Boomers will have to pay for much of their own long-term care

Stephen Frank,

Stephen Frank is the vice president, policy development and health, for the Canadian Life and Health Insurance Association, and his article was published in The Ottawa Citizen on September 2, 2012.

According to our industry polling, three out of four Canadians admit that they have no financial plans in place to pay for long-term care should they need it. That should send up warning signals, especially with the baby-boomer generation moving swiftly into retirement.

Canada, like most western countries, has a rapidly aging demographic with a longer life expectancy. But that also means that many are aging while managing at least one chronic condition, be it dementia or any of the other ailments that affect the elderly. These two trends are going to result in a dramatic increase in the demand for long-term care in Canada over the next 35 years. Statistics Canada reports that the chances of requiring long-term care are one in 10 by age 55, three in 10 by age 65 and five in 10 by age 75. In other words, all Canadians have a 50-per-cent chance of needing long-term care by age 75.

Long-term care can range from periodic support in the home to more formalized institutional care. The types of specialized care could include weekly assistance getting to and from appointments or buying groceries to more formal housing, medical, nursing, social or therapeutic treatments.

Canada is just starting to take measures to address this fundamental shift in demographic demands on long-term care. We have seen governments starting to dedicate modest additional sums to increased home care or other forms of support. This should be commended. However, the pace of change is not remotely adequate to address the coming spike in demand for long term-care and its associated costs. Canadians need to wake up to the reality that they have to be more financially prepared to pay for long-term care as they age.

In a recent policy paper, the Canadian Life and Health Insurance Association (CLHIA) was one of the first to quantify the costs of long-term care in the coming decades. The estimated cost, in current dollars, over the next 35 years of providing care to the baby boomer generation as they pass through old age is almost $1.2 trillion. While there are government programs in place, it is estimated that they will only cover about half of this cost. As a result, Canadians currently face an astounding long-term care funding shortfall of about $590 billion — or roughly $54,000 for each baby boomer in Canada today.

Addressing a fiscal shortfall of this magnitude will require a concerted and focused response from both governments and individual Canadians. One effective way to reduce this burden is to reform the system in order to transition individuals out of the hospital and, where appropriate, to allow significantly more individuals to stay in their homes as they age. This would not only be more cost effective, but allowing individuals to receive care in their own homes would be in keeping with the clear preferences of Canadians. Our industry polling also showed that 77 per cent of Canadians would prefer to stay in their homes as they age.

In addition to enhancing patient care, we estimate that appropriate structural reform will generate savings to governments of over $139 billion. These savings can then be re-invested into other long-term care initiatives to further reform the system and address the funding shortfall.

No matter how you look at it, Canada will have to dedicate significant additional resources to long-term care. While governments certainly have an important role to play, based on the current fiscal realities, a government-only solution is not the answer.

Individual Canadians will need to do more. Long-term care is not included under the Canada Health Act and, therefore, is not available to Canadians on a universal basis. Unfortunately, 55 per cent of Canadians believe that government health care programs cover half or more of the cost of their long-term care needs. That is simply not the case.

Governments can play an important role in communicating this reality to Canadians so that they can plan accordingly. In addition, governments, by being more efficient in how they contribute to long-term care, could re-invest the funds to provide incentives to Canadians to save for their own long-term care needs. In this way, Canadian baby boomers would be in a far better position to age with dignity and meet the expectations they have for their lifestyle in their golden years.