Helping Clients Grow Old Gracefully

Does the increasingly common situation at left describe an area of need that CPAs can fill? The AICPA special committee on assurance services believes it does. In its report on the future of assurance services, the committee identified ElderCare as a service opportunity that allows CPAs to help older people continue to live on their own when they can no longer completely care for themselves. (See sidebar, “ElderCare: A Significant New Service.” ) For this vulnerable clientele CPAs can provide bookkeeping; supervise investments; arrange for medical or home care and transportation, consult on available community services; and assure family members that the elderly person is receiving services and maintaining property at a predetermined level.

CPAs are seeking opportunities to expand the use of their unique skills at a time when the U.S. population is aging. Developing a service that meets the needs of older adults may prove to be a win/win use of these skills. To explore available opportunities in this area, CPAs need to understand some of the unique characteristics of older people, how services are delivered to this population and the crucial role CPAs can play in offering essential services to older Americans.

WHO ARE THE ELDERLY?
According to the U.S. Census Bureau, in 1994 individuals 65 years of age and older represented about one-eighth of the U.S. population—approximately 33 million people. In 2011 the first of the baby boom generation will celebrate their 65th birthdays, marking the beginning of an unparalleled increase in the number of elderly persons living in the United States. Demographers estimate that by 2030 older adults will be about one-fifth of our population—about 70 million people.

Reduced mortality also has contributed to the aging of the population. The U.S. Census Bureau says life expectancy has risen from 47 years in 1890 to over 75 years in 1990. As a result, the stage of life popularly described as golden now often exceeds 30 years. To more accurately depict the similarities and differences among older adults, gerontologists refer to specific age groups: the young-old (ages 65 to 74); the old-old (ages 75 to 84); and the oldest-of-old (ages 85 and up).

In general, today’s young-old are more likely to be living with a spouse and have more years of formal education, higher retirement income and fewer health problems than older age groups (see exhibit 1, below), enabling them to move into their later years with more resources than their predecessors. Persons in the old-old age group best represent our traditional image of older adults. These people are beginning to experience some of the loss associated with aging (declining health, death of a spouse). The majority are female, widowed, living alone and suffering multiple chronic health conditions. The oldest-of-old represent the fastest growing segment of the elderly population.

With advancing age, older adults may need help performing personal care and home management tasks. The extent to which a person needs assistance with activities of daily living (ADLs) such as eating, bathing, dressing and toileting and with the more complex instrumental activities of daily living (IADLs) such as handling personal finances, preparing meals, shopping, doing housework and maintaining property will determine what health, social and professional services he or she requires. The proportion of older adults requiring help with ADLs and IADLs ranges from approximately 20% of the young-old to almost 50% for those 85 and older ( see exhibit 2 ). Health service providers and social agencies can provide assistance with ADLs. This loosely organized confederation forms the aging service network.

CPAs, bank trust officers and other advisers currently help the elderly with financial IADLs. How much help individuals need depends on how much money they have and their health. Not long ago, financial services for the older adults were unnecessary except for the wealthiest individuals. However, a growing trend in retirement plans puts more wealth and financial responsibility in the hands of the elderly. The number of defined benefit pension plans has decreased dramatically in the last several years, replaced by defined contribution plans—such as 401(k)s—that require the elderly to oversee their own funds. Reduced company-provided postretirement benefits have increased the elderly’s responsibility for assessing, locating and purchasing insurance. Ironically, just as older adults’ capacity to handle complex situations is diminishing, important financial decisions are required—for perhaps the first time in their lives. We refer to financial service providers who typically fill these needs as the financial service network.

Assistance with nonfinancial IADLs is provided ad hoc on an as-needed basis. An elderly person has the same need for lawn-care, for example, as a younger person. As individuals age, however, they may no longer be able to recognize when they need help, how to choose an appropriate provider or evaluate the service they receive. Providers of services that are not health or finance related, such as plumbers or home contractors, constitute the commercial service network.

Family members are the first line of support for older relatives with functional or cognitive limitations. Spouses represent 36% of caregivers assisting noninstitutionalized elders who need temporary or long-term help. If a spouse is not available to help, adult children frequently fill the caregiver role.

For many adult children, family and work obligations—as well as geography—make assisting aging parents a stressful and sometimes impossible task. Under these circumstances, family members often direct elderly relatives to case managers, who guide the elderly through a service network or provide some or all of the services themselves (see exhibit 3). Family members may also turn to CPAs and bank trust officers to provide financial guidance and services for their elderly relatives. There is no established commercial service network—the elderly or their relatives must identify and contact appropriate service providers.

