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Canadian households spent $9.4-billion of their own money on long-term care (LTC) services in 2019, according to a new report from the National Institute on Ageing (NIA) – and that was before the health care system was hit by the pandemic and rising costs.
An aging baby boomer population and longer life expectancies are expected to lead to greater demand for these services and put more pressure on the system, adding to the financial burden for Canadians seeking private LTC services, notes the report from the Toronto Metropolitan University think tank focused issues affecting Canada’s ageing population.
The NIA proposes a solution: a publicly funded LTC insurance program. It says the program could be funded through specific contributions from Canadians’ wages, similar to the Canada Pension Plan, or through general taxation, as with Canada’s national health insurance program. In return, the NIA says Canadians would have “a greater sense of security” in meeting unpredictable future LTC needs.
“It’s already clear that the current level of public funding has not been enough on its own to meet Canadians’ LTC needs,” says Samir Sinha, director of health policy research for the NIA and one of the report’s authors.
And while private LTC insurance is already available in Canada, Dr. Sinha says insurers struggle to offer affordable premiums. A national LTC insurance program would guarantee all Canadians a basic level of service and financial coverage for LTC services, creating a “more consistent and sustainable level of funding for future generations,” he argues.
“It’s not a hair-brained idea,” he adds. The NIA report cites six jurisdictions – Japan, Germany, South Korea, Taiwan, the Netherlands and Washington State in the U.S. – with similar programs in place. Dr. Sinha says California is also considering one.
The Globe spoke with Dr. Sinha recently about the NIA report and how it could help ease the financial burden on Canadians later in life.
What’s the financial reality for seniors seeking LTC services in Canada today?
Many people are surprised when they realize that a private room in a long-term care home in Ontario could set you back $3,000 a month. Another rude awakening is that if you need home services, the publicly funded programs might only get you two or three hours a day. People start realizing that to make their long-term care goals work, they suddenly need to find sources of income they didn’t anticipate. I’ve had too many conversations with stressed-out daughters and sons about running out of money to support their parents in a long-term care home.
Why do you think the insurance model works best?
Not everyone, as they age, will end up requiring long-term care services, but some will. It’s the same premise of how we created things like universal health care or our employment insurance system. It pools the risk so should you need it, it’s there for you. When Medicare was created in the 1960s, life expectancy was shorter and people weren’t considering the need for long-term care services. But this is a reality that many of us will now face especially with people living longer and the cost of living rising. People have an incredibly hard time saving for retirement, let alone considering their long-term care costs.
How should advisors prepare clients for long-term care costs in the absence of this kind of program?
Financial advisors should be helping their clients appreciate that long-term care is not fully funded by the government, especially depending on the type of care they want or need. Then, they can help their clients figure out how to save and anticipate those potential costs.
This interview has been edited and condensed.
– Brenda Bouw, Globe Advisor reporter
Must-reads from Globe Advisor this week
Why this portfolio manager is buying utilities on ‘strong dividends’ and selling big energy
Money manager Patti Dolan is anticipating better times ahead for investors, but not without some short-term pain. “We may see one more bump in [interest] rates in the short term but expect interest rates to decrease by the end of the year or early into 2024, which should stimulate the economy and benefit the markets,” says Ms. Dolan, a senior wealth advisor and portfolio manager at Wellington-Altus Private Wealth Inc. in Calgary, who oversees more than $300-million in assets. She then expects a “choppy” recovery. Brenda Bouw spoke with Ms. Dolan recently about what she’s been buying and selling.
Five mistakes self-employed people make when filing their taxes
When some self-employed professionals and gig workers start up their businesses, tax comprehension is often a stumbling block, advisors say. “They don’t have a sense of what they are going to owe and how taxes work,” says Liz Schieck, certified financial planner at New School of Finance in Toronto, which conducts educational seminars about the distinction of being self-employed. That includes specifics on taxes and expenses. Deanne Gage explains the five mistakes leading up to the tax-filing deadline of June 15.
RRSP season investment fund flows falter to weakest level since 2009 as investors opt for cash
Investment fund net flow figures from the first quarter of the year show a lacklustre registered retirement savings plan (RRSP) season of $3.7-billion, the worst since the global financial crisis of 2008-09, according to a new report from Investor Economics, an ISS Market Intelligence (ISS MI) business. Market volatility, interest rates and rising inflation also played a role in investment funds closing in net redemptions for the month of January. Deanne Gage reports on what these data mean for investments this year.
Why this former funeral director says his retirement is a ‘work in progress’
Former funeral director David Garvie reflects on his retirement. “Adapting to retirement has been a challenge, even four years in. I’m a work in progress. I’m still attached to my career. For the past couple of years, I’ve been teaching an online course at Humber College on the psychology of grieving for students preparing to enter the funeral services profession. I also stay connected to my professional peers and take courses to maintain my Ontario funeral director’s licence, partly because I love learning new things. I’m a big believer that you should continue to grow educationally until the day you die. I’m aware that until I can let go of my career completely, I probably won’t enjoy my retirement to the fullest.” Brenda Bouw spoke with Mr. Garvie about other retirement gleanings.
Reducing wealth erosion through effective cash flow management
Exodus of U.S. investment advisors sparked by mergers and bank turmoil
What’s ahead for Big Five banks amid impending recession in this week’s Advisor Lookahead
Dividends from largest companies hit record US$326-billion in first quarter
16 mutual funds run by top-rated teams
The bad news personal finance story of the year so far is the housing market revival
What you and your clients need to know
Canadian banks bent on international expansion lag those that stay home, Veritas report argues
The long-term winners among Canadian banks will be stay-at-home institutions that shy away from international expansion, according to analysts at Veritas Investment Research Corp. in Toronto. Their argument, laid out in a recent report, offers a counterblast to the conventional wisdom that insists foreign acquisitions are the only way for Canadian banks to achieve significant growth. It’s a perspective that investors may want to keep in mind as Canada’s Big Six banks start to report earnings this week. Ian McGugan reports.
How firing your advisor to buy index funds could backfire
A guaranteed way to save instantly on investment fees is to dump your advisor and switch to exchange-traded funds tracking major stock and bond indexes. The fees advisors get for their work with clients can be in the 1-to-1.5-per-cent range. That’s money that would otherwise remain in the hands of their clients. But there’s more to the math of switching from an advisor to index investing. Rob Carrick explains how to conduct this analysis on professional advice.
Canada has the highest household debt level in G7: CMHC deputy chief economist
In an analysis published Tuesday, Canada Mortgage and Housing Corp. deputy chief economist Aled ab Iorwerth said that Canada’s household debt has been rising “inexorably” owing to rising home prices. Mortgages currently make up about three-quarters of household debt in Canada. Read more on the seriousness of Canada’s household debt load.
It’s not worth paying high management fees for highly diversified portfolios
Highly diversified portfolios rarely outperform their benchmarks. However, a highly concentrated portfolio can add substantial value. If an investor can find a manager who can construct these concentrated portfolios properly, active management fees are justified. Otherwise, investing in low-cost index funds is a far better alternative for the long-term investor. Most active managers underperform their respective indexes over the long term. Vito Maida explains.
– Globe Advisor Staff