Clients unprepared for long-term care: CLHIA

Three quarters of Canadians admit their financial plans don’t account for long-term care, and 55% believe government programs cover the majority of those costs, according to the Canadian Life and Health Insurance Association.

That’s not the case.

It will cost $1.2 trillion for Canada to provide long-term care to baby boomers, and current government programs only cover about half of this, according to CLHIA, which adds the resulting $590 billion funding shortfall is equivalent to 95% of all individual registered savings plans in Canada.

Read: Canadians have better retirement prospects than Americans So how can advisors help? By educating clients on the need to save for long-term care and tailoring advice based on income levels and the different levels of care provided by each province.

“Make sure clients understand what they are and aren’t accountable for,” says Stephen Frank, vice president, policy development, CLHIA. “Go through options with them, such as saving directly or purchasing long-term care insurance.”

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Provincial governments also have a role to play. They must undergo a structural reform, says Frank.

“We need to move people who are currently staying for the long-term in hospitals and put them in long-term care facilities,” he says.

By doing this, he estimates a savings of $140 billion over 30 years. This could be used to support additional long-term care initiatives, including an RESP-type savings product where Canadians could contribute towards their future long-term care costs, tax-free, and the government would top it off.

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“By the government offering a product like this, it would send a message to Canadians that it’s important for them save,” says Frank.

The CLHIA says the following actions should be taken sooner than later:

• Governments can help close the funding gap by being more effective in how long-term care is provided to Canadians;
• Canadians need incentives to take responsibility to protect themselves from the possible future long-term care costs and governments can help; and
• In order to meet increased demand for resources, including long-term care beds, health care professionals and volunteers, the public and private sectors must work together to find solutions.

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