• November 28, 2022

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Have you seen the ads featuring long-term care (LTC
) services being provided by a loving and attentive home health aide? It’s indicative of the long-term care industry’s shift from institutional care to home-based services as more seniors want to age in place. I wonder, however, if these ads don’t give aging boomers and their adult children the wrong impression. The take-away seems to be that high-quality home care is available and affordable, but I suspect they get a very different message when they attempt to book services—either there aren’t enough home health workers available, or the cost is out of reach.

LTC is experiencing the perfect storm. Just when the industry is rebalancing and shifting away from institutional care, the number of caregivers is decreasing. The trend began several years ago, but the impact was obvious only recently. Greater competition for limited services, new minimum wage laws, and inflationary pressures have been driving up prices. Home health care costs rose 12.5% in 2021 alone, increasing more than the CPI, and exceeding the popular 3% inflation option on long-term care insurance (LTCI) policies that had previously seemed generous.

If my predictions are correct, this is only the beginning of the challenges that elderly clients and their families will face. As the industry transition continues, it will strongly favor care for people who own enough private insurance or have enough personal savings to pay higher wages. I suspect aging in place will be out of reach for middle income individuals unless LTC planning becomes an integral part of their retirement plans. As advisors, we’ll have to advise clients to save significantly more if they intend to self-pay, purchase insurance with higher benefits and inflation protection, or combine the two.


Demand for home health care is already high and expected to increase over the coming two decades as more boomers retire and others reach advanced ages. Changes in Medicare reimbursement policies may contribute to demand, with many hospitals discharging patients with greater care needs.

From the standpoint of supply, the shortage of direct care workers is currently 2.6 million and is expected to reach 3.6 million when the last boomers age into retirement in 2030, according to the advocacy group PHI. The situation is largely the result of changing demographics and immigration trends.

Family caregivers, especially adult children, were a key source of labor in the past, but there are too few available to meet the older generation’s current needs. Families are smaller, less stable, and more mobile than they used to be. Women, who have traditionally been primary caregivers, are employed full-time and can be reluctant to leave a good-paying job or cut back on hours to care for Mom and Dad.

The majority of caregivers hired by agencies and facilities are immigrants, and legal immigration to the U.S. from other parts of the world has been declining since 2017. Today, there are fewer people interested in direct care work, and staff retention has become a problem because of the extremely low pay scale. Workers who have lived for years below the poverty line have found retail and restaurant jobs that pay more and are less labor intensive.

LTC premiums are rising along with the cost of care. Carriers are increasing rates and clients need higher benefit levels and inflation options to buy the same LTC services. Sales of traditional policies will decrease further due to premium costs, and I wouldn’t be surprised to see a new generation of hybrids and riders come to market.

Unfortunately, public confusion about LTC hasn’t changed and inertia remains a problem. If our clients don’t bring up the subject of LTC, then we make sure that we do. We see LTC planning and retirement planning as interwoven. Our goal is to prevent LTC expenses from taking a bite out of a retiree’s financial security. It’s a bite that keeps getting bigger and bigger.


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