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Long-term care crisis looms: insurance industry

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It will cost nearly $1.2-trillion to provide long-term care to the baby boomers, but current government programs and financing will cover only about half that, says Canada's life insurance industry.

The industry arrived at that tally in an effort to quantify, for the first time, what it sees as a looming crisis for Canadians. The research is to be released Thursday as the insurance industry embarks on a campaign to press government to tackle this issue.

While there is a degree of self-interest behind the move – insurers sell long-term care insurance, which few Canadians buy – a number of think tanks and medical experts are growing increasingly concerned about the probable financial crunch and are also beginning to press for change.

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Earlier this week the Institute for Research on Public Policy (IRPP) released a paper calling on government to create a universal public insurance plan for long-term care.

Researchers agree there is a growing problem, but they disagree about the degree to which it could cause financial hardship for older Canadians, and about the best solution. The issue bears a resemblance to the debate about a shortage of retirement savings, in which the life insurers recently successfully lobbied Ottawa to back the creation of Pooled Registered Pension Plans, while many other interest groups argued that an expansion of the Canada Pension Plan would be better.

Frank Swedlove, head of the Canadian Life and Health Insurance Association (CLHIA), acknowledged that some of the industry's long-term care recommendations would benefit the sector, but noted that many wouldn't.

"Our focus is on the broader public policy issue," he said in an interview. "We see this very much as a ticking time bomb, where there's going to be a significant shortfall in the next 35 years as the baby boomers move through their retirement years. … The difficulty is there's very much a perception by Canadians that their long-term care needs are going to be covered by government, and that is just not the case."

Part of the reason there is not enough public debate about long-term care is that it's not clearly identified as a system, like universal health care, said Michel Grignon, one of the authors of the IRPP report.

Long-term care is loosely defined as care for people who need help with their daily activities, such as dressing, bathing or eating, and it can take place in homes, hospitals or other institutions.

Researchers argue that government is not spending money wisely in this area. Many people are receiving long-term care in hospitals, and that money could be put to better use if some were able to be cared for in their homes or cheaper facilities.

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Long-term care is not included under the Canada Health Act. While there are government programs to assist people, they vary by province and are typically income based, the CLHIA argues in the policy paper to be released Thursday. "Canadians need to understand that in many cases they will be largely responsible for the cost of their long-term care needs," it says.

The policy paper makes many recommendations, such as a product like a Registered Education Savings Plan, but for long-term care costs. It also suggests governments look at subsidizing the purchase of long-term care insurance, as is done in the United States.

Because long-term care costs could reach catastrophic levels, the IRPP argues that private savings will result in some people saving too much and others too little. "The chances are between 20 and 25 per cent that you will need long-term care," said Mr. Grignon. In 75 per cent of cases, individuals will have saved for nothing, while the remainder might still find themselves unable to cover all of their care costs.

A universal public insurance solution would lead to an increase in taxes. But, Mr. Grignon points out, "the choice is not between increasing taxes and not paying anything. We'll have to pay for long-term care no matter what, but do you want to pay for it through a public scheme or through premiums for private insurance."

The CLHIA paper suggests that there would need to be an immediate and permanent increase to both personal and corporate taxes at all levels of government of roughly 6.4 per cent for governments to cover the growing long-term care shortfall.


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Portion of Canadians over age of 85 who currently receive home care.


Number of senior citizens who could find themselves living in health-care institutions by 2036, compared with about 300,000 today.

Less than 1%

Number of Canadians who currently have long-term care insurance

Source: Canadian Life and Health Insurance Agency; Institute for Research on Public Policy

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