Do Your Clients a Favor — Stop Talking About Nursing Homes

There are roughly 1.2 million people in nursing homes in the U.S.,¹ but more than 6 million receive care at home.2 Did you know that, as of May 2024, home health and personal care aides made up the largest single occupation in the U.S., with 4 million workers?3 Your client is far more likely to receive care outside of a nursing home than in one. So, when you talk with clients about their future long-term care (LTC) needs, why would you focus on the least likely, most unappealing scenario?

Instead of leading the LTC discussion with the threat of nursing home care, we need to shift to something like, “Kyle, Sara, it’s almost certain that at least one of you is going to need extended care at some point. We should have a plan to help keep you in your own home as long as possible, and to take the burden off of each other and the kids.”

Much better, right? You’re telling them that they’re not doomed to a nursing home if they need care, and suggesting that there are ways to do this without laying the burden on their family.

The vast majority of LTC services — even in nursing homes — are “custodial care,” which is help with daily activities like bathing and dressing, or supervision because of a cognitive impairment. This type of care can be provided at home in many, if not most cases. The downside, unfortunately, is that in the absence of a formal plan for care, the vast majority of these services are provided by informal, unpaid caregivers — almost always family members. And while the financial impact is a concern, it’s not the biggest concern. Much more important are the physical and emotional consequences to their loved ones.

Home care options

It’s undeniable that family caregivers are at higher risk of mental and physical health issues, so the question becomes, why not just hire paid caregivers? Per a 2024 Transamerica study, two of the top retirement fears are declining health leading to long-term care and running out of money.⁴

That means when Kyle needs care, they’re experiencing the former, and if Sara starts spending $5,000 a month to bring in outside care, they’re living the latter! The end result is that even when the money is there to pay for extended-care services, clients are often reluctant to spend it on something as onerous as long-term care.

Home care is always preferable, and usually most affordable — but not inexpensive. If a client uses just six hours per day of home health aide services, five days a week,at a national average of $34 per hour, that’s $53,040 per year.

Of course, home care can become outrageously expensive. A client who needs 24/7 paid care at home can easily spend more than a nursing home would cost, which is why they may consider the other option that’s still far more attractive than a nursing home — assisted living.

A nursing home alternative

Most clients don’t need someone at their side 24/7, but they may need to know that help is right down the hall when needed. Assisted living communities are typically very nice places, offering homelike settings, numerous amenities, various opportunities for social interaction, transportation services, etc.

In many cases, the healthy spouse will move into the community with the impaired spouse. Prices vary greatly across the country, but they offer a far less expensive option than round-the-clock home care and provide much needed relief to the spouse caregiver.

Proactive planning, focused on care in a community setting, is key. What does this planning consist of? First, it’s a review of potential needs. What’s the client’s current health? Are there any obvious risks that may put them in a care situation at a younger age? They don’t need to be sick to need care, but those with chronic illnesses are likely to need care sooner.

Next, when someone needs care, who will be best-positioned not to provide the care, but to manage it? I always ask my clients, “Would you rather have your wife/daughter/son give you a sponge bath and dress you, or pick up the phone to make sure the home health aide is scheduled for the week?”

Having a plan to pay for formal, outside care providers is certainly desirable. Of course, then your client has to pay for it.

So, how will that happen? They may be in a position where self-funding is realistic, and if so, your client should identify the money that’s designated for care now, and segregate it from the general portfolio. If not, they may be reluctant to spend it when care is needed.

Another option is transferring some or all of the risk using LTC insurance of some kind. This is often a necessity for middle-class clients, and can still be an excellent strategic planning tool for your wealthier clients. Regardless of which path they take, the point is, they need to decide now how to fund the care plan.

Have everything in place

Be sure your estate planning or elder law attorney knows your wishes, and helps you with any legal maneuvering, such as advanced directives, healthcare and financial powers of attorney, etc. A change in health may leave you unable to do this.

Finally, your clients must talk about their LTC plan with their loved ones. If the children don’t know what you want, you can’t expect them to figure it out themselves. Communicating your wishes and plans to your family is a crucial step in the LTC plan.

Your clients need to plan for long-term care, and you need to help them do so. The best way to start that process is to dissuade them from assuming that LTC equals a nursing home. Nursing homes are the option of last resort, and are typically used for one of two reasons. First, the actual care needs are such that they cannot be met in a community setting, and second, the client has run out of money and is relying on Medicaid financial assistance.

We have no control over the former, and we clearly want to avoid the latter. Fortunately, though, if we frame the conversation appropriately, we can help them prepare for the most likely long-term care scenario — care in their own home.

Kerry Peabody, CLU, CLTC, RICP is a long-term care insurance specialist with MarshMcLennan Agency.

Endnotes

¹ https://www.statista.com/statistics/1168843/number-residents-certified-nursing-facilities-state/

² https://www.kff.org/medicaid/issue-brief/10-things-about-long-term-services-and-supports-ltss/

³ OEWS Chart

⁴ The Retirement Outlook of the American Middle Class | 24th Annual Transamerica Retirement Survey 2024

A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.

Read more articles by Kerry Peabody