Paying now for the future

You have planned for your retirement, contributed to your pension plans and savings accounts, but what happens if a health issues suddenly saddles you with unexpected costs later in life?

It’s that fear of having to pay thousands more per month in your retirement years that has the National Institute on Ageing (NIA) calling for the creation of a long-term care insurance system, similar to the Canada Pension Plan (CPP) or Employment Insurance (EI), to ease those financial worries.

In its May 4 report, the public policy thinktank examines how similar publicly funded plans operate in six other countries, and how a similar system could help Canadians pay for any long-term care they require.

We recently spoke to one of the report's authors, Dr. Samir Sinha, director of geriatrics at Sinai Health and the University Health Network in Toronto, to learn more.

Is long-term care insurance something people know about?

People don’t like to think about those negative things associated with ageing. We know that we are going to die. We know we are probably not going to be as robust as we are — we see our parents and our grandparents and how they’ve aged — and we know will need some form of care.

But I think the challenge in Canada is that we have our beloved Medicare. It’s recognised as one of the best things about Canada. But I think most people don’t appreciate that while they go through most of their early lives receiving all the care that they need, principally for free, a lot assume that home care, long-term care, elder care is also going to be fully covered and that it will also be taken care of.

Why do you think people think about it?

Back in 1966 when we created Medicare in Canada, on average the population was only 27 years old. Life expectancy was just beyond our 60s. So, most people didn’t feel we needed a universal health insurance program that included those additional costs. And, at that time, we were more likely to be living intergenerationally, where your mom or dad might need some care for a few years, and they would live with you.

I think that is one of the main reasons people don’t think about how their future long-term care needs might be met, should they have them, let alone how it will be paid. It’s quite a real awakening for a lot of Canadians.

There are people who are facing a need for long-term care who are realizing that while they saved for retirement and thought about their basic living costs, they didn’t anticipate the costs should they also need long-term care. If you want a private room in a government funded long-term care home in Ontario, you have a co-pay of about $3,300 a month. If you take a basic room, you would be on the hook for about $1,800 a month.

If you want some government funded home care, you may be lucky to get two or three hours a day, but how will you cover that other 21 hours? I have lots of older patients and their families in my practice who, when they start facing this reality, realize how financially unprepared they may very well be.

How could long-term care insurance work?

A number of countries, and most recently the U.S. state of Washington, have been thinking about this and tackling how to deliver a fully funded long-term care insurance program.

There are three or four countries that do a traditional payroll deduction that is collected from people during their working years, and it’s the idea that everyone pays into this, and the money accumulates into a large pot that is invested and grown, like CPP or EI in Canada. Not everyone will require long-term care services, but some will, and some — especially those living with dementia — will need 24-7 care.

Other places, like Taiwan, funds its program out of a general tax. It is just a line item on the government budget.

I think the most fiscally prudent way of doing things is by looking at a form of a traditional insurance scheme where the risk is pooled among all Canadians. So, it remains low cost to an individual, but it can add up more quickly to meet people’s needs.

Will Canadians want another paycheque deduction?

With our affordability crisis, and people increasingly living paycheque to paycheque, we know how hard it is to pay for housing and increased grocery and gas costs. Well, then you start asking, “How are you doing paying for your retirement?” People are not saving like they used to because they need to spend their money to simply exist. When people start talking about their long-term care costs and are like “What, that’s not covered?”, I think an insurance plan, like EI or CPP starts becoming incredibly attractive.

Has the pandemic changed the way we think about ageing?

We did a number of surveys at the NIA during the pandemic, and one of the first ones we did in 2020 showed that 60 per cent of Canadians told us that they changed their mind as to whether they would want themselves or a family member to live in a long-term care home.

Another survey showed 90 per cent of Canadians want to do everything possible to stay at home for as long as they can. When you come to the population of 65 and older, it becomes 100 per cent. So, people are clear that they want to stay healthy and independent at home for a as long as possible.

What is the future of long-term care?

The NIA did some work in 2019 that was reviewed by the Office of the Chief Actuary of Canada which agreed with our projection that with the population aging our long-term care costs for older Canadians is going to triple over the next 30 years.

The other challenge we have is that people are saying, “I might not have money, but I have children, they will take care of me.” Well, the other challenge that we know about is declining birth rates and changing family dynamics, and that we are going to have 30 per cent fewer available family caregivers by 2050 than we do today.

I think a payroll deduction system is the most elegant way of doing something for future generations, Generation X and beyond, where you have time to accumulate funds into a long-term care insurance plan.

Note: This interview has been edited for length and clarity.