Dr. Martin Luber says young athletes are more at risk today because they tend to play multiple sports throughout the year without a break.

Most people call John Gilfoil to purchase long-term-care insurance when they need the care themselves or when they see friends losing their assets because of the cost of such services.

“But by that time, it’s too late,” said Gilfoil, financial advisor for the Springfield Group Northwestern Mutual Financial Network.

The insurance pays for help, when deemed necessary by a physician, to perform tasks of daily living, such as getting dressed, walking, or bathing. And although the prospect of entering a nursing home or losing one’s independence is something people don’t want to think about, failure to create a plan before they are denied coverage due to advanced age or health issues can result in dire financial, lifestyle, and emotional consequences.

“Statistics show that more than 50{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of people 65 and older will need some sort of long-term care; if a husband and wife are 65 and older, one will live into their 90s,” said Gerald Nannen, president of Senior Financial Advisors Inc. in East Longmeadow, as he cited statistics from a variety of studies. “People need to address the alternatives, but most ignore the issue or say it’s too expensive, and that’s the worst thing they can do.”

A study by the U.S. Department of Health and Human Services shows that people who reach the age of 65 have a 40{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} chance of entering a nursing home, and about 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} will stay there five years or more.

And Tara Reynolds says research conducted by MassMutual solidifies the need to plan ahead. “The fact that people are living longer, but not necessarily healthier, means that many will require some sort of assistance,” said the corporate vice president of Consumer and Product Marketing in MassMutual’s Life Company Marketing. “Right now, 65 million people in the U.S. who are over age 65 need care, and that number is projected to grow to 21 million by 2040.

“There is also a real paradox,” she continued. “One in four Americans is caring for an aging parent by helping them with the activities of daily living. But three in four say they don’t want that for their children.”

However, if a plan is not put into place, the scenario is likely to occur because the cost of long-term-care is prohibitive. “The national average cost of a nursing home with a private room is $87,000, and in Western Mass. the cost for a private room is $350 a day ($127,750 annually), while the cost of a home health aide is $21 per hour,” Reynolds said.

Although many people assume Medicare or Medicaid will pick up the cost, that only happens if the person is indigent or has given away their home and all of their assets at least five years before they need help.

“People have to liquidate their CDs and all of their other accounts, which is what causes the crisis,” Reynolds said, adding that the problem is multi-faceted, since research shows that 63{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of people between the ages of 45 and 54 have less than $50,000 saved for retirement.

“People talk about long-term care as if it exists on its own or as if it’s the only threat or concern that can eat into their retirement,” she explained. “But there is a huge context and overlay, with college funding, retirement savings, and many other things that compete for dollars at the same time.”

Available Options

Long-term-care benefits kick in when a doctor says a person needs help with two or more activities of daily living. Gilfoil said these include walking, eating, dressing, using the bathroom, or bathing. The checks are paid each month directly to the policy holder, who must use the money to pay for care at home or in a facility of their choosing.

Companies that provide this insurance for their employees get a tax deduction, and benefits paid to individuals are also tax-free. The cost typically ranges from about $1,000 to $8,000 annually, and most companies offer three-, six-, and 20-year plans in varying amounts.

Experts agree that people should seek advice from a financial advisor to determine what is best for them. However, Gilfoil said a good time to buy a policy is when someone is between the ages of 50 and 60.

“If you want to stay in your own home and maintain your independence, it makes sense to have long-term-care insurance as opposed to using your assets to pay for it,” he explained, adding that, if a person who lives in Massachusetts has a minimal amount of long-term-care coverage, the government will not take their home if they run out of money. This makes a six-year policy appealing because it gives people time to move or transfer their assets if they require help.

New options have also become available in the past five years in the form of annuity and life-insurance policies that offer a single-deposit payment with long-term-care benefits. Nannen believes they can be superior to traditional long-term-care insurance, and directs clients who have at least $100,000 in funds they won’t need to maintain their lifestyle toward these single-pay plans as opposed to pay-as-you-go plans.

These policies and annuities can be bought for less, however. “The benefit amounts for these plans are based on the age of the purchaser and the amount deposited,” said Nannen. “On most of the plans, there is a $25,000 minimum deposit.”

And although they may have a shorter-term benefit package than traditional long-term insurance policies, they offer three advantages. People can change their mind and typically get their premium back without a penalty, it provides them with a pool of money available for long-term care, and if they don’t ever need the care, their heirs can still collect the death benefit (income-tax-free on the life plans).

Nannen cited one annuity option with long-term care and cash benefits with a $100,000 deposit. “For someone age 65, a deposit of $100,000 into this annuity will pay up to $400,000 for long-term care, either in their own home or in a facility, which gives people amazing leverage,” he said.

He also talked about a life-insurance policy with long-term-care payments that are spread out for 30 months or until the face amount of the policy is depleted, minus a small amount held back to pay for the cost of a funeral.

“Typically, the premium can be returned in the first few years if the person changes their mind,” he explained, adding that the cash gains from this type of insurance are income-tax-free as a death benefit under current tax law. “And many people like knowing that their money can be refunded.”

MassMutual launched a whole-life policy in the spring that allows the owner the flexibility of accelerating payments of a portion of the death benefit during their lifetime to pay for long-term-care services. “We don’t recommend that as someone’s only safety net, but it is a nice pool of money to have available,” Reynolds explained. “If people are trying to make a decision about what to do and know they need life insurance, they can buy this and get started.”

However, experts say it is important to research companies before buying any type of long-term-care insurance, because six of nine major insurers (which do not include Mass Mutual or Northwestern) have raised prices for the product significantly in recent years.

There are several reasons for this, said those we spoke with, including the fact that these policies have not been profitable. “The industry is young, so companies have a difficult time assessing what premiums to charge, because health care costs have skyrocketed above the costs for other insurance,” Nannen said.

Gilfoil agreed, noting that, unlike other types of insurance, people are holding onto these polices. He suggests people who are thinking about purchasing a policy for long-term care ask the following questions:

  • Where am I covered (home, assisted living, nursing home)?
  • What is the financial strength of the insurance company?
  • How long are benefits paid, and in what amount?
  • What triggers the benefit payment?
  • When do benefits start?
  • How does inflation factor into the plan? and
  • How much does the policy cost?

But the decision making required to choose the best option is complex and involves many factors. “Insurance is one of the answers, but it may not be the only answer,” Gilfoil said. “It’s not as easy as people think, and really takes a lot of thought.”

Proven Need

Although options to pay for long-term care vary, it’s a topic everyone needs to consider.

“People may not want to think about going into a nursing home, but long-term care, ironically, may be the only thing that keeps someone out of one because it allows them to be able to afford skilled nursing care around the clock,” Reynolds said. “It provides people with peace of mind for themselves and their loved ones and protects against a very likely eventual cost that can be measured in hundreds of thousands of dollars.”

Still, she admits, “it’s a very emotional topic with huge financial and emotional consequences that include pride and responsibility.”

But it’s a subject that is critical for Baby Boomers to address so they can protect their assets and have choices about the care they receive, if needed, in the final years of their lives.