Most working Americans estimate that their own chances of experiencing a long term disability are substantially lower than the average worker’s. Given the high costs of care, this underestimation often leaves Americans ill prepared to pay for the costs of long term care. This blog examines the eye-opening statistics surrounding disability and some of the common disability planning options.
Study after study confirms nearly everyone will face at least a temporary disability sometime during their lifetime. One in three Americans will face at least a 90-day disability before reaching age 65 and, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than die in any given year. In raw numbers, over 37 million Americans, or roughly 12% of the total population, are classified as disabled according to the 2010 census. More than 50% of those disabled Americans are in their working years, from 18-64. For example, in December 2012, according to the Social Security Administration, more than 2.5 million disabled workers in their 20s, 30s, and 40s received SSDI (i.e., disability) benefits.
Unfortunately, for many Americans the disability will not be short-lived. According to the 2007 National Home and Hospice Care Survey, conducted by the Centers for Disease Control’s National Center for Health Statistics, over 1.46 million Americans received long term home health care services at any given time in 2007 (the most recent year this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one “activity of daily living” (such as eating, bathing, getting dressed, or the kind of care needed for a severe cognitive impairment like Alzheimer’s disease). The average length of service was more than 300 days, and 69% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past age 65.
The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over 65 are increasing at an impressive rate. The Department estimates that 9 million Americans over age 65 will need long term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons age 65 or older will need some type of long term care services during their lifetime.
The Alzheimer’s factor.
Alzheimer’s is growing at an alarming rate. Alzheimer’s increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period. The 2015 Alzheimer’s Association annual report titled, “Alzheimer’s Disease Facts and Figures” explores different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. This report contains some eye-opening statistics:
- An estimated 5.3 million Americans of all ages have Alzheimer’s disease. This figure includes 5.1 million people aged 65 and older and 200,000 individuals under age 65 who have younger-onset Alzheimer’s.
- One in nine people age 65 and older (11 percent) has Alzheimer’s disease.
- About one-third of people age 85 and older (32 percent) have Alzheimer’s disease.
- Eighty-one percent of people who have Alzheimer’s disease are age 75 or older. The number of people aged 65 and older with Alzheimer’s disease is estimated to reach 7.7 million in 2030—more than a 50% increase from the 5.1 million aged 65 and older currently affected.
- Every 67 seconds, someone in the United States develops Alzheimer’s. Thus, approximately 473,000 people age 65 or older developed Alzheimer’s disease in the United States in 2015.
- By 2050, the number of individuals aged 65 and older with Alzheimer’s is projected to number between 11 million and 16 million—unless medical breakthroughs identify ways to prevent or more effectively treat the disease.
The risk for caregivers.
There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons with Alzheimer’s or dementia in 2009. According to the Alzheimer’s Association, those persons are at high risk of developing health problems, or worsening existing health issues. For example, family and other unpaid caregivers of people with Alzheimer’s or another dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease. Spouses who are caregivers for the other spouse with Alzheimer’s or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer’s Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.
The costs of care.
Not only will many individuals and families face prolonged long term care, in-home care and nursing home costs continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows:
- Monthly base rate (room and board, two meals per day, housekeeping and personal care assistance) for assisted living care is $43,200 annually, expected to increase .2% annually.
- Daily rate for a private room in a nursing home is $250, or $91,250 annually, expected to increase 4% annually.
- Daily rate for a semi-private room in a nursing home is $220, or $80,300 annually, expected to increase 4% annually.
- Hourly rate for home health aides is $21.50, expected to increase 4% annually.
If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family’s hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance. Most long term care insurance plans let the individual choose the amount of the coverage she wants, as well as how and where she can use her benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person’s home, assisted living facilities, adult day care centers or hospice facilities.
The importance of proactive planning.
Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care.
Arguably more important, though, is taking steps to ensure that someone has legal authority to make personal and/or financial decisions if a person is no longer able to do so herself due to disability. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a decision-maker for health care decisions. A fully funded revocable living trust can also help ensure that the senior’s person and property will be cared for as desired, pursuant to the highest duty under the law—that of a trustee.
Planning for potential disability is a multi-faceted issue. While our office can assist with sound legal planning, it is imperative to work with a team of professional advisors (legal, medical and financial) to ensure that your planning addresses all aspects of a potential disability, based on your unique goals and objectives. If we can help in any way (including building your team of advisors), please do not hesitate to contact us.