The true cost of elder care

It may be the toll the pandemic has taken on our seniors, or perhaps it’s the demographic of our client base, but many clients are currently struggling with the challenges of providing support for aging parents.

Making decisions around seniors’ housing and care can have significant health, financial, relationship and emotional consequences. Too often, these decisions are made under pressure – the result of a crisis.

“When mom broke her hip in her early 80s and suddenly needed assisted living, I was immersed in a whole new world of senior care issues that were completely unfamiliar to me,” explains Michael, a Newport client in his 50s. “I felt the burden to get it right and yet I had to act quickly.”

To help clients plan for such eventualities, we went to the seniors’ housing experts from within the Newport network to create this two-part blog series on things to know: the options, costs and factors to consider when making choices for an elderly loved one – or even for yourself.

In part one, we’ll look at care options available for seniors, and the questions you should be asking to assess what’s right for your family. In part two, we’ll consider the support you’ll need – from your family members and elder care experts – to make good decisions to ensure a smooth transition to this critical life stage for your elderly loved ones.

Understanding the Options

Like every industry, the seniors’ housing business has its own vernacular. The terms can be confusing and often they are used interchangeably and incorrectly. More recently, media reports related to the COVID-19 outbreaks in long-term care homes have led to further confusion and misconceptions. As a first step, it’s important to clearly understand the different seniors’ housing options so you can focus on what is needed for your family member’s specific needs.

For example, Assisted Living caters more to physical decline, whereas Memory Care caters to cognitive decline – they are very distinct and the care needs are equally distinct. Understand that the terminology used by various companies may differ slightly; be sure to focus on facilities, services and amenities provided to ensure you are getting what you need.

Retirement Homes

Retirement homes offer accommodation and care services for seniors living in a community. These residences may be independently-owned single locations or part of a corporate operator such as Amica or Chartwell; government funding is not typically provided, although funding differs from province to province. For example, in Quebec there are tax incentives, while Alberta has Designated Assisted Living (DAL) funding. Residents have their own suites and can create their own schedules. There’s a monthly rent; and fee-based add-on care packages or a la carte services are available as needed. Many retirement homes offer graduated levels of care, delivered on separate floors or buildings but within a complex or village. They range from Independent Living/Independent Supportive Living to Assisted Living to Memory Care options.

• The Independent Living/Independent Supportive Living option provides housing in a retirement home. Most services are a la carte, with meal plans, personal care needs, or housekeeping available. Some high-end properties have restaurant options – from pubs and fine dining to chef stations – along with comprehensive activities, such as tours, lectures, exercise classes and so on. “My mom and dad describe their retirement community as ‘a cruise ship on land’,” one Newport client told us.
• Assisted Living is a step up in care, and includes more help, with attendant costs. Individual care is typically purchased for a set number of hours per day and could include help with activities of daily living, such as getting up in the morning, bathing, housekeeping and laundry. Different retirement homes cater to different segments of the seniors’ market, from affordability to upscale, minimal care to higher acuity. “This generation of baby boomers prefer options and want the flexibility to make their own choices for both the quality of care and quality of accommodations depending on their needs,” explains Melody Lo, Senior Vice President, RFA Capital, an owner/manager of retirement homes in Ontario and Quebec in which Newport is an investor. Increasingly, developments are being built to cater to these preferences, with more amenities and more suite options. It should be noted that, when choosing an Assisted Living residence, not all homes accommodate wheelchairs or two-people transfers. The level of physical assistance required is an important factor to consider.
• Memory Care is the right option where the care need is great and specialized: the person is not able to take care of their daily living activities and is failing cognitively. “A good indicator is when they can’t find their way back to their suite, for example,” explains Devin Froislie, General Manager of Villagia in the Glebe in Ottawa. “During COVID we had to move several people from independent living into memory care due to cognitive decline. Their families have been grateful because we advocated for the resident when the family couldn’t be present.”

Stay-at-Home Option

An emerging trend is that more elderly people are electing to stay at home longer. Technology is enabling this with monitoring systems, and governments are making in-home support services available. For those with the means, there is an abundance of private services available to help seniors live at home but there is often a point at which the stay-at-home option – even if the home is fully paid for – becomes more expensive than a retirement home.

This customized service comes at a price. Seniors may pay approximately $15,000 per month for 24/7 care in a major urban centre. Supplementary in-home specialized services such as occupational therapy, social work or speech therapy would add to these costs.

Assessing the True Cost of Retirement Living Options

The retirement home operators we spoke to told us that the average age of residents is typically mid to late 80s and the average tenure is 3-5 years. So while much has been made in media reports about the cost of elder care, in many cases, if someone is selling their mortgage-free principal residence in a major urban centre and using the proceeds to fund living expenses at a retirement facility, affordability may not be an issue.