People are living longer. Longevity increases an individual’s likelihood of having to cope with ill health and functional limitations. To remain independent, many older adults require an array of health, social and other professional services. Older adults of today and tomorrow are less likely to have children or other family to act as a first line of support, or they may not want to burden family members with such tasks. Currently, the only alternatives are service providers, most of whom know only about their own network and who may have a vested interest in selling their own services.

CPAs already are knowledgeable providers of financial services. Given their reputation for integrity and objectivity, they are ideally positioned to play a larger role in the ElderCare system as a second line of support, acting as impartial professionals across all service networks and providing assurance that service providers perform as desired. Geriatric case managers can be the CPA’s link to the aging service network.

THE AGING SERVICE NETWORK
The Older Americans Act (OAA) of 1965 is largely responsible for developing what is frequently referred to as the aging service network. This formidable system links the Administration of Aging (AoA), the Department of Health and Human Services, 57 state units on aging, 670 area agencies on aging (AAAs), Title VI grants to over 200 Indian tribes, and more than 20,000 providers delivering services to older Americans. The network’s primary responsibility is to transform a patchwork of programs into a locally coordinated service system. Anyone age 60 or older is eligible for programs and services provided under OAA auspices. In most states, AAAs award OAA funds to programs in their planning areas that deliver access, support, nutrition and health-related services to older adults (see exhibit 2, above, for a list of needs).

In addition to OAA-supported programs, other public, non-profit and for-profit agencies and organizations provide services for older adults. The various age, health and income eligibility standards these community-based programs use often create a fragmented and confusing delivery system. In addition to government-provided services, private case management services have proliferated during the past decade. Known by a variety of names (care managers, case coordinators, service managers) case managers help the elderly find services that foster their independence. Case managers also help families identify and secure appropriate services in a cost-effective manner.

Agencies and organizations use different case management approaches, ranging from simple referrals to actual delivery of comprehensive services. The main differences are the level of authority controlling a service, the types of services provided and the method of payment. Case managers act as brokers, linking clients and service providers through a referral system. The purpose of broker care management is to match clients with appropriate services based on predefined agreements and standards of practice.

A case manager offering the simplest level of care would provide only information and arrange needed services. He or she would not authorize or purchase anything, nor be directly responsible for delivering a service. At the next level, the case manager furnishes some services and coordinates the remainder with external agencies. A more complex arrangement allows the case manager to authorize types and levels of services, with certain financial controls or capped expenditures. The highest level of service consists of a single or merged provider system delivering a full range of services directly or under contract. A consolidated case manager within a prepaid, captive funding structure under one administrative umbrella provides all care. The type of case management an individual chooses depends on his or her health and financial situation and on what is offered locally.

Very little information is available to help CPAs assess the quality of case managers. The diversity of organizations and professions represented makes evaluations difficult. Most publicly funded case management programs have requirements for qualification, training and timely completion of activities. There are, however, no uniform state or federal guidelines for case managers nor is special certification required of individuals and organizations wishing to provide case management services.

In response to the growth of this industry, efforts are under way to educate and certify case managers. For example, the National Association of Professional Geriatric Care Managers (NAPGCM) offers individuals interested in case management a variety of educational materials as well as a national membership directory of case managers listed by state to anyone looking for one. The National Academy of Certified Care Managers (NACCM) is a nonprofit organization that offers a certification exam for case managers. This certification sets a baseline CPAs can use for defining the job functions, skills, knowledge and ethical values of case managers.

WHAT A CPA CAN DO
ElderCare is a nontraditional assurance service that requires CPAs to verify the relevance and reliability of information related to the care of older Americans. Specifically, a CPA can provide three types of service: consultation, assurance and direct service.

Consultant. In this role, the CPA acts as a second line of support to the elderly or their adult children. The CPA does not provide services, but rather acts as an impartial professional across the local aging, financial and commercial service networks. He or she would know what services are available, who provides them and how to acquire them. In the aging service network, the CPA may work with a case manager or otherwise help the elderly client navigate the system. In the financial service network, the CPA might work with trust officers and personal financial planners. The CPA would also handle contracting with the commercial service network.

When performing these services, CPAs must understand their role. A CPA is not expected to render advice on health care, nor should the CPA guarantee any of the services others provide. This is not so different from how a CPA acts in an audit, where he or she knows about the law but does not act as a lawyer. CPAs who provide ElderCare services should maintain a comparable level of expertise about health care.

As consultants, CPAs may also be able to help adult children understand their parents’ financial situation. The elderly often hesitate to disclose their real financial status to relatives who may benefit from their estate. Because the CPA is a trusted—and neutral—professional, he or she can be the link between the elderly and their families. CPAs have a relative advantage in performing this service because they already have the public’s confidence and are expected to provide clients with complete, objective, relevant and reliable information.

