A Different Take on LTC Insurance
Boston College, my alma mater, has become one of the go-to places for the latest research on retirement issues. Its Center for Retirement Research, recognized by the New York Times as "the nation's leading center on retirement studies," covers the multitude of issues affecting individuals' income in retirement, from finances to healthcare.
A new study by its senior economist Anthony Webb sheds new light on who may need long-term care insurance (LTC). He finds that U.S. nursing home stays are relatively short: 11 months for the typical single man and 17 months for a single woman. This is shorter than previously thought. There's some unpleasant news in the study, too: It shows that the risk of older persons needing nursing home care is 44 percent for men and 58 percent for women. The significance is that nursing home stays are higher-probability, lower-cost events than previously thought, which reduces the appeal of purchasing long-term care insurance.
One of the largest deterrents of purchasing LTC insurance is certainly the cost of the premiums. Another big reason for the lack of interest in insurance is that Medicaid pays for a long-term stay in a nursing home for those who can't afford one. The upshot for individuals weighing whether to buy the private insurance is that the benefits of doing so often accrue not to the individual who bought the policy but to the government, in the form of reduced Medicaid payments.
However, one major point the study fails to address that not everyone who needs long-term care goes into a nursing home. In-home care and assisted living are the two biggest recipients of LTC payments, and Medicare and Medicaid do not typically cover these expenses.