More often, the challenge lies in convincing the elderly person or couple to spend the money to gain the support they need. Dr. Kim Panovka, Medical Director and Co-Founder of My Healthcare Concierge, a health care navigation service for the elderly and people with mental health issues, sees this often with her elderly clients. “They worked their entire lives to accumulate this wealth and not be a burden to their family and yet they are still reluctant to spend it,” she says. “It’s like they’re saving it for a rainy day but they can’t see that it’s pouring.”

There are still factors that can quickly encroach on capital. An elderly couple who can’t be housed together because of differing care needs requires a higher cost structure. The second factor that can erode savings is the tragic number of middle-aged people diagnosed with progressive diseases that make it impossible for them to live independently. They may have a long life span but require care to support them.

What to Consider – Advice from Experts and Peers

1. Get the facts on the financials

Before getting serious about the options, you need full clarity on the likely costs associated with senior care, according to Newport Managing Director Peter Churchill-Smith. “An elderly couple may spend $80,000 a year—and often more—on senior living and care needs,” he explains. “Achieving the investment returns needed to pay for that takes careful forecasting and a stable investment approach. That’s why we spend a great deal of time helping our clients plan, so they have the finances to live the way they want in retirement.”

If your parents have built a nest egg—and they’re willing to let you help manage their finances—they’re likely to need assistance forecasting for the future or arranging their care. Ideally, this happens while they’re still relatively young and healthy, and you can project the future income their portfolio can (and should) generate to cover those costs.

Says one Newport client, “My Dad had been a business owner, a seasoned investor and highly independent. But I began to notice he worried more about stock market performance. That in turn caused me to worry about whether they had enough – and whether I might have to top them up at some point. I finally mustered up the courage to talk to them and, frankly, it was a relief for them as much as for me. As a result of our conversations, we ended up moving their investments to Newport, where Steve (Stephen Hafner, Managing Director and Portfolio Manager) ran financial models that showed they’re in good shape. With my involvement, my dad no longer feels the pressure of managing their finances on his own.”

If there’s a sudden deterioration in an aging loved one’s health, the process is more about determining whether they’ll have adequate finances to cover their immediate care needs.

“I was shocked to find out that it would cost more than $9,000 a month for my mother to live in a good retirement home in Vancouver,” recalls Mary, the daughter of a Newport client. “She has the means to cover those costs, but we still had to do some careful forecasting to ensure her savings would last.”

In some cases, our clients are supplementing the costs of elder care for their parents. This can be done tax effectively through prescribed rate loans – a simple tax planning initiative that allows expenses to be tax deductible to the adult child providing the funding. Newport portfolio managers can advise on the set up of such a loan.

2. Assess needs today and anticipate future needs

As Sue Lankford, Leasing and Sales Manager of Villagia in the Glebe, points out, the key is to assess what is really needed today, while looking forward to the future. At the same time, retirement residences have protocols in place to manage resident decline. When selecting a residence, it’s important to ask about the facility’s capacity to provide for a progressive decline. How much care can you provide? What would cause me/my elder person to have to leave? For example, Froislie says at Villagia in the Glebe there are primarily two factors that make care unsustainable: if the resident becomes combative/disruptive/refuses care in a way that impacts other residents, or for funding reasons.

It is quite common for people to move from one stage to another in their needs but moving physically should be limited – preferably only one more move. For example, elders who are living independently are better served by adding assisted living care services for as long as possible before moving to a memory care arrangement.

Higher-end retirement residences are building communities that allow residents to transition to assisted living without a physical move, by adding in wider hallways, adjusting lighting, and other design modifications. The costs for two spouses with different care needs can add up, but more residences are introducing features, including elevator locks, trackers, and other tools that keep the spouse in decline safe but that allow them to stay together.

3. Know what to look for and what questions to ask when choosing care

If an elderly person is suffering from dementia or Alzheimer’s, the needs are more acute. Panokva warns that for some retirement home operators, memory care is “an afterthought – an add-on level of care that they introduce because of a need but is not their core business.” She continues, “Staff aren’t always trained in how to handle behavioural issues. They don’t know how to de-escalate a situation by gently talking someone down or diverting their attention.”

Staff are the most important factor in a resident’s comfort and satisfaction. Panokva draws the analogy of choosing a school for your child. “Whether the student thrives is highly dependent on the teacher.” When Panovka is doing a walk-through of a potential care home for a client, she’ll pay close attention to the staff and resident interactions and enquire about staff turnover.

Looking at the Whole Picture of Elder Care

The practical considerations of retirement living – the options, costs and services – are only part of the picture. Equally important is ensuring that you and your family are aligned in the goals for the care for your elderly loved ones. In part two of our blog series, we’ll highlight how to gain that crucial alignment and seek out the right third party expertise to help you navigate a delicate and often emotional journey.

To better understand the different seniors’ housing options and costs, click here for an overview.