Long-term care in the age of Covid, and beyond

This article appears in the February 2021 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

It’s unusual for a source to cry during an Advisor’s Edge interview. Then again, these are unusual times. And when the interview is about long-term care (LTC) for seniors in the age of Covid-19, shedding a few tears seems like a logical response. Of the more than 14,000 Canadian deaths attributed to the pandemic (as of early January), a heartbreaking 73% were in long-term care and retirement homes.

For Karen Henderson, a specialist in aging and LTC planning, the numbers — and the attitudes and circumstances that led to them — are unconscionable. “Ageism has always been around, and it has really reared its ugly head because of Covid-19,” she said, her voice breaking. “People are dying, alone, of starvation, and it’s because we’ve neglected them. It’s unfair. It’s wrong. But it’s happening.”

Deficits in long-term care are nothing new: provinces have long struggled with shortages of beds and staff. But the pandemic’s toll, and the sight of the Canadian Armed Forces intervening in long-term care facilities last spring, shone a light on the system’s pre-existing vulnerabilities. Further, the need for LTC spaces will grow as boomers age. (See “Aging boomers”.)

Not surprisingly, the pandemic has radically shifted clients’ perceptions of long-term care. In a July 2020 survey conducted by Ryerson University’s National Institute on Ageing (NIA), 60% of respondents — and 70% of those over age 65 — reported that Covid-19 had changed their opinion on whether they would choose for themselves or a loved one to live in a nursing or retirement home. Nearly all respondents said they planned to live safely and independently in their own homes for as long as possible.

Faisal Khorshid, a certified financial planner and senior executive consultant at Khorshid Nieth & Associates Private Wealth Management in Saskatoon, has noticed the shift. His clients, he said, “are more open to talking about their mortality and long-term care.”

“People are more interested in knowing about what kind of LTC benefits are available from the government, what kind of tax breaks they can get,” Khorshid said. “People need a clearer understanding of what type of long-term care they will need, what every province covers and what they don’t, and what the typical costs are. People shouldn’t have to dig to find these numbers.”

Advisors can help by providing roadmaps, referrals and resources that help clients navigate the system and understand what’s available. “Advisors don’t need to be geriatricians,” Henderson said, “but they do need to build their circles of care and expertise so that they know who to call when a client has questions about aging.”

Advisors can become more conversant in aging-related services like Meals on Wheels, for example, or programs such as 55-plus centres or Men’s Sheds groups for social connection or exercise. Advisors can also learn about experts available in their regions and their associated fees.

Advisors may also want to consider partnering with — and referring to — insurance specialists who are well-versed in underwriting long-term care or critical illness policies, for example. (See “Long-term care insurance”.)

For all its heartbreak, said Henderson, who is founder and CEO of the Long Term Care Planning Network in Toronto, the pandemic has also presented advisors with “a wonderful opportunity to pick up the phone and say to their clients, ‘You know what? We need to talk about what you want and need as you age. And we’re going to have that conversation every year as part of our annual meeting.’”

Change is coming

The pandemic is already leading to policy changes. In November’s fall economic statement, the Liberal government promised $1 billion over two years to the provinces for long-term care, contingent upon detailed spending plans.

Some provinces have also introduced new measures. Advisors in Ontario, for example, might point clients to the province’s new Seniors’ Home Safety Tax Credit unveiled in November. The initiative will provide seniors and their families with tax credits of up to $2,500 when they spend up to $10,000 on renovations to make their homes safer and more accessible: installing wheelchair ramps, stair lifts, or grab bars around toilets, tubs and showers, for example, or making modifications to live on one floor. The credit, currently available only in 2021, may entice more seniors to age in place.

That would help the public purse, said Halifax-based actuary Dr. Bonnie-Jeanne MacDonald, director of research for financial security at the NIA. She pointed to research by the Canadian Institute for Health Information showing that, with the right level of support, about one in 12 people in LTC could remain at home. A report from Queen’s University last fall said between one in nine and one in five seniors currently in LTC would benefit from home care.

Long-term care currently costs $73,510 per resident per year in Ontario, according to a November 2020 report by the NIA, and this figure will rise to more than $90,000 once homes incorporate the recently promised increase to four hours of care per day, per resident. MacDonald said living at home costs only half as much. Provincial and federal governments urgently need to create robust plans that allow more Canadians to age in place, she added.

Until that happens, however, grab bars and one-time tax credits are only the tip of the iceberg. Henderson urged advisors and their clients to consider the costs and practicalities of aging in place: “Can you modify your home? Do you have the money to do that? Can you easily get to your doctor, the drugstore, the grocery store from your home? If you don’t drive, do you have public transportation, or could you set up an account with Uber? Do you have family nearby or in the home? Can you afford help in the home?”

Provincial public health units — for example, Local Health Integration Networks, or LHINs, in Ontario — may provide limited home-care services. A senior (or their family members) may be able to pay for a few hours of private help each day with tasks like cleaning, meal preparation or dressing: at $25 an hour, that works out to approximately $2,250 per month, or $27,000 per year.

Full-time nursing care will run much higher. Henderson recalled an elderly neighbour who died five years ago from prostate cancer. “He hired two caregivers who provided round-the-clock care, and it cost $10,000 a month until he moved into palliative care,” she said.

