Long term care planning

Long term care planning involves coming to terms with the fact that you may eventually require assistance with the activities of daily living, and planning financially to pay for this. Long term care (LTC) is not part of universal public health coverage in the Canada Health Act; different provinces and territories offer different levels of support, but there will almost always be out of pocket costs involved. Those costs can represent a major spending shock for retirees, perhaps the biggest possible contingency that retirees can face, hence the need to plan for it. With population ageing, the demand on what public LTC services are available will only increase.

Another reason to plan -- despite the unpleasantness of having to think about losing independence -- is that the default option is to have family members such as spouses or children (or friends and neighbors) provide unpaid informal care. This can become a burden for them over time, with emotional, health and financial consequences (e.g., ). According to one report, one third of unpaid caregivers experience distress, and all of them are at increased risk of burnout.

Three quarters of Canadians don't have a LTC plan according to one survey, but one could argue that someone is not ready to retire until they have a LTC plan in place. Planning for LTC includes thinking about where you will live during various phases of your retirement, learning about what LTC services are available in your community, what those cost, and how you will pay for that if LTC becomes required. You should also talk to your family about your plan.

This article defines what LTC is, looks at the ages at which one might typically need it, and how much it is likely to cost. The article concludes with a presentation of the two main funding options, LTC insurance and using dedicated wealth (self-insurance).

What does long-term care mean?

Long-term care services may include:

• nursing care
• rehabilitation and therapy
• personal care (help with activities of daily living such as dressing, eating and bathing)
• homemaking services (cleaning, laundry, preparing meals)
• having another person there to watch over you and help you when and where you need it

There is typically a length of time component to LTC definitions; in the US, the threshold is at 100 days. Shorter needs, for example recovering after surgery, wouldn't be called long-term care.

Some definitions of LTC, e.g. for insurance purposes, are quite restrictive, and tend to focus on activities of daily living such as eating, bathing, dressing, transferring (e.g., getting in or out of bed), grooming, and so on.

The National Institute on Aging offers the following much broader definition:

"A range of preventive and responsive care and supports, primarily for older adults, that may include assistance with Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs), provided by either not-for-profit and for-profit providers, or unpaid caregivers in settings that are not location specific and thus include designated buildings, or in home and community-based settings".

The IADLs are "activities that facilitate independent living, such as using the telephone, taking medications, managing money, shopping for groceries, preparing meals and using a map". They can also include cleaning the home, doing the laundry, getting to places beyond walking distance, shopping, and using the internet.

Depending on how much care you need and the choices you and your family make, this care can be received:

• in your home
• in the community (e.g., adult day centres)
• in a facility such as a nursing home, a chronic care facility, personal care home, or assisted living facility

When is it needed?

Five stages

Your need for health care and personal care will change over time. You might pass through 5 stages of care, to some degree, in retirement, although many people don't reach stage 4 or 5, as seen in the "For how long?" subsection below.

Stage 1: Independence

In stage 1, your independence is still intact:

• You are self-sufficient and able to manage chronic health problems and disabilities without the help of others.
• There's no immediate impact on your family.

Stage 2: Interdependence

In stage 2:

• Some health problems begin interfering with daily living, making some functional tasks painful or more difficult.
• Family members begin helping out more with cooking, house cleaning, shopping and banking, but formal care is not yet in place.
• Families may begin considering seniors' residences designed for independent living.

Stage 3: Supportive living

In stage 3, you're starting to become more dependent on others:

• You are more dependent on others for practical chores like meal preparation, cleaning, shopping and transportation, and may need some limited direct help or stand-by assistance with personal-care items such as dressing, bathing and grooming.
• Both family support and some formal care are in place, and may include: home care services for help with meal preparation and dressing, adult day care centres, assisted living facilities or retirement residences.

Stage 4: Complex care (crisis management)

In stage 4, you're dependent on others, but home care may still be an option:

• You are dependent on others for most of your care due to multiple health and personal care needs.
• The demands on family members might become unsustainable
• Formal home care may be insufficient or too expensive.

Stage 5: Dependence

In stage 5, your extensive care needs are being met in a long-term care facility:

• Admittance to a long-term care facility as skilled nursing care and extensive personal care are needed.
• Family members can no longer meet the overwhelming care requirements - safety is an issue without 24-hour care

Age of LTC facility residents

Based on data compiled by the Canadian Institute for Health Information, the average age of residents in long-term care facilities in seven provinces (Newfoundland and Labrador, New Brunswick, Ontario, Manitoba, Saskatchewan, Alberta, BC) and the Yukon combined is 81 years old (83 years old for women and 78 for men). Some 64% of residents are female.

The age distribution is as follows, in percentages:

Age	Female	Male	All
0–64	5	10	7
65–74	10	18	13
75–84	27	32	29
85–94	43	34	40
95 and older	15	6	12

How long is it needed?

The US data is more detailed than the Canadian data, so is presented first.

