March 20, 2011
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Being only a couple of years away from the glory land of CPP and OAS benefits, I’ve decided to add to my to-do list a plan for my own care in the event that I am unable to attend on my own to the daily activities of my life in retirement.

I am a baby boomer and although one of the tenets of membership in this club is a belief in our own invincibility, I have come to the realization, because of the work I do as an estate lawyer, that this is truly wishful thinking. I do, however, intend to live longer and healthier so that I can join Canada’s fastest growing population, the 85-plus group, but membership in this group comes with a price which is a significantly increased incidence of dementia. It is expected that such incidence will double in the next 25 years. This will require stepping up measures to deal with intensive health care and daily living assistance for our elder population.

In the period after World War II when I was born, society was different. In my case, we had our grandmother living with us until the day she died. Whether this was a great privilege and honour is a story for another day, but we had a house and our grandmother did not so the solution was obvious. Society has changed and circumstances are different now. It is increasingly uncommon to see three generations under the same roof. Looking down the road to retirement I see that I have a house and I have the means to look after myself, but looking at it from grandmother’s perspective I would rather be on my own as much as possible and not living with my children. I know that health care services are publicly funded if I need treatment and that the Community Care Access Centres will provide some support for me at home. What is missing from this equation is access to long-term care to assist me in maintaining a desired level of functioning throughout the period of my retirement.

I have discovered that there are three basic types of care:

Skilled Care

This kind of care can be obtained in a nursing home but also in my own home from visiting nurses and therapists.

Personal Care

This involves assistance with tasks of daily living, such as bathing, eating, dressing, going to the bathroom and, generally, moving around.

Supervisory Care

This kind of care is provided for the cognitively impaired. These are primarily dementia sufferers who need to be supervised while conducting activities that they can generally handle.

More than 40 per cent of seniors over the age of 65 will require long-term care and spend time in a nursing home for an average stay of three to four years. Women generally live longer than men, which explains why whenever I visit long-term care facilities they are mostly occupied by women. The corollary to this is that men are more likely to be cared for in their own homes by the women who survive them.

In an effort to foster my independence I have done some research about long-term care insurance. I found that long-term care has a real cost attached to it. For example, accommodation with four beds in a room starts at $1,500 per month and can go up to $2,500 per month without any personal care assistance. If I assume that my stay will max out at four years and that what I will need is primarily supervisory care, the cost of those four years adds up to $120,000. I might be able to manage that but what if I need physical assistance? This could easily add another $500 per month to the total, which will be pushed to $148,000.

If I make the same provision for a spouse who is likely to outlast me in the home stretch, that figure can be doubled and rounded to $300,000. This abstraction does not take into account maintaining a separate residence while in care or any of my own personal daily expenses for clothing and transportation.

Other considerations include whether I want to have an estate left for my family and how long I wish to remain independent of their financial assistance. I can probably do all of this on my own because I can sell my house if I no longer need to live in it. (I could also sell my bicycle and my golf clubs which they probably won’t let me use in the home anyway.)

I also know that if I was solely reliant upon the Canada Pension Plan or Old Age Security cheques, I could never afford the premiums for long-term care insurance to take care of my need for assistance during my declining years, and I would be working towards further government or family assistance.

I know that our government will always provide a basic level of care – subsidized, if necessary – to look after seniors with no other resources, but for me longterm care insurance looks attractive because of my relative youth (under 65). Insurance obtained at this age is much cheaper to acquire. According to the statistics that I have reviewed, if I want $1,200 per month worth of benefit for my lifetime protected for inflation with a waiver of premium while I am disabled, then the cost would be approximately $25,000 for a period which will start in approximately 13 years when I am likely to need to draw down on the benefit. If I stay in care for the four years or so that appears to be the norm, the cost of that benefit to me could be around $60,000. I have also learned that there is no standard long-term care insurance
policy, so that you will have to be careful to look at what it is you are paying for.

You can buy a policy to cover a term of years whenever that begins or to cover your life. Alternatively, you can create a pool of money from which expenses can be paid out. This can be used by both spouses, if necessary, to sustain the cost of their care during the period of their retirement. Some policies just pay expenses up to a specified limit. This is the cheapest form of coverage because you self insure for the excess over the limit covered by the policy.

Another option would be to buy a policy which indemnifies for all qualified expenses. “Qualified” means the list of covered items that are determined in advance by the insurance company when you make the contract. The most expensive and least useful of these is an income policy that simply provides a specified income once disability is established whether or not any expenses are being incurred. Since 90 per cent of all care is supervisory, there is room for the possibility that your caregiver could pocket the payments without providing the level of care that the payments should cover.

In the case of long-term care insurance, you must read the fine print. Most policies contain exclusions for disabilities brought on by mental illness except for Alzheimer’s and other forms of dementia and alcohol or drug addiction. You must be certain that all forms of dementia are covered as that is the most likely source of your future need. Limitations will appear in long-term care insurance policies which will limit either the total monthly benefit or the length of time it will be paid. Life should mean life without any absolute capital limit on the payment that should be made to cover your assistance during your lifetime. Different benefits can be paid depending on whether you remain at home or you enter a long-term facility.

There is no standard rate for retirement homes or long-term care facilities, so you need to look at several places to find the level of benefit that is suited to your potential needs or means. You also need to look at location because many seniors will not be placing themselves in care near where they are presently located but will move to locations closer to their children and grandchildren. Other features that require a detailed inspection are the specified waiting period before benefits begin and the inflation protection for the benefits to protect against the surging cost of care.

It is important to purchase long-term care insurance while you are healthy. If you are a candidate for a critical illness, the insurance company might choose not to cover you for any assistance derived from your illness.

Fortunately, there is a great deal of information available on the Internet from the carriers of longterm care insurance. I am indebted to the Council on Aging of Ottawa, which has an excellent library of materials and research which I was able to review for this article.

John Johnson is a partner with the law firm Nelligan O’Brien Payne LLP (www.nelligan.ca), with offices in Ottawa, Kingston, Vankleek Hill and Alexandria.

[This article was originally published in the March/April 2011 issue of Fifty-Five Plus Magazine.]

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.