Those kinds of costs can quickly erode the value of an estate, Khorshid said.

Faced with these considerations, many clients may have no choice but to opt for institutional care. Retirement homes provide community and cater to residents’ varying levels of independence, offering services such as meal preparation, housekeeping and nursing care tailored to residents’ changing needs. Khorshid, for example, builds at minimum a seven-year length of stay in assisted living into his clients’ plans. “At a cost of $5,000 or $8,000 per month in a private facility in Saskatoon, those are big numbers.”

Whether at home or in institutions, the costs and considerations of aging can become overwhelming. And the problem, MacDonald said, will only get worse as boomers — who on average have fewer children than previous generations — age and live longer.

“About 75% of all home care is currently performed by people’s children, and traditionally by women,” she said. “With an increasingly mobile workforce and one of the highest rates of female labour-force participation in the world, those children are simply not available.”

Advisors, MacDonald said, can also help broaden the conversation beyond simply saving money for retirement to thinking about financial and practical decisions for the potentially 30+ years following the end of work.

These conversations, bolstered by personalized information, often provide impetus to act, she said.

“It’s one thing to read about the percentages of people who go into nursing homes. But it’s another to have a financial planner say, ‘Here are your sources of income during retirement. Would you like to live at home or go into assisted living? Wouldn’t it be great if you had an extra thousand dollars a month that would get you into the level of care you’d like to have? Let’s discuss how we can do that.’”

Aging boomers

According to the National Institute on Ageing (NIA), based at Ryerson University in Toronto, the number of Canadians over age 85 is expected to triple in the next 30 years — and the cost of caring for seniors in both nursing and private homes will also more than triple.

A November report from the School of Policy Studies at Queen’s University said 1.3% of GDP is currently spent on traditional long-term care. Unless governments start investing in alternatives, the cost is expected to increase to 4.2% of GDP by 2041.

Long-term care insurance

The pandemic may have increased clients’ interest in long-term care insurance (LTCI), which will help offset the cost of care for clients who can no longer perform daily activities like dressing, bathing, eating or toileting.

Faisal Khorshid, a financial planner and senior executive consultant at Khorshid Nieth & Associates Private Wealth Management in Saskatoon, said younger people are watching their elders struggle during the pandemic and want to avoid a similar fate.

LTCI isn’t cheap, but — as with most insurance products — younger adults will pay far less than seniors.

According to certified financial planner Jennifer Jacobs, a specialist in LTC and living benefits in Hamilton, Ont., a 45-year-old man could pay an annual premium of $1,911 for 25 years and receive an unlimited benefit of $500 per week, indexed to inflation. That premium cost rises to $3,681 for a 65-year-old man; women, who live longer on average, will pay more. “Return of premium on death” riders, or policies in which benefits kick in after a year in care, can make LTCI more affordable or attractive to clients. Adult children or groups of siblings may choose to fund or subsidize their parents’ premiums.

Jacobs wishes more people would look at LTC insurance as a retirement planning tool rather than a hedge against worst-case scenarios. She used the example of a 49-year-old woman who would pay $5,731 a year, for 25 years, for an unlimited benefit of $700 per week, indexed to inflation and with a return of premium.

“By age 74, you have created a tax-free, unlimited, indexed income plan for longevity and health needs. You have no further costs and protection of life, with a guaranteed $143,281.50 death benefit that passes outside probate if the policy is not used,” she said.

Even two years of LTC at age 80, she said, would equal the value of the premiums. Saving the equivalent amount of money over 25 years with a 5% return would yield “a limited benefit of” $273,524, and the returns are taxable.

While LTC insurance may be a viable solution for Canadians who qualify and can afford it, MacDonald cautions against relying on it — and other individualized strategies — to solve systemic problems. Many carriers, she points out, have left the LTCI market because it’s so high-risk and expensive.

Ideally, she said, Canada would follow other countries that have created nationwide long-term care insurance programs.

“Everyone pays into it, and they get it when they need help. If only people who wanted car insurance got it, we’d all be in a really bad situation,” she said. “We all have to have it, and that’s to protect everyone. This is a public policy problem.”

Long-term care costs across Canada

Most people don’t understand the difference between retirement homes and long-term care or nursing homes, said Karen Henderson, a specialist in aging and LTC planning. In short, “you can’t simply decide that you want to move into a nursing home. You must be assessed by your provincial unit as needing 24/7 care.”

Those who do qualify for public facilities pay for accommodations, while governments cover the costs of care and food. Accommodation costs vary depending on province and type (i.e., private versus shared rooms) and can range from zero in Nunavut to up to about $3,444 a month in British Columbia, Henderson said. In Ontario, residents pay approximately $2,700 monthly for a private room.

As the pandemic made tragically clear, however, the care provided in nursing homes may not be adequate; adult children and grandchildren often come in to supplement a parent’s care, or hire private personal support workers to help where they can’t.

Here is the average monthly rent for standard spaces in seniors’ residences (private and non-profit — not including nursing or long-term care homes), by region:

Source: Canada Mortgage and Housing Corporation (data collected in February 2020)