It's no secret that long-term care in either a facility or at home could well be part of anyone's old age.
And it's no secret that governments face spiralling long-term health-care costs as an ever-larger percentage of Canadians enter their senior years.
So is long-term-care insurance the answer?
Experts are mixed in their views on that, yet the majority of Canadians are not even thinking about it. A survey carried out by Leger Marketing for the Canadian Life and Health Insurance Association (CLHIA) found that almost three-quarters of respondents – 74 per cent of them – said they haven't included provisions for long-term care in their retirement plans.
"A lot of people are unaware that they have this potential liability ahead of them," said Stephen Frank, CLHIA's vice-president of policy development and health. "There is a mistaken impression," he added, "that government programs will cover people's long-term-care costs, and that's just incorrect."
In fact, CLHIA estimates that the shortfall is in the billions of dollars, as the cost of providing health care to Canada's aging boomers will reach $1.2-trillion, and current government programs will meet only about half of the bill.
According to Mr. Frank, the probability of needing long-term care in one's old age is not all that high – about 17 per cent. "Insurance can play an important role in helping to be prepared for that," he said, "versus trying to save."
Rona Birenbaum, a financial planner who owns Toronto-based Caring for Clients, agrees that the cost of long-term care should be an important consideration in anyone's retirement planning. But she sees two ways of dealing with such costs, and one of them is indeed saving up for it.
"You put yourself into a position," she said, "such that you can afford it, whether or not you need it."
But, she added, "if your financial trajectory looks like you would not be in a position to afford it, then you consider insurance for part of, or all of, what might be the anticipated expenses."
The problem she sees with the insurance route is, "it's very expensive," she said. "The cost of coverage requires individuals or couples to often trade off some other very important things that they are allocating to, such as retirement savings or lifestyle."
Another concern Ms. Birenbaum has is the fact that, once a buyer has been approved by a carrier, premium prices can go up. In both Canada and the United States, insurance companies have recently raised prices on long-term-care policies, she said.
"So the worst scenario I see is somebody might say, 'Well, I can afford $200 a month,' and five years later, it's $300 a month," she said. "Then five years later it goes up again and it gets to the point where they can't afford it. They have to cancel it or reduce the size of the policy so much so that it becomes meaningless at that point. And they have put all this money into it and they will never claim."
For Michael Wolfson, a professor and holder of the Canada Research Chair in Population Health Modelling at the University of Ottawa, it is not always clear what is covered in the insurance policies.
"It's difficult to know just what you're buying because the boundaries of what is a long-term-care need, and what isn't, is pretty subjective," he said.
With the insurance usually kicking in based on the loss of two so-called ADL's – activities of daily living – defining those isn't necessarily straightforward. "There are various degrees of difficulty people have," he said. "It's not always a 'yes' or 'no' answer."
Part of the reason for the high cost of premiums is a lack of customers. Insurance carriers need younger people to purchase policies, and many of them either don't feel the urgency, or have other priorities, such as paying off a home or saving for retirement.
"A lot of people will realize that they have an exposure to long-term care when they are helping their parents find long-term care," said Mr. Frank, "and at that stage, people are maybe in their 50s, or late 50s, and coverage can be very expensive. It is something you want to purchase earlier in life."
While Ms. Birenbaum feels that people who have positioned themselves for a secure retirement would probably be able to cover long-term care costs, Mr. Frank worries that they may not be able to plan precisely and may have "to dip into whatever assets or savings they have and hope it's adequate." He points out that, in the event of it being needed, insurance will always pay out more than the sum of the premiums.
The Council on Aging, an Ottawa-based non-profit, published a guide that can help pre-retirees decide whether insurance is a good idea for them. The Globe created our own worksheet to help with planning.
Meanwhile, said Mr. Frank, his organization is advocating that federal and provincial governments make long-term-care premiums tax-deductible. Even a 15-per-cent tax credit would be beneficial, he said.
"It would help people with the cost of coverage, and it would also send a message," he said. "When governments put credits onto activities, such as retirement or education savings, it signals to people that, hey, this is something you need to focus on.
"If governments can't get individuals to take responsibility for this, ultimately they, too, are going to have to pay a lot more in the future. We are all going to struggle with this if we don't get ahead of it."