The recession's impact on long-term care: how can CPAs help clients prepare?

• Author: Margolis, Harry S.

The recession will affect how CPAs and other professionals will guide clients in planning for their long-term care needs. The author of the following article focuses his practice on the elderly and others with special needs. In this article, he discusses the impact the recession is expected to have on older people, their families, caretakers, their financial advisers, and other service providers.

The current economic downturn seems to touch almost everyone in one way or another, either directly or indirectly. One of the effects that we have seen recently in our practice is the effect on seniors. Obviously the economy itself is not going to directly affect the physical needs of seniors for assistance with activities of daily living, but it could affect where that care is provided (for example, at home, in an assisted living facility or in a nursing home). It also could determine who provides the care--a family member or someone who is hired.

Long-term care's direction

Here are a few likely trends:

* Most nursing home care and, increasingly, care at home is covered by Medicaid, the joint state-federal health care program for people who are "poor" (under its complicated set of rules). Even before the current recession, the burden on the Medicaid system was growing and straining the ability of states to pay the cost. This strain has caused them to constantly expand the restrictions on eligibility for benefits. Such restrictions are likely to tighten even further in the coming months.

* One result of the weakened economy is that with fewer people working more people will be available to care for family members at home, perhaps delaying or avoiding the move to assisted living or nursing homes.

* With money being scarcer for very many, families will be more reluctant to pay for a nursing home, assisted living, and home care. This may result in more beds and services being available and a decrease in costs. In fact, according to the 2008 MetLife Market Survey of Nursing Home & Assisted Living Costs, during the past year, the cost of semiprivate rooms in nursing homes increased just 1.1% and the cost of private rooms remained unchanged, in contrast with increases that substantially exceeded the inflation rate in most recent years.

* We are likely to see bankruptcies of nursing homes and assisted living facilities if they cannot fill their beds as anticipated and if Medicaid and Medicare reimbursement rates are insufficient to cover their expenses...