Assessing the risk of needing long-term care

How substantial is the risk that you will will need long-term care in a nursing home setting? You’ll see numbers all over the map; federal government data, for example, shows that a 65-year-old person runs a 35 percent risk of entering a nursing facility sometime in their lifetime. Other reports have suggested the risk is higher or lower, depending on the methodology used.

Not all long-term care is provided in nursing homes, of course. A great deal of care is provided in home settings by paid caregivers and unpaid family members and friends—and that can bring the financial cost down dramatically.

A new Rand report tries to assess the risk by tracking a group of people as they moved through the years of possible nursing home use. The researchers did this using data from the federally funded Health and Retirement Study, a respected longitudinal research project that follows older individuals for up to 18 years. They found that the risk of staying in a nursing home is higher than previously reported.

Rand concludes that 56 percent of people ages 57 to 61 will spend at least one night in a nursing home during their lifetimes. People in this age group run a 10 percent risk of spending three years or more in a nursing home and a five percent chance of spending more than four years in one.

Those longer stays pose major financial risks. The median annual cost of a private nursing home room in 2016 was $92,000, according to Genworth’s annual cost-of-care survey, and it is far higher in some states ($160,000 in Connecticut, for example).

Rand also found that out-of-pocket costs vary widely. Just 32 percent of those ages 57 to 61 will pay anything out of pocket over their lifetimes—implying that 43 percent of those with a nursing home stay are completely covered by insurance—probably Medicaid. But the most intensive-use population (5 percent of the total) will experience a mean of 1,495 nursing home nights, and incur lifetime out-of-pocket costs of $46,660.

Learn more in my WealthManagement.com column this month.

 

 

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