The cost of Alzheimer’s – it’s higher than you think
Alzheimer’s disease is stealing the memories and quality of life of nearly 6 million people in the United States. But that’s not all it’s taking. The financial toll of Alzheimer’s and other forms of dementia is crippling. Sadly, very few families are prepared for the cost of care, or realize how little of that cost is covered by insurance.
Today, Alzheimer’s and other forms of dementia take $1 of every $5 in Medicaid funds to provide care for persons living with dementia. Since Alzheimer’s is the only major disease without a prevention, treatment or cure, and our country’s population is aging, those numbers will only get worse. If no cure is found by 2050, it is estimated that $1 of every $3 in Medicaid funds will go toward dementia care.
We are not prepared for retirement – or Alzheimer’s
But what about the financial impact on individuals and their families? Edward Jones Financial Advisor Connor Visser believes the vast majority of people are already unprepared for the cost of a healthy retirement. For those affected by dementia, the impact could be devastating. Visser, who manages Edward Jones’ Superior, Colorado, branch, says that the cost of just one year’s care in a nursing home – estimated by the Department of Health & Human Services at $85,775 for a semiprivate room ($97,455 for a private room) – already tops the $84,821 the average adult has saved for retirement*.
“The average nursing home stay is 2½ years, according to Health & Human Services statistics,” Visser said, “but it’s not uncommon for people to live in nursing homes for 5 to 10 years.”
That would mean the typical family with a loved one in a nursing home is looking at roughly $200,000 to $250,000 in nursing home charges, although those costs could approach $1 million in some cases. Visser cited statistics from the Center for Retirement Research at Boston College which show nearly 40 percent of people over age 65 will require nursing home care.
Other care options also carry a hefty price tag
While many families opt for in-home care for their loved ones living with dementia, those costs can still be sizable, especially when considering that after diagnosis, people with dementia can survive as long as 20 years, although 4 to 8 years is more common. The cost just for assisted living, which is a less intensive form of care, averages $45,000 per year, according to the Genworth 2017 Cost of Care Survey. In-home healthcare average $49,000 per person per year.
“It’s important to recognize that the Genworth study focuses on ‘basic costs’ of care,” noted Danelle Hubbard, director of Family Services for the Colorado Chapter of the Alzheimer’s Association. “The reality is that anyone living with Alzheimer’s who is in memory care will not be covered under the basic service rates, and the cost could well be double.”
Medicare isn’t the answer
“If people haven’t saved enough for retirement, they probably haven’t saved enough for long-term care,” added Visser.
And Visser has seen too many people surprised to learn that Medicare, which is the prime source of healthcare for people ages 65 and over, is not the solution for long-term care, such as nursing homes, assisted-living facilities and adult daycare.
“Medicare typically covers up to 100 days of short-term care and a portion of costs, and the stay must be related to medical care,” he said. “You must check a lot of boxes for Medicare to cover costs.”
Women carry a larger burden
Of the 40 percent of the population over age 65 that will spend time living in a nursing home, the Boston College research data shows that: Nearly 75 percent of nursing home residents are women. Women over 65 require care for an average of 3 years (double that of men) 66 percent of long-term care recipients are women (women live longer than men and typically don’t have a spousal caregiver)
“A couple’s retirement portfolio must care for both people, and the cost of care for one could affect the surviving spouse’s ability to live comfortably in retirement,” Visser said.
For those families that do not have the financial resources to pay out-of-pocket for long-term care, Visser believes the best approach is long-term care insurance. But he advises caution there too.
“I don’t recommend that people look for long-term care insurance until age 55 to 65, as it’s very expensive, but there are different options,” Visser noted. “There is traditional long-term care, hybrid insurance policies with a long-term care rider where people can use the death benefit as a long-term care payment, and others.”
Visser recommends that people talk with their personal financial advisor to understand the options, and that they discuss them early enough so that they can begin paying the premiums from their salary versus their retirement account.
“Even if you don’t anticipate needing nursing home care, it’s good to include it in your long-term strategy,” he said.
Hubbard also advises that families purchasing long-term-care policies understand the limits of those policies.
“Many long-term-care insurance policies will only cover 4 to 5 years of assisted living facility costs,” she said. “The reality is that many people outlive those policies and may need to move into a skilled nursing facility, personal care home or a Medicaid facility if the family is unable to assume the higher costs of care in an assisted living facility after the policy expires. This can lead to an additional transition for persons with Alzheimer’s at a time when they require a higher level of care.”
A sensitive conversation Visser knows from experience with his clients that the long-term care insurance conversation is a tough one.
“When you start talking about preparing for the unexpected, it gets pretty sensitive,” he said. “People don’t want to bring it up, even with their spouse. It won’t be a fun conversation, but it’s an important one to have.”
(*Northwestern Mutual 2018 Planning & Progress Study)