Most people are in denial about the healthcare issues they will face in retirement, but advisors must help their clients start these conversatins so they can plan for their future, explained Katy Votava, president and founder of Goodcare, at the Financial Behavior in Retirement Summit in Chicago on Monday.

Cost, confusion, denial and mistrust of providers are the roadblocks that keep pre-retirees and retirees from planning for their future healthcare needs. While 86% of men and women say that it’s important for their advisors to talk to them about long-term care, just 9% of advisors do, said Votava. But by making this conversation part of their annual financial checkup, it helps to break the ice.

With long-term care costs rising, these types of conversations are becoming even more important. Most people don’t know that long-term custodial care is not covered by Medicare or Medicare supplements. A recent MetLife survey of long-term care costs show just how astronomical these costs can be. The survey found that the cost of care is rising 4.6% a year for private room nursing homes, from $219 daily or $79,935 annually in 2009, to $229 daily or $83,585 annually in 2010. National average assisted living base rates increased by 5.2%, from $3,131 monthly or $37,572 annually in 2009, to $3,293 monthly or $39,516 annually in 2010. The 2010 national average private-pay hourly rates for home health aides are $21.

In fact long-term care costs are getting so high that MetLife announced on Friday that it will discontinue the sale of new long-term care insurance coverage. The problem is that policyholders are living longer and generating more claims than initially projected. Other companies are raising prices to deal with these rising costs. John Hancock, a division of Manulife, just announced it will raise policy prices an average of 40%.
Votava suggests breaking the conversation into two categories: routine healthcare planning and long-term care. Once the routine healthcare planning is under way it’s easier to see how much money is left over for long-term care. It’s also critical to understand how the client is planning to pay for their healthcare: self-insurance, cash, Medicare, insurance.

These are not fun conversations, but they are helpful to building trust and opening the lines of communication between advisors and clients.

Reporting contributed by Pamela Black.