Underestimating the Risk of Disability – The Importance of Being Prepared
No one likes to think about the possibility of his or her own disability or the disability of a loved one. However, as the statistics contained in this article demonstrate, we should all plan for at least a temporary disability. In this piece, we will examine the eyeopening statistics surrounding disability and some of the common disability planning options. Disability planning is one area where our firm can give each and every person and family we work with great comfort in knowing that, if they or a loved one becomes disabled, they will be prepared.
Most Individuals Will Face At Least a Temporary Disability
Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. More specifically, 1 in 3 Americans will face at least a 90-day disability before reaching the age of 65 and, according to the definitive study in this area, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than to die in any given year (see Table 1 below).
In raw numbers, over 37 million Americans, or roughly 12% of the total population, are classified as disabled according to the 2010 census. Perhaps surprisingly, more than 50% of those Americans who are disabled are in their working years, from the ages of 18 to 64. For example, in December 2012, according to the Social Security Administration, more than 2.5 million workers, who were disabled and in their 20s, 30s, and 40s, received SSDI (i.e. disability) benefits.
Many Persons Will Face a Long-Term Disability
Unfortunately, for many Americans, their disabilities will not be short-lived. According to the 2007 National Home and Hospice Care Survey, conducted by the Centers for Disease Control’s National Center for Health Statistics, over 1.46 million Americans received long-term home health care services at any given time in 2007 (the most recent year that this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one “activity of daily living” (such as eating, bathing, getting dressed or the kind of care needed when one has a severe cognitive impairment, such as Alzheimer’s disease). The average length of service was more than 300 days and 69% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past the age of 65.
The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over the age of 65 are increasing at an impressive rate (see Table 2 above). The Department of Health and Human Services also estimates that 9 million Americans over the age of 65 will need long-term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons, who are 65 years of age or older, will need some type of long-term care services during their lifetime. The Council for Disability Awareness provides startling examples of how disability is likely to impact “typical” Americans.
“A typical female, who is 35-years old, 5’4” (height), 125 pounds (weight), a non-smoker, works mostly in an office setting, with some outdoor physical responsibilities, and leads a healthy lifestyle has the following risks:
- A 24% chance of becoming disabled for 3 months or longer during her working career;
- A 38% chance that the disability would last 5 years or longer;
- The average disability for someone like her would last 82 months; and
- If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.”
“A typical male, who is 35-years old, 5’10” (height), 170 pounds (weight), a non-smoker, works mostly in an office setting, with some outdoor physical responsibilities, and leads a healthy lifestyle has the following risks:
- A 21% chance of becoming disabled for 3 months or longer during his working career;
- A 38% chance that the disability would last 5 years or longer;
- The average disability for someone like him would last 82 months; and
- If this same person used tobacco and weighed 210 pounds, the risk would increase to a 45% chance of becoming disabled for 3 months or longer.”
Visit the Council for Disability Awareness website at http://www.whatsmypdq.org/ to calculate your own Personal Disability Quotient (PDQ) or risk for disability.
The Alzheimer’s Factor
Alzheimer’s disease is growing at an alarming rate. Alzheimer’s disease increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period.
The 2015 Alzheimer’s Association annual report titled, “Alzheimer’s Disease Facts and Figures,” explores different types of dementia, causes and risk factors, as well as the cost involved in providing healthcare. This report contains some eyeopening statistics:
- An estimated 5.3 million Americans, of all ages, have Alzheimer’s disease. This figure includes 5.1 million people who are 65 years of age and older and 200,000 individuals under the age of 65 who have youngeronset Alzheimer’s disease.
- 1 in 9 people who are 65 years of age and older (11%) has Alzheimer’s disease.
- About one-third of people who are 85 years of age and older (32%) have Alzheimer’s disease.
- 81% of people who have Alzheimer’s disease are 75 years of age or older.
- The number of people who are 65 years of age and older and who have Alzheimer’s disease is estimated to reach 7.7 million in 2030 – more than a 50% increase from the 5.1 million people who are 65 years of age and older and are currently affected.
- Every 67 seconds, someone in the United States develops Alzheimer’s disease. Thus, approximately 473,000 people who are 65 years of age or older developed Alzheimer’s disease in the United States in 2015.
