer could be as high as $5,000 per year. If you’re 50, the same coverage costs about $1,500 per year. The cost of care — the 10-ton chicken — ranges from $5,000 to $8,000 per month, depending on the care needed. In 20 years, the monthly costs are likely to be $13,000 to $21,000, and $22,000 to $34,500 in 30 years.

Many are more than willing to forgo this coverage when thinking about the present state of their financial condition and planning for future retirement. Yet they often buy long-term disability and life insurance coverage. I regularly ask CAP Members, “what about buying LTC insurance?” The answers are revealing…

I Won’t Need It

It’s too depressing to think about.” “I won’t ever need it.” “We have lots of family around to help take care of us.” “I can save all the money I would pay for LTC insurance over the next 30 years and pay for the care myself.” “My financial advisor told me it’s too expensive and I don’t need it because I have more than enough money to self-insure.” These are fairly strong statements of denial. Most underestimate the potential need for, and cost of, future care. Today, estimates have suggested that more money is spent on long-term care (both public and private dollars) than on prescription drugs and medical devices combined.

So just because you have $5 million in the bank, do you really think that spending $300,000 or $500,000 on care in 2030 is really a better use of funds than paying an LTC insurance premium of $1,500 or $2,000 per year for the next 20 to 40 years? The major financial issue of course is what will be the cost of care in the future. As mentioned above, the size of this roosting chicken is growing each year. And it isn’t just the formal costs. There are other tangible costs, even when “free” informal care is provided by family members or others. If the care is provided by a family member, there are costs – not just to finances, but also in stress to loved ones, reduced quality of life, and to the health of caregivers.

The costs of informal, unpaid care-giving are considerable. A 1999 study sponsored by the MetLife Mature Market Institute asserted that the unpaid cost of informal eldercare is estimated at $196 billion annually, which is far more than the total cost of formal at-home care and nursing home care combined. Those who provide this unpaid service devote an average of 18 hours a week to the task over 4.5 years.

Approximately 70% of all eldercare is provided by friends and family members, and 1998 data show spouses (24%) are the most typical caregivers, followed by daughters (20%), other females (10%), sons (6%) other males (4%), other caregivers (3%) and siblings (2%). The majority of caregivers report that the time spent providing such care reduces the time they can devote to work, other family members and leisure activities.

The majority of these caregivers are employed, and their careers are negatively impacted by their additional responsibilities at home. The study calculated that the average worker who served as caregiver sacrificed $659,193 in total wealth due to loss in income, lack of career advancement, as well as reductions in social security and pension benefits.

Costs of Informal Care

According to the MetLife sponsored study, caregivers also lose money in another way - many reach into their own pockets to assist with payments for food, transportation, medication and formal home health expenses. A caregiver who assists with out-of-pocket costs for an average of 2-6 years spends a total of $19,525.

These responsibilities take their toll on health as well as finances. Over 75% of caregivers report their duties have impacted their physical health and well-being. Twenty percent of these individuals believe they have serious health problems as a result. The duties present emotional strains as well, with older caregivers having a higher mortality rate than their peers.

These problems are projected to grow in the future as the population ages and decreasing family size places additional burdens on employed caregivers. Private long-term care insurance – especially policies that include informal home health care benefits – ultimately protects both the patient and the caregiver, not to mention our society.

So call me today at 1-800-356-5672 to learn more about specially priced LTC insurance available only from CAPIS. Or email me at gschoenfeld@cap-mpt.com.

Glenn Schoenfeld, CLTC
Vice President
CAPIS (CAP Affiliated Physicians Insurance Services)
1-800-356-5672
gschoenfeld@cap-mpt.com

CAPIS — CAP Affiliated Physicians Insurance Services — is a full service life and health insurance agency that is wholly owned and directed by the Cooperative of American Physicians, Inc.

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