Panelists drive home concerns about health-care costs

I have to admit that I was a bit unnerved as I sat through the health-care session at last week's InvestmentNews Retirement Income Summit in New York.

I have to admit that I was a bit unnerved as I sat through the health-care session at last week’s InvestmentNews Retirement Income Summit in New York. As the two panelists rattled off statistics and presented charts with predictions of skyrocketing health-care costs, I found it very hard to sit still in my seat.

My thoughts turned to my 80-year-old mother, who is remarkably healthy, as the mind-boggling costs associated with long-term care and daily nursing-home charges were discussed by Kathryn McCabe Votava, president of GoodCare.com and associate professor of clinical nursing at the University of Rochester (N.Y.), and Lewis J. Walker, a certified financial planner and founder of Walker Capital Management Corp. in Norcross, Ga.

As the two drilled down and discussed Medicare coverage and projected increases in annual out-of-pocket health-care costs during retirement, I started thinking about myself 20 years down the road and how my kids would have to handle these costs. To be sure, it wasn’t a pretty sight.

As Ms. Votava and Mr. Walker outlined ways to construct a realistic retirement health-care budget, I was secretly hoping that the more than 350 financial advisers in the room were taking very careful, detailed notes because I am quite sure this information will become a major topic of discussion with their respective clients.

Health-care inflation is running at an estimated 8.16%, Ms. Votava said. In fact, the tab for out-of-pocket health-care expenses in retirement is skyrocketing. These once minor costs now range between $5,543 and $6,712 a year.

That could reach as high as $55,398 to $64,746 annually in 20 years if health-care inflation rises to 12%, Ms. Votava said.

The panelists stressed that advisers need to factor in the health-care inflation rate in their plans.

It was clear from the session, “Planning and Preparing for your Client’s Healthcare Costs: What You Need to Know to Best Inform your Clients,” that advisers and their clients need to learn more about the high cost of long-term care and the potential benefits of taking out insurance to pay for it.

Savvy advisers need to understand that much like a life insurance policy or a trust fund, long-term-care insurance is becoming simply another way to help protect assets and help clients reach retirement and estate-planning goals.

The role of LTC insurance in everyone’s lives is shifting. As an engaged adviser, you need to hammer home to clients the need to consider LTC insurance as a financial planning tool as much as they do a life insurance policy.

It is time that everyone, advisers and clients, gains a better understanding of the costs of long-term care and an understanding of the potential benefits of LTC insurance.

Jim Pavia is the editor of InvestmentNews.