- By 2050, the number of individuals who are 65 years of age and older and who have Alzheimer’s disease is projected to be between 11 million and 16 million, unless medical breakthroughs identify ways to prevent or more effectively treat the disease.
In addition, caregivers are at risk of developing health problems. There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons who had Alzheimer’s disease or another form of dementia in 2009. According to the Alzheimer’s Association, those persons are at high risk of developing health problems or worsening existing health issues. For example, family members and other unpaid caregivers of people who have Alzheimer’s disease or another form of dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease.
Spouses who are caregivers for the other spouse who has Alzheimer’s disease or another form of dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study, mentioned in the 2010 Alzheimer’s Association report, found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.
According to the National Nursing Home Survey 2004 Study, the most recent of its kind, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than 3 months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission had a shorter average stay than those who lived alone prior to admission.
While a relatively small number (1.56 million) and percentage (4.5%) of the population of people who are 65 years of age and older lived in nursing homes in 2000, the percentage increased dramatically with age, ranging from 1.1% for persons who are 65 to 74 years old to 4.7% for persons who are 75 to 84-years old and 18.2% for persons who are 85 years of age and older. According to the U.S. Census Bureau, 68% of nursing home residents were women and only 16% of all of the residents were under the age of 65. The median age of the residents was 83-years old.
Long-Term Care Costs Can Be Staggering
Not only will many individuals and families face prolonged long-term care, costs for inhome care and nursing homes continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services and Home Care Costs, national averages for long-term care costs are as follows:
- Monthly base rate (room and board, two meals per day, housekeeping and personal care assistance) for assisted living care is $43,200 annually, and is expected to increase .2% annually.
- Daily rate for a private room in a nursing home is $250, or $91,250 annually, and is expected to increase 4% annually.
- Daily rate for a semi-private room in a nursing home is $220, or $80,300 annually, and is expected to increase 4% annually.
- Hourly rate for home health aides is $21.50 and is expected to increase 4% annually.
These costs vary significantly by region and, thus, it is critical to know what the costs are in relation to the location of the individual who will be receiving care.
For example, the median annual cost for a private room in the state of California, during 2015, was $104,025, whereas the median cost for a year in a semi-private room was nearly $90,000.
Americans Underestimate the Risk
Perhaps most importantly, despite overwhelming and compelling statistics, most Americans grossly underestimate the risk of disability to themselves and to their loved ones. According to the Council on Disability Awareness 2010 survey:
- 64% of wage earners believe that they have a 2%, or less, chance of being disabled for 3 months or more during their working career. The actual odds for a worker entering the workforce today are closer to 25%.
- Most working Americans estimate that their own chances of experiencing a long-term disability are substantially lower than the average worker’s.
Given the high costs of care, this underestimation often leaves Americans ill-prepared to pay for the costs of long-term care.
Long-Term Care Insurance May Cover These Costs
If a parent, his or her spouse, or a family member needs longterm care, the cost could easily deplete and/or extinguish the family’s hard-earned assets. Alternatively, seniors (or their families) can pay for longterm care completely or, in part, through long-term care insurance.
Most long-term care insurance plans allow the individual to choose the amount of the coverage that he or she wants, as well as how and where he or she can use the benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person’s home, assisted living facilities, adult day care centers or hospice facilities.
What if Long-Term Care Insurance is Unavailable or Insufficient
Unfortunately, many older Americans will either be medically ineligible for longterm care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to ensure that life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or a couple that would otherwise be at risk of being depleted.
Planning Should Thoroughly Address Disability
When a person becomes disabled, he or she is often unable to make personal and/or financial decisions. If the person who is disabled cannot make these decisions, someone must have the legal authority to do so. If someone does not have the legal authority to make decisions, the family must apply, through the probate court, for the appointment of a guardian over the person, his or her property or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx likely recognize the need to avoid a guardianship proceeding, if at all possible.
At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability. Seniors also need to appoint a decision-maker for healthcare decisions (the name of the legal document varies by state, but all accomplish the same thing). Alternatively, a fully-funded revocable trust can ensure that the senior’s person and property will be cared for as desired, pursuant to the highest duty under the law – that of a trustee.
The above discusses the minimum planning everyone, including seniors and their loved ones, should consider in preparation for a possible disability. It is imperative that families work with a team of professional advisors (legal, medical and financial) to ensure that their planning addresses their goals and all aspects of a potential disability.