A great many older Canadians may be in for a shock when they’re faced with care costs in their final years. A recent poll commissioned by the Canadian Life and Health Insurance Association found that 56% of Canadians aged 60 and older do not know what the costs of long-term care are in their province, and two-thirds – 67% of them – have not made plans to cover the costs of possible ongoing long-term care.“We have a problem,” Stephen Frank, Toronto-based vice-president, policy development, at CLHIA, said in an interview. “We’re facing a looming crisis with Canada’s nine million baby boomers entering retirement. The reality is that 17% to 20% of them will need long-term care at the end of their lives.”
The poll also shows that 70% of women do not have plans in place to cover care costs, compared with 62% of men. “This is particularly troublesome,” noted Heather Clarke, vice-president of insurance services at Investors Group in Winnipeg, “because women have longer life expectancies than men.”
Some Canadians assume that LTC is entirely government-subsidized. But care in LTC facilities, often called nursing homes, is only partly subsidized by provincial governments. The fees paid by residents differ from province to province, and do not include personal expenses such as chiropractic work. According to Manulife Financial figures, a private room in an Alberta home now costs $1,627.50 a month. A private room in Ontario is $2,166.58 a month, and $1,637.40 in Quebec. Nova Scotia has a daily rate of $94.75, which comes to $2,842.50 for a 30-day month. Semi-private rooms are a few hundred dollars less, and in many provinces, those who can’t afford the standard rate can apply for further subsidization.
“In Manitoba where I live, provincial subsidies are generous,” Ms. Clarke added. “Costs run from $31.30 a day to a ceiling $73.40 depending on after-tax income, so a wealthy resident would pay the same amount as a person who’s less wealthy.”
And LTC facilities are entirely subsidized in the Northwest Territories, Yukon and Nunavut.
“The big question is whether governments can continue subsidizing elder care for the huge baby-boomer group,” Ms. Clarke said. The number of Canadians aged 65 and older is now about 15% of the population. By 2031, it will rise to 25%. One in every four Canadians will be 65 and older.
Last year, the CLHIA compiled a policy paper that examined the cost and viability of LTC over the next 35 years as the boomers pass through old age, and found that immediate action needs to be taken to ensure they’ll have access to the care they’ll need. “We looked at the costs, and came up with the conservative figure of $1.2 trillion – assuming an inflation rate of 3% – to subsidize nursing home care, home care and hospital care,” Mr. Frank said. “There is currently $600 billion in government funding in place for this. That means a $600-billion shortfall.”
And that $1.2 trillion, he added, does not include building LTC facilities and training health-care professionals. “It assumes that nursing homes are in place, and doctors and other professionals are on the job. We need private sector involvement to build new facilities, and we need more health-care professionals. There are currently about 200 geriatric medicine specialists practising in Canada. In contrast, Sweden, with a population less than a third the size of Canada’s, has about 500 geriatricians. The shortage will intensify in coming years."
Governments need to take a leadership role and signal to Canadians that they have to take responsibility for their later years, Mr. Frank said. “We’ve sent copies of the paper, and have had dialogues with all the provincial health ministers and the federal minister of health, and we’re starting to see some progress. Some provinces have put more money into home care. But the magnitude is enormous and structural reforms are needed to address the shortfall.”
One of the paper’s recommendations calls for creation of tax credits for the purchase of LTC insurance, and an LTC savings vehicle, modelled on the registered education savings plan. It noted that, as of 2010, only 385,000 Canadians had LTC coverage. “Long-term care insurance has been a more popular product in the U.S. than in Canada,” Ms. Clarke said. “We have a stronger social safety net here, and some assume government will take care of their LTC needs.
“LTC insurance is also fairly expensive, partly because few people buy it. Those who can afford it may not need it,” she added. “And people often only realize the need for such coverage when they’re older and premiums are more expensive.”
She gave the example of one LTC product that pays a maximum weekly benefit of $500, depending on cost of care, for a maximum of 250 weeks. At the age of 50, a single male would pay $1,000 in annual premiums. At age 60, he would pay about $2,000 a year.
But Ms. Clarke noted that the insurance industry is coming up with innovations to fill the looming need, such as products with convertible features. “Some critical illness and disability policies can be converted into LTC coverage if the policyholder hasn’t claimed CI or disability benefits by a certain age.”
And shared LTC coverage for couples is another way to bring down costs, she added. “The probability of both spouses needing LTC is low, so premiums for shared coverage are less expensive than if each spouse took out single coverage.”
The paper cited a number of structural changes that would reduce care costs throughout Canada and could generate savings of $140 billion. One is to eliminate the backlog of Canadians in acute-care hospital beds who are waiting for admission to LTC facilities. “There are currently about 7,550 of these individuals across Canada,” Mr. Frank said. “A hospital bed costs the system about $800 a day instead of about $120 a day in an LTC facility.”
The paper also recommended moving 20% of residents of LTC facilities into home-care settings. “A Toronto Balance of Care project,” the report noted, “concluded that 37% of those on the Toronto Central LTC waiting list could be supported safely and cost-effectively if they were to receive care in their own homes…We know the vast majority of Canadians would prefer to receive care in their homes rather than in institutional settings.”