What are the chances that you will need long-term care, and what will it cost? These are huge questions in terms of retirement planning. Many older Americans can afford to live on their retirement income and savings as long as they don't have long-term care needs, but risk bankruptcy in the event they do need such care.
A recent Urban Institute study (with the wonky title "Microsimulation Analysis of Financing Options for Long-Term Services and Support") suggests some answers.
- In 2011, 6 million Americans over age 65 needed help with two or more ADLs (activities of daily living, such as bathing, dressing, using the toilet, eating and getting out of bed) or had severe cognitive impairment for at least 90 days.
- They made up about a sixth of the over-65 population.
- Only 9 percent of this group received long-term nursing home care (over 12 months, as opposed to short-term stays in skilled nursing facilities after a hospitalization).
- 23 percent received paid in-home care.
- 53 percent received unpaid assistance from family members and friends.
- Americans turning 65 this year will on average pay $138,000 for their long-term care needs over their lifetimes. But this is only an average.
- Almost half, 48 percent, will incur no long-term care costs.
- 10 percent will face costs of less than $25,000.
- 23 percent will have costs of between $25,000 and $150,000.
- 6 percent will pay between $150,000 and $250,000.
- And 15 percent will incur costs of more than $250,000.
In short, approximately three in five seniors will face little or no long-term care costs, one in five will face moderate costs of between $25,000 and $150,000, and the fifth senior will pay high out-of-pocket costs of more than $150,000. The problem, of course, is that none of us can know in advance whether we will be one of the lucky three or the really unlucky one. Factors that can provide some guidance include family history, general health, and family makeup.
Since most care is still provided by unpaid family caregivers, whether you will have to pay out-of-pocket for your care may well depend on the availability of family members to help out when necessary. This is one of the reasons that costs for women are often higher than those for men. Women tend to outlive men, so wives are more likely to be available to help husbands if necessary than the other way around.
The Urban Institute report evaluates a number of options for financing long-term care as alternatives to our unplanned dependence on Medicaid (MassHealth in Massachusetts) as the primary funding source today. In my opinion, the best plan would be a national insurance program like Medicare or Social Security that would spread the risk among all taxpayers. In the absence of such a program, we must all plan as best we can.