Guidance

RESOURCES TO HELP SHAPE YOUR FINANCIAL FUTURE

While the coronavirus pandemic has had an effect on most aspects of our lives, its impact on people in long-term care settings has been especially devastating. The New York Times has reported that 42% of all COVID-19-related deaths relate to nursing homes and other long-term care settings, a stunning statistic when you consider that less 1% of the population lives in nursing homes or assisted-living facilities. The pandemic has also created a deep sense of isolation as family members have been forced to settle for FaceTime or Zoom meetings in lieu of in-person contact. Following are four ways the pandemic is affecting long-term care decision-making.

Impact on Care Setting
Pre-pandemic, many individuals expressed a preference for receiving long-term care in their homes rather than an institutionalized setting. Because the coronavirus has had such a large impact on nursing home care, it has likely accentuated consumers’ preferences to receive long-term care in their homes. That could translate into even greater downward pressure on occupancy rates at nursing homes and assisted living facilities. Occupancy rates in skilled nursing facilities stood at 75.5% at the end of May, a decline of nearly 9 percentage points from the year prior, according to The National Investment Center for Seniors Housing & Care. Not surprisingly, long-term care facility finances are also under pressure. Nursing home margins, thin even in better times, have shrunk further over the past year which may lead to further cost-cutting and closures of facilities.

Impact on Government-Provided Care
The government, both at federal and state levels, is the largest payer of long-term care expenses in the United States. Medicaid supplies roughly half of the dollars spent on long-term care services and support in the U.S., and long-term care expenditures account for 21% of total Medicaid outlays, according to The Kaiser Family Foundation.

The pandemic may also accelerate the trend toward home-based long-term care provided through Medicaid. In 1981, nearly all of Medicaid’s long-term care spending was on care in institutionalized long-term care settings, but by 2016 that figure had dropped to 43%.

Impact on Long-Term Care Insurers
The fact that COVID-19 has ravaged people in long-term care settings has, ironically, had a positive impact on the finances of some long-term care insurance providers. A leading provider of stand-alone long-term care insurance noted that its financial performance has improved so far this year as deaths of insured parties have reduced its outlays for care. Whether positive trends for insurers’ will translate into a modulation of premium increases—or lower starting premiums for new long-term care insurance buyers—is an open question.

Impact on Caregivers
The devastation of COVID-19 has also exacerbated caregiver shortages. While occupancy rates have declined at long-term care facilities, in-home care is inherently more labor-intensive, so a shift to more home-based care is apt to worsen the caregiver shortage.

Planning for long-term care expenses has always been challenging, and the COVID-19 pandemic and its impact on the future of care has only made it more difficult. Consult with your Wintrust financial professional on your family’s plans for future care. 

 

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