Assurer. In this role, a CPA verifies the quality of service others provide in any of the service networks. Exhibit 4, below, shows how the ElderCare system changes when CPAs act as consultants or assurers. Although CPAs may not be experts in all of the services, they know how to define objectives, develop measurement criteria, conduct examinations and issue reports specific to each service provider. As long as the CPA does not provide a service or profit from it, he or she can establish objective criteria for efficient service and attest to its provision.

When acting as assurer, the CPA must be careful not to attest in situations where he or she lacks independence. As members of the financial services network and of the business community in which they practice, CPAs may have clients, relatives and investments in entities that are part of the local aging and commercial service networks. CPAs must be careful not to make recommendations influenced by these relationships. It’s better to offer advice on the options then leave the actual choices to the elderly and their families.

Direct provider. Some CPAs can provide traditional financial services directly to the elderly. With their unique combination of knowledge on business, Social Security laws, taxes and personal financial planning, CPAs can be financial planners or bookkeepers for the elderly. In this role, CPAs fit into the current ElderCare system which is depicted in exhibit 3.

For example, Mary and her daughter could employ a CPA who is an ElderCare specialist as a consultant to help organize Mary’s finances and provide Mary and her daughter with a list of local case managers. When a problem arises, such as a need for home repairs, the CPA could provide a list of reputable contractors and, if requested, arrange for the repairs. As assurer, the CPA could inspect the contractor’s work to make sure it was completed according to the contract. The CPA also could balance Mary’s checkbook each month and provide any other financial service she or her daughter requested.

Identifying the client. Is the CPA’s duty to the elderly person or to his or her family? Lines of communication should be clearly defined in an engagement letter and not left to be determined until after a problem arises. At the start of the engagement, CPAs need to address the extent of services to be provided and for how long.

The most difficult problem CPAs face in dealing with older clients is maintaining objectivity. Some elderly people become attached to those who pay attention to them. Affections can shift easily. CPAs must be careful not to inadvertently take advantage of their caregiver role. Service must be provided as a professional activity that is fully and completely compensated by fees. A statement to that effect in an engagement letter, with a disclaimer on any residual claim to the estate, is essential for every ElderCare engagement.

GETTING STARTED
As with any new service they seek to provide, CPAs will need to identify potential ElderCare clients. Customers fall into three categories: current elderly clients, current clients who have elderly parents and elderly persons living in the local area. Direct marketing to elderly clients may be effective. If the CPA does personal financial planning, the elderly client may need the CPA’s service as a second line of support, providing guidance through the local aging, financial and commercial service networks. If the CPA continues to provide financial services to the client, assurance service must be restricted to other providers.

Current clients with elderly parents may want to provide them with ElderCare. When collecting client profiles, firms interested in offering ElderCare should ask for information on clients, parents, their ages and location. They should review this information annually, and offer services to appropriate clients.

To provide better service to all clients, CPA firms can form ElderCare networks, perhaps through existing affiliations. Elderly clients who relocate to other areas upon retirement could be directed to a CPA ElderCare provider in their new location. Similarly, current clients with elderly parents in a remote area could obtain referrals to local ElderCare providers.

Local groups that serve the elderly may be an effective avenue for reaching the local elderly population. Groups to consider include the American Association of Retired People, the Retired and Senior Volunteer Programs, civic organizations such as the Lions Club or Rotary Club and senior centers. These groups meet regularly and usually are in need of experienced speakers who have expertise and knowledge to share with the group. Active members of these groups tend to be the older adults with the least need for ElderCare services, so it may take time for a firm to assemble a clientele.

It’s very important for the CPA to learn about local services and to become known to the professionals who provide access to those services. Every state has a department or office on aging that can provide the name and location of AAAs throughout the state. Local AAAs are a good starting point, as they can provide CPAs with a list of the services available to older adults in their planning districts. CPAs can use the list to make referrals. Professional groups associated with the aging service network, such as state professional organizations and colleges and universities with gerontology programs may offer important contact with the elderly.

MOVE QUICKLY TO CAPTURE A GROWING MARKET
The potential ElderCare market is large and growing. CPAs’ integrity and objectivity are ideal qualifications for the task of managing support services for the elderly. The field is not wide open, however; other professionals, such as geriatric case managers, already offer support and services to the elderly. CPAs should try to work with case managers who are already linked to the aging service network and who are certified. They can be an important resource for CPAs who want to provide ElderCare services.

Acquiring the knowledge and skill to provide ElderCare services requires considerable investment of time. The payback probably will not be immediate; CPAs must establish new contacts and develop new ways of delivering services. Yet CPAs have the characteristics needed by Mary and other elderly persons. ElderCare may be a unique opportunity to bring a beneficial service to clients that opens up a new line of business for CPAs.