3 Ways to Finance Long-Term Health Care

Posted by Steve Jones

Sat, Jan 10, 2015

Preparing for retirement and old age is something most people in Ontario plan for, but not everyone will have the same needs and resources in their golden years. Monthly expenses, disposable income and emergency funds are almost always part of the financial planning playbook, but, as more people live longer lives long-term care should be factored into retirement savings goals.

Ways to Finance Long-Term Care

In Canada, and more specifically Ontario, there are three common ways to finance care needs during old age; private savings, private insurance and public insurance such as the Ontario Health Insurance Plan (OHIP). Each one of these three savings and insurance vehicles come with advantages and drawbacks, making it difficult to build a fool-proof plan for future financial needs.

Public Insurance (OHIP)

OHIP is the Ontario government’s health insurance plan for all provincial citizens. Funded through provincial taxes and federal government transfer payments, OHIP grants access to emergency and preventative healthcare to all those with a valid Ontario health card.

While this government-run insurance plan does cover some long term care needs, it limits your ability to choose through all care options due to restrictions, both regional and monetary. The best care facilities and in-home health services may not be covered under OHIP and moving to an area with better options is done at the Ontario resident’s own expense.

Advantages

• Seniors get care regardless of financial situation
• OHIP covers up to 100 visits to the hospital per year for residents of long-term care
• Coverage is province wide for all permanent residents

Disadvantages

• Limited choice for seniors
• Regional restrictions may apply
• May not provide access to best healthcare services (i.e. in-home)

Private Savings

Most commonly, private savings is the financial planning method chosen to prepare for the future. Using personal funds to provide long-term care allows seniors to choose between all available healthcare facilities and in-home care options. Having the power to select between part-time and full-time home nurses and related caregivers can increase comfort for both the patient and their family. Unfortunately it is difficult to know at what age care needs will begin, how many years care will be needed and how much money will be required to fuel those health services.

Advantages

• Allows the most personal choice for care facilities and services
• Can be used in conjunction with support from OHIP
• No restrictions on region or private/public facilities

Disadvantages

• Can be difficult to save the necessary amount for proper care
• Necessary savings amounts are hard to predict
• Can become a financial burden to family members if funds run out

Private Insurance

One of the lesser known financial planning options for old age, private insurance can be purchased to pay for long-term care needs if and when they arise. Taking out an appropriate policy can protect people from the uncertainties that can arise from using OHIP and personal funds.

Unfortunately, taking out and maintaining an insurance policy that covers things such as long-term, in-home and palliative care can be costly.

Advantages

• Covers patient regardless of age or long-term care needs
• Gives access to a wide variety of care options (based on policy details)
• Can be used in tandem with OHIP and personal funds

Disadvantages

• Can be costly to maintain policy
• If care services aren’t needed in old age policy, payments aren’t used
• Policies may come with prerequisite health requirements

Diversification is the Best Plan

According to financial planning experts, no one method mentioned above can adequately protect an aging person from all possible long-term care needs that may arise. Without being able to see the future the best approach is to cover all the bases. Building a combination of personal savings and an adequate insurance policy by splitting funds designated for healthcare can give seniors the widest range of coverage, choice and comfort as they age, utilizing OHIP for all health services covered by the government.

The most popular approach is to start saving for retirement, which includes healthcare costs, at the earliest possible age and then adding an insurance policy between ages 55 to 65, when people are generally still healthy and can easily pass a health check. Using the diverse set of savings and personal/public insurance will give seniors the financial care they need either in-home or at the a top-notch care facility.