New York Estate Planning & Elder Law Blog
According to researchers at Georgetown University and Penn State University, over seventy percent of seniors in America over the age of 65 will need some type of long-term care in their lifetime, either at an assisted living facility or nursing home. However, according to a new study only a fraction of those people should be purchasing long-term care insurance, and the authors boldly claim that “individuals should not buy insurance.” So how should an elder decide if long-term health insurance is the right course of action?
Long-Term Care Insurance Study
According to the study published by Boston College’s Center for Retirement Research, only nineteen percent of men and 31% of women should purchase long-term care insurance. The reasons for this bold statement come from a variety of factors. In addressing the discrepancy between men and women, females are statistically likely to live longer so they are also more likely to need to purchase the insurance.
In addition, relatively few people incur enough wealth in their lifetimes that the catastrophic financial burden of long-term care would have such an effect as to need protection from it. Moreover, because of the structure of Medicare and Medicaid most seniors can rely on those government-sponsored programs for the majority of their long-term care.
In order to quantify the odds of needing long-term care insurance, the researchers used government data to calculate the monthly probability of people over the age of 65 transitioning among various stages of health. This regression showed that 44% of men and 58% of women will eventually need some type of nursing home care. However, most of those stays were only short spells. Men spend on average only a year in a nursing home and women on average stay for a year and four months.
Because many short-term stays in nursing home facilities are covered by Medicare – those that last 100 days or less following a hospital stay of three days or more – half of all men and forty percent of women fall into the window where Medicare pays their costs. If a stay lasts longer, Medicaid pays for those who run out of money.
Who Should Buy Coverage?
According to the Boston College study, seniors with significant assets should most seriously consider purchasing long-term care insurance. If a couple’s assets exceed a couple hundred thousand dollars or more they should look into purchasing a policy. Specifically, the target market for long-term care insurance is people who have a sizeable amount of household financial assets and would be unlikely to qualify for Medicaid, but who have little enough that long-term care would be catastrophic to their finances.
It is important to note that this study only looked at the numbers for single individuals, who make up over 75% of nursing home residents. And while nineteen percent of men and 31% of women can benefit from the purchase of this type of coverage, only thirteen percent of seniors in America over the age of 65 have bought a policy.