Looking at the Cost of Care

Last week, I shared with you the OneAmerica interactive cost-of-care map.  Today, I want to apply some of the data from there and share a what-if scenario.

Before we jump into this, I want to share a few pieces of data with you.  The intent here is to help you get your arms around average versus actual experience.   

According to data shared by the Society of Actuaries (SOA) in the 2016 SOA Pricing Report, there is a cost and duration impact that correlates with where someone receives their long term care services.  (This should not be a surprise to anyone.) 

Based upon information derived from the 2015 SOA Basic Tables, historical data indicated that the expected length of service for nursing home care is shorter than that of assisted living or home based care. Consider this:

	Months of service
home health care	29
assisted living	33
nursing home	25

Don’t let this deceive you, more often than not, the steps to the nursing home include first receiving long term care support services at home before progressing to an assisted living facility then a nursing home.

Using the OneAmerica interactive cost-of-care map, let’s use figures for Connecticut.  In today’s dollars, you will see the state average for the cost of care in 2023.

Let’s take a look at what things might look like in 35 years (my age 83) when I might require care.  Assuming an inflation rate just short of 3.0%, you can see that the numbers are pretty big.

Home Care

If I receive care at home for 29 months (using the SOA study) at a monthly rate of $7,676.  When that time is completed, I will have spent $222,604. 

Here is the caveat – that represents the cost for part-time care and is based upon a 44 hour of service week.  That means that someone will be providing care for the remaining 124 hours of the week.  This is quite the quandry.

Let’s say that I want care 24×7 at home.  That cost will explode to $28,896 (the equivalent of 28 days of services received).  Multiply that by the 29 months of care and the impact to my finances is $837,984.

That is assuming that “average” everything is received.

But what happens if I am no longer able to remain at home and move to an assisted living facility?

Assisted Living

If I move into an assisted living facility for the next 33 months (using the SOA length of stay number) at a monthly rate of $8,520.  I will have spent another $281,160 for those 2 plus years. 

Nursing Home

This brings us to care at a nursing home.  According to the SOA table, I would stay for 25 months at an average cost of $22,283 per month.  When all is said and done, my 25 month stay will have cost me $557,075.

The argument will be made, accurately in some cases, that …

… this is not the typical experience,

… that half of the over 65 population may never need care,

… that the average duration of care is less than 2.2 years for a man or 3.8 years for a woman,

… that there is no way that this scenario is accurate.

I will accept that argument, but only if people accept that averages are not accurate and are dangerous to any plan if they are considered to be absolutes.

Next week … a case study

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It is the end of the year which makes it an ideal time to review your book of business and identify your clients who are over 75 and own annuities that are on the sideline and earmarked for an emergency. The share the story how that money can be transformed into a tax-free long term care insurance strategy. That is what the million dollar annuity strategy is all about.  Learn more about it at   https://fridayswithfisher.com/million-dollar-annuity/. 

My “big ask” of you for the million dollar annuity strategy is to identify 3 or 4 annuity owners 75 or older who might be viable candidates for our leverage strategy then give us a call.

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