Financing Long Term Care: Risk Management Intentions and Behaviors of Couples

By Stum, Marlene S. | Journal of Financial Counseling and Planning, July 1, 2006 | Go to article overview

Financing Long Term Care: Risk Management Intentions and Behaviors of Couples


Stum, Marlene S., Journal of Financial Counseling and Planning


Qualitative methods were used to examine how couples perceive and articulate their intentions and behaviors in regard to managing the risk of financing long term care. Two overall decision making styles for addressing the risk of long term care were identified: scrambling and advance planning. Scramblers may or may not have any intentions to address the risk of long term care. Advance planners are goal oriented and are working to achieve their definition of financial security. Some are focused on preparing for a long and healthy later life, whereas others are addressing the risk of long term care.

Key Words: decision making, elderly economic well-being, financial security, long term care

Introduction

Motivating individuals to plan and prepare for financial security in later life is a daunting challenge. Addressing the risks of needing help with daily living and remaining independent, or long term care, is a part of that challenge. Because the consequences of "doing nothing" to prepare for later life are simply too great for families and governments, it is a challenge that must be addressed. If no preparation takes place, multiple generations will be at risk of financial insecurity, experiencing unmet needs, and relying on limited public resources. The need and demand for long term care is expected to rise dramatically as the number of baby boomers begin to turn 75 in the year 2030 (U.S. Congressional Budget Office [CBO], 2004). Paying for long term care can be one of the most costly events of a person's lifetime (Stucki, 2001a). The primary funding streams that currently cover the costs of nursing home and home care are out-of-pocket income and assets (including home equity), government programs (including Medicare and Medicaid), and private long term care insurance (LTCI). However, a majority of long term care is financed by the social capital of unpaid caregivers (CBO, 2004). What is becoming increasingly clear is that individuals and their families will need to assume responsibility for planning and paying for long term care.

Financial practitioners play a critical role in motivating and helping individuals make informed decisions about financing long term care prior to a crisis. Understanding the existing intentions and behaviors of individuals and families related to long term care risk management is essential as a basis for tackling this challenge. Current information suggests that family members prefer to remain in denial or not think about the risk of long term care as an uncertain lifespan risk. Long term care is a risk management decision that is often avoided or faced unprepared and ill-informed. What has been learned from listening to family members involved in financing long term care is that decision outcomes are influenced by complex decision making processes, as well as by the context in which the decisions are made (Schaber, 2004; Stum, 2001, 2005). Gaps between the good intentions of planning ahead to address the risk of financing long term care and the actual behaviors are real but have seldom been examined. Relatively little is known about the perspectives of family members related to long term care risk management.

The current study was designed to help fill in the gaps of what is known about long term care risk management. It was specifically designed to gain in-depth insight into how spouses perceive and articulate their intentions and behaviors related to managing the risk of financing long term care. Decisions about financing long term care are typically made in the context of families, not simply by one individual. The current study focused on couples as one type of family unit; we listened to the decision making experience of each spouse. As a result of this research, financial practitioners and policymakers will gain new insights to help identify strategies for changing and improving long term care risk management. Insights gained will include: (a) a quality "insider" perspective of decision making outcomes that is grounded in the experiences of couples and (b) a solid foundation on which to design and develop strategies to help ensure families are preparing to address the risk of long term care. …

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