US data

A U.S. Department of Health and Human Services study from 2022 projects the risk of needing LTC people turning 65 in 2020-2025 based on a "microsimulation model". Their definition of LTC is having a disability that requires help with "at least two ADLs (activities of daily living) that is expected to last at least 90 days or a need for substantial supervision for health and safety threats due to severe cognitive impairment". The results are as follows:

Life expectancy and average years of LTC needs for today's 65 year old:

	Total	Men	Women
Life expectancy at age 65	20.5	19.1	21.9
Average years of LTC	3.1	2.5	3.6
Percent with LTC needs	56.4	48.6	63.7

Those averages hide a spread of possibilities, better visualized with the distribution of LTC needs:

Distribution of LTC needs, % of population

	Total	Men	Women
None	43.6	51.4	36.3
<1 year	11.9	11.2	12.4
1.00-1.99 years	7.9	7.1	8.6
2.00-4.99 years	14.7	12.8	16.4
>5 years	22.1	17.5	26.3

These data reflect all forms of long term care that match the definition, whether paid or not. Of the 3.1 years average need, about 0.8 years is projected to consist of paid care (0.6 years for men and 1.0 years for women); the rest will be supplied by family members and so on. The proportion of people who will need 2-5 years of paid care is 9.5% of the population, and 4.4% will need more than 5 years. About 45% of the population will require at least some paid care. Recall that the definition of needing LTC in this study is quite strict, so the statistics would go up if the definition was less rigid.

Canadian data

Comparable detailed data for Canada is difficult to find. The overall likelihood of ever needing LTC (probably of the paid kind) is about 17% according to the Canadian Life and Health Insurance Association but that seems rather low in light of the US projections just mentioned.

Based on a health microsimulation model, Boyer et al. (2019) estimate that the objective risk of needing help with at least one ADLs is 56% and that the objective risk of entering a nursing home is 26%. In contrast, the average perceived risk of needing help with one ADL (in a panel of 2000 Canadians aged 50 to 70) is lower (48%) whereas the average perceived risk of entering a nursing home is higher (35%). Boyer et al. (2019) found about 60% of Canadians underestimate their ADL risk, although a subgroup of people overestimate it by a large amount. Similarly the perceptions of the nursing home risk have a wide range in the survey (a much wider range than the objective probabilities based on the microsimulation model).

So needing some LTC is relatively likely, but for how long will that LTC be needed? The Globe and Mail tool linked below mentions that "the average length of stay in a long-term care facility is about 18 months" according to the Canadian Institute for Health Information. Another Canadian article puts the average "length of time that care is required" at 2.2 years.

Another undated statistic is that at age 65, "20% of individuals will require care for more than five years in their remaining years". (The last two articles don't provide the sources of those statistics.)

What does long-term care cost?

Long-term care costs are managed at the provincial (or territorial) and community level. What you pay will depend on where you live and the personal choices you make:

• It can cost from $900 to over $5,000 per month to stay in a long-term care facility.
• Costs for private services range widely: you can pay from $10 to $90 an hour for homemaking, personal care or nursing care.

The cost to you depends on:

• the type of room you stay in
• how much government funding is available in your province or territory

The Globe and Mail has an online tool that shows the maximum costs of long-term care in government-subsidized facilities, by province, for different periods of time. Note that these facilities tend to have significant waiting lists. This tool also contains links to official government websites detailing the costs for each province.

Note that the LTC facility situation depends strongly on the jurisdiction; this infographic shows the proportions of private versus public facilities in all provinces and territories.

Typical costs by province and territory

Sunlife, a company that offers LTC insurance, provides reports showing typical costs for government-subsidized long term care facilities, for private retirement homes, and for home care, for each province.

Financial planning

A tail risk

Putting it all together, "the risk of needing extended facility-based LTC in old age is a low-frequency, high-severity risk", also known as a tail risk. According to one US actuarial study that relies on simulations, LTC costs were zero for two thirds of cases but $600,000 (present value) in 5% of the cases. In a Canadian context, 5 years in a private LTC facility at $5k per month could cost $300k.

Two main funding options

A long term care event that lasts several years is a major spending shock to most retirees. Such a contingency should be addressed as part of Contingency planning for retirement.

The two main funding options are commercial LTC insurance, and using dedicated wealth (self-insurance).

Using LTC insurance

Main article: Long term care insurance

LTC insurance is one option to plan for the costs of a potential LTC event. See the stand-alone article.

Using dedicated wealth

The other option is self-insuring for the LTC risk through dedicated wealth, i.e. assets not already earmarked for other purposes. Such assets can include housing wealth (e.g. downsize your home to free-up some equity; sell your home and then rent a dwelling; or take a reverse mortgage). If that is not enough, a contingency fund can be created to self-insure against LTC risk and other contingencies.

Talk to your family about your LTC plan

Once your LTC plan is complete, you should talk to your family (or other people who might help care for you, such as friends) about it. Don't wait for a health crisis to happen before you have this conversation; you don't want to take decisions under pressure if you can avoid it. Items to discuss include:

• Do you wish to stay in your current home as long as possible, or are you planning to downsize, to move to a retirement residence, or another housing option?
• Should the home be modified to make it safer?
• Are you expecting to get unpaid care, and from whom?
• How are you planning to pay for paid care and what are the expected costs?
• If this involves LTC insurance, what kind of policy do you have, and where are the details stored?

This may also be a good time to talk about estate plans, including power of attorney documents, with your family. Several meetings may be needed to cover all relevant aspects.

Further reading

• Financial Wisdom Forum topic: "Long term care"
• Financial Wisdom Forum topic: "A-rated companies that offer long term care insurance?"

External links

• Canadian Institute for Health Information, Long term care
• Cost of Care Calculator
• Long-Term Care Financing: What’s Fair and Sustainable?
• Revenu Québec, Tax credit for home-support services for seniors
• Conseiller, Perte d’autonomie, quel est le coût?, Sept. 2022
• Retire with style podcast, Episode 115: Intro to Long-Term Care Planning (US content but mostly applicable to Canada); see also episodes 116, 117, and following ones
• Society of Actuaries, Life Journey Study: "how families cope with the final years of life" (2022)
• Caregiver solutions, The Right to Live at Risk (includes a section on "The Four Stages of Care")