It sometimes seems that the general public isn’t paying attention to the growing crisis in long-term care for the elderly but we can’t blame the press for not trying to get the message out. It seems that almost very daily newspaper and other national and local media outlet has published articles recently that highlight the growing severity of what has already become one of the major problems facing an aging America in the 21st century.

With baby boomers approaching retirement and birthrates down, we are on the threshold of the first-ever “mass geriatric society.” Yet as the need for long-term care rises, the number of available caregivers — professional and volunteer — is dwindling, due in part to smaller, less stable families, greater geographical mobility, and the career demands of men and women.

The report, “Taking Care: Ethical Caregiving in Our Aging Society,” published by the President's Council on Bioethics says what eldercare professionals have known for years. “Our ability to care well for loved ones with dementia depends greatly on economic, social and communal resources available to us, such as affordable insurance for long-term care; respite for caregivers; reliable, reimbursable home care services; faith-based or civic support groups; technologies to assist in giving basic care; and health care providers who deliver continuity of care and oversee medical and social service needs. Incentives, including better training and wages, must be found to increase the supply of nurses and other nonfamilial caregivers.”

While the decline of public funding for long-term care has been going on for more than a decade, there now seems to be a growing awareness of how poorly prepared our government is to plan for expected disasters. David Brooks, a columnist for the New York Times and a regular commentator for the PBS Nightly News called attention to the demographic tidal waves that we know are coming; yet our leaders choose to ignore.

“If you want an image that captures what American politics will be like over the next few decades, Brooks wrote, imagine two waves crashing down upon us simultaneously, each magnifying the damage caused by the other.”

“The first wave is the exploding cost of the entitlement programs. The second wave is the ever-increasing polarization of the political class. The polarization will make it impossible to reach an agreement on how to fix the entitlements problem. Meanwhile the vicious choices forced on us by entitlement costs will make the polarization even worse.” As a result, the federal government will have to come up with an extra $50 trillion just to pay for the promises it's made as of today, Brooks says.

Tax increases to pay for these costs would have to be so large they would have a huge negative effect on the economy. Benefit cuts would cause pain. “Doing nothing”, says Brooks, “would lead to enormous deficits, an immobilized government and stratospheric interest rates. It would mean the end of the United States as a great economic power.”

Can it be more abundantly clear that publicly funded care for elders is not only in bad shape today but it will only get worse now that the oldest baby boomers started turning 60 last year? After more than 20 years on the market, shouldn’t the insurance industry have ironed out the kinks in the badly designed early generation of long-term care insurance policies?

With such an overwhelming need and the availability of a private market solution like Long-term insurance, sales of the “new and improved” long –term care products should be booming.

Yet, in the face of what should be a golden opportunity insurers are still wrestling with how to make LTCI a viable product and appear to be utterly clueless in figuring out how to overcome the credibility gap that is suppressing sales of policies that consumers should be lining up to buy. Sales of private long-term care insurance have been declining for the last seven years.

Martin McBirney, a consultant with 15 years' experience as a pricing actuary, lobbyist and product developer, told the New York Daily News that "There is a need out there and the insurance companies have not yet hit on quite the right formula for meeting it".

Insurance companies are so distracted by the continuing bad press resulting from scrutiny from state and federal regulators that they seem unable to get a positive and compelling message to the public about the major improvements in LTC policies that have been achieved in recent years.

When long-term care insurance is not an option: Alternative Ways to Finance the Cost of Long-term Care

Because long-term care insurance requires you to be in good health, this planning option is not available to everyone, especially older applicants for whom the premiums may also be prohibitive. Some newly developed financing alternatives such as life insurance policies with a long-term care rider and fixed annuities that also have long-term care riders should also be explored before deciding on the planning path that best suits your unique needs.

Using Life Insurance as a Long-term Care Funding Resource

What is a life settlement? In its basic form, a life settlement is the transfer of a life insurance policy from the policyholder to a third party, usually a large bank or investment firm. The entity that purchases the policy makes all future payments in order to keep the policy active. In return for turning over the policy (and its proceeds), the policyholder receives a cash payment today.

The sale of this policy (at a discount from the face value) transforms what is often seen as a future asset into a current asset. With current economic conditions created by poor retirement fund performances, this potential asset has taken on much greater significance for many people.

Using a Reverse Mortgage to Pay for Long-term Care Costs
If you are at least 62 years of age and you own your home, you could use a reverse mortgage to pay for long-term care.

A reverse mortgage, is a means of borrowing money from a portion of the equity built up in your home. You are freeing up money that would otherwise only be available to you if you sold the house. You can stay in the house until you die, without making monthly payments. The loan is repaid when the borrower dies or sells the home. The balance of the equity in the home will go to the homeowners estate.

Payments can be received monthly, in a lump sum, or the money can be used as a line of credit. The funds received from a reverse mortgage are tax free.

While the eligibility age for a reverse mortgage is 62, it is best to wait until your early 70's or later. The older the borrower, the larger the amount of equity available to borrow will be. There are maximum limits set by the federal government each year as to how much of the equity can be borrowed. Usually only about 50% of the value of the home is made available in the form of a reverse mortgage.

You can use the funds from a reverse mortgage to cover the cost of home-health care. Because the loan must be repaid if you cease to live in the home, long-term care outside the home can't be paid for with a reverse equity mortgage unless a co-owner of the property who qualifies continues to live in the home.

Author's Bio: 

Robert E. O’Toole, LICSW, is President of Informed Eldercare Decisions, Inc., a private company specializing in elder life planning. A founding member of a national network of social work and health care professionals known as the National Association of Professional Geriatric Care Managers, he is a former editor of the Geriatric Care Management Journal.

Prior to founding Informed Decisions, Inc. Bob worked for 10 years as a senior administrator in the Massachusetts Home Care System and for one of the leading private long term care consulting firms.

Bob has contributed chapters to two books on elder care and geriatric care management issues, and has written numerous articles on the delivery of elder care in the private marketplace. His articles have appeared in Geriatric Care Management Journal, Compensation and Benefits Management, EAP Digest, Workspan, Health Insurance Underwriter and Inside Case Management.

An experienced speaker and workshop leader on elder caregiving issues and financing the costs of long-term care, O’Toole has presented to such groups as the National Association of Social Workers, American Association for the Continuity of Care, The Voluntary Hospitals of America and the Massachusetts Home Care Association.

Bob has also been a lecturer in gerontology at Boston University, Northeastern University, the University of New Hampshire and Stonehill College.

He can be contacted at bob@elderlifeplanning.com