Long-term care: How much it costs and how to pay for it

Clients often don’t budget for long-term care in their retirement plans, which can be a considerable expense.

While the public system is subsidized by provincial and territorial governments, clients must still pay out of pocket for part of the cost.

And the costs of home care and private care while waiting for space are considerable.

“People are shocked about how much private long-term care costs,” said Stephanie Chan, founder of senior care advisory firm Home to Home in Vancouver, as well as online platform myCareBase. “Costs across the country for private care homes … can range anywhere from $6,000 to $15,000 [per month for full-time care].”

Usually, people progress from at-home care to a retirement home and then a nursing home or long-term care facility as their medical needs become more complex, said Neela White, a senior portfolio manager with Blue Wing Advisory Group in Toronto. She is also an elder planning counsellor and a certified dementia care provider.

When clients ask Chan how long they or their parents can stay at home, she finds out whether there’s someone living with the parents who can stay home and care for them, as well as the care budget. She helps clients develop a short-term plan for at-home care and a longer-term roadmap for group environments like assisted living and long-term care.

“I call it a roadmap because there can be twists and turns when things don’t happen according to plan,” Chan said.

Private at-home care is charged on an hourly basis, so clients can increase care intensity over time, Chan said. Care could begin with cleaning, then progress to cooking and medication reminders later, for example.

At-home care costs about $35 to $50 an hour in Ontario and usually has a three-hour minimum, White said.

The costs are similar in B.C. and increase according to complexity, Chan said.

In addition to care costs, clients should budget for home renovation costs. When White renovated her basement suite for her parents, she said she spent around $27,000 on retrofits like wider doorways to accommodate a wheelchair, grab bars, carpet removal and a hospital bed. Other items could include a stair lift, ramps and shower enclosures.

Eventually, at-home care costs will increase to a point where moving into long-term care will be more cost-effective. That breakeven point is usually when the person needs full-time care, Chan said.

When the time comes, families can choose between public and private long-term care. For public long-term care in Ontario, the application process involves a health assessment, and may also involve capacity, functional and behavioural assessments.

A person typically must be unable to perform two activities of daily living (such as dressing, bathing, toileting, eating and maintaining continence) before they can join the waitlist, White said. Median wait times for long-term care in the province can be around 200 days.

In Ontario, public long-term care is co-funded by the government, and the client’s portion is just over $2,900 a month for a private room. Low-income people may also qualify for a means-tested rate reduction, and must reapply every year, White said.

“If you’re already in a position where there are [activities of daily living] that you can’t do, somebody needs to help you,” White said. “[Care is] not something that people are familiar with navigating.”

In B.C., the government charges up to 80% of a person’s income for public long-term care. “It’s a really good system in that [a person will never] pay more than what their monthly income is,” Chan said.

Those who don’t yet qualify for public long-term care, are stuck on waitlists or have the financial ability to pay can look to the private system. Retirement homes can be suitable for people who don’t need as much medical care and don’t receive government subsidies, White said.

White said the specialized care her mother received for dementia at a retirement home in Mississauga, Ont., cost around $9,600 a month. Additional services like dressing, extra room cleaning and cable TV all cost extra.

“As you do get older in a retirement home, there would be more things that you need help with. So, the costs might go up,” White said.

Paying for long-term care

Advisors should bring up long-term care budgets in their client conversations. Advisors can start by asking clients what they want their end of life to look like and then determine the cost of achieving that, White said.

Clients can integrate a health-care fund into their savings plan. Many people follow a natural progression of saving to pay off student debt, then a mortgage and then their children’s education. When education saving is done, families should start a health-care fund, White said.

Clients in their 40s can benefit from buying critical illness and long-term care insurance, White said. Premiums are typically lower when people are younger and they can more easily pass medical underwriting.

If clients have extra funds at retirement, they can also buy an annuity that matches expected long-term care expenses to prevent savings erosion, White said. Parents should also moderate children’s expectations for an inheritance if there are significant health-care costs.

“You don’t want to see adult children … basing their financial decision-making now on the potential that ‘I’m going to get a million from mom and dad,’” she said.

Home equity is another way to fund long-term care. Clients can downsize from a detached home to an apartment and use the price difference to keep their financial options open. But not everyone wants to move out of their home.

“Four walls are four walls,” White said. “You have to stay flexible in your thinking of what you value more: being tied to the family home because of memories or having your independence and the financial ability to make choices in your best interest.”

Family conversations

People who want to age at home can delay the need for long-term care if they keep an open mind. Chan said she has seen cases where people were resistant to home care because they didn’t want to admit they needed assistance and accepted help only when the situation grew dire.

“Before you know it, the person has deteriorated so much that they need to move to long-term care,” she said. “Getting help earlier could have delayed that need.”

To reduce resistance, people should have the conversation early with their aging loved ones and start with small things like having a cleaner or grocery delivery once a week, Chan said. And if it’s time for parents to downsize from a house to a condo, plant that idea two years ahead and keep bringing it up.

“The key is you have to let your parents feel like they’re in control of their own decisions, even if you are the one who instigated the first discussion,” she said.

And aging clients themselves should designate powers of attorney.

“You hear … older people say, ‘I don’t want to be a burden to my children.’ But then you ask the next question, ‘What does that mean to you? What have you put in place so that you won’t be a burden to your kids?’ And so many people are unable to answer that question,” White said.

Most people don’t realize that if they don’t designate someone as power of attorney, their loved ones will need a court to declare who can legally represent them, Chan said. People should also communicate their wishes in writing in advance, so loved ones don’t have to guess.

“It also reduces the fighting between siblings,” Chan said. “Siblings are going to have different opinions, so it is just easier if the parent tells the family, ‘This is what I would want for myself.’”